Examination of Witnesses (Questions 60-79)
SIR
JOHN BOURN
KCB, COMPTROLLER AND
AUDITOR GENERAL,
NATIONAL AUDIT
OFFICE AND
MR BRIAN
GLICKSMAN CB, TREASURY
OFFICER OF
ACCOUNTS, HM TREASURY.
23 NOVEMBER
2005
Q60 Mr Khan: Upwards? Downwards? The
same?
Sir John Gieve: I am sure we will
want to continue to push it upwards. Personally, I think there
is huge scope to push it upwards. What we need to do before the
Spending Review is to consult the sector and the various levels
of government about what a reasonable target should be. We are
already giving some thought as to how we do that. As I say, keeping
it going up is the first thing. Plucking a figure out is quite
difficult and there is always the risk that you project forward
a straight line and two years on it either looks ridiculously
easy or ridiculously hard. Nonetheless, I think we should talk
to the voluntary sector about that.
Q61 Mr Bacon: Sir John, can I take up
one of the latter points that Mr Khan was making about the independence
of the organisations. You replied that the onerous nature of the
audit was what worried them, not whether it undermined their independence
or not. The National Council for Voluntary Organisations' briefing
document that we have got does specifically refer to the fact
that independence is undermined as well. It says: "The Government
should not treat the sector as though it was part of the state
and impose inappropriate monitoring, evaluation and audit systems
which undermines the sector's independence and the benefits it
can bring to public service."[1]
Is it not the case if they are taking money from you then they
should expect that their "independence" has to some
extent been undermined and they should expect to account for how
they spend the taxpayers' money?
Sir John Gieve: I will ask Helen
to come in on this because she has been talking to the NCVO. The
magic word in their briefing is "inappropriate", so
no doubt we can agree that we should not have inappropriate monitoring
returns. Where I am absolutely with you is if we are spending
public money we have to account for that, and we have to ask the
people we give it to to account for it. The trick is to do that
in as light touch way as we can.
Q62 Mr Bacon: Ms Edwards?
Ms Edwards: Just to go on from
that, I think part of the issue has been that some of the monitoring
has been disproportionate given the relatively small amounts of
funding involved.
Q63 Mr Bacon: Who is doing this monitoring
that is disproportionate, is it local authorities or is it government
executive agencies?
Ms Edwards: It is virtually every
bit of government that provides funding. Part of the issue for
us is that the lead funder pilot was relatively successful, as
Sir John said, in terms of simplifying the process of applying
for money but where we have been less successful is in reducing
the burden of reporting where it is disproportionate. I think
part of the reason is that funders take their responsibilities
very, very seriously, they think that a lot is required of them
by auditors and that they should not co-operate with other funders
to share some of that funding where organisations are accounting
to very, very many different parts of government. We think it
would be helpful for us to work with the National Audit Office,
and we are grateful for their offer of assistance on this, to
assure funders that in some instances they are asking for more
than is required even though they have to be careful with public
funds.
Q64 Mr Bacon: This may be a question
better addressed to Ms Charlesworth. Sir John, paragraph 3.9 is
about the fact that: "Only five of the 13 Departments surveyed
[by the National Audit Office] had any established policy or guidance
to help funders design the most appropriate funding mechanism".
It goes on to say: "There is as yet no central or definitive
source to which funders can refer". Is the updated guidance,
which was referred to earlier, going to be that definitive source?
Ms Charlesworth: Yes.
Q65 Mr Bacon: Why has it taken so long
to come up with the not particularly startling idea that one definitive
central source of guidance is a good idea?
Ms Charlesworth: We issued a first
round of guidance to funders, recognising that this was an important
point, in 2003. People found that very useful. When they started
to implement it a series of further questions arose, as people
moved this forward inevitably. What we are doing is updating that
to be more comprehensive.
Q66 Mr Bacon: You said when people started
to implement it they found it very useful.
Ms Charlesworth: Yes.
Q67 Mr Bacon: The fact is of the 13 Departments
surveyed, eight did not implement it at all, they did not appear
to have any guidance.
Ms Charlesworth: A number of Departments
are implementing it. They will be in different stages of implementation.
Some have implemented it for their own allocations but what they
are doing now is working with the bodies they allocate money to,
like PCTs, Learning and Skills Councils, to ensure the recommendation
is taken forward there. What has become apparent, as you go through
the range of different ways in which the government funds the
sector, is that this is more complex. This is the reason why we
are going to work with the NAO on a decision support tool, because
in addition to having the guidance you also need to equip people
with the ability to use the guidance and make the right decision
on the back of the guidance. That is why we are doing the revised
guidance to funders and we will work with the NAO on the decision
support tool.
Q68 Mr Bacon: I would have thought if
the guidance was clear enough you ought to be able to take it
and use it. You talk in paragraph 3.11 about the fact that there
are not so many types of arrangements as are available in the
private sector, for example the strategic partnerships and particularly
framework agreements are much less widely used. Framework agreements
are very widely used now in all kinds of Departments for all kinds
of procurement. How widely used are framework agreements now for
TSOs and are there particular difficulties in setting up framework
agreements and other types of partnership funding?
Ms Edwards: I think we can, and
I think this is a development that will come. It reflects the
fact that in some parts of government the third sector has not
really been seen as a serious delivery partner in the same way
as the private sector has, or at least not so far. Therefore,
their arrangements for contracting or funding the sector have
not moved them forward as far as they need to. There are some
developments, my bit of the Home Office, for example, does have
a number of framework agreements with people who do work for us
and receive funding from us. I think in the new world of corrections,
prisons and probation, the idea of framework agreements will come
into its own. I think as the voluntary sector starts to deliver
more, and as it starts to deliver more under contract and not
just from grant regimes, the whole process of setting up framework
agreements will develop.
Q69 Mr Bacon: It is surprising that it
is a £25 billion sector. Page 37 refers to comparisons with
the private sector in figure 14 and difficulties with long-term
funding. It talks about the fact that: "The sector has .
. . the asset base, we have the ability to raise money, we have
the ability to borrow capital but we need [long-term] contracts
to make that even remotely viable. And yet, when (government funders)
talk about this, they say `Be grateful if you get a three year
contract' whereas under the Private Finance Initiative, 10, 20
year contracts are the norm'." The interesting thing about
the PFI is we are repeatedly told that the PFI is fundamentally
about buying services; so is this, is it not, it is fundamentally
about buying services. What is the difficulty in issuing long-term
contracts?
Ms Edwards: I think if you are
looking at PFI in particular—
Q70 Mr Bacon: I am not, I am looking
at a comparison with the PFI. I am asking you what is the difficulty,
like in the PFI, in issuing long-term contracts to TSOs?
Ms Edwards: I think we do want
long-term contracts. Some of the very long contracts tend to exist
in relation to where there are large capital investments, and
by and large voluntary sector service provision is not of that
nature. I think part of the difficulty as well is that this is
a hugely diverse sector, some of the organisations are very small,
so government Departments and bits of local authorities find themselves
contracting or trying to work with a huge range of different organisations.
Q71 Mr Bacon: Do you mean it is more
in their interest to keep control of it, to have a relatively
short-term contract? I am neutral on this. Is it better for the
taxpayer—
Ms Edwards: No.
Q72 Mr Bacon:— to issue a three
year contract?
Ms Edwards: Yes, sorry, I did
not know what you were going to ask. I thought you were going
to say a one year contract. Longer term contracts, on the whole,
are better for the taxpayer and I think the OGC recognise this.
They produced a guide book with us for the staff of the voluntary
sector and part of that was saying three year contracts often
represent better value for money because people can plan to use
their resources sensibly. If you have just got a one year window
you really do not know what you are staffing it up for, you do
not invest, you cannot deliver the quality that is required if
you think you are going to be closing down again in 12 months'
time.
Q73 Mr Bacon: I am talking about a three
year contract as opposed to a 15 year contract.
Ms Edwards: I think a three year
contract should probably be the minimum, possibly we should be
looking to extend them. I do not know about 15 year contracts—Sir
John may want to comment on this—it would tie down Departments
over a very long period.
Q74 Mr Bacon: Of course, that is exactly
what PFI does and it is one of the worries when contracts are
not inspected enough. In 3.4.3 it goes on to say: "Many funders
still perceive barriers to setting up long-term arrangements"
and highlights concerns about being "locked-in" particularly
"if the quality of the service declined over time, funders
feared they would not be able to address it by removing funding;
longer-term funding could exclude new and innovative service-providers
from consideration." Both of those criticisms apply just
as much to PFI, do they not?
Sir John Gieve: I think the alternative
to PFI is generally on balance sheet financing of capital, which
will have a long-term cost in terms of depreciation and service
charges. The Home Office now have a budget which lasts until 2007-08
and we would not want to commit ourselves too far about what we
are doing in 2012. The Treasury would not either because we have
yet to negotiate our total budget.
Q75 Mr Bacon: Can you just remind me
how long the contract for your fancy new building is?
Sir John Gieve: I have forgotten.
Twenty something years.
Q76 Mr Bacon: So when you get to 2012
are you expecting the Treasury . . .
Sir John Gieve: It is a very small
percentage of our total costs. You have to get these things in
balance. Some contracts with the voluntary sector, for example,
that DfID have gone into with their core overseas aid charities
go longer, and if, for example, we develop the market in correctional
services and we want NACRO to play a bigger role in offender management
in the community, I can see that they may not be able to do that
on three years, and we will then have to look at longer term funding.
So I am not ruling it out but I think the idea that the VCS or
the private sector could generally look for 10- or 15-year contracts
for all services is a bit unrealistic.
Mr Bacon: It is very helpful to have
that on the record, Sir John.
Q77 Jon Trickett: Is the British Council
a third sector organisation?
Sir John Gieve: The British Council
is a public sector organisation.
Q78 Jon Trickett: What is the difference?
Sir John Gieve: Between a third
sector—
Q79 Jon Trickett: Yes, and the British
Council or the BBC? The BBC was created by Charter but just explain
to me the difference.
Sir John Gieve: One is owned by
the Government and the third sector is essentially independent.
1 National Council for Voluntary Organisations, Shared
Aspirations: the role of the voluntary and community sector in
improving the funding relationship with government. Back
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