Select Committee on Public Accounts Minutes of Evidence


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


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2006
Prepared 2 March 2006