Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 140-159)

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

  Q140 Mr Williams: That is a good answer. Do not spoil it.

  Sir John Gieve: That would be one of the things I would concentrate on but the other thing I would concentrate on is whether we are getting the outcomes we want—I should probably stop because this is not my last appearance. I have a trickier one ahead.

  Q141 Mr Williams: We do call witnesses back sometimes.

  Sir John Gieve: You asked what you could do in a sense which would change the excessive caution of public servants, and I think one of the things you could do is conspicuously to reward people who took a risk and succeeded, and I do not know how often you do do that. I only come to occasional meetings.

  Q142 Mr Williams: We concentrate inevitably on the Reports where we can save the taxpayer money. As you know, we save eight times what the National Audit Office costs in taxpayers' money by concentrating on the problem areas. However, we will not go into the philosophy of that. Today's hearing is extremely important because the Government has made it clear that it intends to make greater use of the sector. We, like the National Audit Office, have no role in relation to policy. If that is the Government's policy, all well and good; we go along with it. If they have a different policy, we examine in the light of that. What concerns me here is that if you look at paragraph 2.13 on page 21 I get a very clear impression of an NAO flag waving there and saying "Extreme caution. There are serious problems that need to be addressed before you go too far down this route." Let us look first of all at the first sentence. "Good funding practices adopted by central Government Departments are generally not preserved where there are complex chains of intermediaries." One can understand that. How are you going to address that?

  Sir John Gieve: We are trying to work with those intermediaries, whether they are agencies, quangos or local authorities, to try and ensure that good intentions are not dissipated.

  Q143 Mr Williams: But that does nothing about the complexity and the distortions and the diversion of resources into other channels—I do not mean improperly—that can take place down the delivery chain. Let us look at the second point. Further down it says "Decisions on funding practice will rest with managers outside central Government Departments" and these managers are "at least one remove from the civil service networks responsible for implementing the Treasury Review's recommendations." How can you deal with that? What are you doing to ensure that they do and will conform to the Treasury Review recommendations?

  Sir John Gieve: The broad answer is the same. We are talking to them; we are encouraging them through a mixture of task forces and working parties. We have one on local government, we have another in the Health Service, we have another in the Culture, Media and Sport area.

  Q144 Mr Williams: This has been going on for years and this is still the assessment the NAO has made of the situation as it stands now. Only six Departments, it tells us on the next page, have tried to disseminate good funding practice. Why? There is £2 billion. I know that is small in the total government financial regime but why is not good practice encouraged and why is it not disseminated?

  Sir John Gieve: When it says only six Departments have issued written guidance—and I am afraid our experience is that written guidance is itself a very imperfect lever on getting people to obey it. I hope other Departments are doing more. I think it is very difficult, and it is true of armies, it is true of the Health Service, it is true of apparent command control organisations, that there are many links in the chain and it is quite difficult for the guy at the top to ensure that the guy at the bottom pays any attention to it. That is a fact of life.

  Q145 Mr Williams: I am now getting shivers about the change in direction of policy, because instead of turning round and saying to me, "Well, look, the Government has now said this is going to be a higher priority, therefore we have scheme A, scheme B and scheme C to address the shortcomings, the problems," all we get is that you are talking about it. I would not encourage the Government to invest extra money through these routes unless I was convinced that you had not only talked but you had delivered in terms of financial discipline. We do not want to constrain them, we do not want to stop them doing their job; we want them to do their job but it has to be done within the confines of propriety with public finance, does it not?

  Sir John Gieve: It does. The answer is you should look at whether the level of voluntary sector contribution to public services is going up and whether the sector is doing well and whether they are building their capacity. In a sense, that is the final outcome of the various measures we are taking to try and change the situation. So the proof of the pudding will be in the eating. There is another point here which I think is important, and that is that the Government should make clear to the intermediaries how their success will be measured and in a way that encourages them to produce the best outcomes. We are doing quite a lot of work on that too, both for agencies and through local area agreements with local authorities to try and simplify the monitoring of funding application mechanisms, but in return we need to agree clearer and more measurable success measures by which we will judge their performance on. That approach should help the voluntary sector and their approach in the voluntary sector too.

  Q146 Mr Williams: You see, if you look at paragraph 1.2, you cannot even agree on how much money they get. You say you are probably surprised to discover that they think they have had 12% more than you think you have given them. Somewhere along the route, either there is a touch of alchemy or someone has not got their accounting right. Which is it?

  Sir John Gieve: As paragraph 1.12 goes on to explain, this is because we have been measuring slightly different things, and it is not that we are coming up with different numbers for the same thing, but we are both in the same ball park. I would not attach too much significance to that.

  Q147 Mr Williams: I would. Can I talk to the other Sir John a moment, Sir John Bourn? I may be wrong in the interpretation I put on the first paragraph I referred to but do you consider that the controls that exist at the moment are effective?

  Sir John Bourn: No, I do not, for the reasons that have come out. They are too bureaucratic and concerned with detail and they do not really enable those who are concerned with control to sum up and understand the way in which the organisation is working and achieving its purposes, so you might have a set of accounts in which you have all the ticks in the boxes but you had still not understood the voluntary organisation and how really effective it was on the ground.

  Q148 Mr Williams: So they are giving them the money but they do not know whether it is value for money or not?

  Sir John Bourn: I think, as Sir John and Ms Edwards and Ms Charlesworth have said, they recognise they have not got it right and they recognise that they have got to do better.

  Q149 Mr Williams: This Report is relatively new, so it must be fairly up to date, and to me it has come over as chaotic, to be honest, in terms of financial control. I am only concerned about that because the Government is thinking of throwing more money in this direction. How long is it going to take you, Sir John, the other Sir John, to get that right and put proper controls in, or do you intend to? Do you not think they are needed?

  Sir John Gieve: Sorry. I got the wrong end of the stick last time. The controls on whether the money is being spent on the right purposes and we are getting value for it that matter are the controls on the individual public bodies and their own contracts. So, for example, are we getting good value out of the hundreds of millions we spend on drug treatment, on the voluntary sector drug treatment agencies? That is an absolutely a core issue for us. We can no doubt do better, get better value for money, especially if we move to longer term funding, but nonetheless, we do know what we are spending and we do have controls over it. The paragraph you are pointing to is, if you like, the survey that we do of what the whole public sector is spending on the voluntary sector and that is not a control mechanism; that is a sort of surveying and coordinating function and we do not perhaps need the same precision on that that we do about our own spending on particular programmes.

  Mr Williams: At first I was going to commend you on sounding very much like a Member of the Committee of Public Accounts in the first part of what you said, but then unfortunately you drifted into sin towards the end. However, we look forward to seeing perhaps in a year or so how far you have progressed in making sure that taxpayers' money is looked at and that this sector is not trammelled in the way it carries out its work. Thank you.

  Q150 Chairman: You made an interesting point earlier, so let us get it ingrained in our collective memory, that when people in the public sector take risks at work, we should do more to congratulate them. Perhaps we should remember that, Sir John. I have over the last four years tried to do that, not so much with Permanent Secretaries because they are past caring.

  Sir John Gieve: I have noticed you are much more polite to the more junior members of staff. Perhaps you should have some PAC awards for successful risk taking.

  Q151 Chairman: I do not know if we could go that far, but we can certainly give credit where credit is due, can we not?

  Sir John Bourn: I certainly think, Chairman, that you have addressed many audiences in which you have said the PAC does recognise successful risk taking and you are not against people taking risks; what you are against is people taking risks without them knowing what they are doing, and it is the encouragement to think through. As Sir John said, if you look at the public sector, it takes the most amazing risks, walking off a cliff without having sussed out what it is about, and that is the thing that needs attending to. What you have done and what we have sought to do in our analysis of successful risk taking, illustrated with cases where Departments have done it and have done it well, we have been glad to testify to those successes, but it is an interesting idea, Sir John advances that there should be PAC awards.

  Chairman: The Sir John Gieve Award. Anyway, I am afraid we are not finished with you yet. I am sorry.

  Q152 Helen Goodman: I am going to bring this down from these Olympian heights. Sir John, do you know about the practice of issuing protective redundancy notices? Are you aware of this?

  Sir John Gieve: I am vaguely aware of it but Helen is saying she is very aware of it.

  Q153 Helen Goodman: It is the problem where when the voluntary sector organisations do not know before the beginning of the new financial year whether they are going to get money in the subsequent year, they then issue redundancy notices in order to that they will not have ongoing salary costs that they will not be able to afford in that event. Do you think that that is likely to be conducive to good morale in the voluntary sector organisations if this happens as a matter of course on a regular basis?

  Sir John Gieve: No. It would be very disruptive.

  Q154 Helen Goodman: Would you like to run the Home Office on this sort of basis, where every January you were issuing redundancy notices to a large proportion of your staff?

  Sir John Gieve: No, I would not, and I do not.

  Q155 Helen Goodman: Could you explain therefore why it is that if you turn to page 34, figure 13, only 18% of the voluntary sector organisations surveyed were told that their funding was being renewed on time? Do you know why this was?

  Sir John Gieve: I do not know about the particulars of those, but I was picking up that in answering your colleague on why this was, it seemed to me, more important than the fact that only 60% felt they were getting advance payments. I do think that this is a chronic problem in government, I know we have been guilty of it in the Home Office and there are usually particular reasons around uncertainties about whether we are going to change our policy or not, but it is very destructive and we certainly have that in our sights.

  Q156 Helen Goodman: Would you accept that the people in fact it is most destructive for are the clients who are affected by the uncertainty of the people working with them? I am slightly concerned that although you care about this, you have not got a very clear view about why this should be. If you do not have a very clear view about why this is going on, what steps can you take to improve the situation?

  Sir John Gieve: I think actually it is connected to multi-year funding, in the sense that if you are having to renew a contract every year, in three years there are three occasions when you may be late, so at least if you move it on to multi-year you can do better. Perhaps a more positive reason is that we tend to have used the voluntary sector on new programmes, on pilot programmes, on things we are trying out, and therefore the final decision has been delayed, so I think we do have a reasonable diagnosis of why it is happening, and it has been a long haul to change it.

  Q157 Helen Goodman: I would also like to cover the point that Mr Trickett made about the representativeness of voluntary sector organisations in deprived communities where the aim is social regeneration and capacity building at that level. Clearly, this relates to the issue about accountability. To whom is the voluntary sector organisation accountable? Is it accountable to the taxpayer for where the money is spent or is it accountable to the community for delivering what the community needs? Have you thought, and if you have not, would you like to think about asking the communities for the targets and standards that they think should be used for monitoring so that we bring these two different strands together?

  Sir John Gieve: I think that is the ideal, and it can be possible. To give one example, we have a national target to build confidence in the police and the rest of the criminal justice system, but that is measured locally, so if you are not doing the things that the locals recognise, then you will not get the increase in confidence. That coincidence, if you like, is where you want to get to.

  Ms Edwards: I think a certain amount of that does go on already. There is a lot of involvement of communities, not specifically in targets, and I think we could do more on that, in regeneration. I know some of the issues around that. People often feel they are involved in consultation but sometimes they are not listened to, and then they are not necessarily involved in taking forward the action that is required. I think we have further to go on that front, but I do not think there is a complete lack of dialogue at that level. I think government is trying to do much more than it has in the past.

  Q158 Helen Goodman: I was not suggesting that there is a lack of dialogue. I was suggesting that an improvement might be to give the communities more of a whip hand by giving them the control over what is measured.

  Ms Edwards: It is interesting, is it not? There is a huge amount of devolution at the front line at the moment. Central government in looking at things like local area agreements, trying to work with local authorities in a different kind of way to roll some of the moneys together so there are not all these different funding streams coming down and attendant responsibilities on local authorities to consult local communities about how that money is spent in accordance with local priorities. So I think there is a movement in this direction, but I can understand why people in communities might feel that it does not look like that from their point of view.

  Q159 Mr Bacon: Ms Charlesworth, how have you managed to turn the relatively mundane subject of overheads into a high science? I have listened with some perplexity to all your answers about full cost recovery, but it says in figure 10 the general support costs, central functions, overheads—not, I do not think, particularly difficult to understand—and if organisations are incapable of working out what their overheads are, is it not questionable whether you should be giving them any money at all?

  Ms Charlesworth: I think the work that ACEVO has done has identified first of all that there is an enormous diversity of organisations here doing a very wide range of different things, so their cost structures will be necessarily different, and what ACEVO have tried to do, and I think successfully now, is provide a common framework for doing that. We are then going to contract with people in different ways, through grants, through contracts, whether you have a tariff system or a price. So the job here and the job we are embarked on is simplifying, but if we over-simplify then people will find when they are looking to fund that their circumstances are not reflected in the guidance, and this is why the NAO have rightly identified that the decision support tool will be very beneficial here, and we will work with them so that what we do is guide them through to make sure that they understand what is right in their circumstances and then they can keep it simple.


 
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