Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 60-79)

OFFICE OF GOVERNMENT COMMERCE AND HM TREASURY

6 MARCH 2006

  Q60  Chairman: The Clerk has confirmed that, so that is the answer.

  Mr Oughton: As I have said already, in giving my advice to the Prime Minister and the Chancellor I am making—

  Q61  Chairman: We have had advice from the Clerk. You are in danger of being in contempt of this Committee.

  Mr Oughton: I am making an assessment which I give to the Prime Minister and the Chancellor. That is policy advice to them.

  Q62  Chairman: It is not. You were told this was a clear case. Mr Bacon was referring to figure 29. It was a factual case. What was the department concerned?

  Mr Oughton: I would need to consult my ministers, if I were to give that information.

  Kitty Ussher: Perhaps Mr Oughton could write to us once he has considered his answer.

  Q63  Chairman: Would you be prepared to give it to us in a private session at the end?

  Mr Oughton: I need to consult my ministers and then certainly I would write to you with a response.[2]

  Chairman: We shall look forward to receiving your answer.

  Q64  Mr Williams: We must reserve the option of calling the witness back after we have heard from him.

  Mr Oughton: Yes, I understand that of course.

  Q65  Greg Clark: May I address the issue of cashable versus non-cashable savings? Page four of the Report, paragraph seven, says that overall, around two thirds of the £21.5 billion target is expected to be cashable. Does that remain the case?

  Mr Oughton: Yes, it seems to be working out as we expected.

  Q66  Greg Clark: But on page five, paragraph 10, it notes that as at the 30 September, just under a half were cashable.

  Mr Oughton: 48%.

  Q67  Greg Clark: So two thirds is the plan, but only half so far. What is the discrepancy?

  Mr Oughton: The discrepancy is because the rate at which savings are made will depend on the nature of the work stream they are coming from. So, for example, on procurement, where by definition there is hard cash coming off the bottom line, we have done some good things on a modest scale, but when I look at forward plans for departments, I can see what is going to happen over the next two years; they have made predictions for three years of their programme. I can look at their predictions for procurement, for productive time, for all the other elements of the programme. I can then make a judgment on the proportions of cash and non-cash that are being delivered. So it will not necessarily look the same in year one, year two and year three.

  Q68  Greg Clark: I understand that, but on that, in the NAO sample of projects which is designed to be representative of the whole, they found that only 31% were cashable and 69% non-cashable, which means that to reverse this by 2008 something like 75% of any savings you discover from now on need to be cashable. Is that going to be met?

  Mr Oughton: Yes and that is our plan. If we are successful in rolling out across procurement generally, which is our intention, some of the techniques that we have been trialling around procurement—I have mentioned the electronic auctions already which have launched very well but on a modest scale—then I would expect there to be very many more significant savings coming from an area such as that. That would allow us then to shift the balance back.

  Q69  Greg Clark: If it is not achieved, then it means the money that was planned to go into the frontline would not be there, so you would accept the importance of this.

  Mr Oughton: Cash and cashable are both very important because they both allow resources to be reinvested in frontline service delivery.

  Q70  Greg Clark: Sure, but you accept the split; that is helpful. In terms of the National Audit Office in this, have you shared your six-monthly reports to the Chancellor and the Prime Minister with the National Audit Office?

  Mr Oughton: The National Audit Office have seen the conclusions and judgments that I have reached.

  Q71  Greg Clark: Have they seen the reports?

  Mr Oughton: Seen; yes.

  Q72  Greg Clark: Do you share them with them as a matter of routine every six months?

  Mr Oughton: I should not say routine. We have only had two, maybe three reports so far; we are only just into this process.

  Q73  Greg Clark: Do you intend to put them on the copy list when they go to the Chancellor?

  Mr Oughton: No, I do not. We have a separate process.

  Q74  Greg Clark: The National Audit Office being the auditor of the public sector, do you not think that they perhaps ought to see the progress report?

  Mr Oughton: No, because when I give, and when any official gives advice to ministers it would not routinely be the case that those documents would be copied to the National Audit Office. There would be a separate process of disclosure of material to our external auditor.

  Q75  Greg Clark: Would it not be the case Sir John that in any audit of a commercial company, the auditor should have access to any relevant financial figures?

  Sir John Bourn: Yes, he certainly should have access, but what Mr Oughton describes would be the practice in the profession as a whole. It would not be that the company would send all the papers to the external auditor as a matter of course; many of them he would have to ask for himself. As Mr Oughton has said, we have asked to see them, we have seen them, we shall continue to ask to see them and we shall see them.

  Q76  Greg Clark: So you expect to be able to ask for them and get them without let or hindrance. Very good. Savings of £2 billion were claimed for the Gershon Review in the Chancellor's 2005 Budget. The timing of that was rather sensitive because it was a few weeks before the General Election was called and obviously there is a need, particularly at that time but at any other time, to be meticulous about that. Sir John, were you asked to comment before the publication of these figures as to their accuracy?

  Sir John Bourn: No.

  Q77  Greg Clark: On page 45 of the Report, the NAO says ". . . we conclude that most of the efficiency gains announced in March 2005 were not based on clear audit trails and, from our understanding of the process through which the gains were collated, were not subject to adequate challenge by the Office of Government Commerce". Does that continue to be your view?

  Sir John Bourn: Yes, that was the view and is the view in relation to what is said there.

  Q78  Greg Clark: As I understand it, the process of collating this information involved the Treasury ringing round departments asking what savings they could offer up in time to be mentioned in the Budget with no checks at all; certainly no checks from the NAO. That is correct is it not Sir John?

  Sir John Bourn: No, we did not check the figures.

  Q79  Greg Clark: Mr Oughton, what do you have to say about that process?

  Mr Oughton: That is an accurate statement of the gains as they were reported in the Budget in the spring of 2005. What has happened since then, which the NAO again quite accurately and faithfully record in the Report, is that there is now greater confidence around the figures because more work has been done on audit trails, more work has been done on establishing baselines.


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