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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