6 Letter from the Cabinet Office to the
Clerk of the Committee
Thank you for your letter of 16 November, setting
out the further questions from the Committee. I am sorry that
I missed your deadline of yesterday, but I thought it would be
helpful to include responses to the three further points raised
by the Committee, following John Hutton's appearance on 1 November.
This is the reason for the very slight delay.
I have given the information requested in the
same order as your letter, with the responses on the three further
points at the end.
E -GOVERNMENT
Point 1
Note 5 to the Resource Accounts reports e-Government
gross expenditure of £24 million and gross income of £12.6
million; overall a net expenditure of £11.4 million for 2004-05
representing 4.5% of total resource outturn. Compared to a net
expenditure of £6.9 million for 2003-04, this represents
a net increase year on year of £4.5 million. Expenditure
and income comprise:
| 2004-05 £ million
| Expenditure | Income
| Net Expenditure |
| | |
|
| Common Infrastructure | 16.6
| (7.4) | 9.2 |
| Directgov Programme | 3.4 |
(1.2) | 2.2 |
| Efficiency Review | 0.8 |
(0.8) | NIL |
| Knowledge Network | 3.2 |
(3.2) | NIL |
| Total | 24 | (12.6)
| 11.4 |
| | |
|
In 2003-04, £6.9 million was spent on building the government's
common infrastructure. Government Common Infrastructure, Directgov
Programme and Knowledge Network are cross government projects
providing infrastructure and services to support the delivery
of e-Government services on behalf of government as a whole. The
first two projects were incomplete and received some core funding
from the Cabinet Office. Knowledge Network was complete and received
contributions from other government departments. e-Government
also delivered work in relation to the Efficiency Review on behalf
of the Office of Government Commerce.
Point 2
Note 5 to the Resource Accounts reports e-Government staff
costs of £360,000 incurred in front-line delivery and therefore
classified as programme costs. These are included in Note 3 to
the Resource Accounts which reports staff costs in full. e-Government
total staff costs for 2004-05 were £6.7 million of which
£360,000 were classified as programme costs and the balance
as administration costs.
Point 3
The £5 million paid to ITNet and subsequently impaired
is an unrelated transaction to the £5.9 million that forms
part of the settlement agreement and is not payable to ITNet or
related organisation. The £5.9 million is the sum of lease
payment obligations that would be made for hardware and software
up until 2008-09. No payments against the £5.9 million have
been made and no firm plans for the hardware/software re-use have
been established at this stage. The Cabinet Office is in discussions
with the hardware supplier about potential re-use and restructuring
the lease. The Cabinet Office will shortly assess information
provided by Chief Information Officers and Chief Technology Officers
across government departments on the potential re-use of the hardware
and software as a resource pool.
Point 4
In the Cabinet Office balance sheet as at 31 March 2005,
e-Government projects are stated at accounting net book value
of £37.1 million; comprising gross expenditure of £127.9
million and accumulated depreciation of £90.8 million. This
represents 15% and not 80% of the tangible fixed assets recognised
by the Cabinet Office. Table 1 provides a breakdown of the various
assets.
| 2004-05 £ million | Hardware
| Software | Total
|
| | |
|
| Government Gateway | 0.94 |
20.48 | 21.42 |
| DotP | 0.03 | 13.98
| 14.01 |
| Knowledge Network | 0.25 |
0.98 | 1.18 |
| e-Government Unit Other | 0.09
| 0.28 | 0.37 |
| Total | 1.4 | 35.7
| 37.1 |
| | |
|
The Cabinet Office has introduced cost-sharing arrangements
so that expenditure on e-Government IT systems provided as common
infrastructure is significantly if not wholly recoverable from
the wider public sector.
Point 5
The dispute was settled on 29 July 2005. When the Resource
Accounts were signed the Cabinet Office position was that the
dispute should be settled amicably out of court so as to minimise
costs to the taxpayer. However, the relationship between the Cabinet
Office and ITNet had been at a particularly low point in the weeks
prior to July, and an amicable settlement looked very unlikely.
But during July the relationship improved and by 24 July a submission
was made to the Minister with a recommendation on the settlement
conditions that would be appropriate. Significant efforts by all
parties enable a binding agreement to be reached by 29 July—too
late for inclusion in to the Resource Accounts. The question of
how the potential liability should be treated in the Resource
Accounts was discussed by our Audit and Risk Committee, and with
the National Audit Office.
Point 6
The potential liability reported in the Cabinet Office Accounts
was based on the limitations of liability within the contract
for termination. The settlement agreement terms reached with Serco
Solutions Limited (formerly known as ITNet UK Limited) were that:
— The Cabinet Office did not pursue its counter
claim, which was more than the value, or potential value of the
ITNet claim;
— The Cabinet Office took the remaining lease term
for certain hardware items which it is seeking to re-deploy for
use by government;
— Confidential information relating to the dispute
was not discussed in a way that would harm Serco's commercial
standing or reputation.
Point 7
The True North project has not been re-awarded and Cabinet
Office is not seeking to re-award. The systems that were to be
migrated and consolidated for hosting purposes under the True
North project have each been extended within the terms of the
contracts that were in place at the time of termination of ITNet.
These systems are DotP (Delivery on the Promise), Knowledge Network
and Government Gateway.
There are separate procurement exercises in place for a replacement
of DotP and to continue to provide the Government Gateway. These
exercises adhere to the proper Office of Government Commerce Gateway
Process and EU procurement rules for public bodies.
Point 8
The table below breaks down the costs incurred by the Cabinet
Office in 2004-05 in order that the defence and counter claim
could be built up appropriately.
The True North (TN) Exit Litigation costs of £3.3 million
are included within Note 4c to the Resource Accounts "Non-staff
administration costs—Other expenditure—Supplies and
Services".
Exceptional items are material items which derive from transactions
falling within the ordinary activities of the reporting entity.
These costs were not disclosed as exceptional, since they fell
within the materiality limit for audit purposes which was 1% of
gross operating expenditure; gross operating expenditure amounted
to £345.9 million for 2004-05.
Forecast expenditure for TN Exit Litigation costs during
2005-06 will be subject to finalisation and audit.
| TN Exit Litigation Costs | 2004-05 (actual)
|
| £'000 | |
| |
| |
| Legal fees and disbursements | 1,025
|
| Other disbursements | 517 |
| Litigation Management and Witness statements
| 1,779 |
| TOTAL | 3,321 |
| |
Suppliers paid:
— Simmons and Simmons—legal fees (including
counsel and court fees) + disbursements.
— Energis—other disbursement exit GSI.
— ITNet—other disbursement data cleansing.
— Qi Consultancy—litigation management.
— Cabinet Office staff—witness statement+litigation
management.
— Alan Whitfield Associates—witness statement+litigation
management.
— Computacenter—witness statement+litigation
management.
— Andrew Pinder Consultant—witness statement.
— Cornwell Management Consultancy—witness
statement.
— Hudson TMP—witness statement.
— Quo Imus Ltd—witness statement.
Point 9
Comparatives in the 2004-05 Resource Accounts have been restated
to comply with merger accounting principles as explained in Note
2 to the Resource Accounts. Machinery of government transfer of
functions are accounted for as a business combination and the
results and cashflows related to the transferred services have
been written out of the account from the start of the financial
year. Prior year comparatives within the operating cost statement
have been restated by £1.234 million with corresponding adjustments
being made to the general fund. The restatements do not represent
significant errors. This approach is consistent with the Resource
Accounting Manual and was discussed and agreed with the National
Audit Office.
Point 10
The proportions of the capital underspends in 2003-04 and
2004-05 relating to the SCOPE Programme are significantly different.
The majority of the underspend in 2003-04 related to the e-government
programme and not the SCOPE Programme. However the 2004-05 underspend
was proportionately more related to SCOPE the reasons for the
underspend are as follows.
The SCOPE Programme is primarily funded from the Capital
Modernisation Fund (CMF). The SCOPE Programme Board extended the
risk reduction phase of the Programme, prior to the selection
of a preferred supplier for the main delivery contract, in order
to protect the investment HMG is making in the Programme by reducing
the risk of delivery problems or cost overruns occurring after
contract award. This has meant that the starting point for the
largest elements of Programme cost, which relate to the development
and delivery of the SCOPE system by the main supplier, have been
deliberately deferred in the interests of best value for money
overall. It does not mean that the final delivery of the Programme
will be deferred commensurably. This was possible because there
is a greater degree of flexibility over the spending profile of
CMF funds. No additional funding, beyond that already planned,
is currently expected to be needed for the SCOPE Programme. The
Programme has in place an active risk management regime overseen
by the SCOPE Board. The Programme Board is made up of board level
representatives of each of the 10 SCOPE partners and also has
permanent representation from the Office of Government Commerce.
Point 11: Properties
The footnote to Note 13 to the Cabinet Office's "Annual
Report and Resource Accounts 2004-05" on tangible fixed assets
includes a list of properties owned by the Cabinet Office. This
represents a complete list of all properties owned by the Cabinet
Office.
Attached is a list of other properties occupied by the Cabinet
Office, the annual rents paid on those properties and to whom
they are paid.
CABINET OFFICE LEASEHOLD BUILDINGS
| Building | Annual Rents Paid
| Landlord |
| 10 Great George Street, London, SW1P 3AE
| £900,000 | Lower Ground Floor_Muller Professional Services, Ground Floor_Edward Charles & Partners LLP, Second Floor_The Home Office
|
| 35 Great Smith Street, London, SW1P 3BQ |
£1,014,475 | Percy Nominees Ltd
|
| 2 Little Smith Street, London, SW1P 3DH |
£200,000 | Weber Shandwick Worldwide
|
| 7 St James's Square, London, SW1Y 4JH |
£500,000 | Jones Lang Lasalle
|
| ÜfpStockley House, London, SW1V 1LQ |
£1,430,000 | Dexter Brown Ltd
|
| 67 Tufton Street, London, SW1P 3QS | £870,000
| Nelson Bakewell Property Consultants |
| 9 Whitehall, London, SW1A 2DD | £796,000
| Nelson Bakewell Property Consultants |
| Grosvenor House, Basing View, Basingstoke, Hampshire, RG21 4HG
| £177,000 | Department for Constitutional Affairs
|
| 11 Belgrave Road, London, SW1V 1RB | £715,941
| Mapeley Estates Ltd |
| 1 St Colme Street, Edinburgh, EH3 6AA |
£27,396 | Citibase |
| St Clements House, 2-16 Colegate, Norwich, ND3 1BQ
| £37,892 | Abergrave Ltd
|
| 1 Horse Guards Road, London, SW1A 2HQ |
£216,498 (Please see Note 1 | HM Treasury
|
| | |
| | |
| | |
| | |
Note 1: Prime Minister's Delivery Unit (PMDU) occupy space
at No l Horse Guards which is owned by HM Treasury. There exists
a Memorandum of Terms of Occupation (MOTO) between HM Treasury
and PMDU which agrees a general service charge which cannot be
broken down into elements, such as rent, for PMDU's part occupation
of the whole building. As such, the figure supplied represents
this encompassing figure.
Point 12
THE CIVIL
SERVICE CLUB
The Cabinet Office holds the freehold of 13-15 Great Scotland
Yard; the property which is occupied by the Civil Service Club.
The Cabinet Office has a Memorandum of Terms of Occupancy (MOTO)
with the Civil Service Sports Council, who hold it "for and
on behalf of the Committee of the Civil Service Club".
Annual rent paid to the Cabinet Office is £52,000 per
annum.
The note repeats Note 14b from the 2003-04 Resource Accounts.
In the preparation of those accounts, research was conducted which
revealed the true history of this asset, on the basis of which
its value was transferred from the General Fund to the Donated
Asset Reserve.
Point 13
The Annual Report mentions at paragraph 48 the costs of the
office of the Rt Hon Alan Milburn MP between 9 September 2004
and 31 March 2005. The costs of his office are included in Note
3 Staff costs and in Note 4 Non-staff administration costs. Data
mentioned in the Annual Report is required to be consistent with
the Accounting Schedules but comparatives are not required. The
costs of previous Chancellors of the Duchy of Lancaster's office
have not previously been reported separately, but have of course
been incurred historically.
Point 14
The revised ETN was due to be published by 31 October 2005
however, the OGC Efficiency Team revised this deadline for all
Departments to 30 November 2005. Since then, HMT and OGC Efficiency
Team have agreed that Cabinet Office should defer publication
until the effects of the new Cabinet Secretary's review of the
Cabinet Office have been quantified by the annual planning round
process. The revised ETN is now planned to be published by 31
March 2006.
The extant ETN forecast the following efficiency savings
in 2004-05: £3.36 million and headcount reduction of 10 (associated
headcount savings of an additional £0.5 million). Cabinet
Office reported achieved savings to HMT and OGC Efficiency Team
and details were reviewed at the joint moderation meeting in July
2005: £1.2 million and no realisation of headcount savings
at that time.
Point 15
I am enclosing a copy of the Financial Management Review
Report.
Point 16
The Cabinet Secretary has recently announced a number of
changes to the organisation of the Cabinet Office, including:
moving the Government Car and Dispatch Agency to DfT and the Government
Social Research Unit to HM Treasury; a number of internal reporting
lines have changed; and we are considering whether any further
changes are needed. We will be producing a new organogram to represent
these changes and will send it to the Committee as soon as it
is available. However, a copy of the Cabinet Office organogram
as it stood in July 2005, together with the costs by management
unit, is attached.
FURTHER POINTS RAISED FOLLOWING JOHN HUTTON'S APPEARANCE
ON 1 NOVEMBER
1. London and Hannington Radio Mast. Firstly
can I clear up some confusion regarding the title and location
of this asset. The listing in our Resource accounts does indeed
refer to "London", but this actually relates to the
previous item in that list ie the Civil Service Club, London.
The mast in question is located at Hannington, which is located
mid-way between Basingstoke and Newbury, on the summit of a large
hill surrounded by open farmland. The site consists of an Aerial
station with associated outbuildings and workshops, and it was
transferred to Cabinet Office from the Home Office as part of
a Machinery of Government change in June 2001.
2. Measurement of success against targets and objectives:
Ministers, Special Advisers and civil servants are aware of and
abide by established standards of propriety and ethics as described
in the Ministerial Code and Civil Service Codes. This objective
is measured by on-going feedback from users on the quality of
advice provided. For example, as a result of views received on
the relevance and accessibility of the current version of the
Civil Service Code, the Government is working with the Office
of the Civil Service Commissioners to improve the wording and
promotion of the Code.
3. The organogram attached sets out the 2005-06 budgets
for the various units.
16 December 2005
| 
