Examination of Witnesses (Questions 1-19)|
17 MAY 2006
Q1 Chairman: Mr Oughton, welcome back
to the Committee. Could you introduce yourself and your colleagues
Mr Oughton: Yes, of course. I
am John Oughton, the Chief Executive of the Office of Government
Commerce. On my left, Peter Fanning, the Deputy Chief Executive
of the Office of Government Commerce, and Martin Sykes, Executive
Director, board member, Office of Government Commerce. On my right,
Hugh Barrett, the Chief Executive from the Office of Government
Commerce Buying Solutions, our trading fund arm, and on my far
right, David Rossington, Executive Board Member, Office of Government
Commerce and Head of the Efficiency Team.
Q2 Chairman: Thank you very much. You
are very welcome. We may have some specific questions for buying
solutions a little later on and we will hear from Mr Barrett.
You said when you came to your appointment hearing that you wanted
to continue "to deliver a high level of service to our existing
customers in civil central government". You have been in
charge for two years now: how would you assess your progress?
Mr Oughton: I think the progress
has been good. I think the Office is valued still by government
departments and, indeed, more widely because we have taken on
a remit now to work with the wider public sector as well as central
government. There are many specifics around our successes, which
are set out in the departmental report on efficiency, on achievement
of our value for money targets a year early and in developing
best practice. Perhaps the bigger picture point, though, is more
important, and that is that with the strong support of both the
Prime Minister and the Chancellor and, indeed, all of the Cabinet
we have been developing a new rather more demanding approach in
the Office of Government Commerce to the delivery of the efficiency
programme and improvement in performance across government. The
message now is very much that choosing not to improve is not an
option: we do expect to see continuous improvement. Embedding
that strong message is a great strength. It would be fair to mention
a couple of the challenges: most importantly, that we are going
through a zero-based review, as part of the Treasury group's own
zero-based review process, at the moment. I am having a thorough-going
look at the activities of the whole of the organisation. That
is unsettling for staff, of course, but we are determined to produce
an organisation that is clearly focused, concentrating on the
issues where we can make a real difference and running our own
business more efficiently in the future.
Q3 Chairman: Extending your remit
across the wider public sector, how can you reassure us that has
not spread you too thinly and that you still have the focus you
originally were given?
Mr Oughton: That is an issue that
we are addressing in the zero-based review. Some of our departmental
contacts do say that they worry that we are spread too thinly
and it is a concern for me too. The way we do this in the wider
public sector, of course, is by not having the same depth of relationship
with every one of 400 local authorities or 43 police forces or
the health trusts or 25,000 schools. We cannot possibly do that
in the way we have a relationship with central government departments,
so we work through agents in the sector. We have accredited the
use of Gateway Reviews, for example, based in the Health Service
and in local government, so we work through a multiplier effect
by agents working on our behalf, as well as ourselves working
Q4 Chairman: You said when we appointed
you that you thought the Efficiency Programme would be about half
the Office's work. Has that turned out to be true, two years on?
Mr Oughton: Yes, I think that
is right. My original expectation was that we would manage the
Efficiency Programme very much as a freestanding additional element
of OGC's activity. That is why I appointed David and we set up
the efficiency team. In practice, a lot of the work of the core
OGC on procurement, on the development of our approach to productive
time, in supporting departments in developing their own plans
and managing the projects that are needed to deliver the efficiency
programme well, means that a lot of the resource from across the
whole of the OGC is now brought to bear, so I think that original
prediction has turned out to be right.
Q5 Chairman: Mr Fanning, you have
arrived from the private sector. What are the cultural differences
you have identified that threaten the drive for more efficiency
in the public sector?
Mr Fanning: I think measuring
efficiency in the private sector is a great deal easier. You have
income and you have cost. You try to operate on both of them,
but at the end of the day you are looking at the net position.
In the public sector, it is very much more difficult to measure
efficiency and I pay tribute to my colleagues who have made a
great deal of progress in that. It is very easy to cut costs in
the public sector; it is much harder to recycle resources, because
you have to establish at the same time a performance measure as
to, for example, the consequence of the removal of resources and
the impact that will have on the quality of service the public
are receiving. The efficiency measures that we use, the techniques
that have been developed, enable us to assert with a great deal
of confidence that the recycling of resources is done with no
deleterious effect on the volume or quality of service that the
public receive. That is one big difference in measurement. Another
issue would be that people come to work in the public sector to
deliver services to the public, whereas people in the private
sector, particularly senior management, have a very clear numerical
focus. I think, therefore, that introducing an efficiency culture
into the public sector is more difficult. We have some extremely
good examples, for example, in education and health and the police
services, where, for example in the area of productive time, changes
in management culture have resulted in improvements to the quality
of service that the public are receiving and a recycling of resources
into the frontline. In a North Wales police force, for example,
the introduction of activity-based costingsa financial
management techniquehave resulted in the saving of, I think,
145 police officers' time which would have been spent on administrative
tasks and now is being allocated to performing police duties that
the public recognise as important. That is an example where better
measurement and modern management techniques have resulted in
a recycling of resources from administrative tasks to tasks which
the public would recognise as being of interest to them.
Q6 Chairman: That is the police force
that is investigating the Prime Minister for making an anti-Welsh
Mr Fanning: It is not the same
police force. I think it is the North Wales police.
Q7 Peter Viggers: Are you making
enough use of private sector skills in the Efficiency Programme?
Mr Oughton: I think we are. Indeed,
last night at the CBI dinner the Prime Minister made the point
that we are very keen across the delivery of all the public service
to involve the private sector in that delivery. In my own Board
team, I have a mixture of public and private sector skills. We
are split about 50:50 in terms of our experience, over 100 man
years of experience in the public sector and the same in the private
sector. If I may take the specific work that we are doing on efficiency,
the procurement workstream is headed by a recruit I brought in
from the private sector, from GNER, working around procurement.
He is supported by others who have come in from the private sector,
from BT and elsewhere, and they bring private sector skills to
bear to help us to develop the approach that we are taking in
the public sector.
Q8 Peter Viggers: But of course in
some areas they are chalk and cheese because they are aiming to
achieve different things. Do you find that you are up against
this private/public interface? How easy do you find it to measure
performance in the public sector?
Mr Oughton: This is not the first
time I have used private sector support to deliver our outcome.
I remember doing this very much in the efficiency drive we ran
in the mid-nineties, so for me this is a perfectly natural way
of doing business, I think. In the private sector, of course,
the profit motive is a very clear one and the bottom-line numbers
are very much clearer. The commitments we have entered into on
the current Spending Review and the commitments on efficiency
are about the recycling of resources to improve frontline public
services. The key challenge for usand it is very hard,
I accept thatis the measurement of the output: the quality
of the public services that are being delivered, as well as measuring
the money savings that are achieved in the Efficiency Programme.
So it is a more complicated thing to do, I accept.
Q9 Peter Viggers: You mentioned the
previous Efficiency Programme. What is special about the current
Efficiency Programme? What is different between this and what
has gone before?
Mr Oughton: I think the NAO Report
that was published in the middle of February sums it up, because
they talked about this programme as, in their view, being probably
the most ambitious Efficiency Programme that they had seen operating
in government anywhere, and it was taking a very broadly based
approach across central government and the wider public sector.
So they judged that the ambition was greater, the breadth was
greater, and the achievements that were being sought were more
substantialso many of the same techniques being used as
previously, but on a much broader scale.
Q10 Peter Viggers: We were told in
evidence that departments are being encouraged to measure new
efficiency initiatives in net terms where this is possible rather
than gross terms. Was it a mistake to use gross terms initially?
What has the progress been in switching to net?
Mr Oughton: Not a mistake, I think,
Mr Viggers, as the NAO Report itself acknowledged, but some of
the work that was captured in Peter Gershon's original report
was work that was already being developed in departments. At the
point at which the decision was taken and the commitments were
entered into in the Spending Review, we were working on and building
on a number of initiatives that already existed. So, working back
to a point at the start of those initiatives, before the investments
were being made, to make change happen would have been a piece
of very complicated reverse engineering, if you like, to produce
those calculations. We have said very clearlyit was said,
I know, in the sessions of evidence on Budget 2006that,
as we move into the next Spending Review period, into Comprehensive
Spending Review 2007, we aim to move to a net basis.
Q11 Peter Viggers: You have a dual
role of developing relationships with departments and also policing
them. Does this cause difficulty?
Mr Oughton: Yes, I think sometimes
it does. It requires a much more sophisticated management of relationships
between the Office of Government Commerce and our clients, the
departments and agencies with whom we work. In a sense, the first
phase of OGC, a brilliantly successful set-up phase, was also
a very straightforward one because we were majoring on advice
and help and guidance and support. That was a benign relationship,
in a sense, and not a terribly intrusive one. As I explained to
Mr Fallon, the approach we take now is a more demanding and more
intrusive one, really challenging organisations who are not improving
their performance. That requires a skill in the staff in OGC who
can manage that approach. That is harder to do, of course.
Q12 Peter Viggers: We were told earlier
that the number of projects within the Efficiency Programme without
baselines is down to just over 100. How many projects are still
without baselines and how are you seeking to move forward on that?
Mr Oughton: We are reducing that
number below 100. I will ask Mr Rossington to comment in detail.
We have made very clear that, until a project has successfully
established a baseline, we will not count savings against it,
we will not count gains against it. There are examples now of
where new baselines have been established for health productive
time, for example, so we can now start counting those gains in,
but we have made absolutely clear that we will not attempt to
measure and score and take credit for gains until we have baselines
Mr Rossington: That is exactly
the position. The issue about baselines is one that is diminishing
over time. For example, in the most recent information that we
have from the 10 biggest departments contributing to the Efficiency
Programme, it looks as if the latest figure is less than 5%. The
Office of Government Commerce has a programme of work underway
with departments to eliminate those remaining problems and that
will conclude by the end of the summer, along with a lot of other
work on measurement following the NAO's recent report.
Q13 Peter Viggers: At what periodicity
do you receive reports to enable you to monitor performance?
Mr Oughton: We monitor on a quarterly
basis. We have, in a sense, increased the rhythm and the frequency
of reports because we are at the end of the first year of the
three year programme. The time available to us, therefore, to
make any corrections if we feel that the programme is falling
short of its objectives, is relatively short. Quarterly reports,
we think, are right. I report to the Prime Minister and the Chancellor
every six months and I do so making an assessment, making a judgment,
on progress against the targets. That is advice to the Prime Minister
and the Chancellor department by department, but we collect information
and we monitor the numbers quarterly.
Mr Rossington: It is perhaps also
worth adding that, in between the collecting of information, there
is continuous contact between the OGC and departments; for example,
in the past 24 hours I happen to have met three management board
members from three different major departments contributing towards
the Efficiency Programme to talk about aspects of their work.
That is a regular occurrence. The OGC is very much here in close
contact with those who are delivering the efficiencies.
Q14 Peter Viggers: Recent press comment
has indicated that some departments have increased their headcount
when they undertook to reduce them. Are these reports correct
or did they come as a shock to you?
Mr Oughton: Some of the changes
in departmental headcounts, of course, have occurred as a result
of redefinition or reclassification. If you were to take the Department
of Constitutional Affairs, for example, bringing the magistrates'
courts inside central government has increased the numbers for
a perfectly clear and transparent reason. In the Department of
Work and Pensions, for example, in response to particular policy
issues that need to be tackled in the Child Support Agency, ministers
took the decision that in the short-term, in order to deal with
those issues, headcount should be increased in the agency while
Sir David Henshaw was conducting his longer-term review into child
support. I think we have good visibility. I am not surprised by
the fact that there are changes in both directions. The overall
picture, however, is the one that is described in the Budget Report
on 22 March, and that is that we are well on track to achieve
the 84,000 gross (70,000 net) reductions in headcount across central
Q15 Peter Viggers: You did not mention
the Department of Transport, which was intended to reduce its
headcount by 650 but it has gone up by 1,400. Can you comment
Mr Oughton: I would expect the
department to meet its targets by the end of the three-year period.
This is a three-year programme. In any three-year programme, you
will expect there to be variations in both directions to reflect
circumstances, but the departmental commitments are absolutely
clear and entered into for this three-year period and I would
expect them to be delivered.
Q16 Peter Viggers: The Home Office
was intended to reduce staff by 2,700 and it has gone up by 4,000.
Mr Oughton: At the moment, yes,
but I would still expect those commitments to be met, and we do
monitor this very carefully. Mr Rossington has described the process
we use. We underpin that by a very intensive scrutiny process
that I run. I am about to do it now with the permanent secretaries
of those departmentsthe Home Office is one of the first
to be donewhere we will go through all of those numbers
and all of that performance in each of the departments.
Q17 Peter Viggers: It is fairly difficult
to believe that something is going to change in the Home Office
which will enable the rise to suddenly become a diminution.
Mr Oughton: I will be better able
to answer that question, Mr Viggers, when I have had my conversation
with Sir David Normington and his team, which I will be having
in a very short period of time.
Q18 Peter Viggers: The verification
of totals at the end of March 2008, how long do you think the
verification process will take and when will the results be known?
Mr Oughton: I hope quickly. We
are developing better ways of measuring. In response to the NAO
Report, we have developed further guidance and further methodology
on the measurements, which is currently under consultation in
departments, and my intention is to have that methodology nailed
down before the summer recess. If we can successfully achieve
better measurements and combine that with the accountability that
the accounting officers and their finance directors currently
have for signing off the numbers before they are submitted to
me, then I hope, when we get to the end of the programme, that
the audit and the eventual verification can be done relatively
quickly. It will be more of a routine by that point than it is
Q19 Peter Viggers: Will that be a
transparent process? When you clear this by the end of the summer,
will that be visible and transparent?
Mr Oughton: We can make it so
because I think it is extremely important that there is a high
level of confidence around our method of measurement. The NAO,
with my full encouragement, will be looking at the programme again
next year. They will want to probe, I am sure, whether we have
made progress on the measurement issues that they identified in
their report in February. I will want to be able to satisfy them
openly and publicly and transparently that we have a good process