Examination of Witnesses (Questions 40-59)
MR JOHN
OUGHTON, MR
PETER FANNING,
MR HUGH
BARRETT, MR
MARTIN SYKES
AND MR
DAVID ROSSINGTON
17 MAY 2006
Q40 Mr Gauke: Do we know yet whether
future savings by the departments I have mentioned will be reported
net of any expenditure from the modernisation fund?
Mr Oughton: As I think we have
tried to make clear, the approach that we want to move to for
the Efficiency Programme for all new initiatives will be that
they should be calculated on a net basis from a clear starting
baseline.
Q41 Mr Gauke: In 2004 you told us
that the mechanisms for departments being held to account will
be first of all through the Spending Review settlements themselves.
Does this mean that departments who fail to meet their efficiency
targets will be penalised in the forthcoming Comprehensive Spending
Review?
Mr Oughton: I think that all aspects
of departmental performance are relevant when judging the resources
that are required for the next Spending Review period.
Q42 Mr Gauke: And that is certainly
going to be a factor that will be relevant?
Mr Oughton: I would expect so
because, again, as I think the Chief Secretary made clear last
summer in announcing the approach to Comprehensive Spending Review
2007, one of the important elements that the Treasury wish to
address was a judgment on the effectiveness of public spending
across all departments. My colleagues in the core Treasury will
be handling this, of course, but I would expect them to want to
take a very close look at how money is being spent and what we
are getting for it. That is how the public service agreement system
operates.
Q43 Mr Newmark: I have a couple of
points of clarification and then I have a separate question. This
£21.5 billion figure by April 2008, you said, is not all
cash. You said that roughly 50% of it is under private sector
provision, so that is the way I think about it. Gershon is ultimately
£10.5 billion or £10.75 billion of cash savings, and
the rest of it is, sort of, other savings, is that correct? So
the real cash element of Gershon is really closer to £10
billion than the £21.5 billion which is the headline figure
that Gershon and the Chancellor use.
Mr Oughton: I would not compartmentalise
it to those precise numbers.
Q44 Mr Newmark: Well, roughly. £10-£11
billion, then.
Mr Oughton: Sure. What we have
said is that a bit more than half we expected to be hard cash
and the rest would be non-cashable resource. It is an unusual
construct, so it is worth unpacking it slightly. The point here
is that the whole of the £21.5 billion benefit is to be used
to support the delivery of government programmes in the departments
where that benefit is generated. It is to help achieve the public
spending commitments that—
Q45 Mr Newmark: I am thinking about
it from the taxpayer's standpoint. From the taxpayer's standpoint,
in real cash terms, there is £10-£11 billion of cash
savings, as opposed to other efficiencies, which is what you are
talking about with the other half.
Mr Oughton: The taxpayer should
see £21.5 billion of improved value secured in the delivery
of public services.
Q46 Mr Newmark: But in cash terms—that
is, what is being saved in cash terms—it is really half
that figure.
Mr Oughton: Yes—and I do
not think there is anything between us, Mr Newmark, because that
is absolutely what we have said throughout.
Q47 Mr Newmark: I understand what
you are saying now. I do not think the public was aware. I think
when the public think of this £21.5 billion figure that was
announced, they think of it in real cash terms.
Mr Oughton: The end result should
be £21.5 billion of benefit to the public services, either
through real cash being invested in new programmes or released
capacity that can be used to deliver those programmes more effectively.
Q48 Mr Newmark: Thank you. That clarifies
that point. I would like to pick up on a point Peter Viggers made.
The figures he was talking about were figures based on April 2008.
That is the benchmarks that were being used. If we go back to
the DWP—and I appreciate they have a problem because of
the cock-ups on tax credits and everything, so they are a bit
behind on that—and we look at 2007-08 figure, there is still
going to be a 17,000 headcount shortfall from Gershon in 2008,
which was his target date. So it is not a short-term glitch: we
are talking about two to three years now. It is the same thing
with the Home Office. That is also an April 2008 figure, which
shows that there are going to be 4,000 more civil servants, as
opposed to what was originally set out in Gershon. Therefore—and
I am asking you to make a judgment here—would you not say
that the gulf between prospective staffing levels outlined in
the departmental account and the cuts as laid down by Gershon
is really an embarrassment for the Government, and for the Chancellor,
in particular, because this was his baby? He took ownership of
Gershon and already we are hearing a number of excuses as to why
they are not going to meet their target in 2008.
Mr Oughton: I do not think, Mr
Newmark, I have said that I expect departments not to meet their
targets announced in the budget reports.
Q49 Mr Newmark: These are figures
announced in the departmental reports.
Mr Oughton: I know the figures
to which you are referring.
Q50 Mr Newmark: These are real figures;
they are not ones I am making up.
Mr Oughton: Sure. I do, indeed,
know that the figures you are referring to are in departmental
reports. That is every department's current statement of the position
on headcount. The point I was trying to make in response to earlier
questions is that the commitments that were entered into, the
84,000 gross (74,000 net) reductions in posts, were changes that
would occur as a result of implementing the initiatives, the lines
of activity, that Sir Peter Gershon identified in his report.
In the absence of taking that action, then those posts would not
be reduced from central government headcounts. There are other
changes going on. There are other reasons why changes, both plus
and minus, happen in departments. I have, for example, a headcount
agreement with the Treasury based on a number for 2008. I confidently
expect to have fewer people in my organisation for that period
than I planned on, so there will be an example of changes in the
other direction.
Q51 Mr Newmark: With due respect,
that is in your backyard, but if you look at transport, the Home
Office—
Mr Oughton: Yes, we do it.
Q52 Mr Newmark: —the DWP. I
read here in the Times that one of the worst offenders
is the Cabinet Office, the main supporting department for Tony
Blair, which was supposed to cut running costs for the financial
year just ended, 2005-06, by 5.2%: "Instead, in an embarrassment
to the Prime Minister the Cabinet Office administration bill rose
by 1.4% to £882 million." For each department I seem
to be looking at, there seems to be a mismatch between what they
say they are going to do and what they are achieving. Mr Fanning
is from the private sector, like myself originally, and if one
were up before the board of directors at the end of the year or
the end of two years, one would be held accountable for this mismatch.
It seems to be there is a slightly cavalier attitude: "Don't
worry. Mañana. Tomorrow we will get there."
I do not share your confidence, given what I am seeing in the
departmental reports and what I am reading.
Mr Oughton: No, and I do not think
I share your description of what is happening. I am not saying,
"Don't worry. Man¯ana. We will deal with this."
I am saying that the plans that were set out and committed to
in the efficiency programme we monitor and we need to be satisfied
that they are being delivered.
Q53 Mr Newmark: But they are already
out of sync.
Mr Oughton: No. Are the departments
taking the actions that they said they would take and delivering
the benefits? The answer to that, set out very clearly in Budget
2006, is that against the original targets 33,000 posts have been
removed from the central government headcount and another 7,000
posts have been redeployed so that those activities were now in
frontline facing tasks. In terms of: Are the actions being taken
that people promised they would take? the answer is, "Yes,
they are and we are tracking them." Are they having the effect
on the overall headcount that we expected? "Yes, they are."
Are there changes happening in departments as a result of new
priorities and different circumstances? "Yes, of course."
But my responsibility and my concern is to ensure that the changes
in headcount that were promised in the Gershon report and in the
Spending Review 2004 are being delivered and the evidence shows
that they are.
Q54 Chairman: These are not changes
in overall headcount.
Mr Oughton: They are changes in
headcount in the activities that are being looked at in these
initiatives. As I think I said before, Mr Fallon, without the
actions the departments are taking those headcounts would not
reduce.
Mr Rossington: I would add one
further point on running costs. I think it is worth pointing out
that overall running costs for Whitehall departments have increased
by less than 2% compared with a target of 2.4%. I think that is
also mentioned in the material from the press yesterday. To my
mind, that is the most important figure in that article.
Q55 Mr Newmark: I would like to touch
on another thing. We heard the Chancellor claim that £4.7
billion of economies have been secured already. Going back to
my point, is this £4.7 billion in cash savings or these other
savings to which you referred?
Mr Oughton: It will be a mixture
of both. Some of it will be hard cash from procurement; some of
if will be improvements in output because resources have been
redeployed.
Q56 Mr Newmark: Is it roughly half
and half again?
Mr Oughton: It is about half and
half. Those proportions will vary over the period.
Q57 Mr Newmark: To what extent are
the headcount reductions reported by departments subject to review
within OGC?
Mr Oughton: They are reviewed
as every other part of the programme. Again, Mr Rossington can
describe precisely the review process we operate.
Q58 Mr Newmark: The reason I am asking
is because I have gone through five departments and seen a mismatch.
Mr Rossington, you seem to have tremendous confidence, because
you look at a sort of headline figure. Are you reviewing things
department by department, so you are staying on target?
Mr Rossington: Every three months,
OGC is sent a set of data by departments covering efficiency gains
(that is, contributions to the £21.5 billion), relocations
and also headcount. When we get those figures, we check them.
Where there are any questions that we have, we go back to the
departments. We look at them with Treasury colleagues as well
until we are satisfied that they are robust. It is because of
that approach of grinding out the detail, frankly—which
is what my team does as programme managers—that we have
confidence in the data that we produce.
Q59 Mr Newmark: It is interesting
that you say it is "grinding out the detail" and I will
focus this next question on you again, Mr Rossington. The NAO
indicated in February 2006 that the OGC does not validate departments'
reported headcount reductions as rigorously as the reported efficiency
gains. Why is that the case? You say you grind things out but
the NAO seems to be indicating a different perspective at least.
Mr Rossington: The NAO's report
came out in February 2006, and that is obviously three months
ago now. Specifically on headcount reductions, we are—
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