Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 80 - 99)



  Q80  Mr Ruffley: Because the ONS on the last day of September this year said that in the first 15 months of the Gershon efficiency drive, to cut 84,000 posts gross—the total number of full-time equivalent Civil Service jobs had fallen by only a thousand. How do you explain that?

  Mr Oughton: What I can explain, Mr Ruffley, is that—

  Q81  Mr Ruffley: You accept that figure of the ONS, do you?

  Mr Oughton: May I answer the question?

  Q82  Mr Ruffley: I just wanted to make sure that we are on factually the same terms. You accept that that is what the ONS said?

  Mr Oughton: That is the ONS figure. The answer I was going to give you to the question was that as we monitor departmental progress with delivering the efficiency programme, I am looking every quarter—I looked at it for the July quarter and we will be looking at it again in the October quarter—at what departments are telling us about the reduction in number of posts. My staff will drill down below that headline number and look at how those reductions have taken place. They will look at the actions that have been taken, the changes in departmental programmes that have occurred which have produced those reductions. They are reductions on what would have been the figures if those efficiency changes had not been implemented. We will look at headline numbers and how they are made up.

  Q83  Mr Ruffley: It remains the fact that the total number of full-time equivalent Civil Service jobs has fallen by only 1,000, according to the ONS. Would you accept or reject that figure?

  Mr Oughton: I think it—

  Q84  Mr Ruffley: I do not understand how your answer relates to that figure.

  Mr Oughton: If I may, you are mixing two things. What we are attempting to achieve in the efficiency programme is a reduction of 84,000 posts, compared with what would have been the case if the efficiency programme was not being implemented. That is very clear. That is the commitment. There will be 84,000 gross fewer posts than if we had not been implementing the efficiency programme. It is as simple as that.

  Q85  Mr Ruffley: It is actually compared with future growth! Mr Oughton, is that what you are saying? Compared with what it might have been if there had been growth—

  Mr Oughton: That is precisely what I have said.

  Mr Stephens: Can I just clarify, on the ONS figures? I think as the ONS draws attention, those headline figures include a transfer of staff from the local government sector, let us say magistrates' courts into the central government sector, which does not represent any increase in overall numbers within the public sector—abstracting from that shows, as we reported in the Budget, about a reduction of 12,000 or so.

  Q86  Mr Ruffley: Your figure is that it will be, accounting for what you have just said, 538,000 full-time equivalent posts. That is the figure you have now, or as at April last year. I am just getting this from what the spokesman said. Let us for a moment accept your figure of 538: at this rate you are only proceeding at half the speed you need to, to hit the target by April 2008. That is correct, is it not?

  Mr Oughton: That would be correct, and would be a concern for me, if I thought that there was a straight-line trajectory from the start point of this programme to the end. I think there are two points to understand here. The first is that many of the changes occur as a result of investment being made in the modernisation of delivery of services. For example, in the Department of Work and Pensions, where the largest single contribution to that post reduction is taking place, 40,000 gross, 30,000 net—that is dependent on the investment being made and modernisation of delivery channels for delivery of services to claimants, consumers and members of the public. An investment has to have time to work. This is why we look at this over a three-year period. You would expect the trajectory to accelerate towards the end of that period, as the investment starts to bite. The second point is that of course in other respects, as posts are being reduced, as every manager looks at the costs of his or her operation and looks at ways in which they can streamline those costs, the changes that happen first are the ones that do not require investment to make those changes happen. The simple management decision is to do things differently, to work differently and to use different working practices. You can make those changes relatively quickly. They are, in one sense, the easy changes to make. The more substantial changes, which will then deliver the totality of the 84,000 reduction, again require more sophisticated process changes, and that is why they take longer, but they are contained within the three-year period. I am not worried that the trajectory is at the moment, as you put it, half the rate required to meet the 84,000. I would expect to see that accelerate. That is exactly what we looked at when we looked at departmental plans. That is why we took so long to produce the plans, so that we were confident that they represented a realistic trajectory to the Government.

  Q87  Mr Ruffley: You accept, I think, the 538,000 figure of full-time equivalents, taking it out of the re-badging of the magistrates and others. That is a reduction of what, over the first 15 months?

  Mr Oughton: The reduction that occurred as a result of the efficiency programme is as was reported in the Budget: 12,500 posts.

  Q88  Mr Ruffley: Can you tell me whether those posts have been reduced in round figures, in which departments?

  Mr Oughton: Not without notice, Mr Ruffley, but, as I explained—

  Q89  Mr Ruffley: Roughly; where did most of the 12,000—

  Mr Oughton: No, not without notice. I am very happy to give the Committee a note to show precisely which reductions have taken place.[4]

  Q90 Jim Cousins: I wonder whether the note to which you have just referred could give us this quarterly analysis, distinguishing between different components you have set out to the Committee, so that, for example, we can clearly separate out the reduction in posts compared with what would otherwise have been the case, with, alongside it, the sectoral changes in classification like magistrates' courts, which have moved from one sector to another, together with perhaps growth in activity within the Government sector that may lead to the creation of new posts. It is important to have those three different components of the workforce assessment alongside each other.

  Mr Oughton: Mr Cousins, I will give you what I can in the context of the efficiency programme. If the Committee would like information on those wider questions, we would need to engage in a collective effort within Government to produce those numbers. However, I would suggest that in order to give you the best information I would prefer to hold fire on producing information until the Pre-Budget Report has been published because that is where I expect to be able to set out our most up-to-date statement of progress on posts and on money.

  Q91  Jim Cousins: Our Chair is a hard man, but that would satisfy me! Can I ask you about the overlay of the Lyons Review alongside the reduction in the Government workforce, because that review is always presented regionally and so you get very attractive headline figures, and sometimes even headline headlines, about the transfer of posts into a particular city or region. Nonetheless, the impact of the reduction in the Government workforce as a whole might leave a region that has a very attractive plus figure in the Lyons relocation with in fact a substantial reduction in employment as a result of the achievement of the overall figures. It would be very helpful to the Committee if your analysis of the post reductions could be presented on a regional basis because that would allow the Committee to compare the Lyons Review on the one hand with the reduction of regional Government workforces on the other hand.

  Mr Oughton: Again, Mr Cousins, I will give you what we can in the context of the implementation of the efficiency programme. I should just make the point, however, as the Chancellor made in both the Budget in 2004 at the time when the Lyons Report was published, and also, more importantly, in the Spending Review announcements in July, that you have to see both the Lyons relocations and the headcount post reductions in the context of an expected significant growth in employment across the wider public sector, frontline workers and frontline deliverers of services. That was the whole point behind the work we did on Lyons and on efficiency, about releasing resources that can be reinvested, both money and people, in frontline service delivery tasks. In overall terms, you would expect to see those numbers growing not declining.

  Q92  Jim Cousins: I understand that of course, but perhaps it might be helpful to you if I set out where my thinking is going. If we look to the United States—and many people do—where there is regionally flexible pay, to which I made reference in my earlier questions, and where there is a firm pruning of the public sector workforce, there is also a compensating factor through allocations to states which compensate for the reduction in demand in those states, brought about by those changes. Mr Macpherson, do surprise me: are we considering any such compensating factor in our own public sector spending?

  Mr Macpherson: If you look across public sector employment over the last year, it increased by 95,000. Civil Service employment has fallen by 10,000. The increase in the wider public sector—basically health and education and law and order—is likely to be distributed on a basis that will change the basic distribution of public sector employment in favour of the regions. All I would add to that is that, as you will recall, there have been changes to the formulae that determined both local government and health allocations in recent years, and both those changes have tended to favour regions like the North-East.

  Q93  Jim Cousins: That was rather a long answer when you could simply have said, "no, we are not considering the equivalent compensating factor, which they do in the United States". You are not considering it, are you?

  Mr Macpherson: We try and keep these things under review, but I do not think at present we are considering the particular form of redistribution you have in mind, simply because we do not have a state system like the United States.

  Q94  Jim Cousins: In the last few years there has been considerable growth in public expenditure, and that is something that has washed through regional issues. Regional issues have been dealt with because every region has seen considerable growth in public spending through various allocation mechanisms. But were it to be the case that that growth in public expenditure were now coming to an end, it is bound to highlight these regional issues to which I have been drawing attention. Just a thought!

  Mr Macpherson: We have been trying to improve our data of regional spend, which we publish every year. We monitor it closely, and these things are important.

  Q95  Chairman: Before we leave Lyons, the Treasury's own offer from its core of 1,100 was to send 11 people to Norwich. Have they got there? Is it more than 11?

  Mr Macpherson: I think you are focusing on the core Treasury. When you look across the Treasury group, which is the Treasury, OGC, DMO, you have quite a big presence in Liverpool through OGC buying solutions, and we are seeking to redistribute people through that.

  Mr Oughton: That is absolutely correct. We have a number of regional offices: in Norwich, a large office in Liverpool, a very small office in Leeds and a very small office in Edinburgh. I am expecting to relocate all of the remaining OGC buying solutions staff currently in London, or their posts, and we will close the London office in spring of next year. Those posts will move to Liverpool. I have moved my procurement policy team to the Norwich office, which proves that we can do policy outside London, which is an important signal to give; and of course in partnership with core Treasury we are still looking at how to move forward on the shared accountancy services project—the number of posts you were referring to earlier.

  Q96  Chairman: But on the core Treasury it is still only 11 relocated.

  Mr Macpherson: It is.

  Q97  Chairman: Have they gone?

  Mr Macpherson: That has not happened yet because we are still working on the shared accountancy project, which raises various issues. We are on target to deliver the IT improvements, and we will be taking a view on what it means for the movement to Norwich in that context. The Treasury group as a whole is undoubtedly going to deliver its Lyons target.

  Q98  Susan Kramer: Can I pick up one last question on efficiency? We are always asking you for information, are we not? Can you help me with these 84,000 posts slightly more? Some of us obviously have been under a misapprehension that it was 84,000 posts, roughly where we were at the starting point. It is clearly now 84,000 posts presuming a certain level of growth. Is there any way you can give us an idea of what that presumed level of growth is, and why we should refer—

  Mr Macpherson: John is absolutely right to define it in those terms. When we published the 84,000, we always made clear that 14,000 was going to be reallocated within the total.

  Mr Oughton: Precisely.

  Mr Macpherson: These changes are designed to reduce the size of the Civil Service. I am confident that they will. Given a fairly flat outlook for admin costs across the public sector, although John is right to compare it to what otherwise would have been, I do not think we envisaged any great growth on unchanged policies, so my guess is that it will generally feed through into a reduction of the Civil Service of around 70,000. The one caveat I would make is this: as you know, there have always been issues around definition of the Civil Service, for example prison officers count as civil servants. We just need to be careful in terms of how the frontline public services delivery is evolving in terms of what it means for the Civil Service. The Gershon changes of a net 70,000 in number is precisely that, a 70,000 reduction.

  Q99  Susan Kramer: Keeping oranges as oranges and apples as apples, that is 70,000. Moving on to some of the risk management issues, obviously financial stability is a major topic of discussion and fundamental concern of yours, along with the rest of the Tripartite Standing Committee. How robust, in your assessment, is the UK financial system, and how quickly could it recover from a major operational disruption—and 7/7 is one of those thoughts in mind?

  Mr Macpherson: I think it is robust. We have learnt a huge amount in the last few years, following September 2001. The degree of co-operation between the tripartite body you mentioned and the financial services industry is very considerable. Every year we now have, in a sense, a special test of the system. What is happening at the end of this month, which will involve something like 70 firms, 1,000 people, the Bank, the FSA and the Treasury—and I understand quite a lot of international observers will be coming to watch it—because we are pursuing these test sessions on a far larger scale than in other countries. We are taking this incredibly seriously. We have systems in place. I think July was instructive in the sense that on 7 July the systems did prove robust. The London Clearing House system was directly affected but it kept going. Clearly, there are things we can learn from 7 July about communications, and getting stuff on the Internet as quickly as possible; and we are seeking to learn the whole time.

4   Note by the Witness: In Budget 2005, the Chancellor announced that Departments had delivered the first 12,500 reduction in Civil Service posts. The Chief Secretary's written answer of 1 November 2005 to the Members for Wimbledon, Romford and Gateshead East and Washington West provided a breakdown of these reductions by Department (Official Report, Col 981W). Departments will report on further progress in their Autumn Performance Reports. Back

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