Examination of Witnesses (Questions 80
WEDNESDAY 16 NOVEMBER 2005
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 grossthe
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 quarterI looked at it for
the July quarter and we will be looking at it again in the October
quarterat 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 sectorabstracting 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 netthat 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.
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 Statesand
many people dowhere 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 sectorbasically health and education and
law and orderis 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
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
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
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 projectthe
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
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
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 disruptionand
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 Treasuryand I understand quite a lot of
international observers will be coming to watch itbecause
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