Examination of Witnesses (Questions 120-131)
MR BILL
JEFFREY CB AND
MR TREVOR
WOOLLEY
24 OCTOBER 2006
Q120 Linda Gilroy: Is there a human
relations programme to work with them to find other employment
if they are not in a position to move?
Mr Jeffrey: Yes, there is.
Q121 Mr Jones: As to relocation,
it impacts not just on individuals but on those towns or communities
from which they are moving. What discussions are you having with
either the DTI or regional development agencies in those areas
to minimise the impact of the relocation of jobs out of those
areas?
Mr Jeffrey: We are certainly in
touch through the regional offices and the regional development
agencies about the impact in their regions, and I am keen that
we should be. I believe that often within the Civil Service we
tend to overlook the extent to which in the regions and in large
cities and localities there are a number of different government
departments involved and we can at the very least within government
be thinking imaginatively about how to find other roles for people
within the locality.
Q122 Linda Gilroy: When there are
redundancies of over 100, which are termed "large scale",
does the DTI not normally swing into action in a very positive
way alongside what you are doing as the MoD?
Mr Jeffrey: It does, but if we
can we are keen to avoid redundancies in this case. Among other
things, that implies looking not just at other opportunities with
the MoD but within the Civil Service.
Q123 Mr Jones: One matter which generates
press headlines on a regular basis is write-offs and losses. Obviously,
you do not get headlines when you reduce the losses but only when
they go up. A modicum of good news in these accounts is that there
has been a fall of 36% in 2004-05. What other measures are you
taking to ensure that the reduction in losses continues? Have
you learnt any lessons in the past 12 months that you can project
forward to help reduce this?
Mr Jeffrey: One feature of this
is that because we report impending write-offs in the year in
which we get to know of them and they appear year after year as
prospective write-offs in the future this Committee has an opportunity
to have a go at us every year. I do not want to claim any special
credit for having got the figure down. The fact is that in an
organisation as large as this for good as well as bad reasons
it is sometimes the case that expenditure incurred sensibly at
the time, and in the knowledge held at the time, turns out to
written off. That figure will never be zero. We are keen that
it should be as low as it can be.
Q124 Mr Jones: What are you doing
to ensure that it is as low as possible?
Mr Jeffrey: We try to take prudent
decisions of a kind that further down the track will not lead
us to conclude that there is no option but to discontinue something
and lose some money in the process.
Mr Woolley: One of the key roles
of our audit committees in respect of each of our agencies and
top level budgets, as well as the Defence Audit Committee, is
to review losses reported in that business area. These audit committees
are becoming much more active than they were some years ago in
examining the causes of these loss reports and seeing whether
there are lessons to be learnt, although as the Permanent Secretary
said, in many cases it is perfectly legitimate that losses should
be incurred because they represent valid management decisions.
Q125 Mr Jones: But some of the major
ones are write-offs because of cancellation of projects. Are there
any other big ones in the pipeline that we may be looking at in
future years? We will not reach the point when it will be said
that a project will never be cancelled, but what are you doing
to ensure that projects are more robust so that they will not
be cancelled?
Mr Jeffrey: The lesson learnt
over many years is that principally there should be greater investment
in the early feasibility stage. That money may itself end up being
written off, but certainly there is a lot of evidence—there
is argument about the exact percentage; some say it is 15%—that
by careful investment of resources at the preliminary stage it
is possible to proof the project against subsequent failure to
a greater degree than we have sometimes done in the past. Obviously,
such level of expenditure is not itself free of risk.
Q126 Chairman: Towards the beginning
of this evidence session you said that you understood in the past
year that you had to create enough space both administratively
and within the equipment programme. Does it imply that you need
to create a space by cancelling something?
Mr Jeffrey: Not necessarily. I
think it implies that we need to look hard at our programme, which
is what we are doing at this time of year anyway as we approach
the spending review next year, and in doing so we need to be conscious
that, given recent experience, it would be wise to find some way
to create enough contingency to be able to react as swiftly as
we would wish. Whether particular outcomes flow from that depends
on how successful we are in managing the rest of the programme,
delivering efficiencies and the outcome of the spending review.
Q127 Chairman: Therefore, is it right
that space within the equipment programme means either cancelling
an existing programme or increasing the size of the contingency?
Mr Jeffrey: It means managing
the programme in such a way that as we get into the period of
spend it is not so circumscribed that we are limited in what we
can do in the short term.
Q128 Chairman: Given what the Prime
Minister said, is the Treasury signed up to that?
Mr Jeffrey: The Treasury is signed
up to and has been delivering on looking at those short-term requirements
that we can properly describe as unforeseen operational requirements
in a positive fashion. That is what we have been doing. Particularly
in view of what the Prime Minister said, I have no reason to suppose
that that is not what they will continue to do. When it comes
to the longer term size of the defence budget one would not expect
Treasury Ministers to be other than cautious ahead of the discussions
that they are due to have.
Q129 Chairman: When you say that
the money should not be too circumscribed, essentially it is circumscribed
by the Treasury, is it not?
Mr Jeffrey: Of course, the Budget
is the Budget. Our responsibility is to manage the Budget and
the equipment programme within it and find as many efficiencies
as we can. You mentioned that you would be writing to us about
that section of the report dealing with efficiencies which is
a very important part of it. 16
Q130 Chairman: I am thinking particularly
about the validation of the efficiencies, because when you came
before us last year you produced a lot of efficiencies which proved
to be invalid.
Mr Jeffrey: As it transpired,
last year we overestimated the efficiencies that would flow from
logistics and changes in the DLO. This year, in part because I
was conscious of the attention that you had given this subject
last year I was very clear that the department needed to do its
auditing of the DLO savings well ahead of this hearing.
Q131 Chairman: It is unfair of us
not to ask you the question.
Mr Jeffrey: I am slightly disappointed
that you did not ask the question—now is my chance—because
we have done the audit and are able to be much further along than
we were. As a matter of fact, this year it has moved the other
way. Our auditors have found that, if anything, at the point when
the report was published in the range that we gave we had slightly
underestimated the efficiencies in the DLO, but perhaps I ought
to write to you about that and give you details. 17
Chairman: That would be very helpful.
We have given you a fairly hard time on several issues. I always
think that this is the most testing evidence session of anybody
that we conduct during the course of the year because you are
required to answer for everything that the Ministry of Defence
does and are expected to do so in detail with the accounts before
you. Last year you had the ability to say that you had only just
arrived, although you did not then take advantage of that opportunity
very much. I am extremely grateful to both of you for going into
the detail that you have been able to provide but also for the
commitment to write to us about various other matters and for
giving evidence this morning.
16 See Ev 34, para 13.
17 Ibid.
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