Examination of Witnesses (Questions 40-59)
MR BILL
JEFFREY CB AND
MR TREVOR
WOOLLEY CB
28 NOVEMBER 2007
Q40 Mr Jenkin: I appreciate that,
but is less than 1.5% then, is it not?
Mr Jeffrey: Yes.
Q41 Chairman: Can I ask about the
nuclear deterrent? With many programmes there is the possibility
in the back of the supplier's mind that that programme might be
the victim of a budget removal at some stage because it just becomes
not affordable. That is not the case with the nuclear deterrents,
is it? It is going to be, because of its high profile, pretty
much guaranteed and protected for its programme life, is it not?
Mr Jeffrey: It was necessary to
make the decision that was made last year and announced in the
White Paper and one of the other purposes of making such a statement
was to give the industry the confidence that this was our intention.
That does place on us a burden of negotiating very carefully.
Chairman: Yes, but all the other programmes
are subject to a bit of concern; this one is not.
Q42 Mr Hamilton: The minister said,
when the nuclear deterrent was agreed upon in the House of Commons,
that it would not affect the defence budget in any way. You have
just said that it will affect the defence budget; did I understand
that correctly?
Mr Jeffrey: What I said was that
the undertaking in the White Paper about the cost being provided
additionally and not impacting on conventional capability has
been met, but obviously once the money has been provided it takes
its place within the defence budget. I do not think I am saying
anything different from what was said in the White Paper or from
what the minister said.
Chairman: Can we move onto head office,
the main building and staff issues?
Q43 Linda Gilroy: The Government
has announced a 25% cut in the Ministry of Defence head office
staff. What savings are expected to be made from that streamlining
exercise?
Mr Jeffrey: Our estimate is that
by the end of the period, two or three years hence, we will be
saving more than £50 million a year but there will be some
additional expenditure earlier associated with that to fund the
departure earlier than otherwise would be the case of some of
our Civil Service staff.
Q44 Linda Gilroy: That £50 million
that you have identified is to be reinvested in operations, is
it?
Mr Jeffrey: The thinking is that
across the whole budget—and this has happened elsewhere
in defence, in the service headquarters, in the defence equipment
and support area as well—that we ought constantly to be
looking for ways of reducing administrative costs. The more we
succeed in that, the more there will be available for the front
line. It is also the case that in the spending review for every
government department there is an in-built assumption that administrative
costs would reduce by 5% a year cumulatively, so we are not exceeding
that by very much. I would also say, if I may, that I see this
exercise as the opportunity not just to meet expenditure targets
but to create a head office that is actually slicker and brisker
at what it does. We definitely have ambitions to emerge from this
not with a smaller number of people working even harder but working
more effectively.
Q45 Linda Gilroy: I want to ask you
about that in a moment, but before moving onto it, does that mean
that the savings, if they are to be deployed to the front line,
will be given back to the Treasury? I think I am right in saying
that operational costs currently are met by the Treasury.
Mr Jeffrey: We may be misunderstanding
each other here. By front line costs I mean those of the department's
ordinary budgeted costs which are closer to the front line within
the services.
Q46 Linda Gilroy: What do you mean
by closer to the front line?
Mr Jeffrey: The cost of the armed
forces; the cost of service accommodation, for example.
Q47 Linda Gilroy: Not front line
in terms of deployments in Iraq and Afghanistan.
Mr Jeffrey: The costs of operations
will continue, subject to the point that the Committee is aware
of, to be funded in the usual fashion. What I am not saying is
that we are saving £50 million of head office costs and it
is disappearing into the Treasury coffers. We are saving it within
the context of a settlement that is now fixed; but we will have
that much more money to spend on other things.
Q48 Linda Gilroy: So the aim of the
streamlining exercise, as you have just said, is to make head
office—I think this has been said previously—more
agile and better able to respond to the needs of those on operations.
If you see that as an opportunity, how will reducing head office
staff by 25% achieve that and what were staff doing before that
will not need to be done in the future?
Mr Jeffrey: What we are doing
is looking first of all at what the head office does and what
needs to be done at the centre of the department and what might
not. In each of the main areas we are asking those in charge of
them to conduct an exercise of a very similar kind to what has
been done in the service headquarters, fleet and air commands
and in the army, to look at the tasks, to apply lean principles
of thinking about the processes, to simplify processes where they
can be simplified. It is certainly the case that right across
government it has been found that if you look very carefully at
that sort of issue it is possible to streamline and to manage
to do the business of the department with fewer people. It is
not straightforward and it requires a very careful exercise. It
requires above all the involvement of staff themselves because
they are the people who know best what they are engaged on.
Q49 Linda Gilroy: Yes, and they have
said to us in a briefing that so far you have said very little
more than you have just put before the Committee. I think it would
be helpful if you could tell us when they are able to know more.
I think they see it as a very rough and ready process in which
a decision has been taken without examining whether what you are
suggesting in terms of agility can actually be achieved.
Mr Jeffrey: The proof of the pudding
will be in the eating. Yesterday I completed my own 14th or 15th
session with groups of head office staff, 20 or 30 each time,
explaining this to them and hearing what they have to say. The
area where there is still a degree of uncertainty—and I
am conscious of it—is around exactly how we will manage
the process over the next few years for early departure and what
the terms of that will be and how we will fill posts in the meantime.
Q50 Linda Gilroy: When do you expect
to be able to put more details in front of the unions? I think
you have twice yearly reviews of what staff are thinking about
which would give us an indication of staff morale; what are those
currently saying?
Mr Jeffrey: They are not changing
greatly at the moment. Since I do not have figures immediately
to hand I think I should offer to write to the Committee about
these figures. [2]The
answer to the first question is that we are aiming to publish
some more detail on this before Christmas but probably not in
that detail yet. Discussions are taking place with the unions
about the whole of this.
Q51 Mr Jones: Can I ask how you define
head office?
Mr Jeffrey: That has been one
of the issues we have been addressing. Historically the Ministry
of Defence is an agglomeration of different parts of the organisation.
We are very keen to get to the point where the head office comprises
the essential decision making and policy making support for ministers'
functions that one would expect to see in a headquarters in any
organisation.
Q52 Mr Jones: Does it include the
defence procurement agency and the defence equipment agencies?
Mr Jeffrey: No, it does not.
Q53 Mr Jones: So that is separate.
The £253 million you are saving there—projected—will
that be separate to this £50 million?
Mr Jeffrey: As I mentioned earlier,
the in-built assumption in the spending review for every government
department is that administrative costs will reduce by five per
cent a year each year. That applies to administrative costs outside
the head office. The head office in our terms is simply the four
or five thousand people in central London.
Q54 Mr Jones: I accept that, but
it is in our briefing that there was a specific issue around the
defence logistic organisations and defence procurement agency
merging, that by 2010-11 there would be a £253 million saving;
is that in addition to the £50 million you are going to save?
Mr Jeffrey: Yes, it is.
Q55 Mr Jones: Are we on target for
that saving?
Mr Jeffrey: I believe so, yes.
Mr Jones: You are losing 1000 civil servants
and 300 military plus perhaps 800 more relocated from London.
How is that going?
Chairman: Can you concentrate in that
question on the relocation from London?
Q56 Mr Jones: And the south east.
How many have gone north?
Mr Jeffrey: There are a number
of posts in London which essentially have provided corporate services
for the department rather than being part of the head office in
the way we have just been defining it. There may be a case for
locating these outside London; there is a general government policy
in doing so and we are looking at the scope for doing so.
Q57 Mr Jones: It has not happened
yet then.
Mr Jeffrey: Not yet.
Q58 Mr Hamilton: If you got to a
point through this programme and the discussion you are having
with the staff where everybody says, "No, we cannot cut in
this area", would you, as the head, turn round and tell the
Government you are not going to cut, remembering what the consequences
of that could be? I recognise the fact that you cannot get the
cuts in every area you want and there will be areas where you
want to cut and you cannot cut because the staff will not go.
The point I make is: are you strong enough to turn round and say
that you are not cutting down to that level because of the interests
of the organisation?
Mr Jeffrey: What we have done
in each of the main head office areas is to identify what might
be a sensible target but we have kept to ourselves as a management
board the responsibility of when all that work is done—about
the middle of next year—to consider it and to see what the
impacts would be, to see whether there would be areas where it
just would not make sense to make reductions and if necessary
we will make adjustments accordingly. The overall objective is
to make the savings that I have described and we are very keen
to stick to that if we can.
Q59 Robert Key: The whole defence
sector of the economy has been shrinking and in the last spending
round we lost some 11,000 jobs in the Ministry of Defence. Now
you are proposing another thousand civilian jobs in addition to
the 300 military posts. Obviously there is a risk that the best
staff are going leave. What management measures or structures
have you put in place to assess the risk of your best staff leaving?
Mr Jeffrey: In a sense this comes
back to the questions that Linda Gilroy was asking me. The reason
I wanted to pause over exactly what our scheme will be for early
departures of the civil servants in the head office is because
it needs to be managed very carefully and our objective is to
manage it in such a way that we retain the people who want to
stay in the department and who we need and the skills we need,
and we lose those who are happy to go and we are happy to see
go. It is always difficult to do that against general Civil Service
conditions. That is the balance we will need to try and strike.
My objective is to avoid losing the people we most need.
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