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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 1168-i House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE DEFENCE COMMITTEE
MINISTRY OF DEFENCE ANNUAL REPORT AND ACCOUNTS 2007-08
SIR BILL JEFFREY KCB and MR TREVOR WOOLLEY CB Evidence heard in Public Questions 1 - 128
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Defence Committee on Members present Mr James Arbuthnot, in the Chair Mr David Crausby Linda Gilroy Mr Dai Havard Mr Adam Holloway Mr Bernard Jenkin Mr Brian Jenkins Robert Key Richard Younger-Ross ________________ Memorandum submitted by Ministry of Defence
Examination of Witnesses Witnesses: Sir Bill Jeffrey KCB, Permanent Under Secretary of State, and Mr Trevor Woolley CB, Finance Director, Ministry of Defence, gave evidence. Q1 Chairman: Good morning and welcome to this the first of two evidence sessions on the Ministry of Defence Report and Accounts. Sir Bill, Mr Woolley, may I say first thank you very much indeed for putting in your memorandum in good time for this Committee report this year. Can I begin by asking you about your PSA targets, please. You had six PSA targets and you met in full only one of them and I wondered why that was and whether you were satisfied with that? Sir Bill Jeffrey: I do not think we could be satisfied with that performance as you have described it, Chairman. As the Committee will know very well from the attention it pays to our business, there were different reasons in each case. I think the most obvious example of an unmet PSA target is the readiness one where, as the Committee knows, there is a very clear explanation for that which is to do with the extent to which the Armed Forces have been deployed on current operations and therefore it just has not been possible to maintain the levels of readiness that were set in the original target. Overall what I would say is on the first of the PSA objectives, which is the one to do with operational success, again the Committee through its extensive work and its visits will know this well, indeed better than I do, we feel that at that end of the business, although there is a lot still to do in Afghanistan particularly, there is a lot to be proud of as well. Q2 Chairman: We will come back to that specific target later on this morning. You were deployed on operational matters in 2005, 2006 and 2007 and in your interim assessments you knew you were deployed on those operational matters and yet you were predicting a much more positive outcome on your PSA targets. Those predictions proved to be wrong. Why was that do you think? Sir Bill Jeffrey: Certainly for some time now, as I look back on the quarterly reports we have been predicting (because the trend was clear) that we were unlikely to meet the readiness target. There may have been a bit of institutional over-optimism at some stage but in relation to that target in particular I hope the Committee would agree that we have been clear for a year or so, if not longer, that it was heading in the wrong direction. Whether we could have spotted that trend earlier I would not be able to say. Q3 Chairman: Your forecasting leaves room for improvement, does it not, and how will you improve it? Sir Bill Jeffrey: You could present it that way, Chairman. It is very hard to assess in an empirical way what the impact of deployed operations will be on an indicator like this. As I said to the Committee in this session last year, and I think as the Chief of Defence Staff has said to you as well, it would have been surprising if readiness levels as we measure them had not declined. Exactly how far and how fast I think is quite challenging technically to forecast. What we have been doing as a Department all the way through is our best to maintain such readiness as we can whilst obviously regarding the support and manning of deployed operations as, by some way, the highest priority. Q4 Chairman: Is there a culture in your Department of what you described as institutional over-optimism? Sir Bill Jeffrey: I would not go as far as to say it is a culture, Chairman. It is something we need to guard against because - and again I hope the Committee feels this as you meet people and as you get about the Department - people are enthusiastic about what they do. I certainly feel that in the area that I am sure the Committee will come on to this morning of acquisition and procurement we need to guard very much against a combination of ourselves in our project teams, staffed by people who are keen to deliver what they can for the Armed Forces, the ultimate user and indeed our suppliers all feeling optimistic about the deliverability of a project in time. We have worked hard to counter that - in some areas successfully and some areas less so. Q5 Chairman: You need to inject an element of reality and realism into your forecasting, do you not? Sir Bill Jeffrey: On the particular area that I have identified, I think the main means by which we can do that is by more systematic use of what are known in the trade as eschewed costs exercises, benchmarking, asking ourselves the question if you look internationally at what others are paying for this sort of capability what should we expect to pay. We have done that in the past but not as systematically as I think we ought to. Q6 Mr Jenkins: One thing you might be able to help me with, or you might not be able to help me with, is to cast some light on some of these PSA targets we have got. If you look on 2005-06, 2006-07, 2007-08 we have "on course", "broadly on course with minor slippage" and then "partly met". By "partly met" do you mean it was two per cent off target or 50 per cent off target? When does "partly met" become "not met"? Do you have any way of indicating exactly the degree of concern because "broadly on course with minor slippage" and "partly met" could mean the same thing to me. When did it become "partly met" rather than "broadly on course with minor slippage"? Sir Bill Jeffrey: I think occasions when we have used the phrase "partly met" are usually in relation to PSA targets where there is more than one element to them. The obvious example is in relation to the equipment programme itself and the objective "build for the future, deliver the equipment programme to cost and time". Our objectives there are partly met in the sense that we have delivered on key user requirements through the projects that the Committee knows about, but in relation to cost and time there has been slippage that exceeded the initial targets we were set, so in that sense the PSA target was met in part but not in whole. Elsewhere if you look at some of the international conflict prevention work, I think the view - and this is an inter-departmental one - has been that we have made significant progress but it would be overstating the case to say that we completely met the PSA target, so it is a variety, but I quite take the point, if you look in particular at the readiness target, over the last few years, as I have and as many members of this Committee have, we were possibly holding out hopes of reversing the position longer than it was realistic to do so. I think that is a fair criticism. Q7 Mr Jenkin: I am trying to get a handle on what assumptions you were making then that now do not apply. Is it that additional deployments have been made therefore cancelling more training or is it additional attrition on equipment? These terms "slippage" and "some risk" are euphemisms for what? Is it just optimism or are you being optimistic about what we will not be required to do and a year down the track we find we are doing all sorts of extra things that were not in the original assessment which is why it has slipped? Sir Bill Jeffrey: Obviously we did not have perfect vision of what the commitments would be. We did not at some stages during these three years know exactly what decisions ministers would take on deployments. I think the main feature of this is the extent to which one can assess the impact of deployment over this period of this degree of intensity on the Force elements whose readiness on all the measures that are described in these papers we were attempting to assess. I think to an extent, as I have said, we probably held out for longer on an assumption that we could steady this or improve it than might have been realistic. It is worth bearing in mind that the 78 per cent (which was the original target when it was set at the beginning of the PSA period after the 2004 Spending Review) was seen as a stretching target because it was five per cent more than we were achieving at the time, and in that sense maybe it is not that surprising that it has tailed off in the period since then. Q8 Mr Jenkin: In March this year the National Security Strategy said that we were going to enter into a period of recovery from operations and recuperation but in the six months since then it has just not turned out to be that. Were you happy with that assessment going into the National Security Strategy? Sir Bill Jeffrey: We are now looking forward rather than looking backwards and I think there is reason to believe that there will be a significant scaling down as we achieve the fundamental change of mission in Iraq for example that the Prime Minister has referred to, so there is the prospect in reasonably short time, notwithstanding the fact that we will no doubt still have some presence in Iraq, of getting down essentially for the purposes of this sort of planning instrument to one medium scale. Q9 Mr
Jenkin: That assumes we are
not going to send additional staff to Sir Bill Jeffrey: I
think the only sensible posture for the Department to take is that we will do
what we are required to do and are doing now in two theatres. As I said, there is reason to suppose that
the commitment in Q10 Mr Jenkin: But what demands are made upon you is not within your control? Sir Bill Jeffrey: I think to that extent this is the construct of a business trying to manage itself as rationally as it can in an uncertain world. I do not make any apology for that. I think it is in the nature of the business we are in that we do not exactly know the future nor do our ministers nor does anybody. Mr Havard: This question of recuperation and recovery, I am told that we are not going to be in a position to have another large overseas conflict or be ready for it until 2017. Is that correct? How long is it going to take to get back to this state. Q11 Chairman: We will come on to that later I think. Answer that question if you would and we will explore it further later on. Sir Bill Jeffrey: It is difficult to be precise. It is certainly the case that reconstitution for what is known in the planning business as large-scale deliberate intervention will take longer than reconstitution for another medium-scale operation should one come along. I do not recall the 2017 date but I will check and give the Committee some information. Chairman: We will come on to your own predictions on that in a few minutes' time. David Crausby? Q12 Mr Crausby: The National Audit Office tells us that you have not yet published detailed measurement and delivery plans for your new Departmental Strategic Objective targets despite the Treasury's deadline of April 2008. When will you be able to provide us with a copy of these objectives? Sir Bill Jeffrey: I am not immediately certain from the way you have described it, Mr Crausby, what the National Audit Office was referring to. There is an intention within the Department certainly to pull together a cross-departmental strategy and that is going on now. It is putting together our defence strategic thinking, our business strategy and our long-term resource strategy, but I do not recognise the term that the National Audit Office are quoted as using. Q13 Mr Crausby: The NAO simply noted the deadline set by HM Treasury for departments to create detailed measurement and delivery plans for their Departmental Strategic Objectives was April 2008 and those detailed plans have not been published to date. Sir Bill Jeffrey: I do apologise, it is not something that is immediately known us and I think the safest course with the Committee, as ever, is to offer to give you a note. Mr Woolley: We do have detailed targets for each of the Departmental Strategic Objectives against which we are reporting now and against which we reported at the first quarter recently. Q14 Chairman: Maybe you would send us a note on that. Sir Bill Jeffrey: We will certainly do so. It may be what is at issue here is what Trevor Woolley has just described which is the new style Departmental Strategic Objectives which replaced the PSA objectives. We have published these and indeed, as he says, the first quarter's report against them is the one we sent you a few days ago. Mr Woolley: There are a couple of sub-objectives where we did not report at the first quarter where we said we would be reporting at the second quarter, but we do have detailed targets that relate to those sub-objectives and they have been agreed and we can certainly provide those to the Committee if that would be helpful. Q15 Mr Crausby: So you will send us a note. Can I ask some questions about defence inflation and the impact that that will have on our targets. The Committee recently visited a seminar at Shrivenham and three experts told us there that price inflation for normal goods and services when they calculated the defence inflation for equipment was some three per cent higher than normal inflation. Does that calculation of three per cent defence inflation ring true with you and what impact will that have difference of three per cent on the GDP deflator have on our performance? Sir Bill Jeffrey: It is certainly the case, and I can recall in the equivalent session last year discussing this with the Committee, that some of our input costs are rising faster than general inflation, although it has fluctuated hugely in the last few months, and oil and fuel is one of these. I am aware of the analysis by Professor Kirkpatrick that you were briefed on at Shrivenham and it is an interesting one. I do not think we could immediately validate the figure of three per cent. It is like any analysis of this kind, it rests pretty heavily on the assumptions that are made at each stage as Professor Kirkpatrick sets out the argument and I think we would question in particular the assumption that we should not discount technological improvements in comparing the costs of different generations of defence equipment. However, it is an interesting piece of work and it is certainly an area that within the Department we are devoting quite a lot of attention to. Q16 Mr Crausby: So do you calculate a figure of your own? First of all, do you accept that defence inflation is running higher than the GDP deflator? Secondly, do you calculate a figure of your own? Sir Bill Jeffrey: If I might make one comment on the GDP deflator point, the thing to bear in mind about the GDP deflator is that it measures in the end inflation in the output of the economy; it does not measure input inflation, and often elsewhere in the economy the cost of inputs rise more rapidly than the eventual price that one pays in term of outputs. As I have said before, we would certainly recognise a picture in which the mix of goods and services, and dare I say it also people because we are always (to the extent that it is affordable) pleased when Armed Forces pay settlements are at the top end of the range that that mix of goods and services and people in some respects inflates year-on-year by more than general inflation. I would not care to go further than that and I certainly do not think that although we have found it a good lead (and I do not mean that in any critical way) we could as a Department sign up to the three per cent figure. Mr Woolley: I think that is right. I think it is important to be aware of this distinction between input and output inflation. It is very difficult to measure a unit of defence capability, which is our defence output. If you cannot measure a unit of defence capability it is very difficult to say how the cost of that unit of defence capability may have increased or not from one year to the next. What we are obviously very interested in is the input cost because it is in the nature of the economy that you would expect the input cost to increase faster than the output cost, just as a company's wage bill will tend to increase at a faster rate of inflation than the prices of the products that a company is manufacturing. Nonetheless, it is important for us to understand what the inflation of those input costs is. In terms of pay, which is a very large part of our budget, we have a very good understanding of that. In terms of the equipment it is quite a complex issue. To the extent that we have equipment programmes with firm price contracts, where over a period of years what we are paying for a particular contract has been absolutely fixed, you have to make an assumption as to what element of inflation is built into that firm price and that is not self-evident. In the cases of contracts for defence equipment that have variation of price clauses, which are intended to take account of inflation, these variation of price clauses are linked to a whole series of published indices. These may be the retail price index, they may be industry-specific indices, and each contract has a different variation of price clause in it relating to these indices and some different measures in some different proportions, and therefore in terms of trying to get a feel for the overall average weighted rate of inflation in defence equipment procurement with variation of price clauses, this is a far from straightforward exercise, but we are trying to assemble more information on this. It is a very detailed exercise we have to undertake and that will give us a better understanding of our input inflation. We would not expect that input inflation to be higher than the inflation in the rest of the economy because we would expect our efficiency, like any private company's efficiency, to be able to translate those rises of input cost to rather lower output prices. Q17 Mr Crausby: So are you saying that you think it is there but it is difficult to calculate? Sir Bill Jeffrey: I think we are saying it is difficult to analyse (because it is as complex as it is) what the inflation of input prices and the equipment we acquire is, although we are working on that. We are certainly not saying that there is not an effect called defence inflation. I think every defence department in the world experiences the generational effect that Professor Fitzpatrick's paper describes in the sense that the equipment we buy is becoming more capable but item-for-item more expensive as technology advances. That is undoubtedly there, it is something we have to cope with as a Departments and, as Trevor Woolley said, in a way, this is what lies behind the major efforts to improve efficiency that are described in the report the Committee has in front of them. Q18 Chairman: So you are working on it? Sir Bill Jeffrey: Yes. Q19 Chairman: Is this not what you said last year? Sir Bill Jeffrey: It is. Q20 Chairman: Is it what you will say next year? Sir Bill Jeffrey: I hope not. I think we will have a better picture before then and we can certainly, if the Committee would welcome it, provide some analysis of this issue as we see it at present. It is certainly not one in which we are at all uninterested and, for the avoidance of doubt, it is one that we do play into our discussions with the Treasury because we do draw to their attention some of the cost pressures that we face that we have just been describing. Q21 Chairman: What is the timescale for the outcome of this work? Sir Bill Jeffrey: I think the detailed work will take a year. Q22 Chairman: It has already taken a year, has it not? Mr Woolley: It has but in terms of the information that we need to assemble through an analysis of all the different defence contracts this is a time-consuming process, and obviously we need to have an intellectually robust product at the end of it, and we expect that to take another year. Q23 Chairman: Another year? Mr Woolley: Yes. Sir Bill Jeffrey: I do think since the Committee is as interested in this topic as it obviously is, we should try to furnish you with a note with what we are able to say about this issue complex as it is. Chairman: It would be helpful if you could because, as you say, it is very important in your negotiations with the Treasury. Brian Jenkins? Q24 Mr Jenkins: I am sitting here listening to the answers and in some part you have answered some of the questions, but going back a number of years, I remember going through the retail price indices with families and pensioners and why they are different, and it is only recently (this was 30 years ago) we started re-establishing the differences in different groups and different purchasers. When you start talking about it is difficult to estimate the rate of inflation because of inputs and outputs, they seem quite simple calculations to do: an input analysis and a rate of inflation. What worries me is the widespread belief, and I do not know how you answer this, where everyone recognises out there that the MoD is a customer that buys last year's technology at next year's prices and you are tied into long contracts which do not appear to have taken any inference from the falling cost of technology whereas anyone around the table would know that the technological advances we have seen in society in consumer goods should be reflected back through the producers into the goods you are purchasing. Why is that not happening? Sir Bill Jeffrey: To some extent, Mr Jenkins, I think the argument in the defence area is about numbers of repeats. The huge savings in the civil sector tend to be in areas where there is a mass market and there can be massive economies of scale through production. We are in a different sort of business and we have to recognise that. I do not think it is fair to say that we get last year's technology at next year's prices. We certainly try to negotiate the best prices we can. As Mr Woolley said, there are variational price clauses in most contracts that are intended to address that. I am not saying to the Committee there is not an issue there. It clearly is the case that if you look at the basket of things that we acquire that there are significant variations in year-on-year costs within it. We understand a bit about that but the detailed exercise that we have been at for some time, and I fear will be at for a bit longer is intended to get much more under the surface. Q25 Chairman: Is the real risk that the best will be the enemy of the good? Moving on, your Report and Accounts were qualified this year. When were they last qualified? Sir Bill Jeffrey: They were qualified the previous year for an entirely technical reason, which I am sure the Committee will recall, to do with the expenditure in theatre. Mr Woolley: There was a small over-spend on "requests for resources to", that is the cost of operations, in 2006-07 which led to a technical qualification by the National Audit Office because of that overspend, but in terms of the substance of the Accounts they were last qualified in, I believe, 2002-03. Q26 Chairman: The qualification this year was not what you would describe as a small technical qualification? Sir Bill Jeffrey: No it was not. Q27 Chairman: Is it serious? It sounds pretty serious to me. Sir Bill Jeffrey: It is. It is serious and troubling and we are working hard to make sure that it does not happen at the end of this year. As is I think clear from the Accounts it reflects the fact that although the Joint Personnel Administration system is, we believe, now bedding down for the principal purposes for which it was introduced, it has had quite serious problems in terms of its ability to give us and give our auditors the information they need about expenditure on Service pay and allowances that would give them the confidence to test that aspect of our Accounts, so it is serious. I asked for an internal piece of work, which the Committee I think will be aware of, to be done which revealed that, looking back on it, the JPA project paid too little attention to the extent to which the system that was being produced would feed the Accounts and give us the confidence to have the Accounts properly audited. We are working very hard at the moment. I had a conversation with the recently appointed Chief Executive of the Service Personnel and Veterans Agency a week or so ago to address all the issues that the NAO drew to our attention and on which we were already working, with a view to sorting this out as quickly as we can. Q28 Chairman: So you have introduced new financial controls on JPA. Do you think that these controls will have the effect that the Accounts will not be qualified, or at least not for the same reason next year? Sir Bill Jeffrey: I would not care to make a confident prediction about that yet because as we have gone into it there is a lot to be done to correct the situation, but there is a good prospect, and we are working very closely with the NAO who have been extremely helpful over this, of getting to the point where they can give us unqualified Accounts in this respect at the end of the current financial year. Q29 Chairman: Why would you not be confident of that? Sir Bill Jeffrey: I think principally because of the technical complexity of this issue. It comes down to the means by which very, very large numbers of payments are made in a system, notwithstanding the extent to which the JPA is enabling us to make it simpler, which is extremely complicated. I do not know whether Trevor Woolley would like to add to that. It is proving a difficult task but there is a lot of effort being invested in it. Mr Woolley: I think the difficulty is that we have replaced a manual system with an automated system. In a manual system there are lots of opportunities for manual intervention if it looks as if a payment is being made at the wrong level or to the wrong person. The automated system we have in JPA does not have that same level of control and the same level of evidence that the right payments have been made to the right people. There is no suggestion that there is a significant amount of wrong payments being paid but there is no actual evidence to satisfy the NAO that the right payments are being made. The reason I think we cannot be absolutely confident is that although we are putting a lot of procedures into the system to give greater assurance, it will only be at the end of the financial year that the NAO tell us whether in their view there is sufficient assurance. Q30 Chairman: So the set of suggestions that the NAO have made about completing a systems map, having new processes to ensure that there are not input errors or output processing errors, an overall plan for prioritising issues, are those recommendations ones which you are following? Sir Bill Jeffrey: Yes exactly, and we are doing so as quickly as we can because I can assure the Committee that this is something that as Accounting Officer I take extremely seriously. Chairman: Still on JPA, Richard Younger-Ross? Q31 Richard Younger-Ross: In terms of self-service satisfaction you told us that the JPA Centre was currently running at 4.5 per cent. How do you intend to improve that figure? Sir Bill Jeffrey: I thought the current figures (although I do not have them in front of me) were better than that. Certainly I know that the satisfaction surveys have been on an upward trend and some of the teething problems that we undoubtedly had as we initially rolled the system out have been addressed successfully so that people are now getting their basic pay without interruption, but I do not have an up-to-date satisfaction survey figure in front of me. My recollection is that it is a bit higher than you have just quoted. Q32 Richard Younger-Ross: You say it is going up? Sir Bill Jeffrey: Yes. Q33 Richard Younger-Ross: When is it going to get to the 90/95 per cent level which is what I would expect from any pay roll system, if not higher? Sir Bill Jeffrey: As quickly as possible. I would find it hard to put a date on that but again this is something I discussed with the new SPVA Chief Executive when she took over and building up the satisfaction levels within the system is something that I have asked her to take as a pretty high priority. Q34 Richard Younger-Ross: The contract you let out to do this ran at an addition of £2.3 million over budget. Only £516,000 of that was reclaimable from one of the contractors EDS. Why was so little reclaimable? Sir Bill Jeffrey: There is a provision in the contract for a failure charge which is essentially something that takes account of the nature of any failure in service delivery under the contract and also the extent to which it is reasonable to attribute responsibility either to EDS or to the Department, and there is an agreed procedure for settling between us what failure charges should be imposed on EDS. In 2007-08, as you say Mr Younger-Ross, that figure was £516,000. Q35 Richard Younger-Ross: So the other nearly £1.8 million is a failing by the Department? Sir Bill Jeffrey: I would not be absolutely certain that is the sole explanation but it is certainly the case that the half million or so was as much, consistent with the contract, as we thought it reasonable to impose as penalties on EDS. Q36 Richard Younger-Ross: It has been suggested that part of the problem was that the hardware was designed in one part of the country and the software in another part of the country; is that true? Sir Bill Jeffrey: It depends which problem you are talking about. If we are back at the problem of the issues which led to the qualification of the Accounts, the source of that was, as I have said, the project paid too little attention to the financial dimension of the issue. If your point is about the extent to which in its early days the system in all three Services suffered teething problems and there were issues that gave rise to complaints, I think I would argue that with big systems of this sort inevitably this is going to happen to some extent. I do not recall ever having been told that the particular way in which the hardware and software were put together contributed to that. Q37 Richard Younger-Ross: I think we would all accept that you can have some small teething problems in any system but this seems to have been a major failing and if the satisfaction figures, which I am told by the way are up to 77 per cent now, were down to 45 per cent at one point, that strikes me as not a small teething problem but a systemic failing. Sir Bill Jeffrey: I am not going to sit here and defend 45 per cent as a favourable rating but having seen one or two of these things across government there is a period when not only are some people affected by mistakes in the system but a lot of others who know them know about them and therefore there is a sense around that the system is not performing and that reflects itself in favourability ratings. The figure that I did not have but your Clerk has been able to provide you with suggests that we are on quite a rapid upward trend, as I believed we would be. These are big, complex systems and it is never at all satisfactory or defensible when people are paid the wrong amounts on encounter difficulties in the self-service element of it, but I think we are getting into a better position now. Q38 Richard Younger-Ross: That is what I mean, Sir Bill. You seem to accept that this level of failure is acceptable. The real question that we want as a Committee to know is how do you stop failures like this occurring at future dates? Sir Bill Jeffrey: It is principally, as the project is developed, by taking as much of the risk out as possible and delivering it carefully in stages so there are as few risks as possible of things going wrong. I do not remotely want to say that this was completely satisfactory, of course it was not, I am simply asking the Committee to consider the fact that this was replacing myriad manual systems, it was covering a very large population of employees, it was essentially automating a pay and allowances system which is extraordinarily complex and needs to be made less complex, and therefore it perhaps was not as surprising as all that that we encountered some of the problems that we did. Chairman: Moving on to the implementation of the efficiency programme, Robert Key. Q39 Robert Key: The achievement in cutting civilian staff numbers has been quite remarkable. Your target was to reduce the civilian staff by at least 10,000. The achievement to the end of year 2007-08 was actually to cut civilian staff by 17,500. That has however clearly been achieved at a substantial cost and I draw the Committee's attention, Chairman, to the Annual Report and Accounts, paragraph 213, on page 127 and if I may I will quote two sentences: "We must address the limits on individual and organisational performance imposed by the variable quality of management and leadership and the limitations of our pay and reward structure. We must address the threat to future capability flowing from the skills gap associated with streamlining the Defence Equipment and Support Business Strategy, the lack of a deep understanding of our skills needs and our uncertainty over whether we will have an adequate supply of talented people sufficiently representative of the society we serve to fill key posts in the future." That is a very, very bleak assessment of how you have managed to cut 17,500 civilian jobs. Is this what has been contributing to the stretch currently experienced by the Armed Forces themselves not just the civilians? It has had an impact, surely, on the efficiency of the uniformed members of the Armed Forces? Sir Bill Jeffrey: I think, Mr Keys, there are two different issues here. One is that we were committed to reduce the number of civilians and the Joint Personnel Administration Project, which we have been discussing, is an example of one of the means by which we did so, by automating processes that were labour-intensive. Another good example is the Defence Logistics Transformation Programme where we have reduced the number of civilian staff very significantly by doing things smarter, and I think the report brings out in many respects very successfully. Reducing civilian numbers is something we have been working on and ought to be working on and every other part of government is doing so. That we over-achieved to the extent that we did I think reflects the particular situation in one or two parts of the organisation, of which the Defence Equipment and Support organisation is a contributor in the sense that we lost people more rapidly than we had probably been expecting, but it also reflects the fact that some of these efficiency measures did deliver achievable reductions in civilian numbers. The second point is the one dealt with in this paragraph which may be on the self-critical side but it does bring out the fact that as a Department we have to look to our skills base in particular and we have been developing a strategy for doing that right across the board, in relation to financial accountancy skills in Trevor Woolley's area, commercial and project management skills and some of the high-tech skills as well so we very much need strategically to build the skills of the Department to face the challenges of the future. Q40 Robert
Key: But looking to the
future you also say in the same paragraph: "We must address the risk to our
change programmes posed by the decline in overall satisfaction with the
Ministry of Defence as an employer and the disengagement many of our people
feel with them." Looking ahead for
example to the move of Headquarters Land from Erskine Barracks, Wilton to
Andover, first of all the military were very concerned about this because they
thought they might get something worse rather than something better, but were
assured they would be new build, something worthy of Headquarters Land if they
moved to Andover, or somewhere else (because as you know there were a number of
options. In fact, they are not they are
going to move into the refurbished buildings that have been vacated at Sir Bill Jeffrey: I am aware of the Land Command case that you mention and I quite accept that that will have had an impact on staff there. Across the Department I think it is the case that during a period of significant organisational change and upheaval there is an inevitable impact on the way our staff feel. The surveys that we conduct reflect that but they also reflect staff who are broadly very committed to the job that they are doing, feel motivated about it, generally speaking, feel that they are clear about their role in the organisation, so that the survey material (and I think some of it is reflected in the report) does reflect what I would hope are the relatively short-term consequences of organisational and structural upheaval but it also reflects staff who, rightly, are proud of what they are doing and convinced of its importance. Q41 Robert Key: I am grateful for that honest assessment. Could we move on to the Capability Review which found weaknesses in the leadership at the Ministry of Defence, specifically that the Defence Management Board did not act as a unified group representing the interests of different parts of the Department. Can I be quite clear that I understand this. What happened was that the Defence Management Board itself was scrapped and replaced by the Defence Board which was to make high-level strategic decisions and in addition a new Defence Operating Board was created to implement those decisions. How does all of that actually improve leadership within the Ministry of Defence? Sir Bill Jeffrey: It does not in itself do so, Mr Keys. I think what the Capability Review found, and in doing so was to some extent reflecting back to us what some of us had said to the reviewers, was that we needed as a Board to operate more strategically and more corporately and in self-critical mode that is what we believed at the time. The CDS and I have set ourselves the task, in what are nevertheless very busy times, of using more meetings generally to consider the strategic direction of the Department supported by the Operating Board where the Vice Chief of the Defence Staff and Permanent Secretary in effect are there to drive through the strategic direction that the top board gives to ensure that everybody is clear about who is following through on particular remits. We think it is a better working model. Whether we are operating more corporately you would need to ask individual members of the Board. I certainly believe, again in quite challenging times, the group of colleagues that sits around the Defence Board table are all fully committed to defence as an entity. It is inevitable that they bring issues that are particular to their role in the organisation to the table and it is right that they should, but I feel - and you will have to take my word for it I am afraid - that the Defence Board is cohering and has a common view on what we are trying to achieve. Q42 Robert Key: Sir Bill, the streamlining process is going to result in a 25 per cent saving in manpower at head office. How have you gone about deciding where to make these cuts? It has been argued by some that management simply said to each individual division or section in head office each section has got to cut 25 per cent and you identify how you are going to cut it and then all those 25 per cents were aggregated into the final figure, which was not a very coherent way, was it? In management terms you would not just say every department cuts 25 per cent; you would say perhaps you need to cut less and you can cut more or we can merge you here and there? Could you explain the process a little so that we can understand how efficient and effective the 25 per cent cuts have been? Sir Bill Jeffrey: It was not as crude as you have been led to believe. One has to start somewhere and there is an element of chicken and egg about this. What the Board did at the beginning of the process was to take, I would say, three things. First, we had to reduce numbers because every government department had an obligation after the Spending Review to reduce its administrative cost base by five per cent a year cumulative, so we had to reduce numbers by something of this order. Secondly, we believed it ought to be possible. Thirdly, we saw it as an opportunity to enable the head office to work in a less elaborate, simpler, better-defined fashion with quicker decisions and less elaborate staffing. How we did it was to start by saying that a 25 per cent reduction overall ought to be possible and then to ask the three stars in each of the main areas to make an assessment within their own areas with a starting point that was not 25 per cent in each case. It reflected a judgment of where it was likely to be least likely to find savings or most likely, so it was differentiated from the outset. There was then a process in which those who knew their part of the business best analysed it and came up with proposals for ways of doing things differently. Some of these were quite substantial with different processes, and a redefinition of what needs to be done at the centre, and out of that came restructuring with numbers of posts at different levels in each of the main areas. It came back to the Board and we had to reach a judgment on how much of this to pursue and how much not to do so, so it took time, it took longer than some within the organisation would have wished but I think it was a better process as a consequence. Q43 Robert Key: Thank you for that. Finally, would you be so kind as to try and explain to me what the Chief of Defence Staff meant in a recent article about streamlining. He said that the streamlining project would help to "stimulate and embed a more agile way of working across the MoD". Can you give us some examples of what this will mean in practice? Sir Bill Jeffrey: The Chief of the Defence Staff uses the word "agility" a lot and I think it is a helpful one in this Department. Most members of this Committee now know us quite well and I think - and I say that as somebody who has not spent most of my working life in the MoD - the MoD has quite a strength in terms of its grasp of its business but sometimes agile it is not. It can staff the same issue successively at different levels and it can sometimes embark on very elaborate processes. I think what Jock Stirrup meant was that there is an opportunity here, if we manage it well, to address that issue and to enable us to take decisions more quickly and be clearer about who is actually responsible for taking them. Q44 Mr Havard: All this streamlining, different working methods, agility and all the rest of it, a lot of it is predicated, as I understand it, on technological support not the least of which is the Defence Information Infrastructure Project which, as I understand it, was originally going to cost £2 billion and now it is going to cost £7 billion and is late. Perhaps you could explain to us exactly how the support is going to come through this fewer number of people who are going to be more agile and do all these things? Sir Bill Jeffrey: There is a long explanation of the £2 billion/£7 billion figures that I had to give to the Public Accounts Committee a few weeks ago. I think it was actually £3 billion that at an earlier point was the value of the contracts that had actually been approved. The £7 billion is the NAO's estimate of what the total cost of the project, including some associated aspects, will in the end be. It does not mean that the cost has gone up. The actual increase in cost is in the small numbers of hundreds of millions, which is a lot of money but it is barely three per cent of the total cost of the project. I think when they audited it the National Audit Office felt that this was a project that by the, admittedly unstretching, standards of government IT procurements was on the right lines. As far as timescales are concerned, there has been significant slippage in the roll-out of the terminals which we have had to accommodate ourselves to, and we are now expecting by the end of January to have delivered the first group of 68,000, as I recall, terminals and are well on course for that now. Q45 Mr Havard: They are all being trained and this transformation is all taking place seamlessly to create less people doing more? Sir Bill Jeffrey: What this is is a new IT infrastructure which replaces a number of very self-contained functionalities across the Department. It is not in itself one of these functionalities; it is the infrastructure in which a number of other systems reside. Again, I think in project management terms one of the things the National Audit Office felt we had done well was not in that sense to bite off more than we could chew by wrapping individual projects up with the DII. The DII in a way, which will in time cover the whole of the defence business, including the deployed part of it, will be the IT infrastructure by which the whole business does its work. Q46 Mr Havard: What I am trying to get at is is the support mechanism that is coming in in concert with the reduction in the number of people so that you are supporting a higher level of work for a fewer number of people? Are they going hand-in-hand or are they disconnected in some fashion? Sir Bill Jeffrey: Certainly there has been an extensive training programme and there will continue to be around the roll-out of the DII. The DII is not itself the means by which most of these staff savings will be made. They tend to come from projects like the JPA and the Defence Logistics Transformation Programme. What it is is the element that unites them all because many of these change projects are dependent on having for the first time in the MoD a single IT infrastructure that enables everything, and there is a lot of associated training, I can assure you. Q47 Chairman: Despite the size of this, Sir Bill, I would recommend that you abandon use of the phrase "small numbers of hundreds of millions". It does not go down well! Sir Bill Jeffrey: I understand that, Chairman. Q48 Mr Jenkins: I noticed in one of your answers, Sir Bill, you said "we reassessed what needs to be done at headquarters". That always gets an alarm bell ringing in my head. Have we moved any work or staff out of the headquarters on to another site? Sir Bill Jeffrey: There has not been a block of work that has moved. In two significant areas there has been the reappraisal of the relationship between people at headquarters and people elsewhere in the Department. In the Vice Chief of the Defence Staff's personnel area some of the reductions there reflect the changed way of working between DCDS (Powers), as he is known, and the principal personnel officers in the three Services. In the equipment capability area, similarly there has been a discussion between DCDS (EC) and the Defence Equipment and Support Organisation about exactly what the relationship between the two is. The performance of that has been to define in a more strategic way what General Viggers and colleagues do at the centre, so it is a redefinition to make the centre of the Department more strategic. Q49 Mr Jenkins: So the answer is yes, that most of them will be? Sir Bill Jeffrey: I would not describe it as 'moving work'. The answer is that we have found ways of enabling us to do the work that needs doing at the centre with somewhat fewer people. Q50 Mr Jenkins: The percentage of people, we always have civilian and uniformed in the headquarters, so what was the percentage of civilian and uniformed? Will it be the same? Sir Bill Jeffrey: As I recall, it is about one in three or one in four of our people in the head office are military staff. This exercise has scarcely changed it. Mr Woolley: The proportions are very-little-changed, with a very slightly higher reduction in civilian numbers proportionately than military numbers, but it is very close, within a percentage or two. Q51 Linda Gilroy: Sir Bill, the Cabinet Office has introduced a requirement for all departmental accounts and reports to list data losses during the year, and of course the MoD Annual Report lists two serious ones from January and February of this year, the loss of substantial amounts of data relating to personnel records containing limited details also of referees and next of kin. Of course, we have been told by the NAO as well that, since 2004, the MoD has lost 121 memory sticks and 747 laptops. The Burton Review looked into that and said that there was, nevertheless, some good practice in the MoD in policy, but, in practice, he was highly critical that the procedures were not dealing properly with what should be, in an MoD of all departments, key operational business and business assets. The Burton Review identified 51 recommendations. Where are we with the implementation of those recommendations? Sir Bill Jeffrey: Well, the first point to make is that we accepted all of them and have established and published, at the time when the Burton Report was published, an action plan to implement them, and we are on course with that. Some of them could be done quickly. We have, in particular, already encrypted around 20,000 laptops and others will take longer. The thing that is most challenging, as you implied, is the behavioural aspect of this. I was dismayed by the sequence of events which Sir Edmund Burton has asked by me to investigate because it revealed that, although, as you say, our systems and processes were as you would wish and our policies were right, it just was not getting followed through in practice, so, to my mind, the most important aspect of the Burton Action Plan is the awareness and education campaign to just drive home to people that this is as important as it is. Q52 Linda Gilroy: Well, he said that that would depend significantly on support and leadership across the Department. Given that there have been further data losses more recently, what does that say about the leadership and the way in which the Action Plan - who owns the Action Plan? What does it look like in terms of the daily/weekly/monthly business of what you do? Sir Bill Jeffrey: The Action Plan is owned at the centre by John Taylor, the Chief Information Officer, and he has a team to support him in doing that, but the most important lead comes, as we were implying earlier to Mr Key's questions, from the Defence Board. We have been as clear as we possibly could be across the organisation that this is a very high priority, which we have established, as one of the strategic risks that we monitor and manage within our Board. Why have there been other cases? I do not think we are ever going to eradicate in the modern world the loss of a laptop, for example, or systems of that kind. What we need to do is to reduce it and very definitely make its impact less damaging. The most recent case involving the loss of the hard disks actually resulted from a census by our suppliers of their removable media, which was being undertaken because of all the effort we have instigated from the centre to get more on top of this, so it is work in progress, but it is exceptionally important work. Q53 Linda Gilroy: The problem with it is that any single loss can incur a huge loss of data even if you reduce the number of actual incidents. Sir Bill Jeffrey: Indeed. Q54 Linda Gilroy: I would like just to ask you about recommendation 17 in particular, which says that "a coherent joint Service and Civil Service awareness should be launched on the importance of information and data as a key operational and business asset, with appropriate attention devoted to exploitation and protection within the law". What does that look like from the many individuals in the Department who have access to, and use, these huge amounts of data? Sir Bill Jeffrey: Well, it is happening. It is hard to describe a campaign in a few words in front of a committee like this, but it is definitely being pursued energetically. An aspect of it, which I think is, as you implied when you referred to the troopman(?) database, very important, is that this should not just be about the importance of protecting systems and data security, as such, it must also be about the proportionality of these systems. One of the problems with the troopman data that was in the laptop was that it was more extensive than it needed to be for its purpose and was not being kept up-to-date and, in a number of other respects, was not compliant with data protection legislation, so, in trying to shift the way our people manage these issues, we are spreading that message as well. Q55 Linda Gilroy: But surely that message has to be spread on a regular and consistent basis? Am I not right in thinking that there are industry standards which are implemented in the private sector and presumably, through the Cabinet Office, it is being implemented across government departments? For instance, from an individual point of view, because this is about motivating and making sure that individuals pay attention to this, is it embedded in the appraisal and reporting system? Sir Bill Jeffrey: It is, yes. Q56 Linda Gilroy: And, as far as the people who accredit these issues are concerned, I notice in a further recommendation, and I am just interested following on Robert Key's series of questions to you, that one of the things that Sir Edmund drew attention to was that the current cadre of accreditors within the Department was small to cope with the scale of the task it faces, and they are currently 15 short of the required manning level of 60. What has been done about that, and presumably this is an area that has been exempt from the streamlining process? Sir Bill Jeffrey: My recollection is that we have been addressing that and the numbers have been rising, but I do not have a figure in front of me and, if I may, I might add that to the list of things to give the Committee more information about. Q57 Linda Gilroy: Finally, recommendation 38 also referred to another thing that is necessary for the enforcement of this and just to make sure that people do take it seriously, and it required that "the MoD should review and formalise a coherent system of censure and punishment for those who lose, or compromise, personal data". What has been done about that so that people realise that there are consequences to being careless? Previously, in the Second World War, we had "Careless words cost lives", and, in the Cold War, information issues were taken very seriously. The consequences of the loss of data in the modern IT age are even more substantial and, therefore, the efforts have to be regular, consistent and substantial, and I just do not get a sense from your responses that that is the case. Sir Bill Jeffrey: We have to be fair to individuals when these events occur and, therefore, every case needs to be looked at individually, but, subject to that, the information campaign that we have been discussing certainly includes very clear messages that this is an area where people will be held responsible and accountable for their actions or failures, and I think right across government that the climate on this issue has become significantly chillier and staff know that they will be severely dealt with if they have actually behaved negligently. Q58 Linda Gilroy: So could we have a note about what that consists of as well because my understanding is that these very serious data losses resulted in administrative action rather than anything more serious. When would there be more serious action than straightforward administrative action? Sir Bill Jeffrey: Yes, we will provide something on that. Q59 Chairman: It would probably not be a fair question to ask you, but, if a civil servant loses a memory stick, one consequence follows, and, if a minister loses the same memory stick, it would be interesting to know what consequence followed as a result of that, but that would be a question perhaps to ask the Secretary of State when he comes before us next week. Sir Bill Jeffrey: I shall warn him to expect it! Q60 Mr Jenkin: Objective 1, just to remind ourselves, to "achieve the objectives established by ministers for operations and military tasks in which the UK's Armed Forces are involved, including providing support to our civil communities", this is the only target which is fully met, but we are not allowed to judge that measurement because this is the one where the criteria for that target are kept secret. Can you understand that we are a little bit frustrated by this? Sir Bill Jeffrey: Yes, I can. Q61 Mr Jenkin: How should we best deal with it? Sir Bill Jeffrey: I think what the Department certainly does, and the Committee has not been slow to ask, is provide quite extensive information about current operations. At root, the assessment of PSA1, as it was, rests on quite detailed military judgments, and Trevor may be able to remind me as to exactly what these are. Mr Woolley: We try to give more information on the criteria on the successor to this, the departmental strategic objective 1, in the memorandum that we gave the Committee recently in terms of what the criteria were that we look at in establishing whether or not this objective is met. Q62 Mr Jenkin: To give a specific example, the operations in Afghanistan, I think it would be safe to say, are problematic, and nothing I say should in any way be seen as criticism of the Armed Forces themselves, we think they are doing an absolutely incredible job, but the flow of drugs money to the insurgency is up, the areas controlled by the Taleban are up, every patrol that goes out is making contact with the enemy, and it is difficult to argue that these military operations are "a success" unless success is drawn in very narrow terms. Can you elaborate in any way without compromising the secrecy of those objectives? Sir Bill Jeffrey: I was trying to find the relevant reference,
but it is certainly objective 1 in the PSA agreement in this Annual Report over
the whole period, "Objective - achieve success in the military tasks we
undertake at home and abroad", and the assessment is that this was met, and
that is over that period up to the end of March 2008. Our first quarterly performance report, which
the Committee received a few days ago, for 2008-09 against departmental
strategic objective 1, which is the equivalent objective, says, "Some
progress. Security in Q63 Mr Jenkin: But is the target really about successfully deploying rather than the outcome of the military operation itself? Is that what the target is about? Sir Bill Jeffrey: No, it is defined in terms of achieving
success in the military tasks. I do not
want to understate the significance of this, but this is an entirely natural
first strategic objective for a department like this to have, and you would
question us pretty closely if we did not have this as our first objective. Inevitably, it is subjective in its
assessment and the only people who can make, in my view, a reliable assessment
of that are our military commanders, which is what they do, but in the
quarterly reports, like the one that you received recently, we try, in a way
that would not give heart to the enemy, to give an honest account of where we
think the campaign has reached. I think
what I have just quoted, "Security in Q64 Mr Jenkin: I think it is impossible to pursue this line
of questioning, Chairman, and I do not know whether we ought to seek a briefing
in private on this matter. Perhaps that
is something we could address with the Secretary of State. Moving on to restoring capability, your
memorandum states that, "we continue to analyse the qualitative impact this",
referring to current operations, "is having and to develop and cost a programme
designed to restore full capability once commitments return to level
anticipated within defence planning assumptions". Your memo says that you are assessing how to
restore full capability after current operations in Sir Bill Jeffrey: I would have thought so. This is the work on detailed ways of restoring capability and we will certainly be able to give the Committee a note on that when the time comes. Q65 Mr Jenkin: As my colleague Mr Havard referred to earlier, you say that you expect to restore full contingent capability by 2013 or 2014. Can you first explain what you mean by "full contingent capability"? Sir Bill Jeffrey: It means that the force elements that we assess for these purposes are at a satisfactory state of readiness without significant or tactical weaknesses. It means, in effect, reversing the trend of the last few years when operational deployment has made these figures go down. Q66 Mr Jenkin: Are we perhaps straying into over-optimism again because I have heard very senior and respected figures, who no longer work in your Department, saying very much later dates than that, 2017 or even 2020. Are we straying into over-optimism again? Sir Bill Jeffrey: It depends what you are talking about. Mr Havard's question, I took it to be about large-scale deliberate intervention and I think that could be further off for the reasons that you imply, but there is an awful lot of uncertainty about this. I do not want to sound as if I am blowing the edges off it, but the fact is that we do not know when we will be in a position to really start the process of regenerating what my military colleagues call the "seedcorn". We know that it is going to be a principal preoccupation of the Department as soon as we can get on to it, but we do not know exactly what the condition of the Armed Forces will be when we get to that happy state of lower commitments and, as you implied earlier, we may find it hard to do so because we may be asked to do other things. This is a world in which there is considerable uncertainty and our task is to manage that uncertainty as well as we can. Q67 Mr Jenkin: But how do you assess risk? Presumably, there must be a way of making an assessment of risk that this forecast will not be met, for example, and what the risks are of being required to do something before full contingent capability is restored and of not being able to do something perhaps? Sir Bill Jeffrey: Undoubtedly, one of the risks is that the commitments that the Armed Forces are expected to fulfil expand in ways that we, at the moment, know nothing of, but, as I said earlier, the working assumption, which seems the best one for us to make, is that for some time to come Afghanistan will be a significant commitment, but that, as we move into the fundamental change in the mission in Iraq next year that the Prime Minister has described, then we will be able very substantially to reduce the 4,000 or so troops that we have in southern Iraq. Q68 Mr Jenkin: You say in your memo that, if the Treasury decides to run the next Spending Review for publication next summer, you will be in a position to ensure that the necessary costs are taken into account. Is there some doubt about that? Sir Bill Jeffrey: About when the next Spending Review will be? Q69 Mr Jenkin: No. Presumably, there are some costs associated with restoring full contingent capability. Will all of those costs be taken into account in the next Spending Round? Sir Bill Jeffrey: We will need to ensure that they are, first of all, identified and that it is all costed properly and we will need to ensure that, in the discussions with the Treasury in the next Spending Round, we register them as important priorities. Q70 Mr Jenkin: Is there some question about not having the necessary data to enable you to do that? Sir Bill Jeffrey: I do not believe so, no, and Trevor may want to comment. There is inevitable uncertainty about some of this, but, if the next Spending Review is next year, it will deal with the succeeding three years and we will need to make our best estimate of how much recuperation we expect to be engaging in over these three years. Q71 Mr Jenkin: Presumably, the 2013/14 forecast is based on an assumption that these costs will be fully funded? Sir Bill Jeffrey: I think it is, yes. Mr Woolley: What we are trying to establish is what it would be necessary to do in order to ensure that we would have that full contingent capability by 2013/14, and clearly that involves a number of military judgments about the capabilities of the Armed Forces, some of which give rise to additional expenditure, and we will be seeking to identify what that additional expenditure will be. There is though quite a lot of uncertainty. It obviously depends on the level of commitment in Afghanistan, and that might be higher or lower, and that in itself then works its way into the level of additional training that might be required for members of the Armed Forces who have been focused specifically on training for Afghanistan rather than exercised in more general skills, and it depends to a large extent on the state of equipment returning from Afghanistan and the extent to which that needs to be replaced or refurbished, so there are a lot of uncertainties. I think that we will need to offer a range of possible costs and continually refine them in attempting to establish what the cost of recuperating to a full contingent capability will be. Q72 Mr Jenkin: I think obviously what this Committee would like to know is what the range of costs are once you have established them, and then we would like to know to what extent you are able to cover those costs out of the allocations you are given. Is that a possibility? Sir Bill Jeffrey: That is an entirely reasonably request. At this stage, we do not know, but we can certainly flag up the Committee's interest. Q73 Chairman: It is not only a range of possible costs, it also sounds to me as though it is a range of possible dates because what you said in your memorandum was not that you expected to restore full contingent capability by 2013/14, but that you are doing work to see how you might restore full contingent capability by 2013/14. Why was it that date that you chose? Was it that you did not expect any sudden need for this contingent capability to arise before 2013/14? Mr Woolley: I think it is more a question that we think it, in practice, unlikely that we could establish this in less than five years, and that is why we took 2013. Q74 Chairman: Whether the need exists or not? Mr Woolley: Well, the need of course could crop up at any time, but it is a question of when we think it might be realistic to establish that full contingent capability that our defence planning assumptions set out. Q75 Chairman: So, if the need cropped up in 2012, there would be absolutely nothing you could do about it? Mr Woolley: I do not think we are saying that. At any one time, ministers and the chiefs of staff reach judgments as to what might be deployable on particular operations, but it may be that, in order to deploy on operations, we would have to break some of our planning assumptions. For example, our harmony guidelines for the tour intervals of members of the Armed Forces, what we are talking about here is restoring a full contingent capability that is consistent with our defence planning assumptions. Clearly, to the extent that we are prepared to break those defence planning assumptions in terms of harmony, we can do more on an exceptional basis in a shorter time-frame. Q76 Chairman: So 2013/14 is not just a figure plucked out of the air, it is the earliest conceivable time by which you could restore full contingent capability? Sir Bill Jeffrey: I would say that the earliest is the more realistic time and I do not think one can ever be so absolute as to say that nothing can be done in the meantime, for the reasons that Trevor gives. This is a world in which we plan as well as we can, but still have to deal with events. Q77 Mr Havard: You have got various mechanisms to help you with the planning assumptions, the Studies and Assumptions Group and lots of other people who presumably feed into all of this, but this all comes back to these assumptions, so you are trying to make the process consistent with them. Is there not an argument, and it is an argument which is going on generally, about how those planning assumptions are dealt with and whether or not we need a new Strategic Defence Review and actually change what it is we are prepared or anticipating to do, whether it be large, small or medium and the various combinations of? Is this an active debate and an active piece of work within the Department? Sir Bill Jeffrey: Well, there are two points there. The first is that, on the planning assumptions, they are really what it says on the tin, they are the working assumptions about the demands that one might expect to be made on the Armed Forces and the capabilities from which they derive, and the fact that we are operating above them and have been for some years, I think, is a tribute to the military, in particular, but the system as a whole. It does not mean that they were the wrong assumptions, it simply means that, in the event, we have ended up ---- Q78 Mr Havard: If we have been tested in battle, it is always the plan that goes first. Sir Bill Jeffrey: ---- exceeding them. Q79 Mr Havard: Perhaps you need a new plan. Sir Bill Jeffrey: As far as our Defence Review is concerned, you might want to ask my Secretary of State about that when you see him in a week or so. Q80 Mr Havard: I am sure I will! Sir Bill Jeffrey: Sorry, "you might want to ask" is a bit Sir Humphrey-ish! I do not think there is any current intention to have a full-scale Defence Review, comparable to the Strategic Defence Review in 1997, in the foreseeable future. Q81 Mr Holloway: Sir Bill, moving on to readiness, the targets to improve it have not been met and indeed it has deteriorated. Does this mean that we will not be ready for future operations beyond the stuff we are doing now? Sir Bill Jeffrey: It certainly means that the measures that we use to assess readiness show the decline that we have seen and, as I argued earlier, I think we all feel, and the Chief of Defence Staff has said the same to this Committee in the past himself, that there is a certain inevitability about that. By definition, if you use the military estimate, and certainly if you use it as intensively as we do now, it becomes less ready for other tasks than it would otherwise have been. It does not mean that we will not be capable of doing more in the future and, for all the reasons we have just been discussing, I think one of our prime responsibilities as a department is, as soon as we possibly can, to regenerate this capability for future use. I think it is also worth adding that, even if we were operating within the defence planning assumptions, sustained operations within these assumptions would be having some impact on readiness. Q82 Chairman: But we are not. Sir Bill Jeffrey: We are not. Q83 Mr Jenkin: You are planning to recast your readiness targets in which, you tell us, you are planning to relax the readiness targets for some force elements, so what does this actually mean in practice, like we are not going to be ready to do what compared to what we are planning to be ready for at the moment? Is the Department refocusing on current operations? Sir Bill Jeffrey: There have been some changes made in the way in which readiness is measured in the last few months, and they are reflected in the first quarterly report, which the Committee has just had. Their purpose is to focus more on our capabilities rather than specifics and to avoid an element of duplication that was there before, and the changes there have in fact had the effect of making the measured readiness level slightly worse than it would otherwise have been by about 2 per cent, we think. Q84 Mr Jenkin: Making the readiness level worse? What do you mean? Sir Bill Jeffrey: I think your question may have related more to what we do to measure readiness in future, and I do not know whether Trevor can say something about that. Mr Woolley: I think there are two issues. There is the issue of how we measure against this target and what we have done is reconstructed the measure to make it more realistic. We have a large number of force elements and each force element is assessed as to whether it is at serious or critical weakness, but obviously, in having an overall index, we need to weight individual force elements because you would not weight our Gazelle helicopters at the same weight as you would weight our nuclear deterrent, for example. Q85 Mr Jenkin: But it does suggest to me that these new readiness targets mean our Armed Forces are actually going to be less ready than they would have been under the old targets. You will score them as ready and you are setting an easier target. Mr Woolley: Well, there is separately the fact that, in one or two cases, I think not more than half a dozen, we have relaxed the required readiness state of some of our Armed Forces. Q86 Mr Jenkin: But that smacks of moving the goalposts of a target you have decided you just cannot meet. Mr Woolley: Well, it is not in relation to the target, it is in relation to an assessment of the likelihood of requiring those particular force elements at the level of readiness we are ultimately required to have. Q87 Mr Jenkin: So basically we are then downgrading the readiness of the force elements that we just do not think we will require or the capabilities we do not think we will use? Sir Bill Jeffrey: I think I may have misunderstood your first question, and I apologise. There are two things going on. One is that we have made some changes in the way in which readiness is measured, which are reflected in the last quarter's report. They are more to do with making sure that there is not double-counting or disproportionate attention given to some capabilities and not others. Q88 Mr Jenkin: No, I understand that point you are making. Sir Bill Jeffrey: The net effect is to make the figures look worse than they actually are than better. Q89 Mr Jenkin: But I think Mr Woolley was making another point, that there were certain capabilities which we are less likely to use which we do not, therefore, keep at such a high level of readiness. Sir Bill Jeffrey: Yes, and I think there is a limited extent to which that is affected. Q90 Mr Jenkin: What sort of elements are we talking about, what sort of capabilities? Mr Woolley: I cannot, off the top of my head, give you specific force elements whose readiness has been reduced. There are no more, as I say, than a handful, but we can give you further information on that. Q91 Mr Jenkin: Cynically, one could refer to this as another round of cuts to make savings. Mr Woolley: It is a reflection of the priority we are giving to force elements that we expect to deploy on operations. Q92 Mr Jenkin: Could we have a note on those capabilities? Mr Woolley: Yes. Q93 Mr Crausby: My first questions are aimed at the Permanent Under-Secretary because you commissioned the review which led to the merger of the DPA and the DLO in April 2007 with the objective of creating a "fit-for-purpose" integrated procurement and support organisation. Has this fit-for-purpose objective been met and what is your assessment of the progress made by the new organisation? Sir Bill Jeffrey: I think the new organisation has made good progress. I think you will have an opportunity, as a committee when you take evidence from the Chief of Defence Materiel later this month, to take his view on this. I have been impressed by the speed with which the merged organisation has settled down. Good support on the changes has been the creation of project teams that cover not only the initial acquisition of equipment, but its full life support as well, and that is, I believe, bringing benefit. We have also strengthened in what are known in Abbey Wood as 'co-stars', the two-star oversight of groups of associated projects, and I feel, when I hear about the way that is working, that perhaps it is moving in the right direction. In the so-called 'Pace Programme' that Kevin O'Donoghue has put in hand, there are changes again associated with necessary reductions in manpower which will allow staff to be used more flexibly. Now, that is part of it. The other part, and this will take longer, but I think is heading in the right direction, is really what we were discussing earlier around the building of skills. Again, Sir Kevin can give you more detail than, I imagine, us trying to cover this morning, but, in terms of identifying groups of jobs where we expect particular levels of qualifications, the licensing of project managers, the building of commercial skills, it is inevitably something which will take time, but I think we are making progress. Q94 Mr Crausby: I think it was proposed to cut manpower by 27 per cent, was it not, by 2012, as I understood it from the joint organisations as they came together? What progress has been made in that field? Sir Bill Jeffrey: I cannot give an immediate figure, but certainly the staffing level has fallen quite significantly over the last 12 months or so, and I think General O'Donoghue would say he was on course to deliver the reductions that are expected. Q95 Mr Crausby: The PSA Target 6 was "to deliver the equipment programme to cost and time", which was only partly met. Now, your Annual Report and Accounts 2007-08 also states that "procurement performance declined", so what are the reasons for this poor performance? Sir Bill Jeffrey: The one which was met, as we observed earlier, was the key user requirements where 100 per cent, as it happens, of key user requirements and projects were met. In the end, that is a very important figure because it means, albeit sometimes later than was originally planned, the military getting what they need. The two other elements of this are the average cost increase across the larger programmes over the year and the average time slippage, and here we have seen some deterioration which is attributable actually to quite small numbers of projects. On the cost increase front, it is Nimrod, which this Committee knows well and which continued to cause us problems during the course of last year, and the estimated cost there increased 21/2 per cent over the year, and the meteor missile, BVRAAM, where, for a variety of reasons, costs increased by 91/2 per cent, although actually are still less than the approved cost when the programme went through its maingate approval. These two, between them in the way this works, have had a disproportionate effect on the cost growth over that single financial year, but I am not pretending that this is other than a step backwards in terms of the observable figures because, in the previous two years, we were in fact remarkably close to these targets. Q96 Mr Jenkin: Do you make any assessment of how much delay in decisions by procurement actually adds to costs? Sir Bill Jeffrey: I would find it hard to quantify, although we could have a go, but it certainly does. There is no doubt that time costs money, and these projects invariably, and one of the sources of cost growth is delay because they tend to be correlated. Q97 Mr Jenkin: It took ages for the carriers to get through maingate. It seems to be taking ages to get Future Links through maingate, though we understand quite considerable money has been spent on that project. What is the point of delaying these decisions or is this a political question? Sir Bill Jeffrey: Well, there are two things at play. One is that there are sometimes very good reasons for taking time and spending money in the earlier stages of a project. Some of the NAO work, well beyond the Ministry of Defence, illustrates that it is worth investing, and a rough order of magnitude figure that the NAO have been talking about is 50 per cent, a proportion of the expected cost of the project early on before the final commitment is made and before maingate occurs in order to take some of the risk out at later stages. We have been doing that more and I think it is the right thing to do. Sometimes, delay occurs for less noble reasons than that and I do not mean political reasons, it is simply because the system takes a while either to agree on the specification or to scope a project, and it is that which we ought to be tackling. In a way, it is that I was alluding to, among other things, when I talked earlier about greater agility because, if we could get some of the agility of our UOR process into our main procurement effort, it would be a very desirable outcome. Q98 Chairman: I would like to come on to the issue of UORs. When we went to Abbey Wood in October, we heard that a large proportion of the defence equipment staff were focusing on current operational issues, some of them UORs, some of them the ordinary current operational issues. Presumably, this has the effect that longer-term equipment procurement has a reduced number of staff or perhaps reduced quality of staff because the focus is on the current operational requirements or the UORs. Would you say that it had any impact on longer-term equipment programmes? Sir Bill Jeffrey: It is certainly the priority, and I think the Committee would expect it to be. I ought to take the opportunity at this hearing to mention things that the Department ought to be proud of. I think our performance in delivering UORs with industry has been remarkable. To date in this year, 82 per cent delivered on, or before, their 50 per cent confidence level in terms of timing, so we are doing well there. I would not overstate the knock-on impact on the rest of the business. There undoubtedly is some because certainly, when I visit Abbey Wood, I hear the same accounts of significant staff effort being devoted to the UOR process, but I do not think it is more in the end than a relatively small proportion of the total staff effort, so I would not jump to the conclusion that our longer-term investments are at risk because of this. Q99 Chairman: Still on UORs, have you heard, anecdotally perhaps, that a UOR is asked for by a unit in theatre and, by the time it actually comes into operation, that unit has moved out and the new unit that has moved in has got little understanding of why that UOR was requested and little need for it, so it lies around in containers? Have you heard that? Sir Bill Jeffrey: I think I may have heard it said, but I am not sure that I have ever been presented with a concrete example. Q100 Chairman: Have you looked for it? Have you looked for a concrete example? Sir Bill Jeffrey: No, I confess, I have not, Chairman, but I am not aware of a particular example of that where the original requirement was unfounded. Q101 Chairman: No, but, if the incoming unit has got no understanding of the need for that requirement, then it means that the money has been wasted, does it not? Sir Bill Jeffrey: It raises an issue, as much as anything, about the transition from one UOR to the next, which, I know, is something that my military colleagues take very seriously, the transfer of knowledge and understanding of what the operating conditions are, and it would certainly be disappointing if the conclusion was that a UOR that we were working hard on was simply not required. If that were the conclusion, we would stop trying to acquire it. Q102 Mr Holloway: Sir Bill, you talk about operating conditions, and I know that the UOR thing has been a great success, but you talk about operating conditions and I will give you an example of a commander I met, admittedly, seven months ago who was about to go out and do the police mentoring job, a troop commander, and they were saying on the ranges that he was pulling his hair out. He had put an urgent request in to PGHQ that they should not have to have Snatch Land Rovers and that they should have some weapons with rather more range than the Demarco, and this guy was, as I say, pulling his hair out because he was being told the particular vehicle that he needed for his task and the weapon systems that he needed for his task when he and everybody in his unit and the sister unit that had been there before disagreed. This particular guy was personally ringing up TA units in provincial towns to see if he could borrow some GPMGs. That is woeful. Sir Bill Jeffrey: Well, I am not familiar with that particular example. Chairman: I think you will need to provide chapter and verse. Mr Holloway: Sure, but my point though is that actually, in terms of operating conditions, often when commanders are asking for things that they need, they are being told, "No, that is not actually the appropriate thing", like longer-range weapons, like vehicles that can cross grain. Q103 Chairman: I think also that is actually probably a question that you need to put to the Secretary of State next week because it is a general question and I think that, if by next week you can provide some details, that would be helpful. Sir Bill Jeffrey: What we are talking about here essentially is the means by which the urgent operational requirement is identified and then processed. If there are examples of any confusion about what the requirement actually is, then we can, and should, look into these. All I was saying was that, if you look at the system as a whole and look at the extent to which over time we have delivered on equipment like Mastiff, for example, there has been progress, and I would not want to overstate it, but there has been. Q104 Mr Jenkin: Could you kindly update us on where we are with the short examination of equipment programme? Sir Bill Jeffrey: It has taken longer than we would wish, is the first point to make. It has not, to pick up a point that was made earlier, constituted anything like a full-scale defence review, but we have wanted, as we have done it, to assess the policy implications of the options that are open to us. In some cases, we have had discussions with our suppliers about different ways in which our capability requirements can be met, and we are not yet quite at the end. I have been very conscious, as have ministers past and present, of the need to keep the period of uncertainty to the minimum. We had a good discussion in the National Defence Industries Council last week, I think the industry understands where we are, and we are hoping that we can resolve this one way or the other within the next few weeks. Q105 Mr Jenkin: Does not the fact of the examination really rest on the fact that the present equipment programme is not affordable in the current planning round that we are in? Sir Bill Jeffrey: It reflects the fact that our current costings have shown some quite significant increases and we do need to find ways of reducing costs over the forthcoming period. Q106 Mr Jenkin: But when last did the forward equipment programme actually match what you were given by the Treasury? Sir Bill Jeffrey: Well, there is always an extent to which we take things at risk because there is always an extent to which it might safely be assumed that equipment will take longer to deliver than is, on the face of it, planned. As it happens, notwithstanding what we were saying earlier, I think we are getting better at acquiring on roughly the timescales we originally planned and, therefore, one can take less of a risk than may have been the case in the past, but there definitely is an issue and there are respects in which we will need to find ways of reducing the overall costs of a programme. Q107 Mr Jenkin: Can you put a financial figure on the gap? Sir Bill Jeffrey: Not easily, and I have thought about this before this session because the one thing is that, if you get beyond the end of the year after next, we are into new spending review periods and who is to say what the outcome of a spending review will be. Q108 Mr Jenkin: But within the present time-frame? Sir Bill Jeffrey: In the shorter term, there is the linked question of the rest of the programme and how much, and we may face some pressures there, we have some opportunities for making savings, so it is hard to put a specific figure on it, but it is undoubtedly the case that we need to make some decisions that will refocus the programme, not least for the reason that the then Secretary of State gave when he wrote to your Chairman about this a few months ago, to try, if we possibly can, to balance the programme more towards the nearer-term operational priorities. Q109 Mr Jenkin: But, within the constraints, it is very understandable that that should be the priority, but the effect of this is that you really only have the two options, either to cancel programmes or delay programmes. Those are the only two options. Sir Bill Jeffrey: Or rescope them in some fashion. Q110 Mr Jenkin: Downwards in some way? Sir Bill Jeffrey: Yes. Q111 Mr Jenkin: How will we better support the front line? What do you mean by that? Sir Bill Jeffrey: Well, we can all think of particular capabilities that current deployments are stretching more than others. Q112 Mr Jenkin: Yes, but we are told that those will all come out of UORs. Sir Bill Jeffrey: They will, but nonetheless there is an extent to it. To take armoured vehicles and force protection as an example, these are issues that have been hugely significant for us in the last few years and it would be highly desirable if we could do so, to focus on these, to the extent that the budget allows us to, but I do not think I can go much further than that in terms of specifics at this stage. We are conscious of the need to take decisions on this as quickly as possible. Q113 Mr Jenkin: When do you think the review will be completed? Sir Bill Jeffrey: I would say within weeks rather than months. Q114 Mr Jenkin: So before Christmas? Sir Bill Jeffrey: Yes. Q115 Mr Jenkin: That is very good news. Obviously, there is public concern being expressed by some of the Forces' chiefs, that they are going to lose some of their sort of high-end longer-term capabilities, like Joint Strike Fighter, for example. Is that a possibility? Sir Bill Jeffrey: I do not think any of the chiefs of staff have been commenting on this publicly, to my knowledge. Do you mean some of their predecessors? Q116 Mr Jenkin: Possibly. The Chief of Defence Materiel (Air) recently commented that the RAF faced "serious challenges" in balancing its short-term operational commitments with the country's long-term strategic planning. Presumably, that is what he is referring to. Sir Bill Jeffrey: Yes, well, I do not think anything I have said today will displace the sense that we do face a challenge on this, that is what we are trying to work our way through, but the chiefs of staff, I think, and it goes back to our earlier discussion about the corporate way in which the Defence Board approaches these things, they are, above all, keen to get an outcome through this set of discussions that is best for defence overall. Q117 Mr Jenkin: But do you not dream one day of having an affordable equipment programme? Sir Bill Jeffrey: It would be a very desirable state to be in. There is a tendency always to find that our ambition sometimes exceeds our means and we just have to manage that as best we can. Q118 Mr Havard: There are obviously reports in the press about individual projects and so on, the frictional sort of stuff that you would expect really, but there was a report in the last couple of days. You mentioned armoured vehicles and the FRES Programme being, in some fashion, renegotiated with General Dynamics. Are these the sorts of things that are taking place in terms of readjusting the programme that you are talking about, so is there a series of elements like that? Sir Bill Jeffrey: There is a limit to what I can say about the FRES Programme at the moment because there are still some commercially sensitive discussions going on. Q119 Mr Havard: Yes, but the question I am asking, Bill, is that big-ticket items, like JSF at one end, and there are known projects which need to go ahead, are presumably being readjusted or re-evaluated in some fashion, so is that what is happening within the plan? Sir Bill Jeffrey: What we have been doing is looking at the full range of projects in the equipment programme and seeing where it would make more sense to rescope or to change the period within which the project is intended to be delivered. On FRES, the position is that it is currently in its assessment phase. We selected General Dynamics in May as the provisional preferred designer for the FRES utility vehicle and we are still discussing exactly how to pursue that relationship, and there is nothing more, I am afraid, I can say to the Committee at the moment. Q120 Linda Gilroy: I have just been looking at page 106-107 of the Annual Report which deals with research and the work that is flowing from maximising the defence capability through research and development and the work of the Research and Development Board. There are tensions there, as there are in all the rest of the budget, between trying to align things with urgent requirements, but also looking to the long term. Whenever we take evidence from industry, they tell us that it is a 20-year payoff and, if you cut back on the research budget, then it will be the long-term capability that suffers. Can you just tell the Committee how those tensions are being resolved, if they are being discussed, to your knowledge, through the Board that deals with these things? Sir Bill Jeffrey: They are constantly being discussed. We attach very high importance to the Research and Development Programme and, as a result of changes made in the last year or so, we are now managing it through the Board you have referred to more as an entity with not just ---- Q121 Linda Gilroy: But there has been a cut in the research budget, has there not, and no doubt they are being looked to to bring forward efficiencies and other such things, but is there also a concern, with the pressures on addressing the pressure areas arising from deployments and urgent operational requirements, that there is a danger that, in the long run and with a cut of that scale in their budget, they will not be developing the capability we need to keep us ahead? Sir Bill Jeffrey: There has been some reduction recently. We are certainly very keen to protect this area of expenditure, if we possibly can, because it is, for the reason you give, long-term very significant. We are also keen, through the Defence Technology Strategy and other means, to give industry a sufficiently clear picture about some of our longer-term requirements for industry to feel able to invest more of its own money in this area because I think most of those whom I talk to in the industry feel that is not unreasonable, but they need a good sense of our judgment of what our future requirements are going to be. Q122 Linda Gilroy: So is there any prospect of DIS 2 coming forward and describing how some of these tensions are being resolved? Sir Bill Jeffrey: Well, the Industrial Strategy, as opposed to the Technology Strategy, we have a longstanding commitment to reissue that. The view we have reached, and it is one that industry strongly supports and it said so at the NDIC last week, is that it would be pretty pointless to reissue the Defence Industrial Strategy until we completed the examination of the equipment programme. To be completely clear about it, the view of the industry is that they would prefer us, for the time being, to be holding off on reissuing the DIS until we are able to say more about the content of the individual industrial sectors. Q123 Chairman: If I can finally remind you, Sir Bill, last year you told us that it was the view of industry that there was not much point in producing DIS 2 until the outcome of the planning round. This year, there is not much point in producing DIS 2 until the outcome of the short examination. What will it be next year? Sir Bill Jeffrey: I hope by next year that it will have been issued. Q124 Chairman: Well, I rather do too, but history suggests it will not. Sir Bill Jeffrey: The one thing I would say, Chairman, is that we may not be in a position to give as much detail just at the moment or in the recent months about the part of the original Defence Industrial Strategy that was to do with individual sectors, for reasons that the Committee understands very well, but the more general description within that first DIS of the approach we take to defence procurement, the areas that we regard as being proper for onshore provision, the importance we attach to partnerships and a wide variety of procurement approaches, the importance of a close and transparent relationship with industry, all of this still holds good. We are still operating under the Defence Industrial Strategy and I think, were some of our industrial suppliers here, they would attest to that. Q125 Chairman: The only comment I would make on that is that the discussions that I have had with defence industries suggests that they feel that the mood of openness has gone, there is a much reduced degree of openness. Can I pursue one point that Linda Gilroy has just raised about the cut in the defence research budget. Would it be possible, in your note that you are writing to us please, to give us up-to-date figures of the level of defence research spending funded by your Department over the last 15 years? Sir Bill Jeffrey: Yes. Q126 Robert Key: Could we look at the manning balance, Sir Bill. Your predictions about when you will achieve manning balance, particularly for the Army, have been pushed back each year since the Spending Review 2004, and there is a very depressing graph on page 172 of the Annual Report and Accounts. How do you arrive at those estimates? Mr Woolley: Obviously, in terms of making forward predictions of the strength of each of the Armed Forces, we make assumptions and estimates of what we think the intake will be and we make estimates of what we think the outflow will be, and that informs our estimate of what we think the strength will be in one, two, three years' time. Now, obviously, these are subject to variabilities. The extent to which we succeed or not in meeting recruitment targets is, to some extent, unpredictable and it will depend, for example, on the state of the economy to some extent. Similarly, outflow rates are not entirely predictable because, whilst, to some extent, people leave at the end of the fixed term, they do have the option to re-engage with voluntary outflow to factor in as well, but a strength of the three Services has embedded in it part of the Defence Statistical Organisation and they are responsible for doing analysis to come up with forecasts to inform our judgments. Q127 Robert Key: This of course is not only about statistics. Looking at past form on this, what is your hunch about the impact of the current recession in the economy on recruitment and retention? Sir Bill Jeffrey: I think it will help for as long as it lasts, and obviously one has mixed emotions about that, but I do not think we are banking on it. We have a number of steps, including the retention allowance and the particular retention centres that we are operating, and indeed right across the board there are efforts to improve retention. The other area that I would focus on because, as Trevor says, it is a combination of how effective we are at adding to the trained strength and how effective we are in retaining people, one of the factors which, I feel, is increasingly significant is our ability to convert initial recruits into additions to trained strength. The raw recruitment figures are in fact, for all three Services, not that bad and they are not so very far away from the targets that the three Services have been working to, but, particularly for the Army, converting recruits into additions to trained strength, for reasons that this Committee understands very well, is quite difficult. It is something the Army are working on very hard indeed, but it is the point at which we can begin to affect this balance positively. Q128 Robert Key: But is this an art or a science? In other words, have you currently got computer prediction models of what you would expect to happen to recruitment and retention, given the economic and social data that are now emerging as we enter recession? Sir Bill Jeffrey: We adjust the estimates as we go to take account of as much as we know about steps we are taking ourselves to impact on retention, in particular, through the various allowances and what we know of the labour market. I do not know if you are more familiar with the detail than I am, Trevor. It is not computerised, but it is quite a careful process. Mr Woolley: Yes, I think there is 'computery' in doing the modelling, but obviously the assumptions that go into the models as to how the future might be different from the past is a matter of judgment and, in that sense, an art. Chairman: We will be writing to you with a couple of more questions about recruitment and retention and pinchpoint trades and things like that, but I think that concludes the questions that we would like to ask both of you, so thank you to both of you very much indeed for joining us this morning, which has been helpful, and we look forward to seeing the Secretary of State next week. |