Examination of Witnesses (Questions 40
- 59)
WEDNESDAY 18 JULY 2007
MS HELEN
GHOSH AND
MR STEPHEN
PARK
Q40 (18.07.07) Chairman: You have
indicated that you anticipate in the Comprehensive Spending Review—by
the way, when is it going to be announced? When is the great mystery
going to be revealed unto us?
Ms Ghosh: I was about to say either
before the recess or in the autumn, that is the answer, but time
is ticking on for before the recess, so either side of the recess
is a possibilty. We are not the only department which has not
got an agreed -
Q41 (18.07.07) Chairman: I thought
under Renew you were trying to be a little bit more specific,
but I presume you blame it on the Treasury for not having told
you when they are going to announce it?
Ms Ghosh: You take the words right
out of my mouth! Clearly, this is something where there are a
number of departments whose settlements have still not been announced
yet.
Q42 (18.07.07) Chairman: Okay. Your
planning assumption then is level cash?
Ms Ghosh: Yes.
Q43 (18.07.07) Chairman: When we
were doing our British Waterways inquiry they told us at their
planning assumption was minus five per cent RPI. Who has decided
the planning assumptions for your subordinate bodies like the
Environment Agency and BW?
Ms Ghosh: No one has yet decided
those, and I think something that Stephen and I, and my management
board, will be looking at very carefully when we have got the
CSR settlement is to make sure that we are working with our delivery
bodies but very importantly build a sustainable plan and programme
which matches ministerial priorities across the CSR period. If
we have got a tighter amount of money, we cannot have—and
it is the case that ministers have already announced some commitments
in high priority areas—a basis where the delivery bodies,
as it were, make an assumption and rush away with the money. What
we have got to do, when we have the settlement, is build up from
almost a zero base and say, "These are our interests and
commitments around floods, or around voluntary modulation."
Q44 (18.07.07) Chairman: Hang on,
this does not make sense. It does not make sense in terms of a
budgetary process because you said, Mr Park, a moment ago that
it was directors who effectively made proposals for their budgets,
and therefore I would have expected the Environment Agency, BW,
and all the other subordinate bodies to have made their proposals.
Ms Ghosh: No, sorry, they have
not made any proposals.
Q45 (18.07.07) Chairman: So how do
you know what to bid for with the Treasury, then?
Ms Ghosh: The CSR 2007 was a process
where actually we were not encouraged on the whole to bid. We
were given very clear guidelines across the piece that actually,
apart from DFID and schools and hospitals and areas that were
growing, most of the rest of us would not be bidding. So what
we did there was that we did indeed work with, in particular,
people like the Environment Agency and Natural England on the
issues around the new RDP programme about what their view was
of a sensible level of spend, in particular around flood management.
So we did work with our delivery bodies on the arguments we would
put to Treasury about the particular spending pressures we would
have, so that was a collaborative output. What we need to do when
we have a formal settlement is to make sure that within whatever
envelope we have actually we can meet all our requirements. What
we need to do is learn, in a sense, from history and say, "Before
we commit to particular budgets for delivery bodies and particular
administrative spend we need collectively to make sure that it
is sustainable over the period." So when I say we take the
CSR settlement and we work through it in terms of where our commitments
are and where our priorities are, we want to do that with the
delivery bodies before we say to British Waterways or to the Environment
Agency, "Here's your money." We need to make sure that
actually the totality adds up to the amount of money we have got.
Q46 (18.07.07) Chairman: But you
must have given some indication to the Treasury as to the type
of level of budgetary requirement to run the Department?
Ms Ghosh: I think there are some
departments which have flat cash on an admin spend, but most departments
are like us. We are all, in administrative terms, going to live
at minus five and most people will get flat cash, unless you can
prove there are pressure areas.
Q47 (18.07.07) Chairman: There are
a lot more elements to your budget than just the administrative
bit?
Ms Ghosh: Indeed there are, and
then they invited us to talk to them about the areas we thought
would be particularly pressurised if the assumption was flat cash
programmes, i.e. in real terms a reduction, which is why we have
talked to them and Hilary announced the overall outcome on flood
protection. We had to talk to them about voluntary modulation
and match funding, but we have yet to take decisions, once the
CSR settlement is announced, on how we slice up the rest of the
cake, and we are very conscious that we need to do that rapidly
and in partnership with delivery bodies but in a way which means
that we can go into every year with the planning you describe.
Q48 (18.07.07) Mr Drew: So many of
your plans are predicated on the efficiency savings through reducing
staff numbers and yet, as you know, the investigation we conducted
into the RPA did pointedly demonstrate that a number of those
staff removals led to later problems and in fact—I cannot
remember the numbers exactly, but you really had to replace virtually
everybody you removed because of the disasters that overtook you.
What guarantees have we got that if you are actually going to
move people from within the Department itself it will be any more
successfully delivered?
Ms Ghosh: Because I have got to
do it. I have got to do it for two reasons, (a) because I am signed
up through the Gershon commitments and through the arrangements
I have with the Treasury for funding to deliver 1400 reductions
over the SR O4 period by the end of this year, and because -
Q49 (18.07.07) Mr Drew: That is eight
months, is that correct?
Ms Ghosh: Yes, exactly.
Q50 (18.07.07) Mr Drew: So effectively
it is an eight month time span?
Ms Ghosh: It is an eight month
time span, but we are already making progress in this year. For
example, of the 1400—and that starts at the beginning of
April 04—we have already reduced by 820 in total, so we
are adding all the time.
Q51 (18.07.07) Mr Drew: Are these
permanent staff, or agency staff?
Ms Ghosh: Yes, these will be full-time
equivalent permanent staff whom we are paying, and that will be
across the whole of Defra, so that is against our 12500 head count
across the whole Department when we began. We have been in negotiation
with the Treasury because of the problems at RPA. We are not being
held to our original 2,400 reduction because effectively to all
intents and purposes, as you say, the savings they were going
to produce they could not produce if we were going to maintain
the service and improve our service to farmers, so they have not
been touched. As I say, we have got the money for around—as
well as the rolling programme of VERs and the compulsory redundancies
which are taking place, for example, at the Wildlife Unit—200
voluntary early retirements which need to come through, broadly
speaking, by March 08. So we have got a plan for how to do it.
Although we will need to control figures in the delivery bodies,
that will be taken out of the policy core of Defra in the way
I described earlier.
Q52 (18.07.07) Mr Drew: Is it true
that there is now an additional 200 redundancies to be found as
regards the Renew Defra headcount?
Ms Ghosh: No, no -
Q53 (18.07.07) Mr Drew: The 200 are
within the 1400?
Ms Ghosh: We are just using the
Renew Defra programme as a way of delivering the savings we need
to deliver, the 1400, in the best possible way. We do not want
to slash any further.
Q54 (18.07.07) Mr Drew: So the 200
are part of the 1400?
Ms Ghosh: The 200 are part of
the 1400 which we need to find over the SR 04 period.
Q55 (18.07.07) Mr Drew: The manner
of actually removing people. When this Department was set up one
of the big grouses of the staff was that because it came from
two very different cultures, the old DETR and the very old MAFF,
there were considerable differentiations in terms of money, pay
and conditions for people. To what extent has that now been resolved?
This is not an exercise, if you like, for effectively removing
some of the people who have never really become part of the culture
of new Defra?
Ms Ghosh: No. In practical terms,
in financial terms, everybody is on the same set of terms and
conditions within core Defra because we had to equalise for equal
pay terms. That has meant, as a department, we are in Whitehall
terms a relatively high payer if you look at the minima and maxima
on average. We and a couple of other departments, partly because
we all came out of the same Department of the Environment stable,
ourselves, DCLG and the Department for Transport, are all relatively
speaking high payers. That does present us with issues around
pay remits and Treasury pressure to be more coherent. Increasingly,
too, I know there were some historic issues with pay rates in
our agencies, particularly around the RPA. Actually, for business
reasons, recent pay remits to our agencies have increasingly brought
them into line with core Defra, so the differences across Defra
as an organisation are very small now and all of that will be
completely invisible in the VER/VES scheme.
Q56 (18.07.07) Mr Drew: Just to conclude
on this, what are the possible penalties, besides obviously your
reputation which you would like to keep intact, on the Department
if you do not deliver the Gershon savings and actually remove
that number of civil servants? Also, particularly, what would
happen because there would be a real addition to budget if you
are not able to get the numbers down in the way in which you wanted
to? What sort of knock-on effect would that have?
Ms Ghosh: I do not for one moment
underestimate the reputational effect because to be an effective
department in Whitehall you have to show that you can—this
is another of our licence to operate areas, actually, to get our
finance under control, as Stephen described, to get our head count
under control. That is the licence to operate and the Treasury
will not look kindly on a sort of policy wheeze if we cannot run
our basic systems well. We are assuming very little in terms of
managing our budget for this year in terms of pay reduction, pay
bill reduction coming out of VER/VES, but if we were to end up
going in to CSR 07 with more people than we need we will have
simply to take forward those administrative cuts, and more, into
the CSR 07 period. Of course, if we overspend in any year the
Treasury, quite rightly, simply takes it off your budget for the
following year and it would have a damaging effect on programmes.
I put it as my number one objective in my performance agreement
with Gus O'Donnell.
Q57 (18.07.07) Mr Gray: One thing
you mentioned—I am no accountant—reminded me of the
old days. I remember the day I arrived at the Department of Environment
in 1992, when I think you were there briefing on housing matters,
and one of the things we were briefed on, I remember, was that
the total staff of the Department of Environment then was, strangely
enough, 12,500, which is the exact figure you mentioned.
Ms Ghosh: It is not the same 12,500.
Q58 (18.07.07) Mr Gray: Indeed not.
Of course it is not. But I remember the second briefing that morning
was—and I think it was in the aftermath of the Heseltine
changes, if I remember rightly—I was told that of course
that is far too many and it was very, very important that we should
spend the next year in reorganising the entire Department of Environment.
The truth of the matter is that you have fiddled around here and
you have made 200 off there, and all that sort of thing. Surely
we need to see some really significant reorganisation of the Department
and we have not seen any, you know, decent numbers, decent savings?
Ms Ghosh: We did, as—in
fact it was not strictly speaking part of the Renew programme,
but it was a policy project that I initiated, thinking about this
administrative point. We have done quite a detailed exercise on
what is the minimum number of people you could have in a department
in a policy core and after lots of work both, as it were, bottom
up and top down concluded—and this will be something which
effectively, because we have to find these savings through the
CSR period, and we have said this to staff—we will be getting
even smaller, because we have got to find the administrative cuts.
Probably for a department like ours, if we want to do the things
that ministers want to do, if we want to be able to respond to
Members and events, we are looking for a department which, as
I say, with the five, five and five per cent reduction is yet
a few hundred smaller than the 3,100. So we have done a bottom
up analysis like that, but unless you want to become like a think-tank
rather than actually delivering some stuff, putting through bills,
answering MPs' correspondence—and other departments have
done similar theoretical work—that is about the minimum
we think we could get to without significantly changing. If you
asked us a question about bee health, for example, we would just
say, "Sorry, we don't do bee health any more." We do
do bee health, I hasten to add, but politically there are some
things where you have just got to have some capacity.
Q59 (18.07.07) Mr Gray: I am glad
to hear you have done that minimising analysis, but do you not
think there is a sort of culture across the whole—not necessarily
particularly Defra—which is actually sort of empire building
and is seeking to keep the army as big as you possibly can within
the constraints the Treasury sets down? How do we set about having
an entirely different mindset, which is to say, "Let's get
as small as possible. Let's beat the Treasury. Let's exceed the
Treasury's expectations"? Has that ever happened?
Ms Ghosh: In a sense the work
we did—and I hasten to add we talked to and involved the
departmental trade union side in this—was almost that. If
we are completely successful, for example in influencing citizen
behaviour—we were looking at the relatively short-term,
but you could say in ten years' time if you have cracked climate
change, if you have reformed the CAP, if we have got a wonderfully
healthy economically successful farming industry, you would not
need a Defra actually, you could shrink, but given those big things
we have got to deliver over the next few years we think the kind
of figure we came to is about right.
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