Examination of Witnesses (Questions 120
- 139)
WEDNESDAY 21 NOVEMBER 2007
MRS HELEN
GHOSH
Q120 Chairman: Are these long leasehold
sites or freehold sites?
Mrs Ghosh: We would only leave
a site if actually it made us money to leave it.
Q121 Chairman: You did not answer
the question. The question was: are these long leasehold sites
or are they freehold sites? Do you lease the building in Guildford
or do you own it?
Mrs Ghosh: I would have to come
back to the Committee on that.
Q122 Chairman: It is a very important
point. If you have to divest yourself of long leasehold buildings
you could be in for big bucks because of the remainder of the
lease or if you sell it at a time when commercial property sales
are not particularly high how can we be assured that you are getting
best value?
Mrs Ghosh: I think that was the
point of the answer I gave earlier that we would only leave a
site if it did represent best value. What we have done in such
cases—and again I am very happy to give you a note on that
particular site—is to make a calculation about whether or
not we are both getting best value and is this the best time in
the market to do so, and then we will reach a view with the Treasury.
Q123 Chairman: The reason I raise
that is that you have just indicated that this is one part of
your strategy to try to reduce your overspend.
Mrs Ghosh: Yes.
Q124 Chairman: It does not sound
to me that these plans are terribly far advanced.
Mrs Ghosh: Indeed they are far
advanced. In the case of leaving the Guildford site staff who
were working in particular for our IT team have already started
to move to London or Farnborough.
Q125 Chairman: So Guildford is good
value for money then?
Mrs Ghosh: Guildford is good value
for money and it is in one of the leafy suburbs of Guildford so
the site has a high value. Of course we are going through all
the business case analysis before we do any of these things.
Q126 Chairman: So you can offset
capital receipts against the administrative budget?
Mrs Ghosh: Again I would be happy
to give you a note on that.
Q127 Chairman: In terms of the accounting
you can do that, can you? Does it not go back into a central pot?
Mrs Ghosh: In this case we have
reached an agreement with the Treasury about the amount of capital
receipt we keep for ourselves. We are certainly keeping a capital
receipt out of leaving the Guildford site. It is not just going
back into the consolidated fund.
Q128 Sir Peter Soulsby: Given the
scale of this potential overspend, the fact that we are so far
into the year already and the fact that you have drawn our attention
to the fact that so many of these admin costs are fixed, it was
not without significance that I think you used the phrase "as
far as possible" you would deal with this. The fact is that
you are not going to make it, are you?
Mrs Ghosh: We will do the best
we can to make it. Obviously if it looks as though we are not
going to make it then we would have to reach some agreement with
the Treasury about how we handle the issue. However, as I say,
this is administration; it does not affect the kind of programme
spend on the outcomes that were the subject of the media speculation.
This is administrative spend.
Q129 Sir Peter Soulsby: Are you able
to give us an absolute assurance that if you were to fail to make
it it would have no knock-on effect on programme budgets this
year or in any future year?
Mrs Ghosh: There is a separation,
as you know, in Treasury accounting between admin spend and programme
spend. We would be—and indeed are—looking at admin
as a sealed box for this purpose. There is, of course, a link
in the longer term and this comes back to one of themes of CSR
discussions about having a simplified set of programmes and outcomes
that you are trying to achieve. One of the key determinates is
of course people and what people are doing and a lot of the fixed
costs are almost a multiplier of people and where people are.
There is a relationship in that sense between the size and shape
of the organisation and some of our fixed costs and some of the
choices you then make about suppliers. You need to have people
to deliver things so there is a relationship when you think about
the programme spend.
Q130 Mr Williams: You mentioned 300
voluntary redundancies.
Mrs Ghosh: Yes.
Q131 Mr Williams: In order to achieve
this scale of savings are you going to have any compulsory redundancies
and are you negotiating on this?
Mrs Ghosh: As you know there is
a very well structured set of procedures that all departments
have to go through if they are considering compulsory redundancies
coordinated by the Cabinet Office. We have always said we will
try to achieve our reductions in head count through voluntary
means if possible. We have had to, as you know—and this
related back to the Wildlife Unit in the West Country—have
some structural compulsory redundancies which, in the event, many
of the staff actually took voluntary redundancy terms. It may
be that we would go through all the procedures necessary and required
under the Cabinet Office agreements. We would not rule out—as
no department would rule out—the possibility of having compulsory
redundancies in that structural circumstance. The response to
our current scheme has been very positive and as far as possible
we would seek to avoid that.
Q132 Mr Gray: Can I just be absolutely
clear that the savings that you have allocated as part of the
attempt to get back to budget, the over-run: is that at least
partly due to the crises that the department has faced? You have
had an extraordinary run of bad luck with the foot and mouth,
the flooding, the bluetongue, the continuation of various other
diseases that are subject to our own investigations at the moment.
How much of that £50 million overspend roughly is that?
Mrs Ghosh: Just to clarify, I
quoted some figures which I think amount to around £65 million—if
I am doing my maths correctly—of programme spend which is
that. That is around £32 million on foot and mouth, around
£1 million which is being handled very much with the foot
and mouth teams on bluetongue, £3 million currently on AI
and around £30 on floods. So £65 million is programme
spend and those are the emergencies and then there is £50
million at the moment—but there are all these mitigating
actions that we are taking—which would be admin. They are
two quite separate things.
Q133 Mr Drew: You are saying that
the £50 million you would have wanted it not to have happened
but regardless of the crises that you have had this £50 million
has come about through every day events.
Mrs Ghosh: Exactly, every day
events, absolutely.
Q134 Mr Drew: How do you separate
them?
Mrs Ghosh: We separate them very
carefully for all sorts of reasons, not least to do with EU support.
The moment the crisis starts we ask the animal health team in
particular, since they have obviously been in the forefront on
this, to separate out the additional costs to them (which are
programme costs because their people are paid for through programme
spend) of the outbreak and so they keep a very detailed tally
(which in the end I am sure the NAO and others will be looking
at and of course the current Anderson review of foot and mouth
will look at) to identify the separate spend over and above the
business as usual spend. That is what we do and that is how we
make our tally.
Q135 Mr Drew: It would have been
quite a credible argument to have gone to Treasury and the EU
to say, "Look at the run of bad luck we have had and we have
obviously had to spend more on administration because we are running
around 24 hours a day, seven days a week trying to deal with these
crises". However, it is not as credible if you say you would
have overspent this money regardless of those crises.
Mrs Ghosh: We have to live within
the Treasury rules and the Treasury rules are that, as it were,
the people and what you traditionally call the running costs of
core Defra are administrative spend and the administration costs
of the animal health agencies—and indeed of all our agencies,
the RBA, the Marine Fisheries Agency—are programme spend
so we could not blur the distinction between the two even if we
wanted to.
Q136 Patrick Hall: As I understand
it the £63 million of overspend due to events outside the
department's control—I am going to include foot and mouth
in that—the £50 million of projected overspend is due
to ordinary day to day management systems of Defra, despite bringing
in mitigating improvements at the beginning of the year.
Mrs Ghosh: Some of the impacts
of those mitigating actions may not yet have come through. For
example things like the sale of the Guildford site may not have
come through.
Q137 Patrick Hall: The £63 million
includes the money from the admin costs of those outbreaks of
events.
Mrs Ghosh: That is quite separate
because those are in a programme spend.
Q138 Patrick Hall: So the £50
million projected arises from the ordinary day to day management
of Defra?
Mrs Ghosh: It arises from the
fact that over the period of the SR04 administrative programme—again
we explored this in some detail in the summer so in that sense
it is not new news—because so many of those are fixed costs
it is in fact difficult to slow them down to the third year of
SR04 where effectively £60 million was instantaneously in
the third year taken out of our budget. We did not have a flat
line in admin spend for the SR04 period; it fell off fast in the
last year.
Q139 Patrick Hall: So the overall
budget for admin was £286 million in this financial year?
Mrs Ghosh: Yes.
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