Examination of Witnesses (Questins 1-19)
CABINET OFFICE,
DEPARTMENT OF
HEALTH & HM PRISON
SERVICE
12 DECEMBER 2007
Q1 Chairman: Good afternoon and welcome
to the Committee of Public Accounts where today we are considering
the Comptroller and Auditor General's Report, Improving corporate
functions using shared services. We welcome Alexis Cleveland,
who is the Cabinet Office's Director-General of Transformation
and Delivery, who leads the cross-government shared services drive.
Also appearing to answer questions on the shared service centres
in their organisations is Mr Philip Wheatley, who is the Accounting
Officer and Director General of HM Prison Service, and Peter Coates,
who is the Director of Finance (Investment) at the Department
of Health. You are very welcome. If I could start by just saying
that we welcome as a visitor the Chairman of the Ethiopian PAC.
I do not know where he is sitting. Oh, he is coming through security!
More seriously, I should say that two officials from the National
Audit Office—Dave Clarke and James Francis—were auditing
the World Food Programme in Algiers yesterday when the office
was bombed. I am pleased to say that both have now returned safety
to the UK, but I think it shows the debt we owe our staff in the
National Audit Office for the difficult and dangerous work that
they do around the world, and we are very grateful, as we also
are for the work that they do for us. Alexis Cleveland, perhaps
I could start with you, if you could look at paragraphs 4.10 and
4.11, at page 35, it is headed: "A lack of information on
current and expected performance makes it difficult for the Cabinet
Office to demonstrate the extent of benefits being derived from
shared services" If you read this Report, it is clear, Ms
Cleveland, that there is a dearth of information about the cost
and performance of these shared services. Does that worry you?
Ms Cleveland: One of the really
encouraging things we have seen from the introduction of shared
services across departments is the great improvement that you
do get in management information. I think until you have got good
information it is actually quite difficult to effectively manage
any of the services that you have got.
Q2 Chairman: If that is right, Ms
Cleveland, why until we had this NAO Report—and we again
read this in paragraph 4.10—has there been no published
analysis of the financial efficiency performance? If what you
say is right, why did we have to wait for this Report to know
this?
Ms Cleveland: There are figures
in different government departments' accounts. Some of them do
actually publish some figures on their shared service areas. What
we are looking to do centrally from the Cabinet Office is to gather
in far more information.
Q3 Chairman: Should you not have
done it before?
Ms Cleveland: We tried to collect
some information when we set up our shared service team within
the Cabinet Office and that is where we managed pull together
an estimate of what we thought the costs were, but that very much
was an estimate with a lot of assumptions in it and benchmarks
and such like, but that was our first attempt to try to pull that
together. If you go to the areas now where they have made progress
in shared services we are giving much better financial information.
Q4 Chairman: If you read paragraph
4.11 you will see that you identified an overall figure of £1.4
billion as a potential global figure. Would it not be much more
useful to set robust individual targets rather than a global figure
of £1.4 billion where it is difficult to work out exactly
what has been achieved or what should have been achieved?
Ms Cleveland: If we had robust
costs for each of the individual departments and individual services
then we can begin to start looking at setting targets against
those. What we were trying to do with this was identify what we
thought the total cost was that we were spending across central
and local government, to look at the sorts of savings that people
were achieving in the private sector in terms of moving to a shared
service model, and putting up "this is the prize for the
public sector", and we are seeking to influence departments
by saying that we have all got to live within tight administrative
settlements and therefore there is something to be gained in looking
at your shared service area.
Chairman: John Pugh and myself travelled
up to Leeds yesterday to look at NHS Shared Services and the management
told us that they were passionate about improving this, and they
were very impressed with it. We walked in and there was a large
room full of people working away. The effect was slightly spoiled
by the very first person who was playing Patience on their computer
screen, but we will leave that to one side!
Mr Bacon: Did you get his name?
Mr Williams: Was he winning?
Q5 Chairman: It just struck me that
I am not convinced that in these vast office blocks there is the
morale on the shopfloor that you might expect. Would it not have
been better to have broken these units down to much smaller units?
What we saw yesterday was people dealing with vast quantities
of paper, invoices, and scanning them every day, passing a piece
of paper in front of a scanning machine. Would it not have been
better to have smaller units where people would have better morale
and could deal with their customers and know why they are working
in this field?
Ms Cleveland: No, I do not agree
with that. I think as part of the move to shared services we need
to drive up the quality of service that people get and we need
to drive up the efficiency overall of the services. I do not think
there is a correlation between staff morale and size of organisation.
Q6 Chairman: Or even dealing with
your customers and knowing really what you are about, the issue
you are dealing with? It could be hospitals or prisons or anything
else, but if you are in some faceless office block in the middle
of Leeds doing shared services for 30 hospital trusts, how much
interaction do you ever have with your customers? None is the
answer.
Ms Cleveland: I do not know that
particular example. I am sure Peter could give you more information
in that particular sense.
Q7 Chairman: John Pugh and myself
do know about it because we spent the afternoon there. Have you
been there, by the way?
Ms Cleveland: I have not been
to that centre. I have been to other shared service centres where
people do have contact. It varies a bit from centre to centre
because if you are dealing with HR services, for example, then
you do have a lot of dealings with your direct customers. If you
are in an area that deals with procurement you may be doing more
in terms of just processing invoices through. The morale in a
particular organisation depends very much on the management in
the particular area. If we are looking at efficiency, generally
looking across processing centres and contact centres, areas like
that, units of about 500 are often the optimum size for management
units.
Q8 Chairman: If HMRC and the Department
for Work and Pensions are gathering ever greater amounts of personal
data in ever fewer centres, how can you reassure us that this
will be kept safely?
Ms Cleveland: I think clearly
we take data security very seriously. Bringing together data into
centres—
Q9 Chairman: I am sure you take it
seriously but how can we be sure that none of this will be lost
or get into the wrong hands?
Ms Cleveland: I do not think anyone
in the private or the public sector can say with 100% assurance
that they will never have any security issues or breaches. In
fact, the private sector do not operate to 100% levels; they look
at levels in the very high 99%s in there. What you can do if you
have more data in these shared service centres is you can concentrate
your training on more specific groups of people, you can police
your procedures more easily than if these are spread across a
large number of outlets. What I think the risk in those areas
is is that if there is then data lost it could be of larger numbers.
I think the risk of loss is less but the potential numbers in
any individual case could be higher.
Q10 Chairman: Peter Coates, how can
you expect NHS bodies of the type we were looking at yesterday
to sign up to shared services when you yourself will not make
that commitment?
Mr Coates: We are making that
commitment. SBS (Shared Business Service) currently have a proposal
with the Department of Health to move across to shared services
and we expect to sign a contract in the near future.
Q11 Chairman: It rather begs the
question—and by the way the reference to this is paragraph
2.17—why have you not done so up to now?
Mr Coates: Because the Department
of Health decided they wanted to design bespoke system based on
Oracle—
Q12 Chairman: Please speak a little
louder, I am having difficulty hearing what you are saying.
Mr Coates: The Department of Health
decided that they wanted a new bespoke system to move across to
Shared Business Services to maintain once they had built the system,
and that took some time. There was transparent discussion between
SBS and the Department and that has now come to an end and we
are now discussing final terms, et cetera.
Q13 Chairman: So the industrial-capacity,
bespoke Oracle system that we were shown yesterday, and we were
given various assurances about, was not good enough for your purposes;
is that right?
Mr Coates: For the Department's
purposes they wanted some refinements in it that Xansa, who support
the Oracle software at SBS, could not offer.
Q14 Chairman: What could they not
offer? After all, they are dealing already with a very complex
system, I do not know how many trusts they are dealing with so
why could they not deal with your organisation?
Mr Coates: It was to do with the
report writing software. I am not familiar with the detail, I
am afraid.
Q15 Chairman: Is there anybody in
this room who could tell me?
Mr Coates: I can offer you a note
on it by all means. [1]
Q16 Chairman: Do you not think it might
have been useful for you to have briefed yourself before you came
to this Committee so you could have told us? It is a fairly obvious
question. Have you got an official behind you, perhaps they can
help us? We do not mind who answers these questions.
Mr Coates: I have got nobody from
the Department here with me.
Q17 Chairman: Okay, do a note for
us then. Can I ask please, Philip Wheatley—welcome back
to our Committee Mr Wheatley—to look to page 21, figure
10; why do you think that four out of five prison governors think
the performance of the Prison Service is worse than it was before
shared services were introduced?
Mr Wheatley: There are two reasons.
The first is the period when this survey was done was immediately
after the period when we had had significant problems with the
payment system and we had to close the system, revert to our disaster
recovery process and go back to a manual system in order to pay
our invoices, which we have done successfully, and we were then
getting the system up and running, and since then it has been
working very well. The survey was done at a point when the shared
service had just had major problems and I am not surprised that
governors were very aware of that because their staff had to revert
to doing the old job by paper in establishments in order to make
sure that we paid invoices. It is not surprising that they said
it was not working as well. I think the other thing is that the
old system, which had staff working in establishments directly
to governors just down the corridor, was very expensive but very
user-friendly from the governor's personal point of view because
you could immediately get hold of somebody—
Q18 Chairman: If you do not mind
me saying so, Mr Wheatley, that is precisely the point that I
was trying to put five minutes ago to Alexis Cleveland. We are
told how much more efficient this is but you lose the personal
contact.
Mr Wheatley: You do but it is
a question of cost. We are trying to work efficiently and we get
an efficient system in which we get a lot more security that people
will be using the system properly and nobody is cutting corners.
It works much better and in terms of the Committee of Public Accounts
you will probably be pleased with it. It makes sure that we buy
everything properly, we receipt properly, we do a really thorough
job. It is not as immediately responsive from a governor's point
of view as a person in the office next door. That is very expensive
and this is a question of how we use public money. We are using
public money to do the job effectively and to do it in a way that
is entirely consistent with the right method of doing it, and
it costs less money.
Chairman: Thank you, Mr Wheatley. John
Pugh?
Q19 Dr Pugh: When we went there yesterday
and discovered you were not just doing back office functions in
terms of shared services, you were also in partnership with the
NHS offering procurement possibilities as well, in other words
stepping into the same territory that NHS Logistics and OGCbuying.solutions
and people like that were already in, do you not think it is slightly
odd to have a number of government bodies providing NHS trusts
with catalogues competing on price and using public money to do
so?
Mr Coates: They are not competing
on the procurement piece. What they are offering is access to
NHS trusts through their own ledgers to the existing procurement
catalogues offered by the various DHL contracts that are available
to the NHS. They are not offering a procurement service as such,
they are trying to interface this.
1 Note by witness: The NHS SBS offering is
a partly configured and partly bespoke system built specifically
for NHS organisations. DH is a central government department with
different accounting and HR requirements, and the NHS SBS standard
system did not offer the extent of functionality that DH needed
to manage its business. Back
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