Examination of Witnesses (Questions 1-19)
DEPARTMENT FOR
CHILDREN, SCHOOLS
AND FAMILIES,
OFFICE OF
GOVERNMENT COMMERCE
& HM TREASURY
14 JANUARY 2008
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 efficiency
of central government's office property. We welcome Mr Nigel
Smith who is Chief Executive of the Office of Government Commerce.
It is your first time, is it not?
Mr Smith: It is indeed.
Q2 Chairman: You are very welcome
to your first appearance in front of this Committee. Also appearing
to answer questions are Mr Mike Burt from the OGC, Jon Thompson
from the Department for Children, Schools and Families, formerly
the Department for Education and Skills and Louise Tulett of HM
Treasury. You are all very welcome. Perhaps we can start by looking
at the key facts on page four. Well Ms Tulett, why does the Treasury
perform so much worse than anybody else? Look at figure two on
page four "Central government departments' accommodation
costs per employee" the Treasury heads the list. Look at
figure four "Departmental allocation of space per employee".
Which department heads the list? Her Majesty's Treasury. So why
are you performing so badly?
Ms Tulett: The data actually used
here was the 2005-06 data and since then we have improved considerably.
Q3 Chairman: Apparently nobody had
done this sort of thing; this is the first time anybody has attempted
this kind of study. Why did you, the Treasury, wait for the National
Audit Office to do this study and then only start taking action
once your record became embarrassingly clear?
Ms Tulett: I believe that the
decisions to take the action actually were not as a result of
the publication of the document but were already in train.
Q4 Chairman: So how much progress
have you made now?
Ms Tulett: We have currently improved
about 20% on our density and we have made savings of some £3
million per annum on the running costs. We are currently also
looking at further moves that might improve us by a further 10%.
Q5 Chairman: Mr Thompson, you have
an excellent record in the former Department for Education and
Skills; I congratulate you. You consistently outperform anybody
else. Has anybody, including the Treasury, come and asked you
for advice?
Mr Thompson: Since the Report
was published, yes, we have had a significant number of visitors
asking about why we are here and indeed, the same as Ms Tulett,
we have significantly moved on from this position and how we have
done that.
Q6 Chairman: How have you done it?
Mr Thompson: We have been very
actively looking at space usage. We have adopted, for example,
an 8:10 ratio which significantly improves our space usage. In
this Report, we were at 16 square metres; we have now planned
on the basis of 11 square metres per person, so below Mr Smith's
recommendation. It is those kinds of areas where we have done
some useful work.
Q7 Chairman: You have been doing
this for some time, have you?
Mr Thompson: Yes, we have been
doing this for some time. We have had a clear view about our estate
strategy and about using the asset to the maximum to get the most
value out of it.
Q8 Chairman: Well congratulations;
you may be in receipt of a gold star PAC award. Mr Smith, why
is there such a variation between the performance of various government
departments?
Mr Smith: The first thing to say
is it is a very, very big estate. It is almost inevitable you
will find a big difference in performance. Just the facts: 13
million square metres, ranging from the offices in Whitehall,
which are very often listed buildings, ranging to people at different
stages of their business cycle. I am not particularly surprised
at the variation.
Q9 Chairman: I am not sure that is
a very effective answer. Let us look right at the beginning of
the Report at paragraph three which you can find on page seven:
" ... departments' performance is sub-optimal and ... there
are a number of key areas for improvement. If departments could
bring the performance of individual buildings into line with private
sector benchmark buildings, Government would reduce gross annual
expenditure on offices by around £326 million". Then
let us look at figure 25 on page 42 shall we Mr Smith? You will
see: "Departments' performance ranges from 14% to 50% worse
than the private sector average benchmark". This is just
not good enough, is it?
Mr Smith: No, I agree it is not.
Q10 Chairman: So what are you doing
about it?
Mr Smith: What I was saying was
that actually the variation is perhaps not surprising. If you
look at the average, then quite obviously Government have a long
way to go to get near to private best practice. What are we doing
about it? The primary thing that is being done is actually trying
to put some systems, some process into looking at the issue, getting
some governance which is consistent across Government and getting
data so we can actually do some effective performance management.
From looking at the Report, although obviously it all pre-dates
my arrival, I am encouraged to see a number of references to what
the OGC is doing in terms of its HPP agenda, high performing property,
its benchmarking service, although I have to say we are about
18 months into a seven-year programme and it seems a long period
of time to me.
Q11 Chairman: You talk about your
benchmarking. Let us look also, shall we, at figure 18 which we
can find on page 24: "All departments have scope to improve
occupation density levels in line with OGC recommendations"
that is 12 square metres per person. Twelve square metres per
person is not ungenerous, is it? It is perfectly reasonable.
Mr Smith: I believe it is as an
average across departments. Twelve square metres is what is being
discussed at the moment; it is likely to become the standard.
Q12 Chairman: Let us look at our
friends in the Treasury, our pampered friends in the Treasury
who are always ticking off everybody else about wasting public
money. How many square metres per person do they have? Over 20m2
is it not? That is staggering.
Mr Smith: It is, although I have
to say what we are talking about here is an average; they are
looking to get below the 12m2 and there will be a range, both
below and above. If you are comparing a building which is a Grade
II building like the Treasury with a building which is a standard
office headquarters, then there is bound to be a range. Certainly
as an average 12m2 is quite realistic and obtainable for Government
across the whole of their estate, yes.
Q13 Chairman: Remind me when the
Treasury last had their offices refurbished. It was very recently.
We had a PAC Report, we had a NAO Report. It was not years and
years ago. Opportunities could have been made there to bring you
the kind of innovative practices that have been carried out by
the Department for Education and Skills. Why were they not done?
Mr Smith: I am afraid I cannot
go back over the history; I was not here. I believe that the offices
were put into place in 2002 under a PFI. There has been a significant
number of changes in terms of getting density in by attracting
other departments to go into the Treasury, of which my department
is one. OGC have moved out of Trevelyan House, also moved out
of our Edinburgh facilities. We have moved into the Treasury,
as have other parts of Government. It has taken some time but
the fact of the matter is that there is now a more acceptable
density, but I would still not characterise it as what can be
achieved in the Treasury.
Q14 Chairman: So now you are newly
appointed from the private sector and you are already putting
a bomb under these people are you?
Mr Smith: I would not classify
it as a bomb, but I certainly would ask people to look at what
is not just possible in the short term but what is ideal in the
medium term.
Q15 Chairman: Are you asking them
why 47,000 departmental staff are still located in London, that
is a quarter of the total? Is that necessary do you think?
Mr Smith: There are two elements
to that. Firstly, obviously a very public target was stated of
20,000 roles exiting London and the south-east, of which, as of
September, 15,500 have actually been relocated outside London.
I should say that no additional target has been set, but there
are certain things in place which will automatically lead to the
question being asked every time there is a new lease break on
an existing building in London or a proposal to put new offices
in London. There has now to be a justification as part of a business
plan as to why it is necessary to have the roles in London.
Q16 Chairman: From your experience
in the private sector, often they have very small headquarters'
staff in the middle of London do they not? If I am wrong, tell
me.
Mr Smith: My last two companies
actually, perversely, both had their headquarters in the middle
of London but no, I would take the point. Over the last 10 to
15 years large companies have moved away from the practice of
having their main headquarters in the centre of London. They have
looked at cheaper accommodation. Having said that, there will
always be more in proportion in Government because of the nature
of the policy which is in London. Having said that, is 47,000
people right? Well, quite obviously the answer to that is no,
because there are big gains to be got by getting offices which
can be moved out into the lower cost regions.
Q17 Chairman: There is a figure here
just showing what those gains are. The excuse that these people
need to access ministers is a pretty weak one is it not? Of these
47,000 people, how many actually ever see a minister and therefore
need to be in this part of London?
Mr Smith: Certainly it should
be lower than 47,000, people but what number it should be I am
afraid I do not really have in my head.
Q18 Chairman: We see on page 38,
paragraph 4.10 that you want to achieve savings of £1 billion
to £1.5 billion. We see in fact: "However at the moment
there is little detail on the specific source of expected savings,
how savings targets will be monitored and a lack of clarity on
whether the £1 billion to £1.5 billion is an achievable
target". So was this just a back-of-a-fag-packet" target?
Mr Smith: I would have to say
that what the £1 billion to £1.5 billion sounds like,
a range of half a billion, by definition that is not something
which has a detailed plan behind it. What I can say though is
that there are certain areas where you can look at the general
scope of the estate and you can make some assumptions about what
you should achieve very often in my experience, what you do is
you start off with your aspirational target and then you actually
work with all of the departments to make it happen. That £1.5
billion is made up of three major elements: the first being space
reduction, that is getting rid of space; the second being density
of people in existing space; the last, which is a smallish element,
is the benefits of collaboration when we are looking at getting
better deals on long-term leases. It is actually three different
areas of work and I would say, looking at those numbers, which
will be developed into detailed plans over the next 12 months
as we get all of the detailed asset management plans from the
departments, that will be worked up into a detailed plan and certainly
I see no reason to believe that £1 billion to £1.5 billion
is not achievable.
Q19 Chairman: Lastly on sustainability,
we have a PAC Report actually being published tomorrow in which
I have said that obviously governments should practise what they
preach. When you read in paragraph 2.17 on page 23: "Departments
were not able to supply any information on the amount of energy
consumed in 2005-06 for 265 out of 877 buildings", it is
not good enough is it?
Mr Smith: Generally speaking the
answer is no, it is not good enough. The data on sustainability
certainly has to be improved, although I have to say that that
particular quotation has to be taken into context. That does not
mean to say that there is not sustainability data on those premises:
the issue is whether or not there are sustainability data on the
individual buildings that we are talking about, whether there
are on individual buildings. If you take for example energy, which
is one of the key bits of data you need in terms of carbon, in
terms of energy efficiency, very often the energy will be supplied
maybe to three different businesses or three different departments
in the same office. You may have energy which is provided to three
different offices where the measure is taken for those three offices
rather than the individual office. Generally speaking there is
some data in Government on sustainability; it is not good enough.
As part of the OGC initiative on benchmarking, that will provide
much better and quality data as we take that forward.
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