Examination of Witnesses (Questions 20-39)
DEPARTMENT FOR
ENVIRONMENT, FOOD
AND RURAL
AFFAIRS
19 MARCH 2008
Q20 Mr Williams: With so many of
these delivery bodies, is it appropriate that 60% of your budget
resources go on the Department itself?
Mrs Ghosh: That is an interesting
take. In one sense, one of the challenges of managing our money
is that so much of our money, as you say a high percentage, is
paid out at the start of the year effectively, is committed at
the start of the year, to delivery bodies. That means you have
to be absolutely sure, which is what we were not in 2006-07, that
you can afford the money that you have given them. Once you have
given the money to the delivery bodies and they are busy making
plans to spend it, your scope when you realise you have over-committed
is that you have essentially either, as we had to do then, to
take the money away from people and disturb their plans or focus
your reductions on the rest of the Department. I think it is probably
an appropriate balance. If one were to hand out more money through
delivery bodies, there would be greater financial management challenges
to it.
Q21 Mr Williams: What challenge do
you have for establishing clearer key benchmarks to enable you
to monitor the bodies?
Mrs Ghosh: As I said earlier,
we have very clear benchmarks set in the business plans that we
approve at the start, generally speaking, of every year for the
key outcomes we want the various delivery bodies to deliver. It
is not necessarily the case that you would want exactly the same
set of key performance indicators from every body because clearly
a certain level of flood defences maintained to a certain level
is appropriate for the Environment Agency; something completely
different would be appropriate for the Marine and Fisheries Agency
and its surveillance of illegal fishing. You have to have a slightly
different set of KPIs for all bodies, but essentially there has
to be a culture where they understand that it is a contract; they
have to understand what our commitments are and what their commitments
are, and that those might change over time. That is the kind of
relationship we are trying to develop. I do not know whether Stephen
has anything more to say strictly on the financial reporting.
Mr Park: It has to be proportionate
to the risks within the individual departments. What we have found,
and I think what the NAO study reports, is the largest delivery
bodies have much better risk management regimes. That enables
us to work with them along the lines that we have. For those organisations
which are smaller and have different risks, we have to approach
it a different way. What does come out of the Report is that for
those areas where we need to have a very good relationship with
clearly defined roles and responsibilities, that works very well.
I would also add that as part of the Financial Management Improvement
Programme, we are increasing the frequency with which we gather
all of the finance directors together to share best practice and
actually to use that as a forum for improving the way we work
as a total entity.
Q22 Mr Williams: You referred to
the smaller bodies. Do you have specific proposals in mind to
improve the oversight of the very small bodies?
Mr Park: To answer that in two
parts, one, we look from the corporate governance point of view,
we have an ownership strand for each of the interfaces with those
bodies as well as a customer strand, and alongside that we also
have the financial management and financial delivery side of it.
On the financial management side, we do encourage those bodies
to share best practice between them. Once again, it is proportionate.
Something which a large body has done is quite difficult for a
small body to implement but they can and do share best practice
between them in terms of getting better procurement by grouping
together and getting better policies by grouping together. The
signs of that working are encouraging.
Q23 Chairman: On that list that Mr
Williams referred to you have got here the National Fallen Stock
Company, which employs just two people and spend £14 million
a year, £7 million per employee. What are they doing?
Mrs Ghosh: I think I can send
the Committee a detailed note on this.[1]
Q24 Chairman: Have you ever heard of
them?
Mrs Ghosh: I certainly have and
indeed I will use a modern term: I speed-dated the Chief Executive
of the National Fallen Stock Company at a recent conference that
we had.
Q25 Chairman: The Chief Executive
and one member of staff?
Mrs Ghosh: No, just the Chief
Executive, and we had a discussion. We were talking about the
future of the National Fallen Stock Company. I believe it to be
the case, but I will come back to the Committee on this, that
the plan always was that, as it were, in the end they would be
dissolved, disappear and move entirely into the private sector.
I will come back to the Committee on that.
Q26 Chairman: There are others such
as 49 people in the Covent Garden Market Authority, and they spent
£12 million.
Mrs Ghosh: And made a profit I
think, as it points out in the text.
Q27 Chairman: Why don't you put them
in the private sector then if they made a profit?
Mr Park: Because this is how they
were set up.
Mrs Ghosh: It would no doubt need
primary legislation to change it because they seem to be operating
very successfully.
Q28 Mr Davidson: Mention is made
here of the aims of the Renew Defra Change programme. One
of the strands is defining the Defra way of doing things. Can
I be clear about the Defra way of doing things in the past? As
I understand it, because they were unable to spend their money,
there was a tradition of under-spending, and so to compensate
for that you over-allocated, and then, as you got better at avoiding
the under-spend, you were heading for an over-spend and had to
make cuts in the middle of the year. Was anybody sacked as a result
of that?
Mrs Ghosh: As you know and as
the Report points out, I made significant changes to the finance
team and that was marked by Stephen's arrival.
Q29 Mr Davidson: Was anybody sacked?
Mrs Ghosh: Let me just go back.
I think the question of over-allocation was as much a cultural
matter, and indeed we would take responsibility for this, as an
issue about the organisation at the highest level, at the management
board level, understanding that the world had changed and making
allowance for the challenges that, as the Chairman said at the
beginning, were likely to crop up mid-year. There were significant
changes made to the finance team.
Q30 Mr Davidson: Was anybody sacked?
Mrs Ghosh: No, nobody formally
was sacked because I did not think it was appropriate. I did not
think it was a disciplinary matter.
Q31 Mr Davidson: Were they all promoted?
Mrs Ghosh: No, they were not promoted.
They left the Civil Service.
Q32 Mr Davidson: They left with full
pensions, no stain on their character?
Mrs Ghosh: Under the normal terms
of early departures from the Civil Service.
Q33 Mr Davidson: Mouths stuffed with
gold?
Mrs Ghosh: Just to go back, as
I said in my introduction, although it was extremely bad financial
management to have to withdraw what was in fact a small proportion
of our overall budget—
Q34 Mr Davidson: How much was it
altogether?
Mrs Ghosh: £170 million out
of a total budget of £3 billion.
Q35 Mr Davidson: That is a fair whack
of money, is it not?
Mrs Ghosh: The fact that our delivery
bodies had to re-allocate their spend was a challenging time;
we could have told them n months earlier but it would not
have made any difference to the outcome. In those circumstances
it was not, in my view, the kind of failure in financial management
by the professional team involved that would have justified that
kind of disciplinary action. That was my judgment as Accounting
Officer.
Q36 Mr Davidson: I accept that it
was no theft and it was not misjudgement of that sort, but describing
it as a cultural issue is a way of smoothing away the fact that
essentially these people were asleep at the wheel, were they not?
You did indicate that times had moved on. For these people in
that Department at that time, it was essentially Sleepy Hollow.
The world had changed round about them and they had not changed
with it. What you did was to stuff their mouths with gold and
then they left. I can understand why that was done but would that
happen in the private sector, do you think?
Mrs Ghosh: I look to Members of
the Committee who have worked in the private sector, but one does
see things like that happen in the private sector, yes. What I
was doing was operating under the terms of the compensation arrangements
in the Civil Service to which I have to adhere. As I say, my judgment
as Accounting Officer was that this was a broader issue. It was
an issue for the management board; it was an issue for us to work
with ministers. We recovered the position. We ended up in the
year spending across resource on budget and therefore it seemed
to me that was the appropriate action. That is my judgment.
Q37 Mr Davidson: I understand the
point of the action but it was a question for the management board.
Were the management board asleep at the wheel?
Mrs Ghosh: As I said, and I said
this to the EFRA Select Committee—
Q38 Mr Davidson: A simple yes or
no would be sufficient.
Mrs Ghosh: We were not sufficiently
aware of the difference in the financial context in which we were
operating. We were also, at the time, dealing with a wide range
of other issues; for example, the issues at the Rural Payments
Agency and—
Q39 Mr Davidson: That is what you
are paid for. When I ask: "were they asleep at the wheel?"
and you tell me they were not sufficiently aware, that is a "yes",
is it not, really? These people were asleep at the wheel because
they were not sufficiently aware that the world had changed. I
understand that other things were going on. Other things go on
all the time. Can I just turn on to these other things that were
going on? When the Chairman asked about contingencies and the
like, what I am not clear about, to use Donald Rumsfeld's phrasing,
is how many of these things were unknown knowns, as it were, and
how many of them were unknown unknowns? How many of these things
could not have been anticipated by any reasonable person who was
not asleep at the wheel and how many of them ought to have been
anticipated and a contingency arrangement made for them?
Mrs Ghosh: The biggest unknown
unknown—I am trying to remember Mr Rumsfeld's terminology—was
of course the impact of the problems at the Rural Payments Agency,
which only came to light towards the end of March. As the Chairman
was saying, in some senses in a department like ours, one should
have some provision—an unallocated provision—for the
kind of emergencies we deal with, which is why we have put £50
million in the budget for next year. I come back to the point:
had we done that at the start of the year, we would simply have
taken £170 million out of the budget at the beginning of
the year; the delivery bodies from whom we took the money would
not have had more money to spend; they would just have not had
it at the beginning of the year. There was not a world in which
we could have dealt with those unknown knowns and given them all
that money, because we would have to have fitted it within our
budget for that year. It is a zero sum game.
1 Ev 9 Back
| 
