Examination of Witnesses (Questions 20-39)
MR NICK
MACPHERSON, MR
JON THOMPSON
AND MS
GILL RIDER
28 APRIL 2008
Q20 Mr Touhig: Fifty-seven per cent
of departments are still reporting their financial performance
and their performance in public service delivery as though they
were completely separate. Why are they doing this?
Mr Macpherson: It reflects history
and a disconnect between finance and performance which this professionalisation
agenda is seeking to address and with the latest spending review
all departments have departmental strategic objectives. Underlying
these should both be operational targets in terms of performance
but also a far clearer understanding of the finance underpinning
them and how that finance will develop over time. That is happening.
Q21 Mr Touhig: Is that the intention
across Government?
Mr Macpherson: People now are
planning on that basis and departmental boards should be holding
the department's performance to account. For example, in the Treasury
board, when I look at performance, I will want to look at performance
but also finance completely alongside each other.
Q22 Mr Touhig: If you cannot see
performance set alongside the cost of delivering that particular
service, how do you decide whether you are getting value for money?
Mr Macpherson: If you do not have
those things alongside each other, you are basically shooting
yourselves in the foot.
Q23 Mr Touhig: So why is any department
still doing it, looking at these things separately?
Mr Macpherson: They are not looking
at them separately, but there is still further progress they can
make in terms of really getting a granular understanding between
costs and output. I do not claim that we have reached nirvana:
we have made progress but there is still more to do.
Q24 Mr Touhig: Do you have a timetable
for achieving this?
Mr Macpherson: As part of the
latest spending review period, we are requiring departments to
plan on the basis that they do. Jon, do you want to expand because
you are actually doing this as finance director at the DCSF.
Mr Thompson: Well, as I answered
the Chairman's question earlier, the CSR requires us to report
both operational performance and financial information together
to the Treasury, so you begin to integrate it. There are plenty
of examples across Government.
Q25 Mr Touhig: That is a key objective,
is it?
Mr Thompson: Yes.
Q26 Mr Touhig: And you have a timeframe
for it.
Mr Thompson: Yes.
Q27 Mr Touhig: Which will be completed
when?
Mr Macpherson: It will be completed
during this spending review period.
Q28 Mr Touhig: The Treasury requires
departments to state the cost of achieving each of their strategic
objectives. How are you going to make sure that they do this,
given just 28%, one in three, of them actually give board members
a monthly analysis of expenditure against operational targets?
Mr Macpherson: They are required
to do it as part of their accounts, so they have to do it anyway
once a year; schedule five of their resource accounts sets that
out. However, as you say, the challenge is to get much beyond
that in terms of having monthly reporting and that is happening
but, as I said earlier, there is still varied performance across
departments.
Q29 Mr Touhig: I am concerned that
you are not doing this already. Why are we not? Just 28%, that
is less than one in three, give the board a monthly analysis.
Mr Macpherson: My guess is that
there has been an improvement even since this Report was done
because of the new departmental procedures.
Q30 Mr Touhig: So you think it has
increased. Could you give us a note and tell us by how much it
has increased?[1]
Mr Macpherson: Yes, I would be
happy to do so.
Q31 Mr Touhig: When you are assessing
the management of assets across Government, how much notice do
you take of the National Asset Register?
Mr Macpherson: The National Asset
Register is a really useful inventory of all the assets. It is
a powerful tool for the Treasury to look through it and challenge
departments on it in terms of where departments might do more.
Having said that, a department which is doing its job properly
probably does not have to get the National Asset Register out,
it should actually be actively managing its assets anyway. It
increases transparency, it increases accountability and, from
the Treasury's perspective, it is a useful tool but it is only
one tool amongst many.
Q32 Mr Touhig: I was going to ask
you what it is for, but you seem to think it is full of measurements,
is it? That is how you seem to see it.
Mr Macpherson: When it was originally
introduced round about the end of the 1990s, it was actually the
first time ever the Government had sought to put down in one place
all of central government's assets. That was a really powerful
message to departments. I can remember at the time, the Inland
Revenue had owned Ipswich Town's car park, the football club,
and that accountability, the fact that newspapers wrote stories
about it, the fact that you hold departments to account, actually
had quite a big effect. A lot of the issues around financial management
are about transparency, getting the facts out there and then accountability,
either through the Treasury, this Committee or the national media.
Q33 Mr Touhig: I was PPS to the then
Chancellor, now Prime Minister, when the National Asset Register
was first published and I thought the Register would be used to
manage the national assets in a sense of saying "Look, let
us dispose of the things we do not want in order to pay for the
things we do want". Why does that not happen then?
Mr Macpherson: It is used in that
sense. Every spending team in the Treasury, as a matter of course,
would look at it and ask departments questions. The message I
am trying to get across is that when it was first introduced,
it was generally helpful in that regard. Now that departments
actually have rather more sophisticated understanding of their
assets, my guess is they will be ahead of the curve, though I
suspect in some departments, even now, it is still useful.
Q34 Mr Touhig: Can you tell us then
how much money is brought into the Treasury from the sale of unwanted
assets?
Mr Macpherson: I can give you
a note on how many assets we have sold in recent years because
we have achieved our targets on that, although inevitably as many
of the assets sales have been in local government as in central
government.[2]
Q35 Mr Touhig: Let us have a note on
that. One last question. I queried matters around the National
Asset Register and in a letter to me in July last year Sir John
Bourn said that the message is that the Assets Register is put
to limited use by government departments adding little to the
information already held by them.
Mr Macpherson: Well, if they already
hold the information, clearly it will be less relevant than if
they do not hold the information. I would contend that the fact
that they were required to make a return to the National Asset
Register forced them to put their house in order. So it has had
an effect, but over time it will have less of an effect because
departments are doing it anyway.
The Committee suspended from 4.55pm to 5pm for
a division in the House.
Q36 Keith Hill: May I pursue the theme
which was being developed by Don Touhig which is really about
the quality of information that you have in terms of the investments
which are being made? May I draw your attention to paragraphs
3.4 and 3.5 of the Report where you refer to the NAO Report on
the welfare to work programme for people with disabilities and
we notice that DWP's knowledge of what was delivered under that
programme was "poor". In paragraph 3.5, the Report says
"Many departments reported problems with the accuracy and
timelines of the primary data from which ... operational performance
might be judged". Why is that?
Mr Macpherson: It is a measure
of how far some parts of the public sector have been behind modern
financial management practice. Mainly due to the work of Mary
Keegan in particular, there has been a huge step forward over
the last few years. For example, the number of departments where
the board will have the accounts within eight working days of
the end of the month has increased hugely, but, as you say, there
are still areas where performance falls short of where we should
be and all we can do is keep the pressure up.
Q37 Keith Hill: This is about the
quality of the data collected at the base, is it not?
Mr Macpherson: Exactly.
Q38 Keith Hill: Are there common
problems across departments with that?
Mr Macpherson: There is a huge
variation. Some departments are extremely good at this sort of
thing.
Q39 Keith Hill: Which departments?
Mr Macpherson: I will mention
my own department. Because national statistics are published each
month, we have very good data on what is going on on the public
finances or inflation or GDP. In big organisations like Jobcentre
Plus, Her Majesty's Revenue and Customs, the Health Services,
you are going to have far bigger data challenges and you will
have patchy data across the regions and different parts of the
organisation but we should not accept that. We have to keep pressure
on them to raise their game. There is no reason in principle why
you should not have good operational data from DWP and indeed,
in some areas like the Pension Service, there has been huge improvement
in recent years. I hope that your report on DWP actually has had
some effect and we will follow that up.
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