Examination of Witnesses (Questions 60-79)
MR NICK
MACPHERSON, MR
JON THOMPSON
AND MS
GILL RIDER
28 APRIL 2008
Q60 Geraldine Smith: But is it not
that you need the right sort of managers? In the Report it mentions
that there are problems with the level of remuneration in comparison
with the private sector. How much would a finance director get
working in the Civil Service? How poorly paid are they?
Mr Macpherson: It will depend
on which department they are in and it will depend a bit on whether
you recruit them from the private sector.
Q61 Geraldine Smith: Just an approximate
figure.
Mr Macpherson: In a large department
they are probably paid about £140,000.
Mr Thompson: I am happy to answer
the question because it is a matter of public record; it is printed
annually in the resource accounts. My annual salary is £145,000.
Q62 Geraldine Smith: How many finance
directors have been sacked when something has gone wrong in the
Civil Service?
Mr Macpherson: The nature of moving
to professionally qualified finance directors has meant that quite
a lot of people have been moved out of their finance director
roles. I cannot tell you off-hand how many have been sacked.
Q63 Geraldine Smith: Not many I suspect.
Mr Macpherson: These are highly
accountable positions. If I employed a finance director who led
to my department overspending—
Q64 Geraldine Smith: He gets a red
mark.
Mr Macpherson: --- they would
not last there very long because I cannot afford to do that. The
reputational damage of having to appear before this Committee
and be told—
Q65 Geraldine Smith: Do they go away
with a package then, if it all goes wrong?
Mr Macpherson: It depends; it
depends on the circumstances. They may be entitled to some sort
of compensation, but if they were managed out because of a failure
to do the job, Gill, you can tell us what the HR implications
are of that.
Ms Rider: The poor performance
processes are very much the same as the processes of the private
sector and I came from the private sector. Essentially, if you
are managing somebody out because of poor performance, you go
through a set of processes which are laid down by employment law
and essentially you get to the end of the process and the individual
leaves.
Q66 Geraldine Smith: In other words,
anyone going through that process in a senior position, finance
director; that has never occurred in the Civil Service to your
knowledge.
Ms Rider: I have only been here
two years.
Mr Macpherson: I could not tell
you off hand. I am not aware of one recently.
Q67 Geraldine Smith: What would you
like to see to make it more? Do you think £145,000 is not
enough? Do you think we need to increase the salaries? Do you
think that would be helpful?
Mr Macpherson: There is a real
tension here, especially with some of these large organisations
like the National Health Service and so on, if you want to get
the best finance director in the business. Some of the best finance
directors in the business have been paid several million pounds
working at FTSE companies. Working for the Treasury, you will
be astonished to hear, I feel we should not set out to compete
with the private sector. We have to compete on quality, the quality
of the job and the interest of the job, but we have to have some
regard to the market. It is a difficult one. In current conditions
the Treasury would be arguing that no public sector person should
be getting a large pay increase.
Q68 Geraldine Smith: Just changing
the subject slightly; I notice on page 16, the Treasury brought
in some consultants to look at training in finance to save some
money presumably and as a result of the consultants, you designed
a Finance Skills for All training course. However, people in the
Civil Service do not seem too keen on attending it: 44% of departments,
not one civil servant who has attended has got up to tier one
level. That looks like a waste of money to me.
Mr Macpherson: Well that means
that 56% did attend it, so I would not say this is a failure.
Q69 Geraldine Smith: It means at
least one civil servant. We do not know whether we looked at those
other 56%.
Mr Macpherson: There are two issues
here. One is whether we have enough people attending this course.
Q70 Geraldine Smith: Is the course
relevant to them? Is that not the problem, that the course has
been created without proper thought?
Mr Macpherson: This was drawn
up with the full input of the then head of profession, Mary Keegan,
and so I have great confidence in the programme. On your other
point about whether we should have used consultants, on the whole
in the Treasury we are a very small department and we have quite
a small budget and I take a pretty dim view of employing consultants,
if we can possibly avoid it. There are some issues in terms of
design where it is easier to buy in the service than to recruit
a whole lot of people and then ask them to design it because actually
it is quite a small, short-term thing.
Q71 Geraldine Smith: Yes, but it
is not very cost effective if you end up designing a service or
a course that people do not want to go on, is it?
Mr Macpherson: I agree. You certainly
do not want to spend money on things which no-one will go to,
but it is not down to the quality of the course, it is coming
back to how we incentivise people to want to learn more about
finance.
Q72 Chairman: Ms Smith has had a
very interesting line of questioning and it is very important
that we do not fall into this trap of saying market forces force
us to pay enormous salaries in the public sector. We are seeing
this increasingly in local government. There is no public appetite
for paying salaries at this kind of level. There are many other
factors in terms of quality of life and interest in the job so
I do hope you will resist this. I am speaking personally now.
Mr Macpherson: Well we would not
be sitting here now if we disagreed with you.
Q73 Mr Bacon: May I say to start
with that there has been a significant degree of progress compared
with when I was first on this Committee? When I first asked the
question about how many finance directors were qualified, the
answer was 23% and that was not that many years ago. I fully appreciate
that getting a qualification in and of itself is not going to
change things but it is an indication of something quite important
in the right direction, so I do welcome that. The Service has
made great progress, but you yourself have identified that it
is about much more, that it is about embedding it culturally.
I would like to ask you about something you said in answer to
a previous question. I half paraphrase because I am not sure I
wrote it down correctly. You said that making finance integral
to what we do is the thing and if we can achieve that, it will
be terrific, or excellent or great, whatever your words were.
Then I re-read paragraph 2.25. Permanent secretaries, as you are
aware and it says here, are the department's accounting officers
and they are ultimately accountable for overall performance and
also for financial management in a department; they are accountable
to Parliament legally for how public money is spent. But it says
in there " ... financial matters do not automatically feature
in Permanent Secretaries' performance assessment criteria"
and it goes on a bit lower in paragraph 2.26 to say " ...
financial management matters are not automatically included in
the performance assessment criteria for senior civil servants
or budget holders". Strike out "senior civil servants"
and just say "financial management matters are not automatically
included in the performance assessment criteria for budget holders"
and you realise how startling a sentence it is. Why not? Why are
they not included?
Mr Macpherson: This may have been
right at the time this Report was written, but it does not chime
with my own personal experience.
Q74 Mr Bacon: May I just check? I
know the Report was published in February of this year, February
2008. Presumably it was written in the months preceding February
2008, which was only a couple of months ago. Has there been a
sea change of which I am unaware?
Mr Macpherson: May I cover the
issue of permanent secretaries because it is something which I
know from both sides.
Q75 Mr Bacon: Yes you can, but I
was actually asking about budget holders and we will come back
to permanent secretaries, of whom you are one. May I ask about
budget holders first? How is it that the performance assessment
criteria for budget holders do not automatically include financial
matters?
Mr Macpherson: I am quite frankly
pretty surprised that they do not because I have been working
very closely with my colleague, Gill Rider, on performance management
for the senior Civil Service over the last 18 months or so specifically
with this in mind. My own experience as someone who has sought
to control and plan public spending at the Treasury has been that
actually this has to be in people's objectives.
Q76 Mr Bacon: You would have thought
so.
Mr Macpherson: Just coming back
to my experience in the Treasury, I do have objectives around
finance, I have objectives around efficiency and I expect, as
the objectives cascade down the department, that those are integral
to people's objectives. We have made a lot of progress on that
over the last year. The challenge for Gill and myself is now to
follow this up. We are both on the pay committee for permanent
secretaries, so I am going to be following this up because it
seems to me absolutely essential if we are going to avoid some
of the financial disasters which this Committee all too often
has to engage with.
Q77 Mr Bacon: It does say halfway
through paragraph 2.26, following that sentence about the budget
holders, "The Cabinet Office is currently reviewing the
... framework" and so on "and while it is expected
that finance will be present within that framework, it will not
be a mandatory element for the whole senior civil service".
If you are serious about making finance integral to what we do,
then surely it should be a mandatory element for the whole senior
Civil Service. It follows as night follows day that if you want
it to be not just important, not just very important but integral
to what we do, make it mandatory. What is wrong with that? Why
are you not making it mandatory?
Mr Macpherson: It is Gill's guidance.
Ms Rider: I agree with you that
it is very important. I cannot consider a case where, if a permanent
secretary has a budget and it will need to cascade down his or
her team in his organisation, it would not be in people's objectives.
To me the entire team needs to add up into the whole and so that
is a very fundamental part. I will need to go and look at the
guidance to understand.
Q78 Mr Bacon: There is a difference
between very fundamental and integral and mandatory and it is
something you either have to do or you do not and people understand
that, do they not?
Ms Rider: I understand. I will
go and look at it and understand whether there are some exceptional
cases that are the reason for this. As far as I am concerned,
we were very explicit when we created the framework that financial
objectives, efficiency objectives and people management objectives
should be in every member of the SCS's objectives.
Q79 Mr Bacon: I understand if you
have a certain key obscure post, I do not know if we have a government
astronomer, I suppose we do, but his knowledge of outer space
is probably more important than his knowledge of double-entry
bookkeeping. I appreciate that. Mr Macpherson, you said you were
on the pay committee for permanent secretaries. What is the pay
of the highest permanent secretary?
Mr Macpherson: It must be the
Cabinet Secretary himself.
Ms Rider: It would be the Cabinet
Secretary.
| 
