Examination of Witnesses (Questions 80-99)
MR NICK
MACPHERSON, MR
JON THOMPSON
AND MS
GILL RIDER
28 APRIL 2008
Q80 Mr Bacon: And he is on how much?
Mr Macpherson: Well it is a matter
record and my guess is it is between £210,000 and £220,000.
Ms Rider: Something like that.
Q81 Mr Bacon: Last time I read it
in the newspaper, though of course you cannot always believe what
you read in the newspaper, it stated the Cabinet Secretary's salary
was £267,000 including bonuses.
Mr Macpherson: No, it is not.
There is a range, if you are Cabinet Secretary, within which you
could be paid and one of the rather sad things, if you are one
of these people, is that you always tend to be paid quite low
in the range. I am sure if someone published my pay—
Q82 Mr Bacon: How much are you paid?
Mr Macpherson: A lot less than
the Cabinet Secretary.
Q83 Mr Bacon: Are you paid more than
Mr Thompson here on £145,000? Poor old Mr Thompson here slums
it along on £145,000. We will all go home and cry in our
coffee about it.
Mr Macpherson: My pay too is a
matter of public record and I think my pay is something around
£165,000 or £168,000, something like that.
Q84 Mr Bacon: You think? Is it like
some of these pop stars? Richard Branson was asked once how much
his salary was and he said he genuinely did not know.
Mr Macpherson: I must say I am
incredibly well paid by the standards of the public sector and
I am very grateful for that. I am not in it for the money.
Chairman: Nor are we.
Q85 Mr Bacon: Could I ask you about
the finance directorship of the MoD? You said it was advertised
and that no-one came forward from the private sector and presumably
therefore Mr Wooley, who ended up being appointed, was an internal
candidate, was he?
Mr Macpherson: Yes, he was already
in the post. They decided to advertise it externally. There were
applicants from the private sector but the view of the panel chaired
by the MoD Permanent Secretary was that none of them was satisfactory.
Q86 Mr Bacon: It is a serious problem
if you cannot get qualified people for important jobs like that
by advertising for them because of the straints of pay. It is
a very serious problem.
Mr Macpherson: It is a serious
problem but you just have to be quite persistent on these things.
If you advertise at the wrong time, you just do not get the applicants,
but if you try again you can. So that is why they are trying again
and I welcome that.
Q87 Nigel Griffiths: We see some
reports from the National Audit Office and I sometimes feel that
the Committee is a bit harsher in translating them than the Report's
contents merit. Sadly, or ominously in the case, it is the opposite.
Mr Thompson, like your colleagues you have a very impressive CV
with your experience with Eagle Star and Ernst & Young but
even more impressive for me is the part you played in local government.
Do you know a single council in the land that has a finance director
without qualifications?
Mr Thompson: Not that I am aware
of. I believe there is a legal requirement in the Local Government
Act 1972 section 151.
Q88 Nigel Griffiths: So it is not
just that you are not aware of it, the answer is no.
Mr Thompson: As long as they are
all legally compliant.
Q89 Nigel Griffiths: It puzzles me
that Whitehall puts up with this and has put up with it for so
long and it should be a real, real concern to the Committee and
that is probably the reason why there are some particularly damning
facts in this, particularly page 22, paragraph 3.7. Can it be
true that less than a third do monthly analyses of expenditure
by operational target as this Report says? They do year on year
but they do not seem to have this monthly monitoring and then
reflecting against operational target. What is the reason? Why
do you put up with that? Either of you. I can understand why you
are looking at each other.
Mr Thompson: The question here
is what is provided monthly. It is well embedded now that there
is a monthly financial report. The very specific question here
is whether that report aligns your spending against operational
targets. Now that may not be there but I am fairly sure there
is monthly information.
Q90 Nigel Griffiths: There is an
ambiguity in the way the paragraph is written.
Mr Thompson: Yes, there is.
Q91 Nigel Griffiths: I accept that.
It says " ... 84 per cent of departments report year-to-date
expenditure against budget on a monthly basis but only 28 per
cent offered a monthly analysis of expenditure by operational
target". In the private sector I would have thought that
would be a requirement. In local government, when I was there
20 years ago, it was a requirement. I am puzzled that in departments
with a much bigger spend than local government, it is not and
I want to know what you are doing about it.
Mr Macpherson: It comes back to
the answer to the earlier question around how we are introducing
a regime for spend against departmental strategic objectives and
I would hope that we will make significant progress on this. The
one reason I pause about monthly data by operational target, where
I can understand that there may be some problems, is if you take
the example of the Treasury. I have information each month disaggregated
by directorate within the Treasury, those directorates will broadly
map onto objectives, but they do not map totally because actually
quite a few people have multiple objectives.
Q92 Nigel Griffiths: Paragraph 3.19
on page 25 again makes another damning statement that only 20%
of departments considered that policy decisions were invariably
based on a thorough assessment with the financial implications.
I have to tell you when I was first a minister in 1997 and I asked
about making policy changes and implementations and what they
were going to cost, I was rather smugly told that ministers did
not have to worry about that and the department internally sorted
that sort of thing out. I did ask for a seminar on the subject.
I did get one which was a one-day seminar. I am told it was the
first time a minister had asked for such a thing since it was
provided to Michael Heseltine. Is this now a matter of routine
with ministers?
Mr Macpherson: Yes, I would hope
that it is a matter of routine. Certainly, if anything goes through
a minister without a costing implication in the Treasury, my finance
director would be incredibly irritated. More generally, it has
been a rule in the ministerial code that the cost of any proposal
which is circulated around Cabinet colleagues has to have been
agreed with the Treasury and if it is not agreed, I would be quite
worried.
Q93 Nigel Griffiths: Could we just
have a little note on whether that is a change in the ministerial
code in 11 years or not?[3]
Mr Macpherson: Certainly.
Q94 Nigel Griffiths: Paragraph 3.26
on page 26, the paragraph basically highlights the percentage
of capital spending that is carried forward and almost a quarter
of planned capital expenditure was carried forward. I am actually
a great believer is carry forward in three-year targets, but only
provided that they are being monitored and preferably monthly.
Is that an acceptable sum?
Mr Macpherson: As you say, there
is a real tension on this carry forward, in-year flexibility as
it is known. You want money to be spent efficiently, so you do
not want departments to be forced to spend it.
Q95 Nigel Griffiths: Chucking it
at filing cabinets and computers and all the rest of it.
Mr Macpherson: Exactly. Equally
there does come a point where if it is really high, you have to
begin to wonder whether the budgeting has been sensible or not.
There was a real problem when the Government cranked up the machine
on capital spending and from a fairly low base, as I recall. Some
departments actually did not realise the lead times involved and
so in the earlier part of this decade there were some quite big
capital under-spends.
Q96 Nigel Griffiths: Is 25% an acceptable
figure?
Mr Macpherson: In my view 25%
is on the high side and I would expect it to come down in the
future.
Q97 Nigel Griffiths: Let us go to
paragraph 4.2. How damning a statement do you think it is that
the NAO's "examination of under- and over-spending by departments
did not find evidence that departments have significantly improved
their forecasting and in-year monitoring" for five years?
Mr Macpherson: That is slightly
unfair.
Q98 Nigel Griffiths: I think you
agreed it though as a statement.
Mr Macpherson: Okay, yes of course
I agreed it. There have been improvements.
Q99 Nigel Griffiths: Hang on, either
there have been improvements or there have not.
Mr Macpherson: Since the 2003
study.
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