UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 1103-iHouse of COMMONSMINUTES OF EVIDENCETAKEN BEFOREDefence Committee
MoD ANNUAL REPORT
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This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.
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Any public use of, or reference to, the contents should make clear that neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.
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Transcribed by the Official Shorthand Writers to the Houses of Parliament: W B Gurney & Sons LLP, Hope House, Telephone Number: 020 7233 1935
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Oral Evidence
Taken before the Defence Committee
on
Members present
Mr James Arbuthnot, in the Chair
Mr David S Borrow
Mr David Crausby
Linda Gilroy
Mr Mike Hancock
Mr Dai Havard
Mr Bernard Jenkin
Mr Brian Jenkins
Robert Key
Mrs Madeleine Moon
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Memorandum submitted by the Ministry of Defence
Examination of Witnesses
Witnesses: Sir Bill Jeffrey KCB, Permanent Under Secretary, and Mr Terence Jagger, Director Financial Management, Ministry of Defence, gave evidence.
Q1 Chairman: Good morning and thank you for coming to give evidence at the first of our sessions on the Ministry of Defence Annual Report and Account. Permanent Under Secretary, you are most welcome. Would you like to introduce yourself and Mr Jagger?
Sir Bill Jeffrey: I hope at the fifth attempt the Committee does not need me to introduce myself. I start with an apology which is for our relatively recently appointed Finance Director Jon Thompson, who had an operation about a week or ten days ago. We thought he would be back by now but he is still recovering. His deputy on the main financial side at director level, Terence Jagger, joins me today.
Q2 Chairman: Let us start with the opening question. Your report and accounts have been qualified again. Why?
Sir Bill Jeffrey: Essentially for three reasons, Chairman. The first is to do with the Joint Personnel Administration System which was the source of a qualification the year before, for slightly different reasons. When we introduced the JPA, we concentrated on its main function, which was to provide the pay and allowances system for the Armed Forces. I think, looking back on it, we paid insufficient attention to ensuring that the expenditure that the JPA covered was properly accounted for. The consequence was that in 2007-08 the NAO had to limit the scope of the audit assurance, essentially for lack of information. For last year, we had in fact addressed largely the problems with the JPA but the consequence was that the NAO had better visibility of the actual payments of allowances, and they did a sample, a relatively small sample, that suggested that in material respects we are either or under-paying. The vast majority of these errors were input errors. In the sample we only found one that suggested that fraud was a factor, but it does suggest that we have an insufficient grip on the accuracy of these payments. Terence Jagger, as it happens, is the expert on that area and you may want to ask him to say a bit more about that. The second issue is to do with stores and stocks where again on a sampling of 245 stock lines, the NAO found that 22 per cent of them had some inaccuracy. We take that very seriously. On the other hand, in a larger sample of 106,000 items that we did ourselves last year, if you take the value of the stocks in question, we discovered a net error of only about 0.5 per cent. What we have done on that is to institute, under the Chief of Defence Materiel, a major review of our logistics processes information system and the way it works and in particular stock management in the DSDA. I think we will always have some problems with recording stores and stocks completely accurately until we introduce fully two computer systems; one is called the Management of Joint Deployed Inventory, which has already been rolled out; and the other is the Future Logistic Information System, which is now the subject of a competition. The third area is on visibility of equipment where the NAO found in particular that we had less visibility than we ought to have of Bowman assets, including those that are actually in the repair loop. There are inherent difficulties in having complete visibility of Bowman radios, given the nature of the beast, the extent to which we are deployed in theatre, but I think we accept completely that we need to have better visibility of this, and there is a great deal of work going on to cleanse the data and to improve the position there. These are the reasons. As accounting officer, I would say that I take these shortcomings very seriously. I think there is a lot of effort going on, led by the Finance Director and Terence Jagger, but I myself receive regular reports on progress with that. I very much hope that although some of these issues are quite intractable, we can get to the point where we do not face qualification of this year's accounts.
Q3 Chairman: Why should we take any of this seriously? Last year you told us that there was a good prospect; you were working very closely with the NAO who had been extremely helpful over this and were getting to the point where they can give unqualified accounts at the end of the current financial year. This year you have told us "we take this very seriously" but you say you do not have a sufficient grip on the accuracy of the payments you make. Why should we believe any of this?
Sir Bill Jeffrey: That is a matter for the committee, Chairman. What I can say, as I have said in my opening statement, is that the issues that led to qualification in 2007-08 are different from those that led to qualification in 2008-09.
Q4 Chairman: And they might be different again next year?
Sir Bill Jeffrey: They have been a test and to that extent, although I readily admit that my optimism that we could escape the qualification of our accounts was misplaced, the particular issues that gave rise to it last year were somewhat different, and we are addressing them. I do not know whether Mr Jagger would like to say anything more on that.
Q5 Chairman: Before we get off this general approach, would you suggest that the steps you took last year to avoid qualification actually gave rise to the qualification of this year?
Sir Bill Jeffrey: To an extent I would accept that, Chairman, because what we were essentially doing last year was to get the Joint Personnel Administration computer system to a point where we could have more confidence in its allocation of costs to expenditure headings within our budget. The consequence of that, and one might argue the consequence of computerising this whole system, has been to make visible errors in the actual claims that people have made. There is an element of this system which involves self-administration. Part of the work that we are engaged on now is to improve, through training and otherwise, the accuracy of the claims that are made on the system.
Q6 Robert Key: On that point, it is not just that claims may be inaccurate; it is the payments that are inaccurate and do not match the claims. That is the commonest complaint I get from my constituents, a very large number of whom are military. They are actually putting in claims for things and then getting completely different numbers back.
Mr Jagger: The NAO's audits of the JPA process say that they are now paying accurately what they are asked to pay. If you like, the chit that goes in saying "pay £100 to Sergeant Brown" results in a payment of £100 to Sergeant Brown. The level of accuracy is extremely high on that. The qualification this year refers to the question of whether the input was correct; i.e. when the unit said "pay £100" there was an error there. That input may be wrong for a number of reasons: misunderstanding of quite complicated rules, just ordinary human error, occasionally just getting things wrong. In the past year we have moved back in the process. A year ago the NAO qualified us because we could not provide evidence that the payments that the JPA was making were accurate; i.e. they were paying what they had been told. This year we can do that and by providing that evidence, we have gone back in the chain and the qualification this year relates to the input. We are not really hearing from the NAO what you say, in effect.
Q7 Chairman: Is there any risk that the steps you take this year to put right the qualification will lead to another different set of problems for next year?
Sir Bill Jeffrey: I would not have thought so. Essentially, as Terence says, having the basis for assessing, as the NAO did, that a proportion of the payments that are being made when you examine them closely are not accurate because they have been wrongly claimed, we are focusing on the claims process, on training and on means by which using data interrogation technology we can identify unusual looking claims that look out of kilter. If we can get that right, then, unless Terence wants to contradict me, I do not see an equivalent problem looming to the one that we faced last year.
Q8 Mr Jenkins: We had difficulty finding a shortfall of about £20 million for training the Territorial Army. Can you imagine our surprise when we are given a figure by the NAO of £268 million for last year that we could not nail down or could not account for and so we did not know how accurate it was? You keep saying "this year". The figure signed off last year by the accounting officer was £268 million. What figure do you estimate you will have to sign off this year as being unaccountable?
Sir Bill Jeffrey: When I say "this year", Mr Jenkins, I mean the NAO report and the qualification of last year's accounts. I apologise for using that phrase. The sum you quote was a grossed up estimate on the basis of a small sample of what the errors in payments might be. Our hope and expectation is that through the measures we are taking this year, we will significantly reduce the error rate.
Q9 Mr Jenkins: Can you tell me how much that is hope and how much expectation? Is it 50/50 or 75 per cent out of 90 per cent out?
Sir Bill Jeffrey: The committee may say that I was over-confident last year, but I feel reasonably confident that the steps we are taking are the right ones. We are never going to eradicate inaccurate claims of allowances completely. This is a small proportion of actually a very large sum, given the size of the Armed Forces.
Q10 Chairman: They must be material to be serious enough to prompt the qualification of your accounts. Accountants do not qualify accounts on trivial matters.
Sir Bill Jeffrey: I accept they are material and it was their materiality that led the NAO to qualify the accounts. What I am saying is that I think there is a good prospect that, with the steps we are taking, we will not eradicate inaccurate claims altogether but there is a good prospect that we can reduce them to the point where they are not material and the NAO do not feel they have to draw attention to them in this way.
Q11 Mrs Moon: One of the complaints that I have had is that actually there is almost a disincentive ever to claim anything, What happens, through the human error that you referred to, is that if you make the slightest mistake, the consequences in terms of investigations are huge and in fact the system is so complex. I think Mr Jagger referred to the complexity of the system. The time it takes to make submissions and the consequences of mistakes and the amount of time taken over investigations actually means that the system is unworkable and you are bound to get mistakes; you are bound to get problems in it. Would you say that was a fair description of it from within the Armed Forces? That is where I am getting it from and that is where I am getting the complaints that are made.
Mr Jagger: No, I would not think it was a fair description. I think the consequences of making an erroneous claim under the JPA system are exactly the same as the consequences of making an erroneous claim under one of the previous legacy systems; i.e. if there has been an honest error, it will have to be corrected. If there has been a deliberate error or an attempt at fraud, then the penalties are whatever the disciplinary process decides. That has not changed whether we are talking JPA or pre-JPA. The actual process of physically claiming through JPA is analogous to what I do myself in the civilian system; it is actually very quick and immediate if you have access to a terminal. I think the complexity comes in the number of allowances and rules that there are. We are doing a lot of work at the moment, first of all following up every single item that the NAO found; they looked at 488 items out of a total transaction number of 24 million, so we do want to be sure whether this is a fair sample or not. We are introducing more support for the individuals if we find an area where there is particular difficulty, whether it is a geographic area or in claiming a particular allowance. We are increasing where necessary at the units discretion in the number of claims which are checked routinely. There is absolutely no intention at all to penalise individuals for making genuine errors; quite the reverse. An error is a nuisance for them, they do not get the right money; it is a nuisance for us to put right. We are absolutely on their side trying to minimise that.
Sir Bill Jeffrey: If I may say so, I think what is a very fair criticism is that our structure of allowances is over-complicated, and this is something that service personnel, officers and the Deputy Chief of Defence Staff who co-ordinates personnel matters at the centre of the department are looking at. It is undoubtedly more complicated than it needs to be and I am sure that affects the perception of those who are claiming under it.
Q12 Mr Hancock: What efforts do you make to recover the money that has been paid by mistake and over what period of time do you judge it to be inappropriate for you actually to request it back because it has taken you so long to ascertain that the mistake is there?
Mr Jagger: The principle is that if an error has been made, we will try and correct it, whether we have over-paid or whether we have under-paid. With people who are still in service, the principle would be that we would always try to recover, unless it was a very long time ago, and I mean many years ago. Clearly, with JPA, that is unlikely to be relevant; we are talking about things that happened in the last few months or a year perhaps. We would take account of an individual's circumstances. If for example they have been overpaid an allowance for a considerable period, we would not necessarily claim it all back from one month's pay; we would come to an agreement with them. If people have left the service, it does become more difficult because sometimes we lose touch with them; they move and they do not tell us their new address or whatever. In principle, it is public money; we will try to recover it. We will make all reasonable efforts, depending on the size of the sum and the difficulty involved. If we cannot, then we will have to submit a case for writing that off that will obviously to the accounting officer ultimately.
Q13 Mr Hancock: What is the sort of percentage that you have to write off because you are unable to recover? Say the figure is £280 million that you cannot really account for to the satisfaction of your auditors, what percentage of that this time next year will you have to say you imagine that you will not be able to recover?
Mr Jagger: That is an extraordinarily difficult question. Can I just clarify what that £268 million is? First of all, it is the NAO's estimate of gross error, so there is a full certificate. Also, those errors arise from any transaction for which we cannot give what they consider satisfactory evidence. So some of those will be clearly wrong; they will be absolute errors and there will be a wrong sum. Some of them are right but we were unable to provide evidence. For example, if someone was getting an allowance which depends on them having a qualification or having been ordained or whatever, the NAO will ask: "Can you prove that this officer is indeed a chaplain?" That is not how in the past we have run the system, so we had some difficulty proving it. It may well be that the £268 million is an over-estimate of the amount. Of the amount of actual error when we find that out, and we are walking very hard indeed at finding that out at the moment, I would hope that we would be writing off - this is no more than an intelligent guess - considerably less than half of it.
Q14 Chairman: You say that when you recover money you do in certain circumstances come to an agreement with the serviceman or woman concerned. Is that an agreement imposed from a great height?
Mr Jagger: No, it is definitely not. If it is absolutely clear that a soldier on very basic pay for some reason is owed a considerable sum of money, I think it is clearly unreasonable to expect him to pay it all back in one go. His unit officers would take a view with him as to what he could sensibly be expected to pay back, given his personal circumstances, which only they will know: his pay and other commitments he has. No, it will not be imposed. Clearly we have an interest in it being reasonable and so we will not want it to be extended over a very long time. We have an interest in recovering public money as well as keeping him motivated and able to function.
Q15 Chairman: Of the outstanding recommendations on the JPA, which do you think will be the most difficult recommendations made by the NAO to meet?
Mr Jagger: There are perhaps two: one is making the actual physical access to the system readily available for everybody, for example on deployed duty or in small units, who is mobile. It is relatively easy to provide access to them if they are at a major barracks. That has been quite a challenge.
Q16 Chairman: But Sangin is a bit more tricky?
Mr Jagger: It is. The other issue is what we referred to a moment ago: the need, over time, to simplify the system. By "the system" I do not mean the IT system but the network of allowances and obligations that any particular serviceman or woman can have, so that the whole thing becomes much easier to understand and easier to operate obviously without penalising people.
Q17 Mr Crausby: The National Audit Office was critical about the department's inability to provide adequate evidence to support fixed assets and stock balances. For example, they said that by the year end it was only possible to confirm the existence of approximately 89 per cent of Bowman assets. How can we possibly lose 11 per cent of nearly 36,000 radio sets?
Sir Bill Jeffrey: I do not think, Mr Crausby, the position is that we have lost them. For one thing, there is a significant proportion of these that had been sent back from theatre to be repaired and were in the repair loop. The problem is more about having accurate records of location.
Q18 Chairman: What is your definition of lost?
Sir Bill Jeffrey: Lost in the sense that we do not have them.
Q19 Mr
Crausby: If we do not know where they are,
how do we not know that they are not for sale on
Sir Bill Jeffrey: The business of tackling these assets, given their number, where they are on vehicles, is inherently difficult with the degree of deployment we have at the moment. We are working both to cleanse the existing inventory systems so that we can be more confident about numbers, and to track down those of which the NAO sample suggested we did not have a full record. Terence Jagger may want to enlarge on that.
Mr Jagger: First, we have seen absolutely no evidence that these are for sale
on the
Q20 Mr Crausby: The NAO made some recommendations at the time. Have you followed those recommendations? I accept that this was a snapshot in March, but it is now November. Do we know where that 11 per cent of the Bowman assets are? I am not just concerned about the £155 million available; I am concerned about the security question.
Mr Jagger: May I re-emphasise that we had absolutely no evidence from any quarter that radios are not in the MoD. We do not have any evidence from outside the MoD that they have gone missing or that they are being abused in any way. This figure that was quoted in the annual report was the result of a lot of work following the year end and was probably agreed with the NAO in May or June. Since then, we have continued to work on the recommendations; we are working very closely with General Dynamics, the original equipment supplier, to provide an absolutely certain base point of what we have where' that when something comes into view, so to speak, it comes out of the repair loop or back from theatre' to make sure it is added that database and that we keep all the evidence. These are high value but relatively mobile assets, so what often happens is that a soldier in theatre will physically take one out of a vehicle to put into another vehicle, which might be extremely sensible from an operational point of view at the time - the first vehicle is damaged in some way and cannot be used. What we have to do is find a way, without putting a bureaucratic burden on a solider who has other things on his mind at the time, to make sure that we know firstly if it comes back for repair that each Bowman has been taken out and put somewhere else. That is the tricky thing and that is what we are struggling with.
Sir Bill Jeffrey: Just to add, the NAO made a number of recommendations in this area. In the material the committee requested before this session, we provided quite a full list of responses to these recommendations, and we are acting on all of those
Q21 Mr Jenkins: I am not going to apologise for labouring this point because I want to really thump it on. If one of these radios, these communication devices through which our soldiers talk to each other, is in the hands of the enemy, it puts the enemy at a significant advantage. Whilst you might say you are fairly confident, let us make sure you are 100 per cent confident. It will not be on sale on a market stall because they are not going to buy them from there; they are going to acquire them and they will be used by the individuals fighting against us. That is why we think it is serious that being out of visibility in the repair shop is not a good enough excuse for not being able to trace this equipment. That is why the Chairman asked what have you done since this initial report to ensure that we are given 100 per cent confidence. If we are not, if any piece of this equipment goes missing, I expect someone to walk. It is as important as that. Do you understand the gravity we all put on this issue?
Sir Bill Jeffrey: I understand completely the committee's concern about the security aspect. I think the inbuilt security features of the Bowman system are such that we can be reasonably confident of that, but I take the point that that is a more than legitimate concern. What we are doing is to recover the position as quickly as we can, given that in the deploy situation this is inherently difficult, for all the reasons that Terence Jagger was giving, because we have very large numbers of pieces of kit that are being used in the heat of the operational situation.
Q22 Mr Hancock: On the Bowman point, it is as if it is jinxed in some way, is it not? The MoD and Bowman are sort of jinking each other. From its inception right through to now it continues to be a problem for the MoD in one way or another. I would like to draw your attention to the statement that the Secretary of State made in a letter to the committee Chairman on 27 October when he revealed the fact that he wanted to highlight that a document had been circulated through the MoD outlining a new strategy for defence. Where were you in all of that then, Sir Bill? Were you the driver of this? Did you think something needed to be done?
Sir Bill Jeffrey: This is something that we have been working on for some time. It reflects the fact that I believe and the Chief of Defence Staff believes that the MoD is generally strong at strategic thinking and we felt for some time that it would be of benefit to the department to have a single document that brought together in a clear way the strategic direction of the department.
Q23 Mr Hancock: I may have slightly misheard. Did you say "were not very good at strategic thinking"?
Sir Bill Jeffrey: My own view is that one of the things that the department is
relatively strong at is thinking strategically.
I say that as somebody who has worked in several
Q24 Mr Hancock: Why not?
Sir Bill Jeffrey: Because inevitably, once the Defence Review takes place, this
statement of direction for our people internally will need to be revised. What it is attempting to do is to give some
direction to the department over the coming period and the outcome of the
Defence Review could well be a year away from now, depending on how quickly an
incumbent government manages to do it.
This is a shorter term thing; it is not for a moment intended to pre-empt
the work of a Defence Review. It is
intended to give the department in essence some interim guidance in the
meantime, which in particular highlights the overwhelming importance of the
effort in
Q25 Mr Hancock: Did you see the letter before it was sent?
Sir Bill Jeffrey: Yes, I did.
Q26 Mr
Hancock: Were you not then as surprised as I
was about that statement where the Secretary of State said there was a need to
provide a better match between the available resources in the defence
programme? If that is in fact his view,
and you obviously shared it if you signed that off, when was the fact that
there was such a need accepted in the department that there was not this tie up
between the two? It is a bit late in the
day, is it not, after two major conflicts, in
Sir Bill Jeffrey: It is a dynamic situation. I think it has been the case for some time that year by year one of the things we have had to do as a department is to manage pressure in the defence budget, which arises from a whole variety of sources: from issues like defence inflation which this committee has taken an interest in and the non-realisation of receipts. There are all sorts of reasons why our budget has been under pressure in recent years, of which the committee is well aware. All that we were saying is that a very significant task for the future is to work to bring the programme into balance.
Q27 Mr Hancock: Is not the Defence Review about matching resources to what the need is? Were you not rather surprised? I find that an absolutely staggering statement - available resources against a defence programme - as if nobody every thought: can we really do this and how are we going to do it? Nobody really sussed out the fact that at some stage you have to get your head round the idea that you could not do some things.
Sir Bill Jeffrey: I do not think it was saying that. I think it was acknowledging an issue that many of us have acknowledged for some time. In previous sessions with this committee I have said quite plainly that we do have year by year, for a variety of reasons, resource pressures to which we have to adapt. The equipment examination which this committee quizzed me on a year or so ago was an effort to look at future costs and to ensure, if we could, that our programme was affordable. So I do not read as much into it as you do, Mr Hancock.
Q28 Mr Hancock: What were the key aims in the MoD that your senior staff were not aware of?
Sir Bill Jeffrey: I do not know that there was any lack of awareness. I think, certainly when the Capability Review took place, there was a view that although there were plenty of statements of policy and statements of a strategic character within the department, there would be benefit for all our people if we brought together a single statement of this kind, which is what we have been trying to do.
Q29 Mr Hancock: What does the strategy change then? What are you looking for?
Sir Bill Jeffrey: What it does, and it is a matter of judgment very much that
changes, is to use in particular the phrase "main effort" about
Q30 Mr Hancock: That really begs the question how seriously people within the MoD would take the idea that you set up in October this year a five-year forward strategy but less than a year away we will have a major Defence Review. Are you really seriously saying that people will take this strategy seriously while they await the outcome of the Defence Review? That seems to me a slight misuse of resources. You are tying people up to come up with a five-year strategy at the same time as another team will be looking at the implications of a complete overhaul for a Strategic Defence Review?
Sir Bill Jeffrey: This is not a five-year strategy; it is a significant piece of internal direction over the coming period until a Defence Review is completed. It is not intended to revise defence strategy. The SDR, when it comes, is the main means by which that will be done.
Q31 Mr Jenkin: Sir Bill, I commend your evidence to this committee. I think you have been very frank with us on occasion about the shortage of resources. I very much welcome this document. Would it be correct to say it is just simply a recognition of reality; it is a recognition of where your department is and where it has been in fact for some time?
Sir Bill Jeffrey: The document has a number of purposes. It is partly the fact that we believe, and I think the Defence Secretary shares that view, that we should use the time between now and the Defence Review usefully and that it would benefit the department to have the kind of top-down direction that this document represents over that period. The other benefit of it I would argue is that it provides a blueprint for how we communicate with the department once the Defence Review has been completed.
Q32 Mr Jenkin: It does also reflect that there is something of a crisis between commitments and resources within the department?
Sir Bill Jeffrey: I would not myself use the word "crisis" but I would acknowledge, as I said earlier and have said in the past, that over the last few years we have consistently had to reassess the programme in our annual planning allowance and look hard at ways of reducing costs in order to keep it within affordability.
Q33 Mr
Jenkin: When we read that
Sir Bill Jeffrey: The additional costs of the
Q34 Mr
Jenkin: If I may just quote: The high level of operational activity places
considerable strain on both the Armed Forces and the wider department. We will need to be better at spending the
money we have and more rigorous in prioritising what we spend it on. This is because
Sir Bill Jeffrey: I think the operation itself is being fully funded.
Q35 Mr Jenkin: What do you call the addition costs of the operation?
Sir Bill Jeffrey: The consequence of being as heavily deployed in pursuing the operation in a sense self-evidently limits what more we can do for as long as we are doing it. I think that is all that this text is intended to say,
Q36 Mr Jenkin: But this also does confirm, does it not, that really the Defence Review is coming too late and that this document is necessary because we have not had a Defence Review?
Sir Bill Jeffrey: Without commenting directly on that, I certainly from my standpoint warmly welcome the fact that all three parties are committed to undertake a Defence Review. Although the landscape has, I would argue, not changed as dramatically as it did in the 12 years before the present Government's review in 1997-98, it has changed, and there are substantial issues that we ought to address. What the present Government is doing, which is highly relevant to this, is encouraging us to do what I would have wanted to do anyway, which is the preliminary thinking, the intellectual ground clearing, precedent to a post-election Defence Review. The Secretary of State's plan to publish a Green Paper early next here is very consistent with that.
Q37 Chairman: Sir Bill, it sounds as though you would accept that the high extent of the operational commitment and deployment severely limits our capacity to cope with the unexpected?
Sir Bill Jeffrey: I would accept that it limits our ability self-evidently to
undertake a large-scale operation while we are as committed as we are in
Q38 Chairman: You have answered a different question. What I was asking was: do we now have a severely limiting capacity to cope with the unexpected?
Sir Bill Jeffrey: I think it depends on what you define as the unexpected and on what sort of scale. I now that the unexpected is the unexpected but it depends on the scale of the unexpected challenge.
Q39 Chairman: So long as we only get something little unexpected, that would be all right?
Sir Bill Jeffrey: It is a way of caricaturing the point I am making. At one level I would argue that ---
Q40 Chairman: It is a way of precisely defining and honing down the points you are making; I would not describe it as a caricature.
Sir Bill Jeffrey: At one level all I am saying is that self-evidently, and it is why this current deployment is so important and so consuming for us as a department, if we are as heavily involved in Afghanistan - and it is not just the specific deployment of troops; it is the rotation and the support that it commands - then inevitably that limits what more we can do for as long as we remain so.
Q41 Mr Havard: Recognising all of that, you have come out with what is essentially an interim strategy position before the longer term broader strategy is established. Can I dig into that for a minute because within it you talk about improving strategic management and continuous improvement. We did ask you a series of questions before you came and you have given us written answers. Can I just pick out a couple of those? One of the things that has been there for some time, in terms of actual practicalities of doing it, is resource accounting. We asked you a question about resource accounting and so did the NAO. The question we asked is: What action plans and timescales for implementation have been formulated in terms of the recommendations that are already made? Your answer was: We have major improvement programmes under way to resolve the problem. What are they and when are they going to be achieved? I would have thought that if there is going to be a continuous improvement programme and a strategic management system which has a relevant performance management system within it, then those are exactly the sorts of questions we ought to be able to get answers to now because this is about the now, not about the future. We asked you a question about the nuclear deterrent and the concept phase, which was apparently due to finish in September. The answer now is: The concept phase will be looked at later this year. It is 10 November; there is not much left of this year. Is that the financial year? Is that a calendar year? If it is going to have a performance management system within it, clearly it needs to have delineated metrics and timescales and so on. We see no visibility of this. Is this what this interim strategy is supposed to provide me with because it is absent to me at the moment.
Sir Bill Jeffrey: If I may, there are two points there.
Q42 Mr Havard: There are more than two points. I appreciate that.
Sir Bill Jeffrey: One is about the deterrent where the 2006 White Paper set us first the task of assessing the requirement and doing preliminary work of a pretty important kind. That work is taking longer than we originally expected it to and we expect to be bringing it both to the Defence Board and to Ministers later this year. I unhesitatingly accept that there has been some delay in that.
Q43 Mr Havard: Is that a calendar year or a financial year?
Sir Bill Jeffrey: It is a calendar year.
Q44 Mr Havard: That is a calendar year, and so that is before 31 December?
Sir Bill Jeffrey: It will be relatively soon. Exactly what decisions it will lead to is as yet not completely clear, but the issue will be coming forward for senior management.
Q45 Mr Havard: I am not trying to be difficult. Does that mean there will be some reporting before the recess of Parliament?
Sir Bill Jeffrey: I would expect so, but exactly how much we will be able to say it is hard to predict at this stage. The second issue is the resource accounts. Looking at it, I think we took the question as being principally about our readiness to accept the NAO's findings. The answer is that we have accepted them and are acting on them, but I can see that we have given less information in response to that question about what the action plans actually are than we might have done. Unless Terence Jagger wants to go into more detail now, maybe the sensible thing is for me to offer the committee a fuller note on that?
Mr Havard: I think that would be useful. I just use that to illustrate the point. If you are going to have a relevant performance management system within your strategic management concept, which is an interim strategy, can we please know what that is going to be and how that is going to be done? For God's sake do not tell me you are going to have a load of consultants in to devise one, will you? That is not an answer I am looking for. We need to know how it is going to work. If there are, and clearly there are, these immediate difficulties in juggling all of this stuff, and we accept that, what we want to know is how can that be structured in the interim position in a way that helps to deal with the situation and move it forward. I accept it is not going to be the longer term strategy we are dealing with. We are dealing with the here and now but we need to understand what you are doing about the here and now.
Chairman: Could you please give us the further information that you suggested in what you have just said, rather than Mr Jagger going into that now. I think it would be helpful to have the sort of information for which Dai Havard has just been asking. That brings us quite neatly on to the public service agreements.
Q46 Mr Jenkin: I am bound to say that we find your revised targets and their assessment rather less informative than we used to. One thinks that the more tangible indicators you were using before were in fact more informative. If I could give you an example, we now have as indicators: no progress, some progress, no progress, not assessed. What do these things actually mean in concrete terms?
Sir Bill Jeffrey: I am disappointed that you feel that because it is certainly the case that the targets have been changed since we moved from having defence only public service agreements to having departmental objectives. I think, if you look at the main areas of readiness, manning and the harmony in recruitment programme, much the same data is made available; that includes in the quarterly accounts that we publish and send to the committee. The headlines about progress I think have always been a difficult issue for us. There is a desire to capture in a single word or so whether we are heading in the right direction or not, and that is intended to do no more than that. The more substantial information underlies it. We are, I hope, still continuing to give the committee our rolling assessments of the readiness levels and all the other indicators that we have become used to.
Q47 Mr Jenkin: Does "some progress" mean that you have 10 per cent increasing to 20 per cent achievement or 80 per cent to 90 per cent achievement? We used to get numbers; now we do not get numbers. Presumably your department still produces the numbers; you are now just not publishing them?
Sir Bill Jeffrey: I do not think it is the case that the numbers we are producing of that kind we are not publishing. My recollection, and I am open to correction, is that in the little headline under each of the main PSA targets we always talked about whether progress was being made rather than attempting to put a particular figure on it. What I do know is that, in relation to the departmental strategic objectives, the sort of language that we use to capture progress or lack of it is laid down across Government by the Treasury. All we are really doing is following some of the phrases that they suggest we use and conditions like that.
Q48 Mr Jenkin: I accept there might be some political direction in the presentation of this kind of information but are you satisfied that your overall performance is actually improving or is the not quite a crisis in your resources arresting progress overall?
Sir Bill Jeffrey: I think it depends where one looks.
Notwithstanding some of the public comment, I think we have a good deal
to be proud of in the way the department is supporting our main effort in
Mr Jenkin: Chairman, do you want me to deal with readiness now or shall I leave that till later?
Chairman: Yes, I think so because it is an important part of DSO2.
Q49 Mr Jenkin: You are quite blunt in your report and accounts that contingent readiness levels have continued to suffer, but it is the absence of figures here that makes it rather difficult for us to understand. In your 2007-08 accounts you stated the figure to be 73 per cent. The question I would like to ask now is: what is the figure now?
Sir Bill Jeffrey: If one looks at the key readiness measure, which is the percentage of force elements showing no critical or serious weaknesses, in the last quarter of 2007-08 it was 49 per cent; in the last quarter of 2008-09 it was 47 per cent; in the first quarter of 2009-10 it was 42 per cent.
Q50 Mr Jenkin: What is the target?
Sir Bill Jeffrey: The target is 73, if I recall.
Q51 Mr Jenkin: It is 73 per cent. Why does your annual report not contain that figure?
Sir Bill Jeffrey: The target?
Q52 Mr Jenkin: Your annual report no longer gives any information on the target for readiness?
Sir Bill Jeffrey: The 73 per cent figure I quote is the target that we had under the
Q53 Mr Jenkin: It is an indicator of how current operations are degrading readiness, which I think is quite a good indicator to have. Every divergence from a target can have an explanation. It might be a plausible explanation; it might not be a plausible explanation.
Sir Bill Jeffrey: What I was going to say, though, was that if the figure was as low as 42 per cent, as it was in the first quarter of this year, first of all, that reflected some particular force elements that have quite an impact on the headline figure, particularly in the maritime field. Secondly, although we are not yet in a position to publish it and bring it to the committee, the early sign from the second quarter of the current year is that the readiness level goes back up towards 50 per cent.
Q54 Mr
Jenkin: But it does sound as though you are
reconciled not to meeting the target or getting near the target while
operations in
Sir Bill Jeffrey: I think it remains to be seen, Mr Jenkin, how much beneficial impact
the drawdown in
Q55 Mr
Jenkin: What effect does a further deployment
to
Sir Bill Jeffrey: The effect of the decisions Ministers have taken in the last month or so has been to increase the deployed level essentially from 8,300 to 9,500, subject to the criteria that the Prime Minister laid down. That has a cost implication which we are discussing with the Treasury. How much of an impact it will have on the readiness levels I find quite hard to assess. I am conscious, frankly, of the debate we had last year about over-optimism. I think we need to be pretty coldly realistic about the fact that if we deploy on this scale, then, as I was saying earlier, it inevitably has some impact on our readiness to do more.
Q56 Mr Jenkin: I do not think a target is necessarily something to be beat you with, but it is an important indicator.
Sir Bill Jeffrey: I agree.
Q57 Mr
Jenkin: Can I ask one final question? Presumably somebody has an idea of how long
we can carry on sustaining the losses that we are suffering in
Sir Bill Jeffrey: It is very difficult for me to answer that question. There is undoubtedly an extent to which the impact of casualties, which at a human level affects the whole department, is a factor we have to keep in our minds.
Q58 Mr Jenkin: Presumably it is quite a simple calculation to make and presumably someone - Adjutant General or Land Command - has some idea about how long we can continue at this rate?
Sir Bill Jeffrey: I do not think it is addressed in quite that way. One might argue in fact that the issue is about the continuation of a satisfactory level of public support. That clearly, as some of the recent figures suggest, has been impacted by recent events. If you asked senior levels in the Army, I think they would say that they are ready to continue and very much up for it.
Q59 Mr Jenkin: But we need to recruit at a much higher rate?
Sir Bill Jeffrey: We are recruiting. A by-product of the current economic conditions is that army recruitment has been buoyant this year.
Q60 Mr Jenkin: But your report and accounts also show there has been a 25 per cent reduction in training exercises. We are either losing capability for things that we are not actually doing on operations or we are actually training our Armed Forces less, even while we are deploying them on operations for these operations?
Sir Bill Jeffrey: I think there is certainly an extent to which my military colleagues would say that those forces whom we deploy are gaining experience but it would be desirable to create more time in which they can train for other kinds of eventualities.
Q61 Mr Havard: Can I just make clear that I do not want you to publish an attrition target next year or at any point that might reveal information to someone else about whether they are succeeding or not and whether I am failing. I would rather you did not put it in your report and accounts. That is my position.
Sir Bill Jeffrey: I am not sure if that is what Mr Jenkin was suggesting.
Mr Havard: That is what it sounded like to me. I make it very clear: the question about recruitment readiness and preparedness, all the stuff about whether we have sufficient forces and their numbers, is all very relevant information for us but I think we need to be very careful about how we express that.
Chairman: I think that is a comment rather than a question.
Mr Havard: It is.
Mr Jenkin: I take it as a ticking off, Chairman!
Q62 Chairman: I have a question. One of your departmental strategic objectives is to be ready to respond to the tasks that might arise. In your comment on that you say that there is no progress, so you are not ready for the tasks that might arise. Another of them is to give value for money in progress and you say you are broadly on track. Would I be right in think that Bernard Gray might disagree with you?
Sir Bill Jeffrey: Let me take these in turn. The statement of no progress against the readiness for future requirements simply reflects the readiness measure that we use. It would be bizarre if we offered a more optimistic headline account against the readiness figures ---
Q63 Chairman: The entire purpose of your department is surely to be ready to respond to the tasks that might arise?
Sir Bill Jeffrey: To the degree that I described earlier, I believe we are, but I think, given the form of these objectives and the reporting methods that we use, what we are really saying is: no progress in increasing readiness levels.
Q64 Chairman: Are the measures wrong?
Sir Bill Jeffrey: For the reason I gave earlier, I suspect that we will be showing progress next time.
Q65 Chairman: Would you suggest then that the measures themselves are wrong?
Sir Bill Jeffrey: The measures, as I think we have explained to the committee in the
past, are not beyond criticism but what they do is to bring together
assessments within the services, of course of the front line, of the state of
readiness of a wide range of force elements, including some that are not really
affected by operations in Afghanistan but including some that are. It is a measure that is helpful as far as it
is helpful, but it is not the whole story.
As I say, though, I certainly think that if, as we hope, the drawdown in
Q66 Linda Gilroy: May I just press you a bit more on the direction of questioning that the Chairman was taking just now? Is there not some lesson to be learnt, however, about using readiness as a measure during a period when we are actually deployed to meet above the defence planning assumptions? Can you just remind the committee - I am looking for the definition in my mind - of what readiness is? I thought it was something to do with measuring for the defence planning what is envisaged in the defence planning assumptions against the state that you would have in peace time rather than in the period when you are not just deploying to the defence planning assumptions but well beyond them for a sustained period.
Sir Bill Jeffrey: In a sense, that is precisely my point. It is a sensible measure for us to keep under review, even in these conditions. It is not that surprising that it is well short of what we had previously set as a target. I think we concluded that, among other things, if we did not carry on publishing it, this committee would want to ask us why not, so we carry on publishing it.
Chairman: There is some purpose in our existence?
Q67 Linda Gilroy: In terms of definition as well, I think it would be helpful, when we produce our report on this session, just to be reminded of the precise definition of what readiness is.
Sir Bill Jeffrey: The measure that is principally used is the percentage of a specified basket of force elements, which at the time when they are assessed show no serious or critical weaknesses. I may not be getting the exact language correct. It is a measure which if one is doing well is higher rather than lower. What I do agree with is the implication of your question because at times like these it does not actually add much to our understanding or the committee's understanding to have a target that is evidently beyond us because of the level of our commitment.
Q68 Mr Havard: You have sort of answered my question. I am struggling with the language that says you have a revised metric which is part of this description you have just given us. I wonder whether it would be helpful if you would write to us and try to explain to us a little further what the revision of that might be, whether it is this previous basket or what other factors you are bringing in. I appreciate that it is not an exact science that we are dealing with here. It would help us if you could put a little more flesh on that phrase "a revised metric".
Sir Bill Jeffrey: We will certainly do that, Mr Havard. The revision which took place a little while ago, a year or so, was intended to reduce the impact of a few force elements that were having a disproportionate impact. I remember at the time we made it, if it had any effect at all, it was to make the figure look a little worse, so it was not something we were doing to make them look better, I can assure the committee of that. I will certainly arrange for you to have a note about what that revision entails.
Q69 Chairman: And value for money progress? Do you think you are broadly on track? That would come as a bit of a surprise to many people, I think.
Sir Bill Jeffrey: I certainly take the point that you made earlier that in Bernard Gray's report there are issues about our ability to achieve value for money. I think the value for money target is focused on our ability to deliver efficiency savings for one thing, and this is an area which, as the Committee has observed before, we have, if anything, over-achieved on. It may be that if you view value for money more broadly then criticisms of the kind that Mr Gray has levelled at the management of the equipment programme come into play. I think this measure as expressed is principally about our ability to generate efficiency savings.
Q70 Chairman: It may be that some of the efficiency savings on which you have over-achieved may have led to some of the state of affairs that Bernard Gray sets out in his report and possibly the state of affairs set out in the Haddon-Cave report on Nimrod.
Sir Bill Jeffrey: The Committee may want to get on to Bernard Gray's report a little later anyway, but I do not think that our search for efficiency and better value for money in that sense lies behind procurement shortcomings. I think there are deeper reasons to do with departmental skills, to do with the way in which we manage the equipment programme, some of which Bernard Gray's report illuminates very clearly. On Haddon-Cave, what the Secretary of State said very clearly on the publication of Mr Haddon-Cave's report was that he accepted that in relation to Nimrod we had taken our eye off the safety ball, and I very strongly endorse this myself. It does not mean that one does not keep searching for more efficient ways of doing things. What it does mean is that one has to keep safety right at the top of the agenda, and I believe we are now doing that.
Q71 Mr Jenkins: Regarding value for money, this is a term and a concept which I am vaguely familiar with, but surely you must understand, and I think the Committee must clearly understand, that it can only be achieved given the set of parameters we operate within. As long as we have got conditions laid down by certain individuals, maybe ministers, who say that we should buy this particular product or go down this particular line, and all that is entangled in it, we are never going to get real value for money on the equipment programme, are we?
Sir Bill Jeffrey: I am not sure if I follow the gist of the question. It is up to us project by project to do our best to demonstrate value for money and that is what we do.
Q72 Mr
Borrow: It is a pity that Bernard Jenkin has gone
because I want just to remind him that in our report last year we did note that
operational sensitivities would mean that this area of reform would necessarily
remain less accessible to the public than other areas of MoD reforms, so on the
questions that we have asked around Afghanistan and Iraq I recognise that you
cannot be as open as you would be in and around other areas of MoD
performance. Within that constraint your
report in terms of
Sir Bill Jeffrey: The Committee takes a very
close interest in the Afghan campaign and hears from other witnesses, including
ministers and the Chief of the Defence Staff.
My own view is that if you see this as a military campaign it has some
significant successes to its credit. I
think also, as I discussed with the Committee with my Foreign Office and DFID
colleagues some months ago, that we can point towards significant improvements
in the way in which military and civilian efforts are articulated
together. It is a challenging issue and
not one that I think we are yet as good at as we could be but I think we have
made some progress. If you step back
from it, clearly there are significant risks affecting the
Q73 Mr
Borrow: There has been talk in recent months of an
increase in the service personnel deployed to
Sir Bill Jeffrey: I think there must be because we only have so many people who are deployable and we need to bear in mind the importance of harmony, which we do not always meet but we need to meet so far as we can. That means that the numbers who are subject to deployment are several times higher than the numbers that we have deployed at any one time, so there is a limit. As for whether we are there yet, you would get a more authoritative response from my military colleagues, but undoubtedly such a limit must exist.
Q74 Mr Borrow: Can I perhaps separate out, because we have touched on it, the issue of readiness? I just want to try and explore a little bit the question of whether or not there is a figure in terms of a maximum figure of forces for a sustainable operation in Afghanistan beyond which we cannot go, on the basis that that operation will last indefinitely into the future, and a figure which would be higher than that that we could search to for a short period of time, which ties in, I think, with the readiness argument that we should have a capacity over and above that for a sustainable operation in order to push those numbers up, rather as we did, indeed, in the early days of the Iraq war when we got the best part of 30,000 troops there, but which is not sustainable in the longer term.
Sir Bill Jeffrey: I think significantly higher figures would be unsustainable in the longer term. How much higher than now is a matter of judgment. What I can say is that the increases that I mentioned earlier, the consolidation of the 700-900 who were initially employed to support the Afghan elections and the 500 whose readiness to deploy the Prime Minister indicated a few weeks ago, were made on military advice and the view of the Service chiefs is that that level of deployment is manageable.
Q75 Mr Borrow: I get the impression that you are not prepared to give a figure to the question I am asking you.
Sir Bill Jeffrey: I think it is hard to do so. I can reflect on the issue and consult senior Service personnel and see if there is anything more I can usefully say, but what I would say is that any very significant deployment above the level we are at now would must run into the territory of questions over sustainability.
Q76 Mr Borrow: The reason I am touching on the subject is that there is quite a lot of debate in terms of we ought to send more troops, but there is this argument as to what level of additional troops we can deploy and is sustainable, and that therefore there are constraints rather than there being a willingness or not a willingness to deploy extra troops principle, the more the public understand that, that there are constraints in terms of what we are capable of doing.
Sir Bill Jeffrey: I think, if I may say so, that the public do understand that. I think it is hard to put a figure on what is the maximum but it is certainly the case that the levels of deployment that we are sustaining now and those in prospect are, in the view of the Service chiefs, sustainable for the time being.
Q77 Mr
Borrow: If I can move briefly on to
Sir Bill Jeffrey: I am not briefed on a
specific answer to that question and I think we had better try and reply to it
in writing. As a matter of fact, as you
will know, Mr Borrow, it is only relatively recently that the memorandum of
understanding between ourselves and the Iraqis eventually worked its way
through the Council of Representatives in
Q78 Chairman: We would like to know that you can provide that information. We do not need those figures now but I was going to ask why you had not been able to provide the information on the cost of the drawdown from Iraq, but if you are now going to provide us with that you do not have to do it in the Committee now as long as you do it after the Committee.
Sir Bill Jeffrey: We will, and it simply reflects the fact that this is a complicated issue and we need to check carefully that we are giving the Committee accurate information.
Chairman: Okay; thank you.
Q79 Mr Crausby: I think we are all encouraged that recruitment is up this year but are you confident that we have the capacity within the training system to take full advantage of what is a fairly quick extra inflow of personnel?
Sir Bill Jeffrey: I believe so, yes. I think the figures that we are working on are manageable by the training system. What is noticeable is that all three Services are finding it easier to recruit than they were before. To take the Army as an example, we had gains in strength in 2007-08 of 8,300 and we expect the gains in training strength in the current financial year to be 9,250, and that is a figure we can certainly manage through the training capability.
Q80 Mr Crausby: Can you tell us about the RAF? I know it was forecast that recruitment for the RAF would dip but why has it been so far below manning levels for so long a time and keeps on going down?
Sir Bill Jeffrey: As you will know, the figure we use is whether the three Services are within what is known as manning balance, which means somewhere between minus two per cent of rest strength and plus one per cent. The RAF has been for a year or so in a worse position than the other two Services and the manning balance figure for 2009-10 was just over two per cent down. Again, I have been advised that the material which we ought to be able to provide the Committee with about the second quarter of the current year shows a significant improvement, so it looks as though the RAF too is benefiting from the fact that this is an easier recruitment climate.
Q81 Mr Crausby: I suppose it will take some time but we do have some particular problems, do we not, with pinch point trades? Can you tell us what you are doing to try and improve the difficulties within pinch points?
Sir Bill Jeffrey: The principal method, as the Committee knows, is to use as selectively as we can financial retention incentives. In the last financial year we applied financial retention incentives to 4,678 personnel across the Armed Forces, targeted on the pinch point trades, and there is some quite good evidence that this highly selective way of encouraging people to stay, given how expensive it is to train them, does have an impact. The Committee will know from the material that we provide each quarter about the pinch points that there still are some areas of significant concern.
Q82 Mr Crausby: Retention is very vital to this issue, is it not?
Sir Bill Jeffrey: Yes.
Q83 Mr Crausby: To what extent do you think the relative improvement in retention is down to economic factors and to what extent do you think it is down to better management and better treatment of our skilled personnel?
Sir Bill Jeffrey: I would hope it is a mixture of the two. In the recent pinch point trades position, to the extent that we are improving retention, the financial incentives are obviously helping. What is certainly the case now is that all three Services, possibly in part because of the economic situation, are showing improved retention rates, so the overall picture, although we have still got some way to go, is a bit better than it was a year, two years ago.
Q84 Mr Hancock: I think there is a problem with these figures, Sir Bill, because they tell us where the issues are but they do not show what you are doing about it. They do not indicate how many people are in training for these various pinch points that need to be filled. To train a Merlin pilot takes a considerable amount of time. It would be interesting to know, in the next table you provide, where you are in the process of filling these gaps. Most of these are people whose in-service training will take up a considerable amount of time, and unless we know that something is being done about it these figures are pretty pointless. Why is it that you do not give us the answer to that, which I consider to be a pretty fundamental question?
Sir Bill Jeffrey: We could certainly try to do so, and I have in my brief for this meeting some information about some of the financial retention incentives and the effect they are having and it might be helpful for the Committee to have a bit more about that. We could also, I am sure, see if we could provide for some of the pinch points information about those who are in the pipeline. We tend to track it in the existing information that we provide the Committee in terms of additions to training strength, but I gather we are looking anyway at the format of our presentation on this and it would be quite easy to put in something about retention.
Q85 Mr Hancock: Retention cannot work every time, can it? For some people their natural working life as a pilot or whatever expires, does it not? You cannot retain them beyond a certain point, and their circumstances change, physically change. People might not be up to the arduous tasks and some of the pressures you have got here. I am more interested to know what the Navy are doing at the present time when they have got fewer ships but they have got significant pinch points. Are their young officers being encouraged to switch trades, for example, switch disciplines within the Service, and people who would have the qualifications to do other roles, are they being encouraged to do so, or are the Army and the Navy and the Air Force so set in their ways that there is not this flexibility that allows them to move across?
Sir Bill Jeffrey: Certainly in the Navy there is encouragement to move around. One of the problems, as you will know, is the quite extensive lead training times for some of these specialisms. To take the Navy as an example, one of the financial retention incentives that we are using to some good effect is to encourage those qualified submariners at the lieutenant commander level to remain in service. These are people with very specialist skills which take a good deal of time to develop. The important thing, I think, acknowledging your point about everyone having a shelf life, is to do what we can to prevent those scarcest and sometimes most marketable skills leaving our service prematurely.
Q86 Mr Havard: Can I support Mike's question here, because I look at this list you have provided today and one of the most severe is aircraft engineering technicians but in the Navy. That is a specific set of skills. This is not the lieutenant commander level. This is at a level of City & Guilds engineering. Is there a problem with the individual Services approaching that differently, one from another, and where are we getting these people from at that level? It is in the same way that they are nursing officers in the RAF but they are not in nursing officers in the Army. It is not the same list. Why is the RAF in more of a difficulty than the Army? I think it would help us to know how the individual Services are approaching what is effectively in that training area a generic problem for all of them, surely.
Sir Bill Jeffrey: Certainly this is all brought together and the consideration of whether a particular shortage would warrant and would benefit from the introduction of a financial retention incentive is something which is looked at across all three Services by the personnel people at the centre. My sense of this issue is that one does need to get into the granularity of it because some of these trades are relatively small numbers of people and it is important to be highly selective in the way we approach them. One of the things I think we are relatively good at is responding to pressures of that sort rather than simply applying a uniform pay regime come what may. I think elsewhere in government we can be very inflexible when we encounter shortages of key personnel. In the Armed Forces the retention incentive mechanism gives us some means to respond to pressures when they arise.
Q87 Mrs Moon: If I was a mother of someone going into the Army and I saw these problem areas with the provision of medical support units I would be really quite concerned. I have got a goddaughter who is training to be a doctor and she is very keen to be a doctor in the Navy, but she tells about me the difficulties of indicating that that is the career path you want to go down; it is quite complex. Are you looking at how you can get into the universities and say to people quite early on, "This is a career path you can follow; this is a career path we will support you in", and make it easy, right at the beginning of courses, for early recruitment onto those courses in these key areas, especially in the medical services, that this is where people can go? It would indicate that there is a problem, certainly with the Army here, that it is not a career path that people early on, when they are doing their training in university, consider as an option.
Sir Bill Jeffrey: If I may, Chairman, I would like to take that point away because, if I had been asked the question without the background that Mrs Moon has given, I would surmise from what I have heard that the medical recruiters are active in universities -----
Q88 Mr Hancock: They are.
Sir Bill Jeffrey: ----- and are having a degree of success, but I think I would like to get some factors to either back that up or disprove it and, if I may, I will add that to the list.
Mr Hancock: But, to be fair, that happens a lot sooner. There are a lot of young doctors being trained at the moment who are already in the military, who are actually being paid to be trained, so I am at a loss to understand how this opportunity was missed because one of the things that you are doing very well is getting people interested in planning their university career through the Services, and that is of enormous benefit.
Chairman: But you are this side of the table, not that.
Q89 Mr Hancock: Yes, I know, but I do find -----
Sir Bill Jeffrey: I am pleased to hear you are giving a more upbeat answer than I was giving, Mr Hancock. I believe that to be the case but I would just like to check it.
Mr Hancock: I know youngsters who are doing it.
Mrs Moon: They are not doing it successfully if they are getting that sort of problem.
Q90 Mr Hancock: But that is because people are leaving. Can I just ask about why it is that 2006 was the last year of figures you can provide us which show us about the voluntary outflow improvements in the Army? You are able to do it for other Services but not for the Army. Why is that?
Sir Bill Jeffrey: It is principally to do with shortcomings in the joint personnel administration system as a means of recording these sorts of data. I understand that there is a new way of working up to producing figures of exactly that kind within the next few months, but, again, I might try and give the Committee more particulars on that.
Q91 Mr Hancock: So the date for improvement will be over the next couple of months, but if a minister came into your office and said, "Look: I want to know what is the true position about people leaving the Army month by month", you at the moment could not give him that information.
Sir Bill Jeffrey: I think the Army could give some information. In the same statistical way in which we did for the other forces, partly because the Army was the last Service to have the JPA rolled out, we cannot give exactly the same accreditation as we can for the Navy and the Air Force, but we are close to being able to do so.
Q92 Chairman: Mr Jagger, do you want to join in?
Mr Jagger: I was merely going to say that we would be able to provide a range. The reason we cannot provide that data, as the Under Permanent Secretary alluded to, is merely to do with reconciliations.
Q93 Mr Hancock: Without that information how are you proving whether the things you have attempted to do, like the commitment bonus, etc., are actually working?
Sir Bill Jeffrey: It is more based on assessments by the Army at the relevant levels. What we certainly have is the number of trained strength of the Army, so in a sense this is more to do with presenting the data in a definitely reliable fashion as we do for the other two Services.
Q94 Mr Hancock: Are you able then to technically target your incentives for the sorts of admissions that Madeleine was talking about where there are noted to be shortages of staff? Are you able, without that proper information, to target those particular points to say, "We are going to do even more"?
Sir Bill Jeffrey: Where we apply a financial retention incentive to a group of people in a pinch point area, part of the process is to monitor very carefully how many people take that incentive up and as a consequence stay longer than they might otherwise have done. We do have good data on that and that is what supports the comment I made earlier about the relative effectiveness of the FRI system.
Q95 Mr Hancock: Are you a bit surprised, and this is a question that Brian raised with me, that we are continuously told that the Army is overstretched and really having problems in filling its commitments when less than ten per cent of them are deployed? What is your response when somebody says to you, "Only ten per cent of the Armed Forces are on deployment"? Why is it such a problem within the Army then?
Sir Bill Jeffrey: As I said earlier, you need
to factor in also the numbers of people who will be deployed on rotation, and
this is an issue I know the Committee has taken an interest in. We operate a six-monthly rotation and that
means that there is a very much larger number of Army personnel and Royal
Marines who are deployed than are actually in
Q96 Mr Hancock: I would like to get some evidence in detail about that. What percentage today of the Army is unfit for service in one form or another?
Sir Bill Jeffrey: The most recent performance report that we provided gave a figure for April to June 2009 of 84.7 per cent medically fit for task.
Q97 Mr Hancock: That means 15.5 per cent are medically unfit for service, and that is five per cent more than are currently deployed on active service.
Sir Bill Jeffrey: It does not mean medically unfit for duties.
Q98 Mr Hancock: They could not go on active service.
Sir Bill Jeffrey: It means medically unsuitable to be deployed on operations, yes.
Q99 Mr Hancock: I think that is the figure that we would need to have a better breakdown of because it is a pretty significant figure, is it not?
Sir Bill Jeffrey: It is certainly an issue that I know the Army have been considering because, partly as a consequence of serious regard for those who have suffered injuries, the Army have been trying to find useful employment for those who have been injured. As we get closer to full manning they have been thinking about the implications of that and whether to reissue the guidance about the circumstances in which people's service can be ended on medical grounds, but it is a very sensitive issue.
Q100 Mr Hancock: Of course it is, but it is a big issue, is it not?
Sir Bill Jeffrey: It is, yes, and I think the Chief of the General Staff, were he here, would agree with that. It is something that, since he took over a few months ago, he has been paying quite a lot of personal attention to.
Q101 Mr Jenkins: You should never ask a question you do not know the answer to these days, but I would like to ask a question I do not know the answer to, because I see this commitment focuses on retention, etc. I am thinking, who decides the shape of the Armed Forces, the shape of the Army? Have we got ourselves into a situation now that to retain people we promote them? I do not mind paying them more, but have we got ourselves into a stovepipe army almost where we have something like a figure for lieutenant colonels, say, of 1,790. That would not run an army of over half a million, not 100,000 at one stage, so who actually decides the shape and how many officers we have in the British Army?
Sir Bill Jeffrey: Point one is that at the moment the number of Army officers does exceed the number we have been aiming at. The formal answer to the question is that the shape and structure of the Armed Forces is set through the process of identifying first of all the military tasks that we are trying to fulfil, secondly, the force structure that that gives rise to the capabilities that that force supports. What I would say is that the Strategic Defence Review, when it comes, will undoubtedly be an opportunity to take a fresh look at these issues and the structure of all three Services and the extent to which it matches the requirements of the contemporary situation. That covers officer levels as much as anything else.
Q102 Mr Jenkins: I am no clearer now on who decides exactly what form is the Army. Is it the military themselves, is it the civil servants, or is it the ministers? Who actually gets involved and says, "This is the shape we should look for", and we can find other financial reasons we want people at different levels. We should not always rely on promotion to a task so we have then got an officer, we have got nothing for him or her, and we send them round from meeting to meeting on procurement or whatever is going on, occupying time and space but providing no benefit to us. Who is going to grasp this nettle and say, "This is what we need", that is to say, the people we need to retain should be rewarded; maybe we should increase the pay rate but not necessarily give them a new rank.
Sir Bill Jeffrey: The answer lies partly in what I said earlier, that the basic structure of the Armed Forces is something that is addressed centrally and the levels of the more senior posts are the ones that are considered by myself and the Service chiefs. When you get into the numbers of different ranks it depends a bit on what part of the organisation one is in. There are Army personnel, for example, deployed on projects in the defence equipment and support organisation and the numbers of people and the levels at which they operate are something which is determined by the Chief of Defence Material within his budget and in consultation in relation to a more senior post with me, so it does vary and within the individual Services the Service chiefs, obviously, have a very big part to play.
Linda Gilroy: In relation to the line that Mr Jenkins is pursuing, can you remind me if there is a line of work on this in relation to production of the Green Paper, because, if there is not, surely there should be?
Q103 Mr Jenkins: We have got no information on it.
Sir Bill Jeffrey: The Green Paper is certainly addressing some of these people issues. All it will be doing at this stage is identifying strategic questions for the defence review to address, but it is undoubtedly looking at the people issues. Whether it will get into this sort of detail I am not certain.
Q104 Chairman: You are in a starring role in the Bernard Gray report. It is recommended that you should have an explicit, preferably legally binding, accountability for the overall costings of the equipment programme. Do you agree with that suggestion?
Sir Bill Jeffrey: What the Secretary of State said in his statement on Bernard Gray's report was that first of all we would plan equipment expenditure, which is another recommendation of Bernard Gray's, on a longer time frame with a ten-year planning horizon for equipment spending, and we would increase transparency by publishing that time horizon and an annual assessment of the affordability of the programme. I will be, as the chair of the new sub-committee of the Defence Board, which Bernard Gray also recommended, prominent in the task of providing both the ten-year cost bed and the assessment of affordability. That is very close to the spirit of what Bernard Gray was recommending, although not identical with it.
Q105 Chairman: That is a different part of his report, is it not? He recommends that you, being the chairman of the sub-committee of the Defence Board, should be very close to it, as you suggest, but he also recommends that you should be explicitly accountable in terms of overall costings, which is a different issue, preferably legally accountable.
Sir Bill Jeffrey: I do not think ministers have any plans to legislate on this. I certainly regard myself as accounting officer, as being responsible, among other things, for the management of the defence programme and, as you observed earlier, that has been quite a testing issue in the last few years. What the machinery that ministers have now set out does provide for is a hole for a sub-committee of the Defence Board which I will chair in explicitly addressing regularly the affordability of the programme, reporting to ministers on it and supporting a public process of assessing affordability. That is a very significantly different position from the one we have had in the last few years. Where I myself would have some reservations is in relation to changes that put me in a materially different position from other accounting officers, and I think what most of what needs to be done here can be addressed through the well established accountabilities of the accounting officer.
Q106 Chairman: Do you accept that there is a slight impression that each new word that comes out of the Bernard Gray review involves a bit of dilution?
Sir Bill Jeffrey: I think the main message of Bernard Gray's review was about the management of the programme, the importance of doing what we discussed earlier, which was to bring a programme which has been facing very substantial cost pressures into better balance, which is the task to the extent that we can deliver it in the period between now and the election, but more significantly perhaps the focus of a defence review after the election, and to improve our internal processes for assessing the cost of that programme, continuing it and ensuring that it is affordable. I think these are very important. They are not new issues but they are issues on which Bernard Gray's analysis shed very considerable light and I believe we will be true to his prescription in that respect.
Q107 Linda Gilroy: I want to ask some questions on streamlining and pace in terms of the Departmental Capability Review. Is there a risk that the reductions in the size of head office, which are reported on, of course, are at the expense of the department's ability to deliver support to the front line?
Sir Bill Jeffrey: I do not believe so. What we said we would do in the head office, because it is essentially a cross-government requirement in relation to the minister for support costs, is to reduce the numbers, military and civilian, by 25 per cent, and we are on course to do that. It is essential that in doing it, as I think I have said to this Committee in the past, we do not just take 25 per cent out and do nothing more. What we have been working on quite intensively in the last couple of years or so is trying to change our working culture so that it is less elaborate, trying to reduce the amount of staffing, trying to reduce the burdens on briefing and simplifying our processes. That, I think, is a never-ending task but it is the means by which we will manage to deliver what is expected of us with the somewhat smaller numbers.
Q108 Linda Gilroy: So you do not think that that is responsible for the assessment of the department's capability in relation to igniting passion, pace and drive as falling since 2007? If it is not that, how are you addressing it? What are you doing to reverse the trend? What do you put that down to?
Sir Bill Jeffrey: I think we are addressing that capability review finding. Against it I would set the fact that the staff survey that we undertook in February as part of a wider Civil Service pilot put us second out of 11 departments on the measures of staff engagement and first on the measures that tell you whether people are really striving to succeed in their work. I was hoping I might have a chance to say to this Committee in relation to our civilian staff in particular, that I think that some of the media coverage recently rather loses the importance and value of the contribution that our civil servants make right across the department. It is understandable that we should have a lot of attention paid to the military at the moment and I think that is entirely appropriate, but I do in fact feel very proud of the contribution that our civilians make. I am very conscious of the need, in reducing numbers, as we have to, to protect essential interests like the safety one that we discussed earlier, but above all, and it is good to have the chance to say it to the Committee, I am very keen to leave our existing people, whether they are in the head office or in DE&S or, as many of them are, right out in the front line commands and indeed overseas, in no doubt about how highly we value their contribution because it is pretty important for defence. I know that the chief of the Defence Staff agrees with that.
Q109 Linda Gilroy: We have talked in the past about their morale, both in head office but perhaps more particularly in relation to the PACE programme, which is a very fast pace of change, particularly affecting staff out at Abbey Wood and people who are consolidating on that. What is the situation there? What are staff surveys telling you about how that is going, and are you keeping the right people?
Sir Bill Jeffrey: There is a department-wide survey going on now that will give us a sense of the mood among our staff. We now have better means of analysing by area the response we get to our staff surveys and we have a fairly light touch but important capability at the centre to ask questions area by area about what the survey results mean. I encourage top level budget holders to follow up our survey results and to act on them. In relation to DE&S, the numbers have been reducing. You may well have a chance to ask the Chief of Defence Material himself when he gives evidence shortly what he feels the impact of that is. It does produce some choices that have to be made. I think he is confident, as I am, that we are in particular staffing effectively the important urgent work on urgent operational requirements, but beyond that it is a question of using our people more flexibly and, more than anything, I think, building up skills, which among the best of our people are at an exceptionally high level already, so that we can operate a somewhat smaller, more capable organisation.
Q110 Linda Gilroy: I think within days of you being appointed was your first session with us in the early days of this Committee when I asked you about the relationship with the trade unions. Has that developed? You said you brought a good track record with you on that. How would you assess that as being now? Is it a constructive dialogue that you are having with them?
Sir Bill Jeffrey: I hope it is. I have a session every few months with the principal national officers of our trade unions and senior members within the department in which we talk relatively informally about some of the strategic issues that, indeed, we have been discussing in this Committee this morning, and issue-by-issue there are discussions about important change programmes of the kind that the Committee is aware of. I do not think it is a bad relationship but it needs working on. There are some underlying differences, in relation to one of our unions in particular a failure so far to resolve completely a pay dispute, but we try to work round these as best we can.
Chairman: We need to bring this to an end fairly soon because some of us need to get away.
Linda Gilroy: Indeed. Would it be helpful if I just asked my questions and asked if the Permanent Under Secretary might like to let us have a little note on them, because there are a number and I would like to put them on the record?
Chairman: Or we can do it in writing.
Linda Gilroy: Indeed, but perhaps I can just say that the other areas I wanted to ask about are in relation to the savings, the £650 million in 2008-09, which puts you less than a quarter of the way to achieving the value for money target savings of £3.15 billion by 2010-11. How does that tally if you are only one third of the way through the quarterly period? With the pressures we talked about earlier in the session on the equipment programme, the Armed Forces deployment, how can you be confident of meeting the target? I think also, on the positive side of it, recognising that a substantial proportion of those efficiency savings is to be recycled into being made available, I did note in the annual report that there had been some reprioritisation to R&D, Chairman, which is around the question you previously put, our concerns about there not being enough money going into R&D. However, is that £25 million enough and is there not scope for more to be made? Finally, I wanted to ask about data security areas because the annual report certainly highlights that during 2008-09, again something we have had a line of questioning on before, there were eight data related incidents reports to the Information Commissioner's Office and seven of these involved the loss of personal data, four of which affected between 90 and 1,200 individuals and three others affected several thousand potentially. I just would like to know what is being done to follow up on Edward Burton's reports. I do not see that being significant of any particular improvement and therefore in the written answer can you say what steps there are to treat data as a strategic asset? I need much more convincing than is evident in the annual report, and who is the champion for this and in particular which minister does it fall under?
Chairman: We will write you a detailed letter asking those questions and we should be grateful for a written response. Before I close the Committee though I should say that the tone of this meeting has inevitably been one of criticism and of taking up concerns that we have. However, it would not be right to leave that un-redressed because I think we should acknowledge that the tasks that the Ministry of Defence have are quite incredibly large. They are by and large done and carried out with great aplomb and success and courage and dedication. That is true of the civilian staff as well as of the military people in the Ministry of Defence. When I was a minister, long, long ago, I was intensely impressed by the civilians in the Ministry of Defence and I am sure that that must not have changed in any respect. I think that we did have a drive some years ago to ensure that work that was done by military people that did not need to be done by military people moved over to the civilians and that does not mean that the work should stop being done; it does need still to be done, and so I would wish to echo the point that you made about the quality of the work that civilians do in the Ministry of Defence. I would also like to thank you both for your evidence this morning, some of which has been difficult but which you have dealt with with courtesy and much information throughout, and I am most grateful.