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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 476-i House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE THE COMMITTEE OF PUBLIC ACCOUNTS
National Audit Office Resources Estimate for 2010
NATIONAL AUDIT OFFICE MR AMYAS MORSE, MR MICHAEL WHITEHOUSE and MR JIM RICKLETON
Evidence heard in Public Questions 1 - 17
USE OF THE TRANSCRIPT
Oral evidence Taken before the Committee of Public Accounts on Members present: Mr Edward Leigh, in the Chair Mr Richard Bacon Mr Douglas Carswell Nigel Griffiths ________________ Witnesses: Mr Amyas Morse, Comptroller & Auditor General, Mr Michael Whitehouse, Chief Operating Officer, and Mr Jim Rickleton, Director General, National Audit Office, gave evidence. Q1 Chair: We are delighted to welcome to our Committee the Deputy Chair of the PAC of Pakistan, Ms Yasmeen Rehman, who is also a member of the National Assembly. You are very welcome. Thank you for coming. We now have to question the National Audit Office, who of course brief this Committee - we are their clients, effectively - on their budget. There is another Committee of the House called the Public Accounts Commission, which I also sit on with Mr Bacon and Mr Mitchell, which meets tomorrow and the Commission is a completely separate Committee of the House which actually has the power to accept this budget or not. This public hearing is not about us accepting their budget or not; this public hearing is about us having a chance to question the Comptroller & Auditor General on whether he has sufficient resources effectively to brief us and do the job for us because, as we keep saying, without the National Audit Office we would be nothing, and we like to think also that without us the National Audit Office would be less - not nothing but less. Mr Morse: I agree. Q2 Chair: So we have this budget. The Office is seeking endorsement of maintaining its net resources for 2010-11 at the same level as in 2009-10, that is, £79.3 million. Is that right, Mr Morse? Mr Morse: Yes. Mr Whitehouse: Chairman, can I interject? It was £79.3 million but since we prepared the estimate the Treasury have taken the decision to remove the capital charge, so this is a notional payment which reduces it down to £76 million. Q3 Chair: Anyway, basically, your budget is not increasing. Are you going to have the resources to go on doing the work for this Committee that you are committed to? Mr Morse: Absolutely we are, yes. Q4 Chair: How will you manage that? Mr Morse: I am sorry to give you a slogan, Chairman and Committee Members, but one of our strategic principles is called "practise what you preach", so we are running our resources more tightly, we are focusing strongly on efficiency and to some extent we are reducing the amount of outside contractors that we are using in doing our work. So taking all of those together, we are quite capable of doing the work within that budget. Q5 Chair: Thank you. Now, you are reducing, we see, outsourcing from £23.2 million to £19.6 million. Can you assure us this will not reduce the quality of work that you are doing for us and others? Mr Morse: Yes, I can. We also get other benefits from having these outsourced contractors. We get the benefit of having contact with the various professional firms, we get a certain amount of knowledge transfer from them and so forth, but I am quite happy that in the current economic circumstances in particular, they are very keen to keep their relationships with us. They are very co-operative, we do get significant knowledge transfer and I am quite satisfied that we could probably reduce the level of contracting further than this without doing any damage to those relationships or our ability to deliver the work. Q6 Mr Bacon: Your strategy states that you plan to employ 900 people but that has since gone up to 930. Mr Morse: Yes. Q7 Mr Bacon: Can you say what the reason for that is, and are you planning to increase your staff any further? Mr Morse: We are not intending to increase it further than that, in the short term anyway, but the reason for it is in some cases because we need a change in the staff mix. We are taking on more students and we are taking them on in a different configuration, rather more in one group so we can really train them and organise them into the population properly but secondly, as I have indicated, it is actually more cost-effective to do the work ourselves than to contract it out and give somebody else a profit margin for doing it. Both of those reasons are at work. If we change the staff mix, we are actually able to be more cost-effective in some of the work we do. Q8 Mr Carswell: I am relatively new to this Committee. Could you give me an example of where government spending has actually changed or been reined in or something that mattered has actually happened as a result of the work this Committee does and the Reports that you produce? I do not mean Today programme interviews. I mean things actually changing for the better. Mr Morse: I can give you a lot of examples because, to be quite honest, it is almost shocking how high a reaction level there is to our Reports. Not every time but very frequently when we produce a Report there is a reaction of change. If I give you an example, we pointed out the fact that there was a lack of identification of dementia patients in the population, that they were just out in the general medical population, being treated and obviously causing very considerable cost as a result of being treated as ordinary patients and they needed special care, so consuming care. As a result of our Report and our follow-up on those Reports, the National Dementia Strategy was put in place. That has had a very significant impact. You could say exactly the same for stroke, and I could go to other sectors. If I take the highway maintenance programme, we found that there was poor understanding of cost at the centre of highway maintenance, extremely variable measures of productivity. It was really this year that we did that, and the Department have already taken action to have a much better understanding of what is happening as a result of that. We have just been listening to something today where you heard a commitment, and I will be very astonished if within six months of now you do not find that there is a series of much stronger controls across all of these debt management arrangements, the whole, wide programme that is there. Similarly, we pointed out on the Drugs Strategy that they did not have overall measurement of the efficiency of what is a massive amount of money being spent, there was no overall method of telling whether the balance of effort between these vast programmes was adequate and really effective. They have committed to put that in place. Quite honestly, if I take you to the audit side for one second, just to answer you as fully as I can, we took a view that one of the most important things in audit, not to understate the importance of it, was the fact that the internal control statements are signed by the actual Permanent Under-Secretary generally, who is the budget holder, the account holder. What we said was, "Are we satisfied that enough work and thought has gone in behind that signature?" Now we have already changed our approach and that is driving better internal control in the Department. I can assure you, as I have been in this job, I have found we have a very considerable ability to drive behaviour and that does drive savings as well. Q9 Mr Carswell: Do you think it would be helpful to you doing your job and helpful to those of us interested in the efficient use of public money if before that signature could be given annually you would need to have a confirmation from the relevant Commons Select Committee? In other words, you would have direct sign-off on departmental budgets. Mr Morse: Bear in mind we are signing on the Department's accounts, not on
their budgets, if I may. We are not part
of the review mechanism on the budget at the moment. I am aware of the fact that that is what
happens in the Q10 Mr Carswell: It says in your Report that the National Audit Office are totally independent of government. I recognise that you are independent of government in the sense of elected government, elected officials, but surely you are a sort of public body, often with people from Whitehall backgrounds, so in a sense you are in the broadest sense of the term part of government, are you not? Mr Morse: Again, I have now been in the job for nine months odd, and I really think it would be wrong to think that we are not very independent, if I may. Most of the people do not come from the rest of government. We train our own accountants, and you might criticise us for having too many people who have come from within the National Audit Office but that is where most of our people actually come from. Q11 Mr Carswell: Do you second people from Whitehall departments? Mr Morse: We do a certain amount of that but really, we do not rely on that for our sinews, if I can describe it that way. We hire some people from the private sector market for particular skills or skills gaps that we have but mostly we grow our own ability. I really would just say to you we are actually trying to understand the issues in government better without compromising independence. I think that is very important to doing a good job. It is not accurate to think of us as being nothing more than a limb of government; that is just not true. Q12 Mr Carswell: Finally, do you think it would help better accounting and democratic accountability to have every item of expenditure over £25,000 put online automatically? Mr Morse: It is a theoretical argument. What I worry about is this. Rubbish in, rubbish out is generally a pretty good principle. I have told this Committee now many times about my concerns about the inadequate quality of information in government. If we take all that stuff and start pumping it out to the public, and people start picking bits of data and getting very excited about them and forming speculation based on coming back and asking millions of questions, good luck! It will certainly change things but I am not sure they will be for the better because, unless you have quality information going out there, the inquiries will not always be well directed and you spend an awful lot of time explaining why they have got the wrong end of the stick about something. If we could get the information level up and progressively become more transparent with the public, I am in favour of that, but the information quality has to come first, I think. Q13 Mr Carswell: You do not think we could just put it out there and let people make up their own mind, using common sense? Mr Morse: It is a point of view. I am being pragmatic. I do not regard it as a matter of principle. As a matter of fact, if you give people a lot of bad information and let them struggle with it, you will generally get some pretty unfortunate results. Q14 Chair: As a matter of interest, until the First World War the NAO, or its predecessor, had to sign off every cheque issued by government. This was overtaken by events in the First World War. Mr Morse: That is very interesting! Q15 Nigel Griffiths: If I might just make a comment, that is to say that I think this Report and your answer to some of those questions tells me what I most admire about the National Audit Office and why it is the world's leading and much envied institution, and that is three key things: the drive for real and effective change and improvement through analysis and showcasing the best; the nurturing of young people, taking them in and then growing people within the organisation; and, last but not least, the ability of the National Audit Office to attract people of enormous experience from the private sector such as yourselves, offering them always a salary far below what the private sector can afford but that great commitment to public service which delivers this. I could be emboldened by Mr Bacon's complimentary remarks about one of my last questions and ask you if you were sitting in this position, what is the toughest question you would ask yourself? I will desist from that. Mr Morse: Are you asking me that or are you forbearing to ask me? I was not sure which one it was. What is the toughest question? I think the toughest question is always ... The question I wrestle with is how far can we take it? I have been terribly impressed with the dedication in the sense of public service of my people in the National Audit Office. I have to be honest and say I am now very deeply committed to it. I was when you gave me the job but I am even more so now, and I really believe it is a very worthwhile enterprise. Still you have to remember something, which is that we are commentating on what is being done by people in government who undertake very great tasks. The desire to see change, to see more accuracy, more measurement, more evidence go into public service - I really believe it could work even better, if I were going to be diplomatic, than it does if all that happened. How far can that really go? How far can the National Audit Office really truly on its own just wail away at it with the PAC and make a difference? I do not know what the limit of that is but if it does not gain championship from inside, there will be a very distinct limit to what we can do. We have actually got to change minds and hearts within government, within the Civil Service, if we are going to get it to work past a certain point, to be honest. Nigel Griffiths: If I might just say, when I was a Minister, having served on the PAC before that, the first thing I said to my civil servants, especially the senior civil servants, was "Get into the National Audit Office. There are experts in the field who have done reports. They want to be helpful," and I have to say the best civil servants followed that advice. Q16 Mr Bacon: One of the things we often hear departmental witnesses saying is "I found this NAO Report genuinely very helpful," and it is often because they had not considered as much as they perhaps should have some of the underlying management and information issues which you draw their attention to. What Mr Griffiths was saying, and what you were saying in answer to him, also points to greater levels of accountability inside the Civil Service because if you are to get more ownership inside, if you are to change hearts and minds inside the Civil Service, you need greater accountability, individual accountability, inside the Civil service. You will find in the literature people writing on this area saying there are civil servants screaming out for greater accountability, greater responsibility and concomitantly the greater job satisfaction that would end up going with that but they do not seem to get it at the moment. This is a very big question, I suppose, but do you think that the current structures are adequate to engender the kind of greater openness and greater accountability that you would need in order to get the greater changes and the greater changes of hearts and minds that you were talking about and, if not, what do you need to change? Mr Morse: I think we need to decide which model we are trying to make work
and get some quite strong consistency around that, and then everyone try and
make it work rather than saying "We'll all fight for the model we prefer and
that will cause confusion." If you take
the central government versus localism discussion that happens, for my money,
there is obviously some logic in integrating services locally and making sure
that they do not bump into each other and get delivered in a cost-duplicative
and unco-ordinated way locally, but then consider: why is everything so
centralised? It never used to be so. It became centralised because of the need to
drive accountability more effectively than it was and also to achieve standards
and improving standards in some way.
Many of these issues were ones which were nationally politically
sensitive. Taking all of that, those two
things have fought each other. If you
are going to have - and I believe you could have - more effective localism and
still central accountability, you probably also need central government itself to
be somewhat more integrated than it is.
So there are a lot of issues where a consensus needs to be
developed. Once that consensus develops,
if you can say, "All right, now we are about making this work, not about
arguing about inventing a new one but making this one work," if you stop moving
the furniture around at quite such a pace and you build up an information
structure which is genuinely informative around that, you have a chance of
making things work better. We are just
this week publishing a Report on changes in government structures and machinery
of government changes which says that there has been a really large number,
some 90 changes in the last few years in the Q17 Chair: One last question from me. You are trying to increase the pace at which you bring out these Reports. You have this target for value for money studies taking nine months or less in 2009 of 60%, a significant increase in the result for 2008, which was 29%. Can you drive this process forward? We are constantly told by Departments commenting on our own PAC Reports, "Well, this was a problem but of course this issue is now very old and we have dealt with it." So it is very important that this whole process moves at a faster pace, I think: you producing the Reports more quickly, coming to the Committee more quickly, us meeting, reporting back to Parliament, so the thing does not become stale. I am sure you agree with that. Can you sustain this progress? Mr Morse: Yes. There are two very important aspects of it. One of them is us doing our work in a clearer and more linear way, and I am very much personally involved with the way our products are developed. I give people very clear guidance. Every one of the Reports that comes to you now that has been initiated in my time I have had a proof of concept meeting; I have discussed exactly what the Report is going to show. The other thing is having the clearance process becoming much more linear than it is and that means we need to work with the Departments and get up to senior levels much faster in order to have the discussions and get through clearance from Departments in a more accelerated way, I really think to the benefit of both, and I am going to need support from the Committee going into the future to achieve that. Chair: Thank you very much, Mr Morse. Thank you to your colleagues. That concludes our public session. |