Administration and expenditure of the Chancellor's departments, 2008-09 - Treasury Contents


Examination of Witnesses (Questions 500 - 519)

TUESDAY 8 DECEMBER 2009

RT HON STEPHEN TIMMS MP AND SARAH MCCARTHY-FRY MP

  Q500  John Mann: They are saying they have experienced it. Whether it is them personally or whether they have witnessed it, I have no idea, but they have experienced it. Is there anywhere else in the public sector with this level of bullying and harassment problems?

  Mr Timms: There is probably nowhere else in the public sector that has undergone the scale of difficult and demanding change that this organisation has been through over the last five years.

  Q501  John Mann: Organisations change all the time. Management change is ongoing throughout society for all employers. Are you aware of any private sector organisation where the staff feels so disenchanted with their employer?

  Mr Timms: I think it is the case that there are examples in the private sector of findings from staff surveys comparable with those that HMRC are finding.

  Q502  John Mann: So I come back to my initial question: Are you proud of your management of people at HMRC?

  Mr Timms: I want to assure the Committee that HMRC top management, the Chairman and Chief Executive—and you have had the opportunity to explore this with them—are absolutely committed to improving the morale and reducing those very damaging and worrying figures that the staff survey contained.

  Q503  John Mann: I have just two more questions which are slightly different but on the same theme, and they are about the future. You are putting staff into bigger centres, mainly in the centre of cities—places like Nottingham and Leeds, for example. Have you green-proofed these changes?

  Mr Timms: There certainly has been, in the course of the Workforce Change programme, an assessment of the environmental impact of the changes that are being made.

  Q504  John Mann: A lot of people have to drive further into cities, where properties prices are tending to go up. To take those two cities, Nottingham and Leeds, in different ways a form of congestion charge is now being proposed for employees entering the city. Have you built that into your calculations in closing down local tax offices?

  Mr Timms: I think I am right in saying, yes, an assessment of the environmental impact that was made did take account of that issue.

  Q505  John Mann: I would put it to you that the projected future costs of "congestion charge style" local taxes in cities has not been costed in and that may be one of the reasons that many of your staff are concerned about having to move to these cities.

  Mr Timms: Manchester is certainly a case in point. There has not been assessment made of which other cities might in the future introduce congestion charges and therefore adding in the costs of putative future schemes into the changes, that is true, but I would not myself favour attempting an exercise of that kind. Your question was about green-proofing: the environmental impact of the changes certainly has been assessed. Perhaps I could make one final point on this. I do not want for a moment to take away from the seriousness of the concerns with the survey. The Committee is absolutely right to focus on those. Everybody at HMRC wants to do better in the future. It is worthwhile making two further points. The survey did of course show a very large proportion of people committed to staying in HMRC. That is a positive finding. The other point I would make is that visiting HMRC offices, as I do, and particularly where the PaceSetter form of working has been adopted, the people who are working in those offices say to me that are enjoying their work and that they have found the management changes that have been made incentivising and encouraging and welcome, and they have very high motivation in setting about their work. I think there is a better side of the story to be told beyond those, as I fully accept, very disappointing and concerning figures in the staff survey.

  Q506  Nick Ainger: I would like to ask some questions on the Royal Mint. When Andrew Stafford the Chief Executive gave evidence to the Committee, I asked him some questions about the Operational Efficiency Programme, the Gerry Grimstone Review, and it emerged that Mr Grimstone had not visited the Royal Mint at Llantrisant, nor had he spoken to the management or met the management. Do you find that surprising, that he is recommending the future of an organisation like the Royal Mint but is not meeting its management or visiting the only site it occupies?

  Sarah McCarthy Fry: Not when you consider that the review team visited, so it was not as if there was no information that was coming back. Their review was actually led through the Shareholder Executive that reported to Gerry Grimstone, so while he did not visit himself I am satisfied that he had all the information that he needed in order to conduct the review because it had been visited by members of the review team.

  Q507  Nick Ainger: That was not the evidence that was given us by Andrew Stafford. You may be right, but certainly in his answers he made no reference to the review team visiting Llantrisant. I also asked Mr Stafford about what the advantages were of vesting the Royal Mint and moving to a government trading company, and he told us that there were two things: first of all that they could acquire companies outside the UK to expand their business, and the second was "joint ventures with overseas partners to enable us to penetrate markets". Should that be the role of the Royal Mint, to start acquiring companies—I do not know where—in Europe or in the Far East?

  Sarah McCarthy Fry: But if you consider that the majority of the Royal Mint's output is for the export market and not for the UK you can see where that would come in, that they will be able to generate better business, they will be able to be more commercial by going into joint ventures overseas. We need to maintain the ability in my view to strike our own coinage in this country, but also, if we have now have got it as a vested company, I think it does give them the opportunity to operate on a more commercial basis and make it better value for the taxpayer.

  Q508  Nick Ainger: But here we have an organisation which in the past has been loss-making; it has only recently returned to profitability, now wanting to start acquiring, I assume, other manufacturers as well as getting access into other markets. Is there not a risk that if that does not work out well it could come back and put the whole organisation at risk?

  Sarah McCarthy Fry: I do not think so. I think they have shown in the past two years that they are able to bring it back into profit, that this current management team is able to run it as a profitable organisation, and they have turned the organisation round. I personally visited the Mint myself a couple of weeks ago, so I have seen what they do there and how it operates. There is another reason why I think vesting will be good as well as them being able to go into joint ventures and find trading partners around the world and build the business. It is also that they believe that they will be able to attract a better quality management team within a vested organisation and they believe a company structure is more likely to do that because they have greater freedom to act and have the clarity of governance to enable them to operate as a commercial organisation. However, of course, as I say, it is my strong belief that we should maintain the ability to strike our coinage here in the UK. There are world-class facilities down there and if we can get better value for the taxpayer by them being able to bring in more business I think that is a good thing.

  Q509  Nick Ainger: I have also visited the Royal Mint and I too was impressed with the workforce and the effectiveness of the management because, after all, it is this management which has turned round a loss-making situation and they are now giving greater returns than required. However, coming back to the public policy objectives of the Royal Mint, there are four. The first one is to deliver a commercial return on capital employed, the second one to ensure a secure and timely supply of UK circulating coins, the third to provide expertise to the Government on coin and minting issues, and the fourth is to meet all relevant legislative requirements. Only the first one is a commercial issue, obviously. The other three issues are not commercial issues. Is it your intention, following vesting, in the longer term to privatise the Royal Mint?

  Sarah McCarthy Fry: The purpose of vesting was not to privatise the Royal Mint. We are working through vesting and we are looking to see what we can gain as an advantage. As I say, it is my belief that we need to be able to strike our coinage here in the UK and use the expertise that we have in the UK to do that. I do think that operating commercially and bringing in more business overseas will help to deliver better value for the taxpayer and help us deliver those other objectives that the Royal Mint has.

  Q510  Nick Ainger: But the current view within the Treasury is that the Royal Mint will not be privatised?

  Sarah McCarthy Fry: The current view is that the purpose of vesting was not as a prelude to privatisation.

  Q511  Chairman: If I may turn to the Valuation Office, last year we reported on the ports revaluation. Perhaps, Mr Timms, you could tell us to what extent the port owners have taken on the backdated liability as payable by port occupiers that the Valuation Office identified.

  Mr Timms: I do not think I do have much information about that. As you know, since we had the discussion on that subject we have announced the arrangement by which businesses in port areas will be able to pay by interest-free instalments over eight years the backdated liability, reducing the amount the businesses have to pay up front by 87.5%. I do not think I have data though about the extent to which port owners have stepped in to help. Anecdotally, I suspect that the extent to which that has happened is very modest, if at all, but I do not have data on it.

  Q512  Chairman: Okay, but have ministers been involved in exploring options for a fairer distribution of the liability between occupiers and owners?

  Mr Timms: That is clearly a matter between the ports and their tenants. As you know, it is the Department for Communities and Local Government that has been dealing with—

  Q513  Chairman: Yes, I know that, but what is the answer to the question? Have ministers been involved in exploring options for a fairer distribution between owners and occupiers?

  Mr Timms: I am not aware of ministers having been involved in that, but, as I say, it would be a matter, I think, for the landlords and their tenants rather than for ministers.

  Q514  John Thurso: If I can turn to the Office of Government Commerce, the NAO recently warned that public projects worth approximately £200 billion are at risk because the Government lacks the commercial skills to deliver them. They also said that the OGC lacked a performance management system to measure the success of its individual initiatives. Given that they have been going for a decade now, is this not rather a disappointing assessment?

  Sarah McCarthy Fry: I think we are moving forward with the Office of Government Commerce. We have completed our first wave of procurement capability reviews as we move towards professionalising the procurement service, and certainly our new chap who is in charge of the Office of Government Commerce—his name has totally escaped me[8]—I have met and I am very impressed with how he is taking the department forward, and, of course, he brings a great deal of private sector expertise into this. We have some challenging targets for them to meet with collaborative procurement, but I do think there is a lot that we can do and a lot that we have achieved so far.


  Q515  John Thurso: The whole point of OGC is to make procurement more effective and that is why it was dreamt up ten years ago. Do you not find it rather bizarre that an organisation that was created specifically for that purpose lacks the performance management systems to measure the success of its initiatives, and is that not the very core of what it ought to be doing?

  Sarah McCarthy Fry: Except that we are getting those performance management processes in place and we are starting to see the savings now coming through. We have got a self-assessment tool that is being used which is highly objective and validated through—

  Q516  John Thurso: How does that tool work?

  Sarah McCarthy Fry: It is an assessment tool that is validated through an assurance process, and then that can escalate from the head of procurement out into the departments, and we have got four procurement transformation managers now in the OGC team so that we can take that out into the departments.

  Q517  John Thurso: Are four enough for the whole job that is before Government in improving?

  Sarah McCarthy Fry: It is rolling out into departments so that we can make sure that every department is picking up on that. We have got our first government-wide agreement on the priority policies that are going through public procurement to move out beyond the first things that we have picked up, and we are looking at the reduction of barriers to SME engagement in public procurement, promoting skills, creating apprenticeships, resource efficiency, fitting in carbon reduction and a supplier charge, so we are moving beyond just using procurement to save money, which, obviously, is the main objective on this collaborative procurement. We are looking at in what other ways we can use the power of public procurement for our objectives.

  Q518  John Thurso: Those are many and various soft initiatives. The core of what it does is to procure more effectively and efficiently, which means better value, which is either better quality for the same price or the same quality for a lower price. What specific targets and measures would you put in place or are you putting in place to ensure that that is what they deliver?

  Sarah McCarthy Fry: We have already delivered in our report £900 million of savings against the target of £700 million. There has been a lag in getting the full data. We have since revised upwards to £1,400 million of savings we have achieved. We do believe we are on course for our £4 billion spending review 2007 target, so I think we can demonstrate that we have put the progress in there. We have got the operational efficiency programme and the collaborative procurement is delivering the savings that we need, and five of our strands are currently out-performing their targets or are on target. We have got three under-performing which we are going to concentrate on, which are ICT, Travel and Office Solutions, and then we are going out on strategies that deliver to the wider public sector where 70% of the spend takes place, so we are making sure that it is across the whole of government spend.

  Q519  John Thurso: Can I turn to the Crown Estate? I think that is yours as well, is it not?

  Sarah McCarthy Fry: Yes.


8   Note by witness: Nigel Smith Back


 
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