CORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 715-v

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Public Administration Select Committee

Good Governance: the Effective Use of IT

Wednesday 30 March 2011

Rt Hon Francis Maude MP and Ian Watmore

Evidence heard in Public Questions 477 - 597

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Public Administration Select Committee

on Wednesday 30 March 2011

Members present:

Mr Bernard Jenkin (Chair)

Nick de Bois

Paul Flynn

David Heyes

Kelvin Hopkins

Lindsay Roy

________________

Examination of Witnesses

Witnesses: Rt Hon. Francis Maude MP, Minister for the Cabinet Office and Ian Watmore, Chief Operating Officer, Efficiency and Reform Group, Cabinet Office, gave evidence.

Q477 Chair : Thank you for joining us today, Minister and Permanent Secretary. Thank you very much indeed. If you could each identify yourselves for the record.

Francis Maude: I am Francis Maude. I am the Minister for the Cabinet Office.

Ian Watmore: I am Ian Watmore, Permanent Secretary at the Cabinet Office.

Francis Maude: Could I by way of a very quick introduction just alert you, Chairman, in case it has not totally filtered through, to the fact we are publishing today our Government ICT strategy? We let the Committee have embargoed copies yesterday. I am just conscious it may have happened late, and I am not totally confident therefore that members of the Committee will have had a chance to read it. It is not a fantastically lengthy document and it is incredibly readable.

Q478 Chair : We have not studied it in any detail, but my understanding is that it does not contain any surprises, dramatic new truths or revolutionary concepts that were not already in the public domain.

Francis Maude: We think it is a lapidary formulation of some important concepts for the future.

Chair : And what does "lapidary" mean?

Francis Maude: Precisely crafted.

Q479 Chair : Right, very good; that was just for the benefit of the public. We know that IT procurement is notoriously difficult and has an appalling track record. In fact, the CIO we had in front of the Committee last week said, "Today, only 30%, we estimate, of our projects and programmes are successful. Why shouldn’t it be 90%?" You are producing a new strategy and we welcome that, but why is this going to be different? This is another of a succession of attempts to reform IT procurement. What is different this time?

Francis Maude: That is quite a big question, and I will start and Ian can pick it up. The projects have tended to be too big. That is partly a function of us being a very centralised country, so a lot of the programmes for which Government IT projects are needed are big national programmes, whereas most countries are more decentralised and dispersed. We inherently have more big national programmes for which IT projects are needed. That is the first thing.

The second thing is we tend arguably to be rather riskaverse in how we procure, and we have tended to take the view that safety lies in big projects with very big suppliers. How this will change: we have introduced a presumption that no projects should have a lifetime value of more than £100 million. That is not a dogmatic restriction.

Q480 Chair : That compares with, for example, the Aspire contract with HMRC, which is, what, £8 billion?

Francis Maude: A lot. I could not swear to the exact number.

Q481 Chair : Could you put a figure on it?

Ian Watmore: I think the published contract value is £4.3 billion, and that is what is left-

Q482 Chair : They are skilfully adding to that.

Ian Watmore: I only know that the published figure is £4.3 billion. I am pretty certain that is right.

Francis Maude: But it is a lot and I would aim not to be doing contracts of that size in future. That is a contract for services; that is not just an ICT build, in my understanding of Aspire, but it is still a very big contract, and of course the downside of contracts of that size, particularly with a systems integrator, is that you get very locked in.

In terms of procurement, we are chunking our projects into more manageable sizes so that you have a wider range of suppliers that are equipped to provide a procurement process that will in future, we hope and intend, be less prescriptive in terms of the how of what is done and more prescriptive in terms of the outcomes we wish to be achieved; and procurements that are much quicker. They tend to be very slow; they are typically twice as long in this country as they are in Germany. This is very costly. A supplier will tell you that bidding for a publicsector contract can cost four times as much as bidding for an equivalent privatesector contract, and this again excludes many potentially competitive suppliers from the marketplace. We have a whole lot of things that we hope will make this better.

Q483 Chair : Is this a cultural change?

Francis Maude: I am always a bit sceptical about trying to achieve cultural change. I think the thing to do is try to change behaviour and, out of changed behaviour, a different culture emerges.

Q484 Chair : You are looking for behavioural change.

Francis Maude: I am looking for us to do things differently, for us not to be constantly reinventing. We are not good in the public sector at reusing what has already been expensively built.

Q485 Chair : Minister, I am very sorry to point this out, but your justpublished document says, "Many of these actions represent not just technological change, but changes to the operating culture of Government," so you do like cultural change.

Francis Maude: Yes, I do like cultural change, but you do not achieve cultural change by trying to change the culture; you achieve it by changing behaviours, and the culture change follows from the behaviour change.

Q486 Chair : We will come to the whole clientside operation in Government later. Mr Watmore, if I may, I should declare an interest: the cochairman of Fujitsu Europe is a personal family friend. But I think you have a bit of history as well, haven’t you?

Ian Watmore: I would like to think so. I worked in the IT industry for 24 years before joining the Government.

Q487 Chair : You worked with?

Ian Watmore: With Accenture.

Q488 Chair : Which is one of the biggest providers of IT to Government, one of the systems integrators.

Ian Watmore: From memory, I think it is about 18th out of the top 20. It is relatively smaller than, for example, people like Fujitsu, which is much bigger. I did personally build some systems in the 1980s in an incredibly complicated environment-the old DSS, now DWP.

Q489 Chair : Was that in Joe Harley’s 30% of successful projects?

Ian Watmore: It will almost certainly have been, because they are still running to this day and people rely on them every day for paying benefit payments.

Q490 Chair : The Child Support Agency system is still running to this day, but it was a disaster.

Ian Watmore: I was not involved with the Child Support Agency project, but the core benefit systems that were introduced in the 1980s, when the welfare state was under huge stress and strain, were brought in in order to mitigate that, and it was a very successful project.

Q491 Chair : The point is you come from exactly the large corporate culture that has bedevilled IT procurement in Government. Are you part of the cultural change that the Minister is looking for or are you just part of the problem?

Ian Watmore: I am certainly not part of the problem, and I would contest that the corporate industry of this country has caused the problems that we have. In fact, I would contest the concept of an IT project. In my mind, I do not know what that means. There are only projects that you introduce in Government to introduce policy that Ministers have decreed or to improve the operation of the system of Government. Technology happens to be an enabler for that. When you look at what we do every year, we do hundreds of projects extremely well. You never hear about them and they work every day. You would know, because the country would cease to function if it did not have all of this technology working.

When we have the socalled IT project disasters, nearly always they translate back to the sorts of things that the Minister was just talking about, which are an overambitious project, too big a project, a policy that probably was not as well thought through at the time of announcement as it might have been, and an attempt to bring in change on a national level to the scale and complexity that the Minister was referring to, usually on a single day via socalled bigbang implementation. All of those lessons, which have been well documented as the cause of the problems in this area, generally track back to one of those three things: policy problems, business change problems or bigbang implementation.

Q492 Chair : If I may-we will come to the other points you are raising-the track record of this, on the evidence we have, is that local Government acquires its IT at about 50% of the cost of national Government.

Ian Watmore: I do not think you can make that comparison.

Q493 Chair : Why can we not make that comparison? What comparison have you made?

Ian Watmore: Local Government does many more smaller projects.

Q494 Chair : Is that not what you are suggesting we should do?

Francis Maude: Let Ian finish.

Ian Watmore: The policy changes that we are announcing, both in this strategy and more broadly in regard to this, say that in the early part of a policy change from Government, we now want people to think through the implications of their delivery. If that requires an IT programme of many hundreds of millions or even billions, with a four or fiveyear lead time before it is going live and with a bigbang implementation, we will say no to that policy early on. We have introduced the changes, in line with the strategy of the Major Projects Authority, precisely to intercept those things right at the beginning. As the Minister has rightly said, the Government’s intention here is to learn from what local Government and others have been doing, to break the very large national projects up into much smaller projects, so that they can be individually procured in an easier way, delivered with more rapidity and, importantly, changed in the light of actual experience in the results. That is the changing direction that the Government is announcing today, and it is one I personally support.

Q495 Chair : This is the Cabinet Office taking powers to stop things, but does the Cabinet Office have enough power to promote new initiatives, new working practices, across Government, or is the notorious siloworking of Whitehall Departments still protected by the political and financial accountability mechanisms, which would actually prevent the Cabinet Office taking some of these initiatives into the heart of Government?

Ian Watmore: I think it is a good challenge, Chairman, and I will let the Minister talk about the ministerial side in a second, but what has been essential is to have that ability to stop things. You get people’s attention when you have that control. We do not want to sit around waiting for things to come up so we can go, "Stop, stop, stop," but the fact that it exists means that people engage us much earlier and, therefore, we can help shape what is going on. For example in Universal Credit, which is one that is very topical, both the Minister and I have been actively invited in by the Department for Work and Pensions, and they are formulating a project plan that is in line with this new strategy. That probably would not have happened in the past.

Q496 Chair : Certainly one of our SME witnesses says that the key to cultural change is to turn off the tap. Minister?

Francis Maude: I think that is right. Is the ability to say "no" enough? It is a pretty good start actually. If you can stop people doing things wrong, you have some chance of encouraging them to do things right. We do not want everything that gets done in Government to be centrally driven, but we do want to stop people and bits of Government doing things in the old outdated way that is part of the problem. The moratorium that we established within days of the coalition Government being formed, so that no IT project with a value of more than £1 million went ahead without my personal approval, did actually institute a bit of a shockwave around the system. We have now raised that to £5 million, but we will still exercise considerable control.

Ian’s point is right. A lot of these problems arose because there was insufficient pushback on policy. You would have Ministers announcing a policy and saying, this is gross simplification, "We must have an IT project to implement it," and then lose interest, with senior officials often losing interest as well. No one who was actually responsible for implementing the wretched thing was feeling empowered to push back to say, "Actually, if you do it this different way, you can slice the cost right down and take a lot of the risk out." I do not know whether it was a cultural thing or what it was, but you have to have the ability to have pushback on policy.

One of the things I hope the departmental boards will do, and I have encouraged them to do, is exactly that pushback. We have set up those boards in a stronger form, with ministerial leadership and very senior nonexecs. They are not there to define policy, but one of their functions will be to push back and say, "Actually, in terms of delivery, this is not deliverable in a rational way," and force Ministers to think again, and hold senior officials and Ministers’ feet to the fire in terms of the deliverability of big programmes.

Chair : You must forgive us: we want to get done by 11.30. We have a lot to get through. If we can have answers as short as possible, but we want you to have your say.

Q497 David Heyes: We know that the Prime Minister believes that there are too few suppliers getting the majority of contracts, but we have had conflicting evidence on that. Do you have any firm figures on the proportion, the share of the market, which goes to the biggest suppliers?

Francis Maude: The first point is the quality of our central data is very poor. When we were renegotiating contracts last summer with the biggest suppliers, the central data was woefully inadequate, and we only got the data in the first instance by asking the suppliers themselves. The second thing is, in terms of the value of contracts, you need to look into the supply chain as well, because there will be smaller suppliers that are supplying to Government, but more often as subcontractors. This is not always optimal, because there will be margin on margin, so what the smaller suppliers get in those circumstances is more limited. We have said our ambition is that 25% by value of Government contracts should be with small- and mediumsized enterprises. It is going to be quite tough to track that, but we have put a requirement on Departments, agencies and public bodies to report on that.

Ian Watmore: Can I just give you a statistic that I think is accurate, and you can check it afterwards, if it is not? The topthree companies in IT in the central Government space are HP-it is the EDS contracts acquired by Hewlett Packard that are HP-BT and Fujitsu. Those three companies account for about £5 billion a year of spend, and I think the total spend on IT in Government is about £15 billion or £16 billion, so about a third of the market is in the hands of three companies. But, as the Minister rightly says, those three companies hold the prime contracts. The subcontracts underneath all of that then have many dozens of suppliers. In fact, Fujitsu supply to HP and BT as well as having their own contracts, so it is a complicated landscape, but those are the three big companies for value.

Francis Maude: We are expecting greater transparency over the subcontract arrangements.

Q498 David Heyes: Despite the lack of data, there is a shared view that too few suppliers get too much of the work, and something needs to be done about it. What impact does that current market concentration have on the ability of the Government to get value for money out of these contracts?

Francis Maude: It is a less competitive marketplace. If you have procurements that take so long and cost so much, and the smaller suppliers just get frozen out to begin with so it is less competitive, you are less likely to have newer, more innovative suppliers, where there will be more risk involved for sure, because we tend to like lots of track record. We are changing the way procurements are done. The standard approach tended to be in prequalification questionnaires, which could be incredibly lengthy and tiresome, and had to be done every time there was an invitation to tender. They would tend to want, for example, three years’ audited accounts. A new small supplier might not have any years’ audited accounts, and so would immediately be frozen out. We are changing all that. We are actually saying, for lots of procurement, you do not need to have a prequalification questionnaire at all. We want this to be quicker, more open and more accessible.

There will still be lots of contracts that go to big suppliers; there will be some things the scale of which is such you need a big supplier to do them, but it should be much more open for innovative solutions. One of the things we are doing is to have, and I think the first one is happening in April, a sort of Dragons’ Den event, where small suppliers are able to pitch to Government innovative ideas and different ways of doing things, because often they find it difficult to get access into the system to pitch ideas.

Q499 David Heyes: HP has told us, in contradiction to that, that they have met with the Cabinet Office, looked at margins and apparently assured you that they are not making any more profit.

Francis Maude: They would say that, wouldn’t they?

Q500 David Heyes: They would, but they say that you agree with them. Is that right? They told us that the Cabinet Office and the OGC had reviewed their margins, and accepted that there is no more profit in this than they would have made from comparable business in the private sector. Is that the case?

Francis Maude: I would be interested in the timescale you are talking about here. I am not aware of any endorsement of that nature.

Ian Watmore: From personal memory, Government business was, at a profitability level, out of the top10 markets that one would cover in the private sector, generally about the second or third worst from a profitability point of view.

Q501 David Heyes: Isn’t this about more than margins?

Ian Watmore: What it was best at from a supplier point of view was longevity of contracts, and it is for the reasons that the Minister has just said. The procurement regime was such that, if you constantly reprocured, you would never get anything done. People used to do a big procurement once, let a 10year contract and then procure underneath that.

Q502 Chair : It is a very lush secure cash flow for underwriting all your overheads.

Ian Watmore: That is what I said: it is the tradeoff between margin and longevity of contract. That is why people are in that business. In any marketplace, if you are covering the whole of the economy, you want a blend of market types. In Government business, it tends to be predictable revenues for the big companies at a lower margin.

Q503 David Heyes: This is about more than margins, isn’t it? It is about the whole question of the efficiency of the way they do the work. What sort of benchmarking evidence is there about the quality of the work, not just the profitability?

Ian Watmore: I personally think this is a really fertile area to explore, because it is really hard to do direct comparisons for the sorts of things that Government does. You can do things on a very basic level, like the comparability of a desktop computer or laptop that you might use in your daily work and compare that with other people, but there are not too many people doing MODstyle systems or GCHQstyle systems, so the comparability is harder there. What we do find when we do the comparison with the commoditytype end is that there is great variability in Government. In some cases in Government, they get great deals; in other places, they have very poor deals.

Q504 Chair : Mr Watmore, can we just crack this one? How much of Government IT spend is really specialist?

Ian Watmore: I do not have a precise statistic.

Q505 Chair : It is a nonsense, isn’t it? Most Government IT spend is on email, data.

Ian Watmore: No, the vast majority of the spend will be on bespoke systems for Government.

Q506 Chair : That is the problem, isn’t it?

Ian Watmore: That is the nature of Government business.

Q507 Chair : No, that is the nature of the way Government buys IT.

Ian Watmore: I do not think that is true.

Chair : How much needs to be specialised?

Ian Watmore: That is not true-I am sorry-because the vast majority of expenditure goes on areas like defence systems, social security systems, retirement pension systems.

Q508 Chair : Defence systems might be special, but why are social security systems any more special than a banking system or a fund management system?

Ian Watmore: Because Parliament has, over many years, legislated very complex legislation in order for people to be in receipt of a retirement pension or an income support benefit. The complexity of the legislation that has to be encoded in the system is massively more complicated than anything equivalent in the private sector. It is the complexity of those systems and the scale-the fact you are doing them for 60 million people, for everybody in this country-that makes them very complicated.

All you asked was a factual question: the vast majority of the spend does not go on email, basic communications and desktops. It goes on special systems to implement Government policy.

Q509 Chair : I am sure the politicians are to blame in the end.

Ian Watmore: I did not say the politicians were to blame; I said it is a complex environment.

Francis Maude: I think politicians are largely to blame actually. I will make a couple of points. The first is it simply is the fact that a lot of this stuff is more specialised. Banking is banking, and banks do things in different ways, for sure, but actually they are doing something that is fundamentally the same. There is only one benefit system in this country, and it is completely different in this country from anything any other country does. You do need to have IT systems that operate it that are fit to do it.

There is another point to make, and I think that part of what you are after is correct, which is that we are not good at adapting-well, first of all, pushing back on policy, so that, if you do it this way, there is already a system around that has been expensively procured by the public sector, which will, by minimal adaptation, do the job-actually saying, "Do it differently and we can provide the IT very quickly from, as it were, the app store, from inventory." There is a real point there. One of the things we are adamant about in the ICT strategy is we have to get much better at reuse and adaptation of what we already have. One of the things we are saying, and we need to press ahead with this, is we need a proper comprehensive asset register, so we properly know what it is we have.

Q510 Chair : I would hazard a guess, and the evidence that we have received is, that at least 80% of what Government does is pretty common or garden stuff.

Ian Watmore: I would contest that.

Chair : There is some that is very high security that necessarily needs to be different. I am very interested that you contest that, and I think that is an assumption that we need to explore further.

Q511 Paul Flynn: I can recall a Government Minister saying that he was going to simplify the social security system and get rid of what he called the "twiddly bits". That was Tony Newton in 1987. Your blame on the politicians is a nostra culpa, is it, rather than blaming any particular party? All politicians have made the system too complex.

Francis Maude: Yes, absolutely.

Q512 Paul Flynn: Why is there a difference of £4 billion between what we think the Aspire programme will cost and what you think?

Ian Watmore: I do not know. I do not know where your figure comes from. I believe that the figure I quoted is the published figure of what is left to run on that contract. It may be, since this has been running for several years, that you have the total lifescale value of that contract. I think I am talking about what is left to spend, but maybe I have misremembered.

Q513 Paul Flynn: The total might well be £8 billion.

Ian Watmore: From when it was originally let, which was three or four years ago. It is possible, but I am remembering a number so we can check it afterwards.

Q514 Paul Flynn: What criteria do you apply when you go through the contracts you see? Which ones do you stop? Which ones do you throw out? What gives you an insight into this that was absent from your predecessors’ judgments?

Francis Maude: What do you mean by which contracts we throw out?

Paul Flynn: You say you are looking at everything that is worth more than £1 million, so how do you decide which ones should go ahead? Do you feel comfortable that you have total command of the technology?

Francis Maude: No, not remotely.

Q515 Paul Flynn: How does ministerial involvement help?

Francis Maude: I have good advice from people and we apply some fairly robust common sense. If I see a fourth project coming up from the Ministry of Defence that looks remarkably like three others I have seen, we then say, "Actually, let’s pull all of these back together and do it differently." It is the same with the moratorium on advertising and marketing spend. We have just found out a hell of a lot about what is going on and been able to exert some discipline on it.

Ian Watmore: If I could, Mr Flynn, the criteria we are using when judging a project are some of the well-known "common causes of failure" of a project. A very good one is, if the Government comes forward with a potential announcement that is going to require a massive change to the whole country on a single day-the socalled big bang-that is something that rings red alarm bells with us, and we would say you need to think of a different way of implementing it because, if you go down that path, you will by definition have a fiasco on your hands. It is about how you implement the policy as well as the nature and the complexity of the policy.

The other thing the Minister has emphasised with which I could not agree more is the desire to reuse things from elsewhere in Government that are already there. There are occasions when we see at the centre Department  A coming along saying, "We need to do this and this is what we would like to build," and we happen to know that Department B or C has already done that. In the past, that information would not have been shared. We are trying to share that, so they can pick something that is already working and reuse that. These are the kinds of things that we are looking to do as we go forward.

Q516 Paul Flynn: The Institute for Government did a report, System Error, and they described some of the typical failures of the past. They picked on the Prism system, which was in the Foreign and Commonwealth Office, and it was an attempt to take 30 existing programmes that were running at the time and integrate them. They said, "In the FCO’s long history of ineptly implemented IT initiatives, Prism is the most badly designed, ill-considered one of the lot." They said the staff were "at their wits’ end". Is this true and how do you avoid this in future?

Ian Watmore: I have no personal knowledge of that system so I could not comment, but I do know that the Foreign Office has a particular challenge, which is something else that is special to Government, around the security aspects of their IT. We are a target for statesponsored terrorists, hackers and criminals in a way that is disproportionate. They go after Government sites. When you are in something like the Foreign Office and you are operating in a different world, they have a real challenge on how to get highly secure technology that is very usable by their people, and the two are often in conflict.

Q517 Paul Flynn: Regardless of whether you understand this system or not or know about it, the general criticism of the Institute for Government is that there was nothing wrong with the technology; it was just the way it was incompetently applied.

Ian Watmore: I think that agrees with my opening remarks. It is very rare that the technology is the problem in these socalled IT problems. It is nearly always the case that either the project management has been done incorrectly or the policy ambition was too ambitious. The reason why IT is the place where it gets found out is because that is the place where all the codification of what has been decided finally comes to fruition, and machines are pretty bad at handling ambiguity. If there is ambiguity, you find it out. That is why we often find these things go back to project management or policy when we track them.

Q518 Paul Flynn: When we get around to reading this precisely crafted document that you published yesterday, will we read in there how this will never happen again?

Francis Maude: No one is remotely beginning to say it will never happen again. This is big difficult territory, where actually we ought to be trying to do things in new ways, periodically, and there will be risk involved. We need to be much better at managing the risk, more willing to take on risk and have much better project management. Is everything going to be lovely and perfect from now on? No, certainly not.

Q519 Paul Flynn: We have been listening to these kinds of assurances for many years. Nothing seems to change. Are you convinced there will be some great renaissance in dealing with IT?

Ian Watmore: The Minister has already introduced a change that has never happened before, which is this moratorium on projects. That gives us the ability to get in early enough. Without that, we could not do it and, with it, we have a much better chance of learning the risk.

Chair : The Minister has very skilfully removed the rope from around his neck.

Q520 Nick de Bois: I would just like to touch on SMEs, and in fact a very welcome aspect of your commitment to drive more business into SMEs. Can I just start trying to understand? Is your plan to encourage more direct contracting with SMEs, or is it to ensure that more prime contractors increase the level of subcontracting to SMEs on those projects?

Ian Watmore: Both.

Francis Maude: Exactly: both. The former by chunking projects up more, so you have smaller projects that are within the range of smaller suppliers, but the latter as well, and to do it in a more transparent way. We want more visibility. When we were renegotiating with suppliers last summer, it emerged that we began to get a bit of a sense of what the margin stacking is, where you have a big prime contractor with subcontractors.

Q521 Nick de Bois: There is some evidence we took from HP, who were here last week, which gave a rough order of merit that about 30% of their prime contracts, they argued, were subcontracted to SMEs. Do you agree with that from the work you did last summer?

Ian Watmore: I think we would say that the data that we got was sufficiently poor that we could not be clear.

Q522 Nick de Bois: You say you will press that.

Ian Watmore: We are mandating, going forward, that that has to be clear, transparent and publicly available data. It would not surprise me if, in certain parts of deals, there was a lot more than people think. Quite often you find you have a big prime contractor here buying a piece of major software from a major company here, which in turn then uses an SME product down here, and so it is quite difficult to track through the supply chain.

Q523 Nick de Bois: I appreciate that. You are going into tierthree and tier-four supply chain there. Before we move on to the alternative of direct contracting with SMEs, we came across evidence, again from HP, that was very disturbing. I hope it is something that, if you have not come across it, you will be able to look at. On the whole, prime contractors enjoy reasonable cash flow payments in their contracts. That is understandable but, by their own admission, these are not being passed on to SMEs working directly on those contracts. Have you come across evidence of that, and is there anything you could reasonably do about that or may have taken steps to do already?

Francis Maude: Government pays its bills with unnatural speed, and so our cash flow management from that point of view is very good in terms of providing liquidity into the economy. It is not necessarily so good in terms of our working capital requirements. It is not uniformly the case that prime contractors operate the same terms with their subcontractors.

Q524 Chair : Can you make that a contractual obligation?

Ian Watmore: I think we can and we will be going forward trying to ensure that cash flow flows through. When I was a big supplier to the Government in the 1980s, if my bill was paid in the same year that I issued it I felt pleasantly surprised. It was the worst payer of all. The Minister has just said exactly the right thing: it is now one of the best payers. The reason it took that policy decision over a long period of time was not to enable big companies to improve their cash flow, but to get it through to the supply chain, where it was really needed. If it is not happening, we absolutely have to change that. If that is contracting or transparency driven, it is something we are pushing on very hard.

Q525 Nick de Bois: That is welcome, because it is important as a lot of SMEs would not even consider bidding for work on unfavourable cash terms, because frankly there is no point in doing it. I was not comfortable; I admired the honesty of the submission but, if that is at all representative of the industry, Government has a duty to do that. I just want to put that on the record.

Francis Maude: That is a really good point.

Ian Watmore: I think we would agree as well.

Q526 Nick de Bois: Turning to the idea of contracting directly with Government, it seems to me you have a stated aim that contract sizes should be reduced to allow this, but I think we are still talking about quite a large significant figure for contracts. Have you done any evidentiary work to establish what our SME base in the UK-I suppose it should not just be the UK-is conceivably capable of handling in contract sizes? I realise that is a pretty general question, but I do not suspect many SMEs will be bidding for £50 million contracts. I would like your view on that and what steps you think you could take to improve that.

Francis Maude: The bar we chose was £100 million, so a presumption against projects with a lifetime value of more than £100 million. Why £100 million? Well, it is a good round number that is a lot smaller than a lot of the projects at the moment and that, for a multiyear project, is not beyond the means of certainly quite a lot of UKbased mediumsized enterprises. I do not think there is any particular magic in this. We do not want to have an incredibly elaborate system. What we want is to encourage a different mindset in the way in which Government thinks about IT projects. A presumption against big projects does not mean you can never do them, but it does mean the expectation is you will chunk them up more and probably do more integration in-house.

Ian Watmore: Can I give you three practical examples of where this will apply? One is in software.

Q527 Nick de Bois: Could I just pre-empt that? One thing you said, Minister, was about the size of the contract. Have you or would you undertake any market examination to substantiate that in your mind, to put your mind at rest that that is the case?

Francis Maude: That going for those sorts of sizes will actually open it up?

Nick de Bois: Yes, whether they are lifetime or-

Francis Maude: Certainly. We had a big event in early February at which the Prime Minister spoke. It was not particularly ITfocused but a lot of it was about IT. Certainly the reaction of the SME suppliers there was extremely positive.

Ian Watmore: I think a few practical examples will help. The first is on software. It is possible for an innovative new company that has produced a new piece of software to take on a relatively large contract, because the software itself is expandable to take that on. That is one very good area.

The second area is in commodities. For example, a lot of the IT spend at the small end of the scale goes on laptops and things of that ilk. Quite often that is bundled up today with the big contracts. It will be a Fujitsu laptop because Fujitsu has the rest of the business. We are trying to unbundle those so that a different range of providers can come in and pitch for those.

The third is on the IT services end where, if we let contracts at below £100,000 for the individual service contract, through the new rules we have introduced we make the procurement much easier, which should then incentivise the procurer to do more of those types of procurements, because it is much easier for them to do the physical procurement. The combination of those three things will see SMEs expanding their role in this marketplace, and there may well be other ideas, which we are very open to.

Q528 Nick de Bois: One final question, if I may, Chairman. Notwithstanding the steps you have outlined and your attempts to simplify the procurement procedure, which, frankly, having been on the other end of it, I wish you well with-it is a big barrier to winning business from Government-what will your benchmarks be for success of having integrated more SME suppliers into the chain? Do you have some benchmarks to say whether you feel you have been successful or not?

Ian Watmore: The first thing is to get the baseline, what it is currently, and that is hard.

Q529 Nick de Bois: You are not sure what that is.

Ian Watmore: No, but we are getting there as the new contracts are published. I would say a very simple benchmark is it has to grow each year, so let’s make it better than the previous year. The Government has an overall aspiration for 25% by value of contracts in general-that is not IT per se-to be with the SME sector. Until we have reached that, I do not think we will be stopping.

Q530 Nick de Bois: Will you share those benchmarks? Will they be public or what is going to happen?

Ian Watmore: Yes, one of our main themes is that making those transparent and publicly available produces better data and reduces the sorts of pressure you have alluded to.

Q531 Chair : Before we move on to skills, one of the things you do with these very large contracts is benchmark them to check that they are value for money, but you tend to benchmark against similar-sized companies doing similar-sized contracts. Surely we should be benchmarking against what the small- and mediumsized enterprises could do. There are examples of where an SME can design a platform or an interface for a tiny fraction of what it would cost a conventional large company to do.

Ian Watmore: The whole topic of benchmarking in IT is complex. With some things it is very easy; it is commodity based. The problem you get into is how you benchmark building the retirement pension system of this country. It is about as complicated as it gets. If we are to have a single system doing retirement pensions, there is no benchmark, so you try to find surrogate benchmarks. There has been a whole load of evidence; function points was one that was used for years. People used to try to compare how much their price per function point was.

Q532 Chair : Do you understand how absolutely maddeningly frustrating it must be to be in a small business and see very large amounts of money being spent, when you know in your business that you could do it for a fraction of the cost, but you cannot get a look in?

Ian Watmore: You believe you could. I think the answer I gave to the previous question remains the same: we want to open up the market by having smaller, more deliverable procurements to enable these sorts of companies to show what they can do and grow from that. At the moment, they are locked out.

Q533 Chair : My comments about your own background were not gratuitous. Do you not need some of these terrorists and insurgents of the industry working in your office, working for you, and then working among the small- and mediumsized sector?

Ian Watmore: Absolutely and we do.

Q534 Chair : How many people do you have from SMEs in your Department?

Ian Watmore: We first of all took on in January a guy called Stephen Allott, who we call the Crown Commercial Representative but could probably be paraphrased as the SME Tsar, to take a view on SME procurement across the regime. He personally comes from a hightech background.

Q535 Chair : That is one. How many others?

Francis Maude: One very senior.

Ian Watmore: To give it the pivotal link, we are recruiting somebody at the moment to come in and lead on our digital world. We are recruiting somebody else to lead on the future of ICT. We are almost certainly going to be taking those people from the types of background that you seek, and we also network very closely with representatives of the SME environment. With the thing that the Minister referred to a few minutes ago, we had 50 SMEs in the room.

Q536 Chair : You have about three people from the SME sector working for you.

Ian Watmore: Three leadership roles. We have dozens of people who have come from the SME sector delivering product or working on the team, but the critical thing is to have people in leadership positions who come from that background.

Francis Maude: And who know the market, who know the supplier base and are out and about looking for new suppliers with new ideas and new ways of doing things. That is part of making us, as Government, a more intelligent and informed customer.

Q537 Chair : I have to say I have far more confidence in SMEs getting access to Government business if Government will deal directly with SMEs, rather than relying on the large customers.

Ian Watmore: I think we have said it is going to be both.

Q538 Chair : In order to do that, there is a whole other aspect here. Public contracting is necessarily bureaucratic; it is highly regulated. It is even regulated by European Directive.

Francis Maude: It is completely regulated by European Directive. That is where it is regulated.

Q539 Chair : That means it is very difficult to manage a very large number of tenders, for example, for a single contract, which is why the temptation is to go for larger contracts and suppliers.

Ian Watmore: Absolutely.

Q540 Chair : Don’t we actually have to press for deregulation of the contracting process and a change to the European Directive?

Francis Maude: Yes, we are doing.

Chair : That is very good news.

Francis Maude: We have also massively stripped down the way in which we apply it-not so much the legal framework, because I am reasonably confident, although if anyone has views to the contrary I will definitely listen to them, that we have not goldplated the European Directives in our own law. What we have done in terms of the guidance that goes out is massively embellished this. There are 6,000 pages of guidance that went out from the Office of Government Commerce on big IT procurements.

Chair : I am going to stop you there. I would like something in writing on this. I think it is a very important aspect, but we must move on.

Q541 Kelvin Hopkins : Following the Chairman’s theme and the comment you have already made, Minister, about the Government not being an intelligent customer, it is evident that there has been a complete failure to be an intelligent customer over a prolonged period, and that is one of the main criticisms that has been made during the course of our inquiry. Is that not a fair criticism and something that is still lacking?

Francis Maude: We are not nearly as good as we should be. There has been a tendency for IT to be completely outsourced. This is much more Ian’s territory and he understands it properly; I am an amateur. I have a sense that, when you outsource IT in the quite comprehensive way that some big bits of Government have, what tends to happen is either an assumption that we have outsourced, so that is fine, complete and we do not need to worry about it, or we retain a massive amount of inhouse capability to monitor and manmark what is being done by the outsourced provider.

One provider told us that they had 2,500 people working on the outsourced provision but there were 4,000 people in-house monitoring them, which is insane. What you need is to have a small but very capable inhouse CIOtype capability, which can scan the market and see what is available. Ideally you have not put everything out to one system integrator/provider, so that you have more competitive tension in how you are procuring your IT services and projects. We have not yet got that balance right, and that is a big part of what we are aiming to accomplish.

Q542 Kelvin Hopkins : To make any market meaningful, the purchaser must have a high degree of power. If the provider has all the power, it does not operate as a market. HMRC in the 1990s apparently outsourced everything-they gave everything away-and retained almost nothing internally with which to manage these very wealthy and powerful companies. Obviously their job is to make profit and do well, and they saw a patsy-an easy win for them. You say a small disciplined team, but has that actually happened?

Ian Watmore: What the Minister said was exactly what I was going to say. We have either abdicated, giving it all away, or we have retained an army, which has just added to cost and bureaucracy on both sides, and the skill is to have something in between-the smaller intelligent group that can procure and manage a contract in partnership, and hold them to account when they need to, but help them fix things when they need to as well. That is a rare skill set. We have been buying it in. Some of the people who are the CIOs of Government Departments were some of the very best people from the private sector. About half the CIOs from the last three or four years came directly from the private sector and were really top players.

We have also been trying to grow it from the ground up. Six or seven years ago, we introduced a technology faststream element for those people who wish to come in from the university sector but specialise in this territory. I gave a presentation to them very recently, and it is great to see them all beginning to emerge now. It takes time to grow your own. There is a mixture of buying in expertise, growing our own, and trying to get something small and fit for purpose around the intelligent customer function to avoid those two traps.

Q543 Kelvin Hopkins : Is there not a case for a big, powerful, inhouse, publicly accountable group, whose loyalty is to Government, to the public purse and to us, as those who use the public services? Is there not a case for building and keeping a centralised facility, not just in the silos for each Department, but a centralised one that can say to Government Departments, "Do not deal with them"?

Ian Watmore: We do have both.

Francis Maude: There is a case not for a big powerful one but a small powerful group, which is what we have to some extent, but are developing.

Q544 Kelvin Hopkins : One more concern I have as well is loyalty. With this free flow of people between the private and public sectors, people are constantly looking for promotion and advancement. If they see their future in the private sector after they have done a job for central Government, is their loyalty to be questioned in some sense? They are IT experts; they are not public servants, first and foremost.

Ian Watmore: We have business appointments rules that stop that, but actually what I find is that most people who come to our side of the table-i.e. the Government side of the table-stay there because they find the complexity and interest of the work to their liking. We do not have that flipflopping. We are a net importer of good talent from the private sector at the moment. The only exporting we tend to do is when we outsource a whole team of people to the private sector. We have been putting volume resources over the last two or three decades out, but trying to recruit back in some of the more highly skilled resources to be able to fulfil the function. That is obviously never perfect, and it is work in progress, but it is what we are trying to do.

Q545 Kelvin Hopkins : In future you will not have the situation identified by Joe Harley of the DWP that only 30% of contracts are successful and 70% are clearly failures. Will that be better in future?

Ian Watmore: As I said earlier, the whole regime of project success has to be improved, which involves getting in earlier to ensure the project is well defined at the beginning, when often it isn’t.

Francis Maude: And improving our project management capability, which is a much broader thing than just IT, but tends to come to the fore in relation to IT.

Q546 Kelvin Hopkins : One final question: is it not difficult to combine what I call the public service ethos with commercial concerns? I am prejudiced in favour of the career civil servant, whose loyalty is seen to be to the state-as is typical in France-together with the skills, so that they are really looking after the public interest.

Ian Watmore: The public service at large is very lucky to have people with that public service ethos. I think we have fantastic people and, right across the spectrum, those people are procuring things from the private sector-buildings, weaponry in the Ministry of Defence and IT. Therefore, what we need are people with the public service ethos who have good commercial and commissioning skills, so that they can engage with the marketplace as appropriate, and IT is no exception to that.

Francis Maude: We do not take the view that mankind falls into two distinct parts, one of which is people with a public service ethos and the other of which is wholly commercial. We think it is possible for people to be more complex than that.

Q547 Chair : I mentioned the client side earlier. Mr Watmore, how many people are working on procuring IT across Government on the client side, as one would put it?

Ian Watmore: I do not have an accurate figure in my head, but my memory was, if you include local Government, the NHS and the wider public sector as well, we think there are somewhere between 40,000 and 50,000 people on the Government side of the world. This includes hundreds of organisations.

Q548 Chair : In terms of Whitehall, there must be 5,000 or 6,000 people in leadership roles.

Ian Watmore: Yes, I would have thought it was something like that.

Q549 Chair : Shouldn’t there be an audit of this capability? Shouldn’t you get a grip on this?

Ian Watmore: The capability is led by the CIO community that we have just talked about. We have been bringing in expert CIOs from outside. We have been growing the capability from within and doing capability reviews right across the Whitehall estate.

Q550 Chair : But you do not know how many people you have.

Ian Watmore: I do not personally here, but people do know. I just do not have the figure in my head at the moment.

Q551 Chair : Could you roughly summarise?

Ian Watmore: They are not my people, you see. They belong to the Departments. They are in a cadre of people and they do multiple roles. They do ITrelated roles but they also tend to be the people who run the overall change programmes as well, because that is where the best project managers tend to come from. They have a broader role. We do not narrowly define somebody as IT or not.

Q552 Chair : It would seem to me there are perhaps five categories of activity they are undertaking. One is on the commercial side negotiating and managing contracts. One is about technical advice. One is about managing the projects themselves. There must be quite a lot of people who actually manage information, and then there is security. What sort of crossgovernmental training programmes do you have in order to ensure there is a crossgovernmental understanding of how these capabilities are meant to be working?

Ian Watmore: I think each of those areas has its own capability development training programme of the type that I talked about-a mixture of bringing people in and training them up.

Q553 Chair : That is run centrally, is it?

Ian Watmore: It is usually driven out centrally then executed in each of the Departments. For example, when I came in, in 2004, I went with the professions, the British Computer Society, etc, and the eskills body, the Sector Skills Council for IT, and we looked at one framework that goes by the acronym of SFIA, which is Skills Framework in the Information Age, which was a single skills framework that we wanted to apply.

Q554 Chair : What people say about that is that you have no power of direction to ensure there is crossgovernmental coherence. It is still left in silos. Do you not need more of a business plan for developing these skills across Government?

Francis Maude: That is a very good question. As always within Government, there is a tension between what you delegate and what you lead centrally. Over the last year, since the Coalition Government was formed, we have tightened the central control of the heads of profession-type role, and it had got very lax indeed so that, typically, heads of profession did not even know to the nearest thousand how many people there were in their professional stream across central Government. That is not good enough; it needs stronger central leadership. This is a classic corporate head office function. It does not mean you want to do it all from the centre in the centre, but you do need leadership from the centre.

Chair : I will stop, because we must press on, but I feel a recommendation coming on.

Francis Maude: One to which I feel a positive response coming as well.

Q555 Lindsay Roy: Evidence from witnesses indicates that too often IT has been an afterthought. Is that a fair reflection?

Ian Watmore: Yes.

Francis Maude: Yes.

Ian Watmore: Or worse, in my opinion, people think they need to have a piece of technology to make their policy or their projects sound sexy. They have to be able to wave or show something around. Therefore, you either have technology not thought about or thought about in the wrong way right at the beginning. Those two things are very often the case.

Francis Maude: They have tended to want an advertising campaign as well, which we have stopped too.

Q556 Lindsay Roy: We know the extent to which you are trying to make progress. To what extent is there still a dependency culture-in other words, an overreliance on the technical expertise of the companies making the bids?

Ian Watmore: There is less of an overreliance on the technical expertise, because we can match that, but there is a real challenge in any organisation-and Government is no different but we have it particularly-in what we call the legacy world. In other words, this is all the stuff we have, like the stuff I was talking about at the beginning, which I coded in the 1980s with my colleagues. It is still running and difficult to replace. It is like the airlines and banks; at the heart of their systems they still have technology that is very old. We have a big dependency on that. Therefore, in the case I was just talking about, that all used to be ICL equipment and would now be Fujitsu equipment. We are still dependent on that. It is less about technical expertise and more about the legacy technology.

The Institute for Government report, which I liked, which came out recently, talked about the idea of platform. What they meant by that was understanding there is this legacy world, but putting a wrapper around it so it sits there and whirs away untouched in the background, and then you build new stuff on this side of the wrapper. That is a very clever and smart way for us to be thinking about things in future.

Q557 Lindsay Roy: What you are telling us is that one of the key changes is that IT considerations will be viewed in a similar way to financial or legal implications, and treated in the same way during their development process. Would that be an accurate reflection?

Ian Watmore: I absolutely think that delivery of the policy, in all its guises, should be thought about right at the beginning when you are making policy, and delivery includes technology, organisational change, people and the other things as well. I absolutely agree.

Francis Maude: As we move towards public services being delivered much more online, following Martha Lane Fox’s excellent report, what has happened in the past is that not very good processes that have been designed to deliver complicated policy tend to get automated, which leads to a lot of complexity in the technology. The key insight Martha Lane Fox had in her report was that you need to use automation and the move to online delivery to force redesign of the process from the outside in. The Chief Executive of one Government agency said to me a few months ago, "Of course, we need to educate the public to use our service properly." I said, "I think you have that the wrong way around actually. I think we need to educate ourselves to provide our service in a way that the public do not need to be educated about it." Amazon did not get where they were by saying, "We have to educate the public to use our service." They did it by having an offering that was irresistible, irresistibly easy to use and then constantly developing it. We have to change our own mindsets and behaviours.

Q558 Lindsay Roy: How are you doing that, because it is a means to an end? [Interruption.]

Chair : Order. Can someone kill the phone please or leave the room immediately? Carry on.

Lindsay Roy: It is a means to an end. How are you ensuring that progress is being made with the service requirements that drive IT?

Ian Watmore: I am sorry; I lost the train of that question. Could you repeat it?

Lindsay Roy: How do you ensure the service requirements that drive IT? You were making the point earlier.

Ian Watmore: Again, the Minister’s point is a huge one, which we should develop, which is how we use the world of the internet to deliver public services to the public. There are two fundamental changes. One is that we can do things online that, in the past, required the public to interact with a clerk in an office. Now they can do it directly. Equally importantly, we do not need to do it ourselves in Government. If we make the information and rules available, whole marketplaces develop on the other side of the divide. A great example of that is from talking to Mumsnet, the network of single mothers. They do not want us to provide services; they want us to give them our data so that they can provide services. If we can do more of that, not only will it be easier for us on this side of the table to do the work but it will actually create much better public service outcomes. That comes from the internet’s availability, which of course was not there 20 years ago.

Q559 Lindsay Roy: To what extent have you been involved in market and customer research in this area?

Ian Watmore: Hugely. Martha Lane Fox has done a whole report on the subject for us, which is evidencebased, from all her work as the digital champion for Government Race Online 2012. With our own Directgov website, which five or six years ago did not exist but now has over 30 million people using it every month, we have a lot of feedback on how that is working and how people are using it. We are beginning to use the technology that exists-I do not think we use it as much as we could-to monitor people’s behaviour in the way they use the online world. That is informing us as well. There is a lot of change in this territory and it is very fertile ground for the future.

Q560 Lindsay Roy: Finally, IT considerations are at a premium, yet we are not sure how many CIOs are on departmental boards. Can you enlighten us on that, because they seem to have a key role?

Ian Watmore: This has been the source of some controversy over many years because, whichever function it is, whether it is IT, finance, HR or something, everybody wants to have their person on the board, and the view of departmental leads was that the boards would become overly big and complex. The only Departments that have CIOs on the board are those for whom IT is so massive. That tends to be DWP, HMRC and maybe the MOD; I cannot remember. The rest have it at one level below board level. What we do is bring them together into the crossgovernment CIO council and, through Francis and me, we can get interaction in to the permanent secretary and ministerial teams.

Q561 Lindsay Roy: In effect, there is greater joinedup working.

Ian Watmore: Yes.

Francis Maude: It is not perfect yet.

Ian Watmore: The people are generally one notch closer towards it all.

Francis Maude: The only other point I would make on CIOs being on the departmental board is that the danger of it is that people say, "He or she is doing the technology. None of us needs to worry about the IT projects." Actually Ministers need to be taking an interest in big projects generally, including IT projects, and so do permanent secretaries. I do not think they have in the past to nearly a great enough extent, so someone down there in the bowels of the organisation will deal with it. That is not good enough.

Lindsay Roy: It can also lead to a silo mentality.

Francis Maude: Yes, absolutely.

Q562 Chair : Can I just return to the question of commoditisation? Mr Watmore, how many contracts do you think are out there where a new forms engine is being written for the Government?

Ian Watmore: I do not know; I would imagine a large number.

Q563 Chair : Why does the Government need any more than one standard forms engine?

Ian Watmore: This is part of the point the Minister was making about trying to understand what assets, things like a forms engine, we already have, and therefore mandating/encouraging their reuse. Probably the example you use is that every different bit of Government thinks, "I have a form that needs filling in. I will develop my own." What we need to be moving to is to say, "I need a forms engine. We already have one of those, so I will use that one."

Q564 Chair : DVLA has a very capable forms engine. They have a capable payment system. Obviously rules engines need to be bespoke. Should there be more than one authentication gateway for members of the public?

Francis Maude: That is a good question. We have a project exactly on identity assurance because, if we want to drive service delivery online, one of the key things is having a reliable way for people to have their identity assured, which is not a kind of national database. There is a very good project under way.

Ian Watmore: What we are trying to do there is to reuse what the marketplace is already doing. Rather than build a Government version of that, if the banks already have a good reusable ID assurance platform, why would we not use that to be the trusted access to our world? The strategy that the Minister refers to actually involves us not building our own thing but reusing marketbased solutions that already exist on the other side of the wall, as I have described it.

Q565 Chair : This is the kind of crossgovernmental commoditisation that the Cabinet Office needs to drive.

Ian Watmore: Exactly. As it happens, that particular topic is one I personally chaired because it is so important, so I agree with you.

Q566 Chair : How does this square with your comment that so much of what Government does is unique?

Ian Watmore: I mentioned the cost.

Chair : It just has to be expensive.

Ian Watmore: No, I am just saying that you asked where the money went. You said 80% of the money went on commodities, and I said it does not; it goes on the bespoke aspects of Government.

Chair : The point I was making is that there is too much bespoke.

Ian Watmore: The more you can commoditise stuff in the way you have described, and the more you can then let the market work in the way we were discussing earlier, not only do you have a cheaper solution but a better solution. Commoditisation, to use a dreadful word of the English language, needs to build on the things you have just been talking about. Where we end up, where the volume of the cost will always fall will always be in those areas of a bespoke nature. If we cannot eliminate those bespoke pieces of Government, and I am sceptical about how far we will get with that-there is a lot of progress we can make but we will not get to the end-then we will still be talking about that element dominating the cost, because bespoke is more expensive than commodity, by definition.

Francis Maude: We can push back on how much needs to be bespoke. I think your point is absolutely correct.

Q567 Chair : The bits that need to be bespoke are the bits the Russians want to look at that we do not want them to see.

Francis Maude: That is not quite right.

Ian Watmore: No, it is not.

Francis Maude: There is not an offtheshelf system to deliver Universal Credit.

Q568 Chair : That is the rules engine, but we could use the same forms engine. We could use the same payments engine.

Ian Watmore: Better still, we could not have a form and do it online.

Chair : That is what I mean.

Ian Watmore: That is what Universal Credit is.

Q569 Chair : There could be common components to Universal Credit, HMRC and DVLA.

Francis Maude: That is absolutely right.

Ian Watmore: Absolutely, but at the guts of it will be something that is bespoke, because it is Universal Credit. I do not think we are disagreeing; it is just that you cannot just commoditise the whole of Government IT. You can make big progress from where we are, but you are going to hit a place where the bespoke nature still exists.

Q570 Chair : The concept should be that the Government has a warehouse of data and functions, but why do we not let Tesco, Barclays Bank, Amazon and all these other people provide the interface with the customer? You are more or less suggesting it. Go through your bank account to access your benefits or taxes.

Francis Maude: Access for what purposes?

Ian Watmore: That would be to authenticate that you are Bernard Jenkin, and you should then access directly your tax records, which should be very secure and privacy should be maintained, and your medical records, and it should be you and you alone.

Q571 Chair : I trust my bank with my bank details. Why should I not trust my bank with my tax details? If we are going to use realtime information from the payroll, that is all in the private sector. That is run by a company called VocaLink, which we visited. They have all that data; it is perfectly secure.

Francis Maude: Famous last words.

Ian Watmore: I can imagine that perhaps a few members around this Committee would contest that putting people’s tax records in the hands of Lloyds TSB would be the right way forward. The bottom line that I think we are saying is that there are certain things that Government has to and should do, and there is a lot more that can be done in the marketplace. Finding the right balance is our collective job. At the moment, we are probably doing too much for ourselves and not enough in the marketplace.

Q572 Chair : Government is not immune to losing hard drives, as we have discovered in the past.

Ian Watmore: It is not, and neither are banks.

Q573 Chair : What the public want is control over their own data.

Ian Watmore: That is what I was just saying, I think.

Q574 Chair: As long as they know where it is and who is keeping it, perhaps they should be allowed to choose who keeps their data.

Ian Watmore: That may be.

Q575 Chair: As long as the Government has access to it when it needs it.

Ian Watmore: The critical point about data is that we should secure the data from the onslaught of the hacker and the terrorist, while enabling it for people online. That is the tradeoff for which we are always trying to find the right balance. It is very easy to open up data, but it is very hard to open it up securely. We are trying to find that balance.

Q576 Chair : Moving on to Open Source and Open Standards, is this not another area that the Cabinet Office needs to be able to mandate? When a Department comes to a project and puts it in front of the Cabinet Office, you need to say, "No, this is going to be Open Source" or "This is going to be agile. This is the way you are going to do it."

Francis Maude: I will let Ian talk about the Open Source part of it. One of the things we have done, and I am not sure we have yet got it right, is establish a sort of "Government’s works", so that a small group of people will look at a proposition, test it, see if there is a cheap and cheerful way of doing it and provide the challenge function early on. On Open Source, Ian can talk about that.

On Open Standards, my conclusion is that lots of people mean different things by Open Standards, and there is often a completely sterile debate, because two sides of the debate are talking about something completely different. There are loads of open international standards out there. What we need to do, to pick up your point, is to have a relatively small number, and we are consulting on this at the moment, of standards that are mandated. For me they are around two things. One is interoperability, connectivity, so you do not have anymore what tended to be the case in the past: lots of different systems being procured around Government that will not talk to each other. That has been a massive problem and we need to be absolutely Stalinist about that: you can do what you like as long as it will communicate. Mandatory on connectivity or interoperability, but also pretty mandatory about security-I mean protection of privacy and security-without being so oppressively secure that the systems become unusable, which has been known to happen.

Ian Watmore: I think you will find the strategy we have published today is promoting all three of the phrases that were used, agile, Open Source and Open Standards, very strongly. They are all different. We have just heard about Open Standards. Agile is a method; it is a way of developing systems. We have taken that on board, as the best practice that seems to be out there at the moment is to chop up these very large systems into very small bitesize chunks and introduce each one of those into your usable world incrementally. I went up to see the Universal Credit programme in Warrington the other day, and that is precisely what they are doing. Instead of waiting for three years to develop the whole Universal Credit programme, they are actually chopping it up into lots of little bits and using the agile method to bring that on stream one piece at a time.

Open Source is another area we are very strongly in favour of. Government has always been quite a leader in this territory around the world. The whole UNIX world emerged as a reaction against IBM in the 1980s, when there was only one big platform on which you could build anything, which was IBM. People created different operating systems, clubbed together and made UNIX. The world moved on to that. We are increasingly in a territory where much of the software we would like to use is freely available on the internet. Rather than build our own, let’s use freely available Open Source software. Better still, let’s license out to developers and say, "This is the problem we want to crack. Come back and give us your solutions to how we crack it, rather than build our own." There is quite a strong trend in that direction.

Q577 Chair : Is this push for Open Source and Open Standards going to be a bit more successful than in the past? Your previous head of the CTO Council was Mr Open Source in Government, and when he left he went to join Microsoft, which is hardly the shrine of Open Source software.

Ian Watmore: I could not possibly comment.

Q578 Chair : Did he really believe in what he was doing?

Ian Watmore: I have no idea who you are talking about, so I will ask him or her when I find out who it is.

Q579 Chair : Who is driving this in your Department now? Are they people from the Open Source community?

Ian Watmore: We have mandated this in the strategy we have just put out there. That strategy has been signed up to by every Government Department.

Q580 Chair : I am asking about the people. Who are they? Are they from the Open Source community? Do they believe in this new way of doing things, or are they just part of the old industry that is saying, "Oh, Open Source is very fashionable. Let’s all say ‘Open Source’, but we don’t really mean it," which seems to have been happening since 2004?

Ian Watmore: I do not think that is quite fair, because people in Government are always looking for the best solution.

Q581 Chair : I am sure they are but, if they are the wrong people, if they do not come from that culture-

Ian Watmore: There are strengths and weaknesses with Open Source software. It is not a panacea.

Chair : I know it is not a panacea.

Ian Watmore: For example, our friends in Cheltenham will show you how they can hack into it very easily. When we are using products in the very secure world, we have to-

Q582 Chair : Of course, but we agree that that is quite a small proportion of what you do.

Ian Watmore: One of the most public statesponsored terrorist things was when people, and I will not say in which country, exploited a bug in Microsoft Word, which happened to be applied to somebody right on the outskirts of the Government network and it burrowed its way in to find its way to the heart of something very secure. All I am making is the point that, while all of these things are very useful, they are not a panacea. People also expect their technology to work reliably. I personally would like to see people move off Microsoft products on to Open Source or use Apple technology. I use Apple at home; it is not very open but I use it. I love it; I think it works; and it is great. I am Steve Jobs’s best customer, but 95% of the business and Government world still uses Microsoft for its basic desktop products, because it is reliable and it works. I think we in Government have an opportunity to change that game quite dramatically, particularly on desktop technology, by making greater use of open products, and that is what we would like to push through.

Q583 Chair : I am delighted to hear that, but would not this change of culture that the strategy says we want be helped by recruiting people into your Department who come from the community of people that believe in Open Source software and Open Standards?

Ian Watmore: I think I have said we are doing that in a variety of ways.

Q584 Chair : You do not have anybody yet.

Ian Watmore: No, I think we have loads of technical architect people inside Government Departments.

Chair : Loads?

Ian Watmore: Yes, absolutely.

Q585 Chair : Is that 8 or 50?

Ian Watmore: Loads is a very precise term, in the style of the Minister’s long word that I cannot remember either. What was that again?

Francis Maude: Lapidary.

Ian Watmore: Lapidary, yes. Loads is not a lapidary word, clearly.

Q586 Chair : Perhaps you can follow up with a note on this.

Ian Watmore: Loads could be better defined, I agree but, when I go around Government Departments visiting their IT departments, I meet with people from a whole variety of backgrounds-small companies, open environments, as well as lifelong civil servants and big integrator types. It is what we have. We have a collage of people.

Q587 Chair : Finally on the GCloud, can you just explain to the Committee what your objective with the GCloud actually is?

Francis Maude: Lots of people, again, mean different things by GCloud. Let me tell you what I think and Ian could probably correct me when I get it wrong.

Ian Watmore: Probably not.

Francis Maude: The first thing that the GCloud is, actually, is a very basic thing. It is consolidating and reducing our data centre estate, which is massive and massively underused. The first thing you should do is be saying across Government you may not just have your own silo data centre; we are going to crunch down what the estate looks like and ensure that it is much more intensively used.

The second thing is the app store, the reuse-I mean knowing what we have, what there is and making it easier for what has already been bought and invested in to be adapted and reused in other parts, certainly of central Government but then in the wider public sector. I think that is the outer limit of my knowledge on this.

Ian Watmore: The whole direction of the IT industry is moving towards cloud computing. That is what we are all doing in our personal lives. If you happen to be, like me, an Apple MobileMe user, you in effect have all your data held in the cloud by Apple, and it syncs up with all your devices, so your iPhone, iPad, laptop or whatever. You can see your contacts, emails and so on. It is physically held in the cloud, and it is the cloud that gives you access. That is a remote storage route. That is where Government, like all the IT industry, is headed.

A very good example of that came recently. You may remember the police crime data, which was put up so you could suddenly see on a website how many crimes had been committed in your backyard. That was about two months ago, and there was a huge news spread about that.

Q588 Chair : There was an interesting story about that, wasn’t there?

Ian Watmore: There were several. Which one did you have in mind?

Q589 Chair : Some people thought that the Government should simply make the data available and allow Google or someone to get hold of it and interpret it. Instead I think we spent £180,000 developing our own presentational engine in Government. Isn’t that the kind of expenditure that is completely unnecessary?

Francis Maude: It is a perfectly proper debate. In the whole area of open data, what do we do with the data before we release it? The key thing we need to do is make sure the data is machinereadable and usable. Some of the financial data, the COINS database, is not particularly; it is deeply impenetrable, but a new scheme is being produced. Just to say the data is all you need to put out there is not sufficient. Certainly my transparency board, which contains serious experts in this territory-Tim BernersLee, Nigel Shadbolt and Rufus Pollock-is quite fierce about what we do and do not do. I do not think that anyone seriously says we did too much. If we got that crime data out there for £180,000, that is pretty damn good, I think.

Ian Watmore: There have been tens of millions of hits on that data. There is a whole slew of these kinds of industry types now picking up on that data and providing interesting public services.

Chair : I think it is an excellent initiative.

Ian Watmore: The reason I introduced it is that in this case-and I may have got the details wrong-we used Amazon to be the place where this data was physically stored. We knew we were going to get a surge of millions of people and, therefore, we wanted to use something that was used to that volume of computing. The cloud has many ends and purposes. It is where the industry is going and we are no different from that.

Q590 Chair : So you are not trying to create a Governmentowned cloud?

Ian Watmore: Not in the way that I think you mean. We are looking to people using cloud-computing techniques increasingly and, where appropriate, the marketplace, and that starts with our own background of data centres, which we need to consolidate and secure to turn them into a more accessible environment.

Chair : I think we have had a very interesting session. Do any colleagues have any future questions?

Q591 Kelvin Hopkins : I just have one small question at the end. To deviate, dissenting slightly from what the Chairman was saying earlier, the thrust of all my questioning has been about the need to develop stronger, more powerful, more effective inhouse capacity to deal with the market. The idea that bankers should somehow have a big role in all of this strikes horror into me. Bankers have shown themselves to be unprincipled, moneygrabbing and not competent. They have brought us to the brink of catastrophe. I would like to think that Government would not be like that. The question is: would that kind of outsourcing also undermine public accountability, which has been fundamental in Government? When I ask a question of a Minister, I do not want the Minister to come back, written or oral, saying, "We are not going to be responsible for this anymore." I want the Minister to give an answer.

Francis Maude: It is a fair question. You are reverting to the issue we were discussing about identity assurance and tax records. Certainly as far as identify assurance is concerned, if there are other organisations out there, which may be public or private sector, that are highly motivated to be good at checking that you are who you say you are, then we should not be reinventing the wheel. This is our point. Plenty of data out there can be matched and brought together instantaneously for the purposes of assuring your identity, and is then dispersed. That is fine; I do not think anyone should have any worries about that. Your question about whether we should be asking other private-sector organisations to hold sensitive personal data is a very good question.

Ian Watmore: What I was trying to say earlier was I think that is a political subject. All politicians in the past, of all persuasions, have been clear to me that tax records should be held by the state on behalf of the citizen. If there is a political shift to that, then we can start to look at different options, but that has never really been an issue in the past.

Q592 Kelvin Hopkins : One very small separate question again: you mentioned a number of times, and I agree, that often it is the policy at the beginning of the show that causes the problems. Had you been advising the Government, would you have said, "Whatever you do, do not give credits to HMRC"? Put the issuing of credits or benefits with DWP, which is where they belong, and then you can integrate the whole lot into the Universal Credit and not have four separate organisations that deliver benefits or credits, or collect money from people. We have local Government, Work and Pensions, HMRC and the Child Support Agency, which is separate again. If all that was dealt with by one Government Department, would it not solve a lot of problems?

Francis Maude: I have yet to find anybody who believes that the introduction of tax credits was an unqualified success. All of us as MPs have heard so many people’s heartrending cases. People have been underpaid or overpaid. They may suddenly get a demand for £4,000 by next week or the bailiffs are round. I am going to be mildly partisan about this. This was a dogmatic view by the Chancellor at the time, who said, "This is what we are going to have. Do not bother me with the detail; just go and do it." It was a disaster that has caused misery for hundreds and thousands of people.

Kelvin Hopkins : Now you are in power you can change it.

Q593 Chair : Thank you very much indeed. I have one very last question on behalf of the House authorities. You may be aware that the Administration Committee in this House has been working out how we can electronically table our questions to Departments, but it does require a very small investment by each Government Department in the machinery at their end. There seem to be all sorts of obstacles in the path of this. We are talking about £20,000 per Department. Do not ask me why we are not just doing it on email for free. I wonder whether I could leave this with you, because we could save a great deal of money across the public sector if we could table and answer all Parliamentary Questions electronically. Are you aware of this?

Ian Watmore: The inner workings of Parliament IT have been jealously kept away from any hands of the Civil Service or the Cabinet Office. It is seen to be part of its independence.

Q594 Chair : Do you want somebody to come and see you about it?

Ian Watmore: If they wish to formally request something, I am sure we would look upon it favourably.

Q595 Chair : Are you aware of the effort to try to automate?

Ian Watmore: I am aware of lots of efforts to modernise the workings of Parliament with technology, including using iPads in the Chamber.

Q596 Chair : This is about interfacing with Government Departments.

Ian Watmore: I understand that and there have been many examples of that in the past, which have all ended in tears as well. I would be happy to get somebody to talk to whoever is working on it.

Q597 Chair : May I ask the relevant Clerk if he will send you a short note, if you could deal with it?

Ian Watmore: Absolutely, we will get the right people to talk to each other.

Chair : Thank you. Thank you very much indeed. That was a very interesting session, and we wish you well with the challenges you have.