Evidence heard in Public

Questions 262 – 405



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Oral Evidence

Taken before the Public Administration Committee

on Wednesday 23 November 2011

Members present:

Mr Bernard Jenkin (Chair)

Alun Cairns

Paul Flynn

Robert Halfon

David Heyes

Kelvin Hopkins

Greg Mulholland

Lindsay Roy

Examination of Witness

Witness: Sir Gus O'Donnell GCB, Cabinet Secretary and Head of the Civil Service, gave evidence.

Q262 Chair: Sir Gus, it is a great pleasure to welcome you and formally to congratulate you on your impending retirement after a very illustrious career in Whitehall. I invite you to put on the record some parting thoughts, maybe to take your revenge on one or two old allies, but also to leave any important advice for your successors and the Government.

You were very clear in your opposition to splitting the role of the Cabinet Secretary and the Head of the Civil Service quite recently, in 2009. In the light of what the Prime Minister has decided to do, what were your principal concerns that you raised with him, and how have they been addressed?

Sir Gus O'Donnell: May I respond to your first point with a brief opening statement, and then come to the question?

Chair: You certainly may.

Sir Gus O'Donnell: Thank you, Mr Chairman. As this may be my last appearance before the House, may I put on record my thanks to the Committee, and to the previous Committee under Tony Wright, for the support given to me as Cabinet Secretary and Head of the Civil Service in terms of working on improving the governance of the country, and the support you have given for the impartiality of the Civil Service, which we should never underestimate? Having parliamentary support for that is massively important.

I am proud to be leaving behind a Civil Service that continues to demonstrate its core values-honesty, integrity, impartiality, objectivity-most recently in supporting the first coalition Government since the war. It is a much more diverse, capable and professional Civil Service than I joined 32 years ago. In addition to the challenges of operating with a coalition Government, the Civil Service is having to play its part in the deficit reduction plan. Over the last year, the Civil Service has shrunk considerably and is now at its smallest number since the Second World War. These reductions have been mostly achieved voluntarily. Mr Flynn, you will be interested to know that the reductions in the senior Civil Service are substantially more in percentage terms than the reductions in the non-senior Civil Service, so it has been weighted towards the top.

In addition to the recruitment and pay freezes, there will be changes to pensions, and in these circumstances, the future Head of the Civil Service-in terms of what you were saying about advice for the future-will need to work hard to ensure that all the staff remain engaged and motivated. Later today, we are releasing the benchmark Civil Service people survey figures, which we do every year. I am pleased to say that despite all the changes-the pay freeze, the recruitment freeze and the prospective changes to pensions-the overall engagement score is unchanged. That is quite an achievement. The Civil Service remains very interested and challenged by their work-the scores there are exceptionally high in comparison with other places-and their work gives them a sense of personal accomplishment. Not surprisingly, they are less happy about their pay and benefits.

My final point is to put on record my thanks to civil servants up and down the country and overseas for the great job they have done. Of course we can improve, and I am sure that my successors will be able to build on what I believe are very sound foundations.

Q263 Chair: Thank you for your kind words. You are tempting me to pick up on two matters that you have raised. The formation of the coalition was based on, if nothing else, the credibility of the deficit reduction programme. The Prime Minister himself is now admitting that this is proving much more intractable than we feared. What advice do you have for the Government in these circumstances?

Sir Gus O'Donnell: We are just ahead of the Autumn Statement. It is very clear to me, in our present circumstances with what is happening in the eurozone, that having a credible deficit reduction plan and sticking to it is massively important.

Q264 Chair: Given that the euro and the burden of European regulation is one of the constraints on growth, is not that bringing this whole issue to a crunch in terms of how we are engaged with a European Union that is becoming very different in its character?

Sir Gus O'Donnell: You kindly asked me to look backwards. If I do so, obviously I cannot take any credit for policy decisions made by Ministers-that would be inappropriate-but if I think of the best piece of evidence-based work we did to advise a Minister on a policy, it was the five tests on the euro, which resulted in Ministers making the decision not to join. I sleep much more happily in my bed at night knowing that, although we are facing this crisis, we have the advantage of an exchange rate and choosing our own interest rates. That is quite important.

Q265 Chair: Without tempting you to explain what policy options you might be exploring, would it be fair to say that policy on the question of how we engage with the European Union is in a greater state of flux today than at any time in your career?

Sir Gus O'Donnell: I have been through times when the whole engagement question has been considered. Maastricht would be an example of when the Government of the day were really focused on ensuring an opt-out from monetary union-if we had not done that, we would have been forced in-as well as opt-outs from the social chapter and the like. There were some very big issues there.

I think some really serious issues will arise as the euro area countries attempt to put right some of the institutional problems in the way they set up the euro. It was clear-I said this at the time-that having a single currency with multiple fiscal policies and not having fiscal rules that people will adhere to can create serious problems for a single currency. As the euro area attempts to address those questions, the Prime Minister has made it clear that if that were to involve any questions about treaty change, there would be some real issues for the UK.

Q266 Chair: A two-tier Europe is now inevitable.

Sir Gus O'Donnell: In a sense, because there has been the euro area and the non-euro area, and Schengen and non-Schengen, there have been differences already.

Q267 Chair: On the question of engagement in the Civil Service, you take pleasure and credit from the fact that levels of engagement from Civil Service staff, the sense of being involved, has not declined; but there are dramatic variations between different departments and agencies-for example, the DVLA is doing very much better than the UK Border Agency or HMRC-and even the best Departments, such as DFID, are still at the bottom of the range of the best private sector organisations. There is a long way to go, is there not?

Sir Gus O'Donnell: There is a long way to go, but if you look at private sector organisations, you will find a lot that are a lot worse than DFID, as well; DFID is way above average for the private sector. You are right, though. One of the great advantages of now having the same survey across the whole Civil Service is that we are able to compare. Some are fantastic; they tend to be the smaller agencies, where people find it easier to identify with the management, the board and the like. Those institutions are doing very well. We just need to learn from the best and spread that across the rest-you are absolutely right. It is a work in progress, there is no question about that.

Q268 Chair: Thank you. Will you explain your concern about splitting the role?

Sir Gus O'Donnell: Yes. As you say, that was made pre-election. Post-election, we are in very different circumstances. There are two things that I would point to: first, this is the first coalition Government since the Second World War, and secondly there is now a deficit reduction plan. The previous Government intended to halve the deficit in four years, but the coalition made a clear commitment to move further and faster on deficit reduction. What that does is make the Cabinet Secretary role a bigger role, because the Cabinet Secretary now has to deal not only with a Prime Minister and a Cabinet, but with a Prime Minister, a Deputy Prime Minister and a Cabinet. There are a lot more coalition committees, so there is a bigger role for the Cabinet Secretary.

In terms of the Head of the Civil Service, as I have said, we are in very, very tough times for the Civil Service; some tough decisions have to be made and are being made, and the numbers are changing. More than ever, it is important for there to be a visible Head of the Civil Service out there in the country explaining the changes. We also have a very big efficiency agenda-as you know, Ian Watmore is doing an excellent job. The Cabinet Office has changed quite fundamentally, before the election and post-election. We have now brought into the Cabinet Office the Office of Government Commerce, Buying Solutions, Directgov, and areas such as COI and NSG, which are changing radically; and Constitutional Affairs has come across from the Ministry of Justice into the Cabinet Office. The Cabinet Office has changed quite radically.

Q269 Chair: It sounds almost as though, if you were staying on, you would split it.

Sir Gus O'Donnell: If I were staying on, the one thing I will be absolutely clear about is that I would have made Ian Watmore Permanent Secretary of the Cabinet Office. The question of splitting is an interesting one. Certainly, both aspects have got bigger. I think that the difference between me doing it and someone new is that someone who has been doing the job for over six years might possibly be able to do them together. I think that the split as envisaged can, given the circumstances, work very well.

Q270 Chair: Do you not think there is a danger that a future Prime Minister might feel that the Cabinet Secretary has become more his own creature than the independent Head of the Civil Service who is Cabinet Secretary at the moment?

Sir Gus O'Donnell: No. You mentioned the Prime Minister, and I think it is very important that the Cabinet Secretary understands that they work for the Prime Minister and the Deputy Prime Minister in the coalition, and that they have to make the coalition work.

Q271 Chair: So after the end of the coalition, this arrangement might well end?

Sir Gus O'Donnell: Well, I think this pattern is right for this Parliament and through this Parliament. What happens thereafter is an interesting question. If you move back to single-party Government, it is quite possible. Obviously the Government will be whatever they will be-I must not make any value statements about that-but if we were into a situation of sustainable public finances and not in the big deficit reduction programme, I would say that that weight would diminish somewhat and I can imagine a circumstance where it would be right to have one person doing both.

Q272 Alun Cairns: Your predecessor, Lord Turnbull, described the new structure as "a messy solution", Professor Colin Talbot called it "a very strange wiring diagram" and Lord Hennessy said that the costs of the changes in "confusion terms are very high." Are the lines of accountability and responsibility clear?

Sir Gus O'Donnell: Yes. You have been given a chart that shows the lines of accountability. I think they are very clear.

Q273 Alun Cairns: Do you not recognise the comments that have been made by the experienced people I have quoted?

Sir Gus O'Donnell: I do recognise them. Having lived through previous regimes where you are working with a single party-all my predecessors worked with a single party; they had that advantage-I am in a world where we are dealing with a coalition. It is different. I would not use the word "messy" but I would say it is slightly more complex. Obviously, we are dealing with two parties in government. We are dealing with a situation where at some point in the future, as we approach the next election, those parties might want to differentiate their product somewhat, as it were. I think it is more complex for the Cabinet Secretary role. I think the specifics of deficit reduction mean that the Head of the Civil Service role is more important as well.

Q274 Alun Cairns: The interpretation given by many is that the Head of the Civil Service role has been downgraded as a result of the change and that it will be an also ran at every stage because the clear influence will lie with the Cabinet Secretary. Do you accept that?

Sir Gus O'Donnell: No, I don’t accept that. Let me explain. Under the arrangements that Bob and Jeremy are putting place, they will have offices right next to each other. The enormous advantage that I have is that I am 50 paces away from either the Prime Minister or the Deputy Prime Minister. So they will work very closely together as a team. Secondly, I think it is a great advantage, which is underplayed, to have a Head of the Civil Service who understands what it is like to be running a Department as well. A lot of the changes we are making are mandatory changes from the centre. The pay freeze goes across all Departments. Understanding what it is like to run a Department-actually to be delivering, say, on the localism agenda: an agenda that will be close to the heart of both the Prime Minister and Deputy Prime Minister, and that they will want to talk about independently anyway-will ensure that Bob Kerslake actually gets good access to both the Prime Minister and Deputy Prime Minister and will be influential.

In the old days those Heads of Civil Service were based in the centre. They didn’t have a Department to talk about and they were involved in terms and conditions of Civil Service, and the like. It is harder to get prime ministerial or deputy prime ministerial attention for those sorts of things. I think Bob Kerslake, who is at the heart of managing the localism agenda, will be able to do that and in addition there will be the synergy that when he goes round the country, civil servants will be able to look up and say, "Here is someone who actually knows about delivery at the local level. He’s got an excellent background in delivery." They will see him as embodying the policy and delivery coming together. Those synergies, I think, will be important round the country.

Q275Alun Cairns: Do you accept that in some of the evidence we have heard, there could be the risk of a conflict of credibility, or even conflict of interest, if the Government have a major drive in a certain policy area-be it to improve the tendering times or anything like that-and the Head of the Civil Service is responsible for a Department that is pretty weak in that area? Do you not think that the other Permanent Secretaries in the other Departments could say, "Well, if the Head of the Civil Service can’t deliver it, why should we?"

Sir Gus O'Donnell: Well, at the moment we have a part-time Head of the Civil Service in me. I also do other things like Cabinet Secretary. There are certain things the Cabinet Office does not deliver perfectly, I am embarrassed to say. We live with that at the moment.

Q276 Chair: Can you just explain one thing? In your wiring diagram, you have "Permanent Secretaries:- Service" reporting to the Head of the Civil Service, and "Permanent Secretaries:- Cross Cutting" reporting to the Cabinet Secretary. What does that mean?

Sir Gus O'Donnell: For the Cabinet Secretary, it’s people who do things which go across departmental boundaries. Let me give some examples: the Chief Scientist; the National Statistician; the Treasury, which operates across boundaries. Those sorts of areas will be very much in the scope of the Cabinet Secretary, who will line-manage those. The big delivery Departments-MOD, DWP and the like-will be in the area of the Head of the Civil Service. But they will operate as a team. One thing they are responding to, which I do very much understand, is that I have 36 direct reports, and I don’t think any textbook would say that that’s a very sensible way to run things. That’s too many, and I think this is a way of them allocating out some of the direct reports between them.

Q277 Chair: But this is a division between policy and delivery?

Sir Gus O'Donnell: No, absolutely not. You had some people giving you evidence-

Chair: Predecessors of yours, I think.

Sir Gus O'Donnell: No, I was thinking more of the academics, actually. They were trying to have this demarcation between policy and delivery, which they saw very bluntly. I do not see it that way. I think Jeremy will spend his time-or I would have been spending my time for the next few years-on the implementation or delivery of the policy reforms that have been announced already. That is the big job. So Jeremy’s job will be about implementation, I would say, in the next few years. There are lots of reforms. Take the welfare reform, making universal credit work will be a massive implementation issue, and I would be very surprised if the Prime Minister is not having lots of meetings to check what is happening on implementation.

Q278 Chair: But then the Head of the Civil Service is doing what?

Sir Gus O'Donnell: The Head of the Civil Service will be there to be visible around the country. They will be checking on how it is going on the front line-like I say, these two will operate as a team-and coming back to say, "Look, you think you’re done on the Work programme? Well, here is what it looks like on the front line in Sheffield. These are the things I would like to feed back to you, and these are the things we should check in implementation." So I think they will come together.

The point about the academics is that they seem to think there is a world where Permanent Secretaries in the past somehow had lots of delivery experience that they do not have now-the whole "Next Steps" stuff. I was trying to look back to find those people who had been Heads of Agency and who had become Permanent Secretaries-and blank, blank, blank, blank. I think we got to Michael Bichard. During my period, Leigh Lewis, Head of Jobcentre Plus; Lin Homer, Head of the Border Agency; Lesley Strathie, Head of agency; and Bob Kerslake, Head of Agency-all Permanent Secretaries. He did not really get it, but we have, because of the initiative of my illustrious predecessor, Andrew Turnbull, the professional skills for Government stuff. We have been building in this delivery stuff, and we have been looking for a wider pattern of experience, which is why, when you look at our Permanent Secretaries, more than a third of them have been in senior roles either in the private sector or in the wider public sector. Again, that is a big change from where it was in those previous days.

Chair: That is very interesting.

Q279 Robert Halfon: A succession of former grandees have come in saying that the proposed changes are a terrible idea. What do you think of what the Prime Minister said about civil servants representing the best trade union lobby in the world and that this is just a case of Sir Humphrey protecting vested interests?

Sir Gus O'Donnell: I was not aware that the Prime Minister had said that.

Robert Halfon: I think he said it to the Liaison Committee.

Chair: I spoke to him about your predecessors.

Sir Gus O'Donnell: Oh right, yes.

Robert Halfon: In response to a number of grandees coming in and saying that it is such a terrible idea to make these changes.

Sir Gus O'Donnell: The Prime Minister is responding to what he sees as the challenges of the day. I have made it clear that I think this is a system that can work very well. Given that we are in circumstances that none of my predecessors had to deal with-they did not deal with coalition Governments, and they were very fortunate not to have an 11% deficit-to-GDP ratio-dealing with these things is quite important.

Q280 Robert Halfon: Do you not think there is an air of Sir Humphrey about the opposition to the changes from the grandees and elements of the Civil Service?

Sir Gus O'Donnell: I could be called a Sir Humphrey. The point I would make about all of my predecessors is that, whatever I have done to bring on the Civil Service, I have done it building on the foundations they left me. I think we all try to do that and respond to the different circumstances of the day.

I think we gave you the paper on history. There is as much history of the roles being split as there is of them being together. So I have always assumed that when circumstances change, you think about changing the solutions to those new circumstances and design the best possible solutions to the problems of the day. That is what is happening here.

Q281 Robert Halfon: So you would disagree with those who have come to the Committee and suggested the opposite?

Sir Gus O'Donnell: Well, I can understand where they come from. All I am saying is that I think, under the circumstances we have today, which I hope are unique, historic and, in terms of the deficit, ones that we won’t get to again, this is a very good solution to those particular problems. I have said already that, in future circumstances where those things do not work, you may well move back to a combined role.

Q282 Robert Halfon: Can I just ask you to comment on what Douglas Wass said in a memorandum to the Committee? "The Head of the Civil Service is now largely superfluous, and could be dropped without any loss to the effectiveness to which the civil service is managed, either in the terms of the formulation of the rules or their implementation. The service is now more federal in its practice and the constituent parts of the federation operate in their own way and according to their own requirements, much more so than was at one time. Other parts of the public service operate in a similarly federal way. Police and fire services are both federal and operate subject to general control from the Home Office and their local police and fire authorities-neither has a national head." What is your view about that?

Sir Gus O'Donnell: In one sense, it is absolutely right about being federal. There are various things that were delegated down to Departments in terms of certain terms and conditions. That pendulum is swinging back, I would say, with some of the changes we have had and the controls imposed from the centre. What it underestimates-and, I suppose, what I have felt I brought to the Head of the Civil Service role-was that ability to get out and learn from what is happening in the front line. That involves going to talk to people in the UK Border Agency about how they are managing Olympic security, which I was doing earlier this week; talking to people about how the new National Crime Agency might be put together and what challenges they have; talking to people about the Work programme; going out there, talking to civil servants from a whole range of different Departments and learning the things they think are working and the things they do not think are working. It also involves being a visible head. They have questions about the changes to pensions, for example, and the truth is that the language we were using-explaining to them about career averaging, about defined benefit versus defined contributions-to be honest, we were not using very clear language. I do not think it was well understood. As a very visible Head of the Civil Service, you can do all those things. I am not sure in Douglas Wass’s day that they did that as much.

Q283 Robert Halfon: Aren’t you describing the Head of the Civil Service, in essence, as a beefed-up head of human resources in the Civil Service?

Sir Gus O'Donnell: No, it is more than that, because you are not just talking about things like terms and conditions; you are going out there to actually talk to them about the implementation of real policy changes, and you are working out what is working and what is not. You are also going out there to talk to them about things like values, and absorbing the issues they have got. You hear from them the things that are disturbing them.

Q284 Robert Halfon: Did you actually consider combining the roles of the Head of the Civil Service and the Permanent Secretary of the Cabinet Office?

Sir Gus O'Donnell: Yes, but for the reason that I said before, I talked to Ian Watmore about this, and Ian was very clear that he believed that his job, in terms of doing the efficiency and reform agenda with all of the new things that have come in-he has just taken in the property unit, and he is doing a fabulous job on delivering efficiency savings-was a big enough post, which is why he did not put in for the job. He wants to work with Bob Kerslake on Civil Service reform and deliver that together as part of the team.

Q285 Robert Halfon: Final question: is it right that, as I understand it, they are getting rid of the Downing Street Permanent Secretary and merging that with the new Cabinet Secretary?

Sir Gus O'Donnell: Not merging it with the new Cabinet Secretary; what we will do is to revert to a much more traditional role where the person in No. 10 will be a Principal Private Secretary, not a Permanent Secretary of Downing Street.

Q286 Robert Halfon: But the Cabinet person will be responsible for Downing Street, will they not?

Sir Gus O'Donnell: The Cabinet Secretary has always been responsible for the whole of the Cabinet Office. Part of the Cabinet Office is No. 10.

Q287 Robert Halfon: So you are downgrading the seniority of the Downing Street part.

Sir Gus O'Donnell: Of the Downing Street part of it, yes. That is absolutely right.

Q288 Robert Halfon: And why is that?

Sir Gus O'Donnell: Basically, it was a traditional model. What I did, in response to what I regarded as the challenges of the job I had-remember, when I brought in Jeremy Heywood from outside, he had good private sector experience, particularly in the financial sector, and as it turned out for the financial crash, that was massively important. We did not have a national security adviser in those days, so all of the agency heads were reporting to me. I was covering all of the intelligence work as well. I felt that we lacked a bit on the policy area in No. 10. I know Jeremy very well, and I thought that Jeremy would be excellent on that. He is someone who has gained the trust and respect, as I have said, of Prime Ministers and Chancellors of different parties. He did that very well. Now, we revert to this new thing, where we will have a Cabinet Secretary who has a national security adviser alongside them, to take the weight off on the intelligence side and issues like Libya. We can revert back to the Prime Minister having a Principal Private Secretary.

Q289 Robert Halfon: Who does the Principal Private Secretary answer to? Would that be the Cabinet Secretary?

Sir Gus O'Donnell: Yes, as it always has been in the past. What makes that work better is that the Cabinet Secretary now has to look to the Prime Minister and the Deputy Prime Minister.

Q290 Chair: Just looking at the chart, the Head of the Civil Service could very easily be the Permanent Secretary in the Cabinet Office, depending on the personalities and their experience. Do you agree?

Sir Gus O'Donnell: It could be; absolutely. We certainly did not rule it out from the start, it was just that Ian decided that he did not want to go for it.

Chair: A brief supplementary, Mr Roy.

Q291 Lindsay Roy: Sir Gus, you spoke eloquently about the professionalism of the Civil Service, their role in policy development, their commitment, their flexibility and their engagement. You have mentioned controls as well. You will be aware that recently the Prime Minister described civil servants as "enemies of enterprise". Is that something that resonates strongly with you?

Sir Gus O'Donnell: No. We have had some interesting discussions about that.

Q292 Lindsay Roy: Interesting is a neutral word.

Sir Gus O'Donnell: Well, what I wanted to do was to prove to him that that was not true. In particular, we have been working on the red tape challenge. I chaired a group on that to show him that we are absolutely committed to trying to improve regulation and reduce it where we can. I think that that programme, working with business and using fancy techniques like crowd-sourcing, will have quite a big impact. In this world where-coming back to what the Chair was asking right at the start-the economy is in for a very difficult time, our biggest trading partner is in a terrible place, the Bank of England Governor has his foot to the floor and we have a deficit reduction plan, that is absolutely right. We need to try to think about structural growth reforms. The whole idea about trying to encourage enterprise in looking at all those structural reforms is massively important now-more important than ever.

Q293 Lindsay Roy: So that is a core objective within the Civil Service reform.

Sir Gus O'Donnell: Absolutely.

Q294 Greg Mulholland: Sir Gus, in your letter to Permanent Secretaries, you said that you would be talking through how the new arrangements will work in practice. You have been having that discussion at the Wednesday morning colleague meeting and also at the Top 200 meeting last week. Can you share some details of those discussions and tell us how you believe the new arrangements will work in practice?

Sir Gus O'Donnell: Certainly. In a sense, you have the outcome of those discussions in the papers that we sent you. When we went to the Perm Secs, both Bob and Jeremy explained how they saw the divide of the roles and asked for comments back. They got some comments from the Perm Secs. In the light of that, we had our Top 200 meeting on Thursday and Friday last week. On the Thursday, the Prime Minister came and discussed his objectives and where he thought the Civil Service was doing well or badly. First thing on the Friday morning, there was a session from Bob and Jeremy about how they would work together and what they saw as the issues. You have the chance there to explain those line diagrams, the different allocations and who would do what. We then had a session with the Deputy Prime Minister and later with Francis Maude. Overall, the idea was that we got the comments in from, first, the Perm Secs, then the Top 200. You should be pleased to know that you are the first recipients of the fruits of that work, which is the papers that have come before you.

Q295 Chair: Is that because we asked for it?

Sir Gus O'Donnell: No, to be honest, when I was thinking about how might you split the jobs and talking to the Prime Minister about it some months ago, I was thinking about this sort of chart. The one thought I had in my head is that this has got to work for the two people who are doing it. You cannot finalise this until you know who those two are and they get together. This is the first opportunity we have had to get it out in public. I thought this Committee is precisely the right one to be able to see as much detail as we have on this.

Q296 Greg Mulholland: We appreciate your doing that. Could you tell us any of the specific concerns that were raised and how you might be dealing with them?

Sir Gus O'Donnell: I think the concerns are those you have raised in Committee. They wanted clarity about who’s doing what and about the line-management roles. One interesting thing was not so much what they would do separately but what they would do together. You have that in the pack. There are certain things they need to do as a team, not just individually. They wanted to work out what the arrangements would be to ensure that the Head of the Civil Service had access to the Prime Minister; that there was time and support available.

The new Head of the Civil Service will not only have an office alongside the Cabinet Secretary, but they will all be supported by the one private office. They were interested in that-being civil servants and mandarins-that is the sort of thing that does turn us on, I’m afraid. I have a brilliant private office who will manage both of them, but it may well be that we need to think about some supplementary support to Bob. I know he is thinking about that in terms of what more he might need. In this light, your Committee had a recommendation about this. I know that Bob Kerslake is thinking quite carefully about how to take that forward.

Q297 Chair: But where will his office actually be? Has that been decided?

Sir Gus O'Donnell: Yes, right next door to mine, where currently the National Security Adviser is. There is an adjoining door between the two.

Q298 David Heyes: Does this really give the clarity the Permanent Secretaries were seeking? For example, a Permanent Secretary with cross-cutting responsibilities is Sir Bob Kerslake, in terms, for instance, of localism and the implications of universal credit. He occupies very much a cross-cutting role in his Department. He reports to the Cabinet Secretary for that part of the job, but he enjoys equal status with the Cabinet Secretary. Is that clarity?

Sir Gus O'Donnell: It is clarity. I know you are going to call Bob before Christmas. Every Permanent Secretary will know exactly who they are reporting to. They will have specified all of those lists. Everyone will have complete clarity on that. Of course, there is no perfect dividing line between two. I often contemplated how I could reduce those 36 direct reports. I never came up with an answer that said, "This is the A list and this is the B list." I don’t think that is right. I think this is as good an attempt as possible to make the management workload feasible for both. I am not saying it is perfect.

Q299 Kelvin Hopkins: Sir Gus, I have brief questions that won’t require long answers. How have you split your time between the responsibilities as Head of the Civil Service and Cabinet Secretary? We have heard some answers from your predecessors who have come before us.

Sir Gus O'Donnell: I’d say of the three roles I have, it has been 10% for the Permanent Secretary of the Cabinet Office. Between the other two, it has varied at different times. Immediately post-coalition, as we were setting up the Cabinet Committees and all the rest of it, I would say that the Cabinet Secretary role dominated. Once those had been set up, in the past six months or so, I would say that the majority had been as Head of the Civil Service, as we have faced issues, as you know, with threatened industrial action and all those sorts of things.

Q300 Kelvin Hopkins: Your predecessors spoke of how they delegated work to keep up with demand for the dual role. What aspects of each role do you currently delegate?

Sir Gus O'Donnell: I delegate a lot. Managing the Civil Service as a whole is something I do with my team of Perm Secs. I stress in all of this that you work together as a team. I am lucky in having some really experienced Perm Secs such as Suma Chakrabarti close by. I have set up something called the Civil Service steering board. I work with them. I work very closely with Simon in the Foreign Office because lots of issues go across borders. We have lots of different groups. I have a group that looks at employment relations, for example. I delegate a lot of that sort of work. Although I chair it, I have other Permanent Secretaries doing a lot of the work. The senior leadership committee is another one, where we together look at succession planning talent management. I chair it, but a group of Permanent Secretaries are on it who all help. I will allocate certain tasks: for example, Helen Ghosh has done a lot of work on talent management and sorting out our stars among the directors and director-generals-those sorts of things.

Q301 Kelvin Hopkins: A slightly more intriguing question is whether Jeremy Heywood currently carries out any Cabinet Secretary duties in his post as Permanent Secretary at 10 Downing Street?

Sir Gus O'Donnell: Any Cabinet Secretary duties? That is an interesting question. He is a policy adviser to the Prime Minister. He certainly operates in that sort of fixing role to try to help resolve policy differences. I suppose, in that sense, there are some policy issues. You should know that Jeremy and I happen to live very close to each other and therefore, for the first half hour of every day, we speak on policy issues and what is happening day by day. The relationship is very close, but obviously he is sitting in No. 10 and is therefore at the Prime Minister’s beck and call minute by minute. So those policy issues that come and go, Jeremy will deal with. When there are bigger strategic ones or ones that cross a whole range of Departments, Jeremy will say to me quite often, "Look, I need you to call together the Perm Secs to bang heads together on this particular policy issue," and that is what I will do.

Q302 Kelvin Hopkins: Finally, the job description for the Head of the Civil Service role did not require the time commitment for the successful candidate. In your view, how much time should Sir Bob Kerslake spend on Head of the Civil Service issues separate from a job as a Permanent Secretary?

Sir Gus O'Donnell: I would expect Bob to be spending around two days a week-40% of his time on the Head of the Civil Service role. That is a rough average. There will be times when it will vary between the departmental role and the other one, but broadly that is about right.

Q303 Robert Halfon: Just a quick question on what you said about the Head of the Civil Service role to go amongst the Civil Service: can I just quote Douglas Wass at you again, just to get your view? He says: "I am sceptical whether the rank and file of the Civil Service have much awareness of the HCS as a factor in their lives. The leadership they see as relevant to what they are doing is their local management, i.e. their immediate superiors and the head of their department. The HCS is very remote from their lives and he is unlikely to have anything to say to them, which bears on their concerns and preoccupations." Does that count as what he said about how important your role was to go amongst the various Departments?

Sir Gus O'Donnell: It’s a bit of different world, isn’t it? I have made a point of running things like Civil Service Live, where we get civil servants from all grades and all Departments together, and I talk to them. I have made a point of wanting to be very visible and approachable by civil servants of all different grades. I have the advantage that my wife joined the Civil Service at the very lowest grade and spent the last part of her career in the Civil Service. So I do know what it is like and have had at home some very clear views about what civil servants in lower grades think about those at the top. It has been very direct feedback and very useful.

Paul Flynn: Are you still married?

Sir Gus O'Donnell: Yes. But it is challenging, and quite rightly. I think it is really important that you do this. Well, that is just my style. I think that listening to people and hearing their complaints is an important part of the job.

Q304 David Heyes: I’ve got the good fortune also to serve on the Communities and Local Government Committee. You know that there is a huge agenda at the moment. We are massively busy and a lot of cross-cutting work is going on. I am going to cheat a bit and ask a question that I would like to ask you if you were in front of that Committee. It seems to me that 60% of a Permanent Secretary is the last thing we need at the moment; I should have thought that there is a good case for 120% or 150%. How will you work that out?

Sir Gus O'Donnell: You can never have enough of a good Permanent Secretary-I absolutely agree with that. Bob will need to sort that out. He will need to work with his team to make sure that he has the right team in place to deal with the agenda. Every applicant for this job had to have their Secretary of State saying that they thought this was doable. We required that and the Secretary of State was very clear about it.

Q305 David Heyes: So if it goes wrong, it is Eric Pickles’s fault.

Sir Gus O'Donnell: No. I very much hope it will not go wrong, but if it does, we will need to make sure that we put it right very quickly.

Q306 David Heyes: Can I ask you about the joint chairing of meetings under the new arrangement? Who chairs the Wednesday meetings of the Permanent Secretary?

Sir Gus O'Donnell: Wednesday meeting colleagues-I cannot help going back to the description that I am grateful to Peter Hennessey for showing me. They were known as the grey beards-which you will understand!

David Heyes: I didn’t think it was grey.

Sir Gus O'Donnell: I think Bob fits the piece perfectly for that. I chair what we call the Wednesday morning colleagues meetings. We meet every Wednesday at 10. They will be jointly chaired by Bob and Jeremy in future.

Q307 David Heyes: Jeremy does not chair it at the moment?

Sir Gus O'Donnell: No, I chair it.

Q308 David Heyes: How will it work? Will you have two chairs in the room with higher backs than the rest? More seriously, will it be a matter of alternating the chairing from meeting to meeting, or will you alternate by agenda item as the meeting progresses? Can you help us to understand how this strange arrangement of joint Chairs will work in practice?

Sir Gus O'Donnell: It is not unusual. Let me give you an example. Under the previous Administration, we had a National Economic Council, which was a group of Ministers. Underneath it, we had, because we were really inventive, a National Economic Council (O)-officials, which Nick Macpherson from Treasury and I jointly chaired. We alternated in chairing those events.

Bob and Jeremy can sort it out whichever way they want. They may decide to alternate, they may decide to take some agenda items each. It is something that we are used to. We do this sort of thing quite a lot, so I don’t think it will be difficult. We have gone away from the idea of one chair having a higher back than the others; we are very much a team, I cannot stress that enough. It is primus inter pares.

Q309 Lindsay Roy: When we talk about Civil Service reform, presumably we are talking about much more than structural change. Transformational change involves a change in culture, empowering people and using their initiative and enterprise. Who will be leading that change? Sir Bob Kerslake or Ian Watmore?

Sir Gus O'Donnell: Both, I hope. As the Head of the Civil Service, Bob will be in first command of that, but I hope both will do it in terms of the better-for-less agenda-the innovation. We are all facing the same issue: we have got a third cut in our Departments. We are all trying to innovate and use the latest behavioural techniques to come up with new ways of saving money and improving the quality of services we provide.

Q310 Lindsay Roy: So Bob has ultimate responsibility and is top dog in relation to this?

Sir Gus O'Donnell: That is right.

Q311 Lindsay Roy: It is claimed that, despite various efforts, we do not have a single Government, but 17 Government Departments. What steps would you advocate to your successors in removing the silo mentality, facilitating joined-up working and building capacity?

Sir Gus O'Donnell: First and foremost, while we have individual Departments there will be some boundary issues-there will always be. There is not a Government in the world that do not have those, and I have been and seen them all. There is no solution to this other than dictatorship, which has its own issues. I am not sure that I would want to go down the route of one big area with one person in charge.

Q312 Lindsay Roy: But surely we can facilitate joined-up working.

Sir Gus O'Donnell: Yes, we absolutely can, and I have been stressing a lot of things about having common sets of policy skills, encouraging people to think about areas that go beyond the boundaries, encouraging them to think about delivering outcomes-not, "What can I do in my Department?" but rather, "How can I solve a big outcome like homelessness or child poverty?"

Q313 Lindsay Roy: So, "What is my contribution towards a specific outcome?"

Sir Gus O'Donnell: Precisely. I think, actually, the number of policy problems that can be solved by one Department working alone is diminishing.

Q314 Lindsay Roy: Would you say, from the evidence that you have, that that is a pervasive approach throughout the Civil Service now?

Sir Gus O'Donnell: I am trying to make it a pervasive approach. I would say that it is work in progress-I stress that. We are getting at fast-streamers as they come in and teaching them, trying to encourage them to be more mobile between Departments so they don’t get that kind of fixed level.

When anyone joins the senior Civil Service, they have to go to a thing called base camp-I often call it "boot camp"-where I basically explain to them, and we have a number of Perm Secs go and teach them about how they should be delivering for the Government as a whole, and not thinking just about their Department. My mantra has been that when you start in the Civil Service you have a kind of hundred-zero-zero mentality-100% of your time on your specific job, 0% of your time worrying about your Department and 0% of your time worrying about the whole, cross-Government. As you go up the ranks, you need to move into those last two columns.

Q315 Lindsay Roy: To what extent is there, to coin a good Scottish phrase, an "ayeways been" mentality-that "things have worked fine this way for many a year"? Is it in the older age spectrum that there is still this conservatism-with a small "c"?

Sir Gus O'Donnell: I think we are definitely in a world where the sorts of problems we are facing are becoming harder-the wicked problems like ageing societies. We are very much more aware that these are things that we cannot solve in a Department, and we are also aware that they are problems on which we need to work with the wider public sector. The current Government have also said to us, "And also be aware that possibly Government should not be trying to solve these problems. Possibly these are things that we should be pushing back on individual responsibility, providing frameworks for people to make their own decisions."

Q316 Robert Halfon: If you were coming back, so to speak-

Sir Gus O'Donnell: I haven’t left yet!

Robert Halfon: Would you prefer to be a Cabinet Secretary or Head of the Civil Service?

Sir Gus O'Donnell: I find that a really tough choice. If you had asked me that when I started the job, I would have said Cabinet Secretary. If you ask me that now, I would say I probably have a small preference for Head of the Civil Service.

Q317 Chair: Shouldn’t the Head of the Civil Service really be the senior job?

Sir Gus O'Donnell: Well, they are different jobs, and I am quite happy for them to be on an equal basis. They will have to work as a team; this will only work if they work together really well.

Q318 Chair: Isn’t the danger that the Cabinet Secretary will have far more regular access to the Prime Minister and he will be top dog?

Sir Gus O'Donnell: It is undoubtedly true that I expect the Cabinet Secretary to have more frequent access to the Prime Minister and Deputy Prime Minister than the Head of the Civil Service will. However, that is something that everybody is aware of and we need to accommodate that.

Chair: We are expecting a vote in a few minutes, in which case we will pause and come back as quickly as we can, but let us spend the last few minutes on the question of the future of the Civil Service, and the messages you might have for your successors. First, you read our report, "Change in Government: the agenda for leadership". Perhaps you can give us a bit of feedback. Are we missing the point, or are we on to something about a sense that there is a lack of co-ordination of change programmes?

Sir Gus O'Donnell: This refers to the last question as well. It is always important for us to try and co-ordinate what is happening across Departments, and there is a great tendency for these things to be looked at Department by Department. The change agenda that we’ve got has some strong central elements to it, but they have tended to be on the controlling spending part-that you must not spend-

Q319 Chair: Which tends to be the negative bit.

Sir Gus O'Donnell: It is the negative bit; that is right.

Q320 Chair: That is not the leadership and engagement bit.

Sir Gus O'Donnell: No; exactly. I think you are right, and one of the things that I have been trying to work on is getting a coherent leadership story across the whole of the Civil Service. This is where I think our agendas coincide, because-

Q321 Chair: How can you do that unless Ministers are prepared to lead it on that basis?

Sir Gus O'Donnell: What I have tried to do is bring Ministers and the Civil Service together, and a good example would be the event that we have just had-the Top 200. I created that group, which did not exist before and which is the top of the Civil Service, and I had the Prime Minister, the Deputy Prime Minister and the Minister for the Cabinet Office all talking to that group about how they can work better together and across boundaries.

Q322 Chair: Do you not feel it would be easier to do that if the Government articulated a clear view of what they want the Civil Service to look like in three years’ time in a White Paper?

Sir Gus O'Donnell: That is one of the things that is absolutely right, and this is quite possibly something that they wanted to do with the new team. I can completely understand that, while you have the has-been in the role, you let him shuffle off the scene and then get on and develop this new agenda with the new team. That is perfectly reasonable.

Q323 Chair: So we are pushing water in the right direction. We are not pushing water uphill.

Sir Gus O'Donnell: No, as you say, there is a massive Civil Service reform agenda. The whole of the Top 200 event was about that precise agenda.

Q324 Chair: In our report, we wrote: "It has been widely reported that the Prime Minister’s Director of Strategy, and others at senior levels in the Government, have been exasperated by this lack of progress and are apparently appalled by the ‘custom and practice’ of Whitehall and by the deadweight of inherited policy, not least by the overbearing constraints imposed by the vast body of EU law and regulation and by the direct application of the Human Rights Act. The Prime Minister himself appeared to vent his frustration when he referred to ‘the enemies of enterprise’ within government." Nobody has come back to us and said that that is completely wrong. That seems to be on the money.

Sir Gus O'Donnell: It is certainly the case that there are a number of Ministers who are very frustrated that EU rules and regulations stop them doing things that they would like to do.

Q325 Chair: But it is not just about EU rules; it is about the inability to tackle things and to make decisions. I have been talking to non-executive directors who are quite stunned by how difficult the system finds it to make decisions that would be very easy to make in the private sector. Do you recognise that there is this risk-averse culture at the Civil Service?

Sir Gus O'Donnell: I do not recognise that.

Chair: You don’t recognise it?

Sir Gus O'Donnell: No, I really do not. If anything, we are up for big risks and managed risks, because we have to be with these reductions in budgets. At times, we have to say things that non-execs and Ministers find very boring, such as, "I’m sorry, but there is a statutory requirement that you consult for x months," or, "There is a state aid issue with the EU that requires you to do this." We, and I regard it as part of my job, have to ensure that what we do is consistent with the law, and that slows things down in general.

Q326 Chair: But if the Government want to challenge that, should the Civil Service not help them to challenge that?

Sir Gus O'Donnell: Certainly, but what we have to say is, "By all means change the law, in which case you don’t have to do this, but actually the laws that Parliament has passed, and that we have to make sure you obey, require you to do a, b and c." They find that very frustrating, and that is what that reference to the dead-weight of previous means. We are just saying to them, "That’s the world, as is. You cannot just change that overnight. You cannot break the law."

Q327 Chair: So you would describe the Civil Service as a flexible and responsive organisation?

Sir Gus O'Donnell: Yes, I would, and we are as frustrated as others about not being able to move as quickly, and we can put to our Ministers enormous numbers of recommendations for changes. I suspect that my No. 1 recommendation-this is probably getting into an area that I should not, but I am leaving, so what the heck-would be to have a lot less legislation.

Chair: That is very interesting.

Q328 Kelvin Hopkins: On that point, during the previous Government, under both Blair and Brown, there seemed to be vast amounts of legislation going through. Much of it was unnecessary and was sometimes not used. There were great big Bills going through every year. My impression so far is that there is much less legislation going through. Is my impression wrong?

Chair: It is just all held up in the Lords.

Sir Gus O'Donnell: To be honest, I think it is a mindset. I come at these things from my background, which is economics, and if you have a policy problem, let us think about how we can influence human behaviour and how we might tax/subsidy various things and try and solve that in that way. The last thing that I would think of is legislation. On the other hand, the one thing that all of our Ministers have in common is that they sit in a legislative body-

Paul Flynn: But that is it: dogs bark, babies cry, and politicians legislate.

Q329 Chair: Is not the problem also that if a great Department of state has no legislation-

Sir Gus O'Donnell: Bliss!

Chair: the top policy advisers in that Department feel as though they are a bit out of the game?

Sir Gus O'Donnell: No. I would say that that would be bliss. They could do really serious, proper stuff. They could talk about implementing existing policies better. They could do 101 things. You do not need legislation.

Q330 Chair: I hope that is right, but would you not agree that it has historically been the case that the highest-status jobs in the Civil Service are about sitting beside a Minister who is putting through flagship legislation, not running the UK passport service?

Sir Gus O'Donnell: I can safely say that I have never got really into the detail of passing-I have never been in charge of a legislative Bill team. Whenever anybody has put to me an idea about doing legislation, I have always said, "Why?" If I have a regret about the career structure that I have had, it is that I wish I had spent more time running a delivery organisation. It is not that I wish I spent more time learning about legislation.

Q331 Paul Flynn: In your astonishing career, serving so many Prime Ministers, your mouth has generally been bandaged against speaking the whole truth. Are you going to get a moment now-now that you are demob happy-where you do the equivalent of the last ambassador’s letter where you state what you really think and give us some sage advice?

Chair: A valedictory telegram, please.

Sir Gus O'Donnell: I will think carefully about that. There are certain things that I can be absolutely clear about: you will not be seeing the O’Donnell memoirs. I am so firmly against that sort of thing. I think that is a violation of the trust that is placed in us. On the other hand, I do think that I have a role in terms of trying to make governance improve-[Interruption.]

Chair: We must go and vote. Have no fear; we are not legislating. It is an Opposition day.

Sitting suspended for a Division in the House.

On resuming-

Q332 Chair: No further valedictory thoughts have occurred to you?

Sir Gus O'Donnell: No, I will happily respond to your questions.

Q333 Chair: Thank you very much.

We will move on now to the handling of the Werritty affair. May I start by asking you how you first became aware of Dr Fox’s contact with Adam Werritty?

Sir Gus O'Donnell: That was during the whole process where there had been some media stories, and then the Permanent Secretary in the Ministry of Defence looked and did that report early on.

Q334 Chair: So you do not think that there were any e-mails or conversations with No. 10 before then or any concerns raised informally? No conversations at all.

Sir Gus O'Donnell: I was not aware of anything, no.

Q335 Chair: Was Ursula Brennan the first person to raise this with you?

Sir Gus O'Donnell: Yes.

Q336 Chair: What advice did you give her when she first raised it with you?

Sir Gus O'Donnell: That she should investigate it seriously and that this did raise some very fundamental issues. Very quickly, it became apparent that it was better for that to come over to me to establish the facts, because obviously-

Q337 Chair: I was going to ask you if you advised her to investigate it-that would not seem to be necessarily the right solution.

Sir Gus O'Donnell: No, indeed, and it was not me. It was, in fact, the former Secretary of State who asked her to investigate.

Q338 Chair: Is that when she raised it with you?

Sir Gus O'Donnell: Yes.

Q339 Chair: So she did not raise it with you before then.

Sir Gus O'Donnell: That’s right.

Q340 Chair: Did you, at any stage, feel that she should have raised it with you beforehand?

Sir Gus O'Donnell: With hindsight, I think it is probably right that this should have come to me earlier, yes.

Q341 Chair: When did you first raise the matter with the Prime Minister?

Sir Gus O'Donnell: When it became apparent that there were these stories, the Prime Minister and I discussed the issue. He asked me to investigate to find out the facts. I went off and started working on a report. As I was doing that and establishing the facts, we had the statement from the Secretary of State and then his resignation.

Q342 Chair: But when you raised it with the Prime Minister, was he already aware of it?

Sir Gus O'Donnell: Well, there were already media reports.

Q343 Chair: So he had not asked you to investigate it?

Sir Gus O'Donnell: There were media reports; we then discussed the issue. The Secretary of State had asked the Permanent Secretary in the Ministry of Defence to look at it. When the Prime Minister and I discussed it, we agreed that actually it would be better if I looked at it and took over-as it were-the investigation from Ursula Brennan.

Q344 Chair: I want to be completely fair to the PUS at MOD, but you have said that, with hindsight, she should have raised it with you earlier. What do you think has been learnt from that?

Sir Gus O'Donnell: What has been learnt is summarised in the recommendations in my report: "Permanent Secretaries should discuss with Ministers at the time of their appointment and regularly thereafter whether any acquaintances or advisers have contractual relationships with the department or are involved in policy development." There is a whole set of very clear recommendations to ensure that this sort of thing actually gets tackled earlier.

Q345 Chair: Should not that report have been private advice to the Prime Minister?

Sir Gus O'Donnell: The point is that a lot of this advice and a lot of the issues had been raised already in Parliament by the Secretary of State himself in the statement that he gave. I did this more detailed report. My experience of these reports is that you will be asked for them. They will be subject to FOI requests and all the rest of it, so my basic view was that we should be-

Q346 Chair: But that is advice to Ministers; it is not FOI.

Sir Gus O'Donnell: I wish. I wish the FOI-

Q347 Chair: So another valedictory message is that the Freedom of Information Act needs a bit of a revisit?

Sir Gus O'Donnell: Well, now you are tempting me, and I am afraid that I am going to be tempted. The problem with the Freedom of Information Act is that virtually everything is subject to a public interest test, so I do not know whether when I give advice to anyone-when we have a conversation around the Cabinet table, I cannot guarantee to Cabinet Ministers that they can actually speak without fear or favour, if they disagree with something, and that that information will remain private, because there could be an FOI request. I could put in policy exemptions, but I have already been down this route. I have gone to a tribunal and I have lost-for Cabinet minutes. I am very pleased to say that the Cabinet thought that the principle was so important that they vetoed that, which they are allowed to do under the legislation. I think that it is having a very negative impact on the freedom of policy discussions. You just do not know what is-

Chair: Thank you for that. We might come back to that.

Q348 Alun Cairns: We have heard reports from Lord Wilson in particular about the sorts of investigation that should have been conducted into the affair and whether an investigation was an investigation or whether it was a preliminary inquiry. But the fundamental issue that came out was that it was his view that the report into Dr Fox should not have been made public. Do you concur with that and, if so, why?

Sir Gus O'Donnell: I think in this era we just can’t get into this stage where we have got reports of this kind where the Secretary of State has resigned. If you look at the report that Sir Philip Mawer did into Shahid Malik, that was published. It was similar, a ministerial issue. So, I think that inevitably we are going to be in a world where these things are public. To be honest, my instincts are where you can, to be transparent.

Q349 Alun Cairns: Do you think Lord Wilson was way off the mark on this or does he not appreciate the times that we are in and the drives for transparency?

Sir Gus O'Donnell: Things have moved on and I think the way the FOI Act has been interpreted, whether or not one might think it should be published is out of your control. The question then just becomes do you publish straight away or later. I thought that it was in the best interests of everyone, including the former Secretary of State, that the report was out there.

Q350 Greg Mulholland: Sir Gus, the evidence provided by Lord Turnbull suggested that one charge that had to be laid against Dr Fox and the ministerial code was the failure to preserve collective responsibility in respect of the Government’s policy on Sri Lanka. Was the investigation of a potential breach of this nature ever raised with you?

Sir Gus O'Donnell: Certainly issues like that arose when you are talking about and just putting together the sets of meetings that had taken place. In terms of the report that I was doing, in a sense by the time my report was finished the Secretary of State had already resigned and I concentrated on those aspects that had been the subject of discussion in Parliament and by the Secretary of State.

Q351 Greg Mulholland: This is an important point. Lord Turnbull giving evidence said of Dr Fox: "He was running a separate policy on Sri Lanka, which was the responsibility of William Hague, then he employed a man to do it, and then he found the money to pay the man. I think that is the sequence of it, but they started with the Werritty bit of it rather than actually what he was using Werritty for." Did you understand that there is a strong feeling that this has not been looked into and should have been?

Sir Gus O'Donnell: Well, I think the reality is that the Secretary of State took responsibility: he had broken the ministerial code and resigned. The question then about some of these other issues-there were certain things on the record about what had happened in Sri Lanka and he had consulted the Foreign Secretary about them.

Q352 Greg Mulholland: So you don’t accept that there is an issue here that should have been looked into?

Sir Gus O'Donnell: To what purpose? The Secretary of State admitted that he had broken the ministerial code. The Secretary of State decided and took responsibility for this and resigned.

Q353 Greg Mulholland: You say, to what purpose, but again, to quote Lord Turnbull, "The mystery is why that charge was never brought against him in this report, and I think they were on the doctrine of,"-I have to say this does sound very much like what you are saying-"‘Don’t kick a man when he’s down, when it’s all done and dusted.’" But surely, in any issue that involves a breach of the ministerial code there should be a full and proper investigation of all charges. The resignation does not interfere with that. That is the end of that particular Minister’s role, but that does not mean that charges are not retrospectively looked into.

Sir Gus O'Donnell: Sure. I did look at the Sri Lankan evidence and, as I say, there had been discussions between the Foreign Secretary and the Secretary of State for Defence on that issue.

Q354 Greg Mulholland: So you think that effectively Lord Turnbull was wrong in suggesting a breach of collective responsibility on the policy on Sri Lanka?

Sir Gus O'Donnell: That is right, because I would say that the Secretary of State and the Foreign Secretary had discussed these issues, and I discussed it with the Foreign Secretary.

Chair: That seems pretty comprehensive.

Q355 Kelvin Hopkins: It has been reported that the initial draft of your report stated that Civil Service concerns about Dr Fox’s contact with Mr Werritty were raised "on repeated occasions", but the phrase was removed from the final draft. Is that correct?

Sir Gus O'Donnell: To be honest, I really cannot remember, but it is certainly the case that issues had been raised more than once. It had been raised with the Secretary of State, most certainly. Irrespective of the wording, I think the facts are that they had been raised more than once, most certainly.

Q356 Kelvin Hopkins: There was press speculation at the time, I remember, that these matters had not been raised with you by the Permanent Secretary soon enough. We had Lord Wilson here, saying that there was a similar example where a Minister was apparently doing political things that were not in line, if you like, with Government policy, and he had raised that with the Cabinet Secretary back in the 1970s. It had gone straight to the Prime Minister, the Prime Minister had taken it to Cabinet, and the Minister concerned was brought into line in that way. I just wondered if action had not been taken appropriately on this occasion.

Sir Gus O'Donnell: Let me be clear: I said that, with hindsight, I wish the Permanent Secretary for Defence had raised it with me earlier, with the issues. On the point that Mr Mulholland raised about a policy issue, I think what was done was absolutely right, where there were issues. Of course, there is the whole overlap between defence and foreign policy; they are very intertwined. The Foreign Secretary and the Secretary of State for Defence did have discussions to sort out issues like Sri Lanka.

Q357 Kelvin Hopkins: On this particular issue, I have one supplementary question. If the phrase "on repeated occasions" was removed, why was it so altered? Any thoughts?

Sir Gus O'Donnell: There may have been a difference of view about what "on repeated occasions" meant. Certainly, as far as I was concerned, it was more than once.

Kelvin Hopkins: That is "repeated".

Q358 Chair: Are you not concerned that the matter may have been raised "on repeated occasions", but that there was no evidence of it being raised, and does that not represent a failure of procedure in the private office?

Sir Gus O'Donnell: Well, there is a real question, yes, about whether there were notes of it being raised. I imagine that this was probably raised orally, so that will be the issue, and people’s memories may have been different.

Q359 Kelvin Hopkins: It does seem important to me, when something like this becomes of serious concern, that it was not raised earlier, or with sufficient force for it to be dealt with earlier.

Chair: And it was not recorded.

Sir Gus O'Donnell: If you look at my series of recommendations, they are all about these things being raised by Permanent Secretaries with Ministers, being discussed on appointment and regularly thereafter, and being recorded, so I agree with you. In a sense, what I am saying with these recommendations is that we should toughen up the procedures. I am suggesting that we need to learn lessons from this exercise and make sure that we have robust procedures in place.

Q360 Chair: Is there no case for amending the Civil Service code in this respect? The Civil Service code is voluminous on serving Ministers and being helpful to Ministers, but it is a very short code. I cannot see anything in it about what you do when the Minister is breaching the ministerial code.

Sir Gus O'Donnell: Well, if you like, that should be something that Perm Secs deal with.

Q361 Chair: It is something that a private secretary or a diary secretary is likely to know about first of all.

Sir Gus O'Donnell: First of all, yes, and they should take the matter up with their Permanent Secretary. That would be the way to do it.

Q362 Chair: Where does it say that in the Civil Service code?

Sir Gus O'Donnell: I do not have it in front of me, but they know that they are supposed to operate with honesty and objectivity.

Q363 Chair: Yes, but is that not the ambiguity that is left? Is there not a case for amending the Civil Service code so that it is clearer about what civil servants do when they find themselves in that very difficult position?

Sir Gus O'Donnell: Yes. Remember that of the 470,000 civil servants who will look at the code-I am delighted to say that 86% are aware of the code, and that has gone up in the latest survey; sorry, I could not resist that-most of them go nowhere near Ministers. For them this is not an issue at all.

There is a question, you are absolutely right, for those around Ministers. There may be a better way for us to get the message across through guidance to private offices-I would extend it to press offices-and giving a duty to Permanent Secretaries, which I think my recommendations do, to make sure that there are procedures in place to pick up this sort of thing.

Q364 Chair: The tragedy is that the whole thing could have been avoided.

Sir Gus O'Donnell: Indeed. That is why I always say to people that you are doing your Secretary of State a favour by being robust, honest and challenging in these sorts of areas to ensure that things are done properly.

Q365 Paul Flynn: May I personally thank you for your unfailing courtesy and help over the years that I have been on this Committee? You have occasionally had courtesy back from us, too; that is a bit uncharacteristic from this group of people. Possibly your abiding legacy will be your contribution to promoting the ethos of the Civil Service-civil service as a job that has rewards and responsibilities above what a commercial job would offer. We wish you well if you do retire.

The Civil Service code states: "It is not the role of the Cabinet Secretary…to enforce the Code." Was your investigation into a possible breach of the code itself a breach of the code?

Sir Gus O'Donnell: What I was doing was looking at the facts-

Q366 Paul Flynn: May I come back to it? The code goes on to say-if you want the rest of it––that if a matter warrants further investigation, the Cabinet Secretary and the Prime Minister should "refer the matter to the independent adviser on Ministers’ interests." He exists; he is still is around. Why wasn’t it?

Sir Gus O'Donnell: What I would have done when I was looking at the facts-I was trying to establish whether there was anything to this-would have been to hand the material over and say to the Prime Minister, "You now need to get this investigated." We just got overtaken by events along the way.

Q367 Paul Flynn: Was it not a quick fix done for political reasons, as has been suggested by two of our witnesses? If Philip Mawer had taken it over, the whole thing would have rumbled on for months. It was convenient for you to do a quick job on this to get it out of the way, dead and buried, so that it did not embarrass the Government.

Sir Gus O'Donnell: I do not think so. It was clear from what the Secretary of State himself had said, and it was backed up in my report, that there was a clear breach of the ministerial code. The Secretary of State took responsibility for that and resigned. If you had said, "Right, we want a full, lengthy investigation into all these issues," what would the Secretary of State have done? In the past-in the Shahid Malik case, for example-the Minister was suspended. Would you have wanted a long period of having the Secretary of State for Defence suspended? I just do not think that would have been good for government.

Q368 Paul Flynn: What I want is for the full truth of this to come out, so that we can plan to ensure that some of the activities that are alleged to have been going on, and may have happened, will not take place in future. That is our main goal. Will Sir Philip Mawer have a look at this again? Will he continue the investigation and look at the loose ends that remain?

Sir Gus O'Donnell: In a sense, we feel that this has covered the ground.

Q369 Paul Flynn: Okay. Matthew Gould has been the subject of a very serious complaint from two of my constituents, Pippa Bartolotti and Joyce Giblin. When they were briefly imprisoned in Israel, they met the ambassador, and they strongly believe-it is nothing to do with this case at all-that he was serving the interest of the Israeli Government, and not the interests of two British citizens. This has been the subject of correspondence and so on.

In your report, you suggest that there were two meetings between the ambassador and Werritty and Liam Fox. Questions and letters have proved that, in fact, six such meetings took place. There are a number of issues around this. I do not normally fall for conspiracy theories, but the ambassador has proclaimed himself to be a Zionist and he has previously served in Iran, in the service. Werritty is a self-proclaimed-

Robert Halfon: Point of order, Chairman. What is the point of this?

Paul Flynn: Let me get to it. Werritty is a self-proclaimed expert on Iran.

Chair: I have to take a point of order.

Robert Halfon: Mr Flynn is implying that the British ambassador to Israel is working for a foreign power, which is out of order.

Paul Flynn: I quote the Daily Mail: "Mr Werritty is a self-proclaimed expert on Iran and has made several visits. He has also met senior Israeli officials, leading to accusations"-not from me, from the Daily Mail-"that he was close to the country’s secret service, Mossad." There may be nothing in that, but that appeared in a national newspaper.

Chair: I am going to rule on a point of order. Mr Flynn has made it clear that there may be nothing in these allegations, but it is important to have put it on the record. Be careful how you phrase questions.

Paul Flynn: Indeed. The two worst decisions taken by Parliament in my 25 years were the invasion of Iraq-joining Bush’s war in Iraq-and the invasion of Helmand province. We know now that there were things going on in the background while this was going on. The charge in this case is that Werritty was the servant of neo-con people who were in America, who take an aggressive view on Iran. They want to foment a war in Iran in the same way as in the early years, there was another-

Chair: Order. I must ask you to move to a question that is relevant to the inquiry.

Q370 Paul Flynn: Okay. The question is, are you satisfied that you missed out on the extra four meetings that took place, and does this not mean that those meetings should have been investigated because of the nature of Mr Werritty’s interests?

Sir Gus O'Donnell: I think if you look at some of those meetings, some people are referring to meetings that took place before the election.

Q371 Paul Flynn: Indeed, which is even more worrying.

Sir Gus O'Donnell: I am afraid they were not the subject-what members of the Opposition do is not something that the Cabinet Secretary should look into. It is not relevant.

Paul Flynn: But these meetings were held-

Chair: Mr Flynn, would you let him answer please?

Sir Gus O'Donnell: I really do not think that was within my context, because they were not Ministers of the Government and what they were up to was not something I should get into at all.

Chair: Final question, Mr Flynn.

Q372 Paul Flynn: No, it is not a final question. I am not going to be silenced by you, Chairman; I have important things to raise. Let me raise the next question anyway. I have stayed silent throughout this meeting so far.

You state in the report-on the meeting held between Gould, Fox and Werritty, on 6 February, in Tel Aviv-that there was a general discussion of international affairs over a private dinner with senior Israelis. The UK ambassador was present. Are you following the line taken by the Secretary of State for Communities and Local Government who says that he can eat with lobbyists or people applying to his Department because, on occasions, he eats privately, and on other occasions he eats ministerially? Are you accepting the idea? It is possibly a source of great national interest-the eating habits of their Secretary of State. It appears that he might well have a number of stomachs, it has been suggested, if he can divide his time this way. It does seem to be a way of getting round the ministerial code, if people can announce that what they are doing is private rather than ministerial.

Sir Gus O'Donnell: The important point here was that, when the Secretary of State had that meeting, he had an official with him-namely, in this case, the ambassador. That is very important, and I should stress that I would expect our ambassador in Israel to have contact with Mossad. That will be part of his job. It is totally natural, and I do not think that you should infer anything from that about the individual’s biases. That is what ambassadors do. Our ambassador in Pakistan will have exactly the same set of wide contacts.

Q373 Paul Flynn: I have good reason, as I said, from constituency matters, to be unhappy about the ambassador. Other criticisms have been made about the ambassador; he is unique in some ways in the role he is performing. There have been suggestions that he is too close to a foreign power.

Robert Halfon: On a point of order, Chair, this is not about the ambassador to Israel. This is supposed to be about the Werritty affair.

Paul Flynn: It is absolutely crucial to this report. If neo-cons such as yourself, Robert, are plotting a war in Iran, we should know about it.

Chair: Order. I think the line of questioning is very involved. I have given you quite a lot of time, Mr Flynn. If you have further inquiries to make of this, they could be pursued in correspondence. May I ask you to ask one final question before we move on?

Sir Gus O'Donnell: One thing I would stress: we are talking about the ambassador and I think he has a right of reply. Mr Chairman, I know there is an interesting question of words regarding Head of the Civil Service versus Head of the Home Civil Service, but this is the Diplomatic Service, not the Civil Service.

Q374 Chair: So he is not in your jurisdiction at all.

Sir Gus O'Donnell: No.

Q375 Paul Flynn: But you are happy that your report is final; it does not need to go the manager it would have gone to originally, and that is the end of the affair. Is that your view?

Sir Gus O'Donnell: As I said, some issues arose where I wanted to be sure that what the Secretary of State was doing had been discussed with the Foreign Secretary. I felt reassured by what the Foreign Secretary told me.

Q376 Chair: I think what Mr Flynn is asking is that your report and the affair raise other issues, but you are saying that that does not fall within the remit of your report and that, indeed, the conduct of an ambassador does not fall within your remit at all.

Sir Gus O'Donnell: That is absolutely correct.

Paul Flynn: The charge laid by Lord Turnbull in his evidence with regard to Dr Fox and the ministerial code was his failure to observe collective responsibility, in that case about Sri Lanka. Isn’t the same charge there about our policies to Iran and Israel?

Chair: We have dealt with that, Mr Flynn.

Paul Flynn: We haven’t dealt with it as far as it applies-

Chair: Mr Flynn, we are moving on.

Paul Flynn: You may well move on, but I remain very unhappy about the fact that you will not allow me to finish the questioning I wanted to give on a matter of great importance.

Q377 Chair: You have had a long time.

On the question of Sir Philip Mawer, don’t we have a bit of a constitutional problem? Sir Philip Mawer is now seen as such as nuclear option that, if a reference is made to Sir Philip Mawer, the Minister has generally resigned before the matter gets to Sir Philip Mawer. Doesn’t he need to have a different role? Shouldn’t he be conducting that quick advice to the Prime Minister, rather than embroiling the Cabinet Secretary in that? Otherwise, it does not seem he has a role at all.

Sir Gus O'Donnell: There is a very important role, which is probably not very visible to you. When every Perm Sec sits down with their Minister and discusses conflicts of interests, their financial holdings, all those sorts of issues, then those reports go to Philip Mawer, who looks at them and analyses. He comes back to us and says, "I’m not sure you are right about this not being a conflict," or, "I think this is okay." He gives us quite continuous advice. There are occasions when there are ways to analyse things. It is true-inevitable in our system-that Cabinet Secretaries can get everybody to jump slightly more quickly than anybody else.

Q378 Chair: We are in the embarrassing position, where in opposition, at business questions, the man who is now Leader of the House of Commons would regularly ask the Government why certain matters had not been referred to Sir Philip Mawer. When he gave a statement on this matter, he had to explain to the House why the matter had not been referred to Sir Philip Mawer. Is there not a problem with these arrangements? Don’t these arrangements need to be reviewed, because they lack credibility and leave open the question that there has not been a proper investigation and that matters have not been properly followed through, as raised by Mr Flynn and others?

Sir Gus O'Donnell: I think there is an issue about how we manage investigations in a world where the media are moving quickly and things are emerging quickly. I relate to the problem we had before when allegations were made about a Minister; that Minister was suspended. If there are allegations made about a Secretary of State, what are we to do if you are going to have a very lengthy investigation?

Q379 Chair: Why does Sir Philip Mawer necessarily need to run a lengthy investigation? Why, when the Prime Minister says, "I need some advice on this ministerial code issue," does the Cabinet Secretary not simply say, "That is a matter for Sir Philip Mawer."

Sir Gus O'Donnell: Because occasionally the Cabinet Secretary can say-particularly in this instance, I admitted-that this is about getting to some civil servants very quickly to find out what they had said and getting people to come up with things urgently. I was able to operate at somewhat more pace; that is all.

Q380 Chair: But then you finish up publishing a report that people feel is not as comprehensive as what Sir Philip Mawer would have produced.

Sir Gus O'Donnell: Obviously, if I had spent longer on that report, it would have been a longer report.

Chair: We are not getting anywhere on that one.

Q381 Robert Halfon: Is it not for the Prime Minister to decide whether a Minister has broken collective responsibility, rather than yourself?

Sir Gus O'Donnell: Yes, absolutely. On this whole issue of violations of the code, I was just providing advice for the Prime Minister. It is the Prime Minister who decides.

Q382 Robert Halfon: So whether or not there was a separate policy is nothing to do with you; it is to do with the Prime Minister making a decision on whether or not a Minister broke the ministerial code.

Sir Gus O'Donnell: Yes.

Q383 David Heyes: If Sir Philip Mawer was not the right person to do the investigation and this exact same situation occurs in the future, who will do the investigation? Will it be the Cabinet Secretary or the Head of the Civil Service?

Sir Gus O'Donnell: I was not saying that Sir Philip was not the right person to do it; I was just saying that given the speed with which the media and the story was unfolding, the Prime Minister asked me to collect some facts, which I may well have passed on to Sir Philip to produce a longer report. As it was, I was able to get what I thought was a reasonable amount of information, which backed up the decision by the Secretary of State to resign.

Q384 David Heyes: But in an exact parallel situation in the future, with rapid media interest in it and a quickly developing situation and the decision is that it is not for Philip Mawer, is it for the Cabinet Secretary? Or is it the Head of the Civil Service? Who will it be in future?

Sir Gus O'Donnell: I would expect these sort of things about the ministerial code will be for the Cabinet Secretary. I take your point. We need to think about whether we can find ways to allow these things to be done more quickly by the independent regulator.

Q385 David Heyes: Is this the missing element in your sharing out of duties?

Sir Gus O'Donnell: It cannot be comprehensive. It cannot cover everything. It would be my view that if you are talking about violations of the ministerial code, it is for the Cabinet Secretary. If you are talking about violations of the Civil Service code, it is for the Head of the Civil Service.

Q386 David Heyes: In terms of the report that you did on this situation, we talked earlier about the final draft being modified. You were not clear with us whether that actually happened, but it has been alleged in many press reports. Who has the power in this situation to amend, modify or veto your-hopefully-independent report? Who is it that persuaded you to make changes to it?

Sir Gus O'Donnell: As I am looking at this, it is my report and I have the ultimate pen on it. I would have looked at the evidence. I would question that this was raised a number of times. Well, how many times? Do we have written material on it?

Q387 David Heyes: Who is it that says, "We don’t like this bit of your report, Sir Gus. Take it out."

Sir Gus O'Donnell: There are plenty of people in my office and in the Ministry of Defence and civil servants who will be looking at it and will be saying, "Is this true? Can we back it up? Do we have the evidence?" It is those sorts of issues.

Q388 Robert Halfon: May I move to the wider context of the Werritty affair? Most of the two reports, that of the Permanent Secretary at the MOD and your report, focused on whether or not he should have been allowed at meetings, so on and so forth. Is there not a wider issue about the role of special advisers, how many there are and what their precise responsibility should be?

Sir Gus O'Donnell: We have a special adviser’s code, so we have very clear rules about what special advisers should do. If you have someone who isn’t a special adviser, we don’t have any codes for them. Therefore, we are in unchartered territory. It is always better to have people in regularised positions-i.e., special advisers, civil servants or A. N. Others. You have to ask yourself lots of questions about A. N. Others.

Q389 Robert Halfon: Is it wrong for a Minister to appoint somebody as an unpaid special adviser, or are they only allowed the formal one or two?

Sir Gus O'Donnell: Two for Secretaries of State. There are occasionally unpaid special advisers, but they would be subject to the special adviser’s code.

Q390 Robert Halfon: If Mr Werritty had been put under a formal special adviser responsibility, presumably not a lot of this would have occurred.

Sir Gus O'Donnell: That is very hypothetical. I don’t know.

Robert Halfon: I am just trying to understand.

Q391 Chair: Well, he would have been allowed to attend those meetings and no questions would have been asked.

Sir Gus O'Donnell: If he were a special adviser? Well, certainly in terms of attending meetings, that would have been fine.

Q392 Robert Halfon: Really, the mistake was not making him an official voluntary special adviser.

Sir Gus O'Donnell: There are very clear rules that special advisers are appointed with the Prime Minister’s consent. That had not happened.

Paul Flynn: In that case, there should be declarations of his income, who was lining his pockets, and they would preview his organisations.

Q393 Robert Halfon: Even if there are cases of other special advisers who are unpaid, do they then have to declare their interests?

Sir Gus O'Donnell: Absolutely.

Paul Flynn: It is a clear case that his funding was being disguised by his status.

Q394 Robert Halfon: Do you think that Cabinet Ministers should have more special advisers?

Sir Gus O'Donnell: No, in general, we have about the right sort of number. I have always said that it is really good for the Civil Service to have good special advisers. I emphasise "good".

Q395 Robert Halfon: Why do you think that there are enough special advisers?

Sir Gus O'Donnell: There is a balance to be had. Most Secretaries of State seem to get by very adequately on two special advisers. That has been the case for a long time, although we often have more at the centre of government.

Q396 Robert Halfon: Do you think Ministers of State should be entitled to special advisers?

Sir Gus O'Donnell: We are in new territory here, of course, because we have a coalition Government. So we have to modify that because sometimes you end up in a world where you have a Secretary of State from one party, who will have his two special advisers, and there may be no other Ministers from the other party there. Having no political side to the coalition in some Departments creates a problem.

Q397 Robert Halfon: Do you think that the role of special advisers and civil servants became blurred under the last Government with Alastair Campbell having a semi-civil servant type special adviser role?

Paul Flynn: On a point of order. What has this got to do with the Werritty case? He wasn’t a special adviser.

Chair: I am very happy with the line of questioning.

Robert Halfon: I am trying to understand the role of special advisers.

Chair: We are thinking of conducting an inquiry on special advisers.

Sir Gus O'Donnell: Alastair Campbell was very clearly a special adviser. There was no ambiguity there.

Q398 Robert Halfon: But he had a Civil Service role, did he not?

Sir Gus O'Donnell: Special adviser.

Q399 Chair: Why do you think Ministers want more special advisers? Is it just a status thing, or is it this frustration thing, because they can’t get the Civil Service to do what they want?

Sir Gus O'Donnell: The area that worries me most is when you have special advisers being brought in when they are media special advisers. The risk with media special advisers is that they see their role as representing their Secretary of State’s view, rather than the Government’s view. That is a great risk.

Q400 Robert Halfon: Are there any other lessons to be learned, apart from what you put in your report, from the Werritty affair?

Sir Gus O'Donnell: Well, I think there is quite a lot in there, and they are fairly stark and clear.

Q401 Chair: Is there anything you personally regret?

Sir Gus O'Donnell: I wish I had been told about this earlier. I wish that somebody had told me, and I would have wanted to go and talk to the Secretary of State.

Q402 Chair: Do you think it was a failure of the Civil Service? Do you think there was a failure?

Sir Gus O'Donnell: I have said already that this was raised with the Secretary of State and the behaviour did not change; therefore it should have been escalated.

Q403 Kelvin Hopkins: You said that you should have raised it with the Secretary of State. Should you not have raised it with the Prime Minister?

Sir Gus O'Donnell: I did not know about it, so I was not in a position to do so. What I would have done, first of all, if it had been raised with me, would have been to go and talk to the Secretary of State. If I had worries that I was not being listened to, I would have gone to the Prime Minister.

Q404 Robert Halfon: Did the Defence Permanent Secretary explain to you why they had not raised it with you?

Sir Gus O'Donnell: I think they felt that they were trying to manage a very difficult situation. They were not as empowered as I think they should have been.

Q405 Chair: You have been very helpful, and I would like to thank you for joining us today. I do not want to end on a particularly sour note; I would like to echo what my colleague said about your courtesy to this Committee during your period of tenure. You have always been a model witness, and you have been very helpful and friendly towards the Committee and its members. I cannot judge how the Civil Service is yet-I do not feel that I know enough about it-but what we do know is that the Civil Service is facing enormous challenges, some very painful, in terms of downsizing. Through you, we as a Committee thank the Civil Service for the spirit with which it is facing these difficulties, and for the loyalty and service that it shows to this country. That goes for you personally as well. Thank you very much indeed.

Sir Gus O'Donnell: Thank you very much, Mr Chairman, for those thoughts. They are much appreciated.

Prepared 28th November 2011