Justice Committee - Minutes of EvidenceHC 97-ii

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Oral Evidence

Taken before the Justice Committee

on Tuesday 31 January 2012

Members present:

Sir Alan Beith (Chair)

Mr Robert Buckland

Jeremy Corbyn

Nick de Bois

Ben Gummer

Mr Elfyn Llwyd

Yasmin Qureshi

Elizabeth Truss


Examination of Witnesses

Witnesses: Sir Suma Chakrabarti KCB, Permanent Secretary, Ann Beasley CBE, Director General, Finance and Corporate Services, Antonia Romeo, Director General, Transforming Justice, and Helen Edwards CBE, Director General, Justice Policy Group, Ministry of Justice, gave evidence.

Q125 Chair: Good morning, Sir Suma, Ms Beasley, Ms Edwards and Ms Romeo. We are glad to have you with us as we pursue our inquiry into the Department itself and how it runs its affairs. We were genuinely very appreciative of the way we were able to roam freely all over the Department and ask anything of anybody we wanted to. We much appreciate the Department’s cooperation in all of that. Having done so, we were surprised to find that internal communication is still a problem in the Department. How could it be that the Secretary of State made a statement on Monday that was the subject of an embargoed press release and this Committee was not told that this was going to happen?

Sir Suma Chakrabarti: If that is the case, I am sorry about it. That should not have happened. I will look into it as soon as I get back. I would have expected the Committee to be informed first and it should have been.

Q126 Chair: It is not the first time and it puzzles us that it happens in a Department that is open plan, where people move about freely and where, quite clearly, a genuine effort has been made to change the culture as we get better internal communication. It appears that it may be the case that the parliamentary branch does not always know what is going on, or maybe the fault lies elsewhere. That is for you to find out, I think.

Sir Suma Chakrabarti: Yes. I think the parliamentary branch does know what is going on, but, clearly, there is a problem here. If this is happening systematically, we must obviously correct it and we will go back and do that.

Q127 Chair: You are engaged in quite a significant culture change, both in the way you run the Department and in the subject matter of what you do. "Rehabilitation revolution" implies a major change in culture. I thought I would give you the opportunity to say how you saw that working out now.

Sir Suma Chakrabarti: The culture change itself, yes.

Chair: Yes.

Sir Suma Chakrabarti: We have been embarked on a culture change for some time on a number of fronts. There are aspects to it that are about our systems, structures and our skills. The three Ss are always in my mind about this.

In terms of our systems, we basically had a very siloed Department and its arm’s-length bodies, with not much joined up. Our systems perpetuated that to a large extent. Where we can and should join up, for example, is on all the backoffice functions and so on. We are changing our system so that we can do that much better. In terms of our relationships with the arm’s-length bodies, we are bringing those much closer together and we can talk more about that during this hearing.

We have also been trying to make our structures leaner by taking out unnecessary layers, both in the Courts Service and NOMS, but also in headquarters. We have done very major restructuring over the last year and a half since the election in terms of taking out unnecessary layers and so on, particularly at headquarters level, but also at regional level. With regard to skills, we have been trying to change the culture of the Department in, I would say, two or three very significant ways.

The first, as Ann and I gave evidence last week to the PAC, is getting the Department to take financial management much more seriously than it ever did before, to understand its costs rather than just its budgets, and be a fundamental part of what we have been trying to do.

The second is getting skills that are about working across boundaries much better than we ever were able to do before. It is an area we have to go much further with in the next stage. We can talk about that as well. But it simply is not possible to change the justice system by the MoJ acting on its own. We have to work better with other parts of the system. Those are two very important parts of it.

The third-and the culture has been changing, particularly since the election-is a sense of us being less, shall we say, Stalinist, central control, and much more about front-line professionals exercising their experience, being able to make judgments for themselves, and about being much more open to nonstate providers than we ever were before. The culture in much of public service often is, "The state should do this," and the default option is that the state will do this and will ask questions later. What we have been trying to do is to say, "Let us have an open discussion about whether we should be doing this or whether we should at least compete against private and voluntary sector providers." Payment by results shows that, of course, in large measure, but elsewhere too it is shown through our competition strategy. It has been quite a culture change. I can add lots of other examples too, but those are three.

Q128 Chair: We are going to explore some of those issues in more detail. Ms Edwards, do you want to say something?

Helen Edwards: I don’t know if you want me to say a little on the rehabilitation revolution directly. The only thing I would add is that Ministers have been very clear about what matters to them and what is important. They have delivered the message very widely and clearly that they want reoffending reduced. People know that we are good civil servants, so we want to deliver on that, and we know that performance is judged on that. We have payment by results, for example, which is increasingly judging people on how successful they are.

One of the other things we have done is made, very clearly, the links with crime. As we know, about half the people who go through the criminal justice system have been there before. Reducing reoffending makes a big contribution to reducing crime. Our partners understand that. For example, the police are joining with us to work on integrated offender management, where we are trying to grip the most prolific offenders and those who come out of prison with no supervision to stop them reoffending, because, otherwise, they go through the system time and time again. There are some clear messages and people have been very responsive to the logic of what we are trying to do, as we saw during the consultation on Breaking the Cycle.

Q129 Mr Buckland: Moving to financial management, we have all seen a copy of the National Audit Office Financial Management Report for 2011 that was published in November. I know that you have now had an opportunity to consider that report. A couple of key concerns arise from that document. Can I first deal with the lack of promptness in filing accounts? It is the second year in a row now that the MoJ was unable to lay its accounts before Parliament before the summer recess. I understand that the Ministry has taken assistance from an external independent topfour accounting firm. That is two years in a row of late filing. Has that firm been paid in full for its work?

Sir Suma Chakrabarti: Ann manages the KPMG contracts.

Ann Beasley: There was a clause in the contract that said if we delivered our accounts prerecess they would get, effectively, a bonus payment, which they did not get because we did not deliver prerecess. To that extent, they were not paid in full.

Q130 Mr Buckland: The NAO report has identified as one of its key recommendations that the Ministry needs to produce a report next year in a more timeous or timely way. How are you going to do that, bearing in mind the failure of the last two years?

Ann Beasley: We have undertaken a number of studies and as a result have brought in CIPFA-our professional accountancy body-to look at what was fundamentally wrong with the way we were producing our accounts. The NAO concluded that, although we set off for the 201011 accounts with a lot of energy and determination to try and deliver prerecess, there had not been a fundamental change in the way that we produced the accounts. So we brought in the professional body, CIPFA, and they have made a number of recommendations about approaching the accounts in a different way, which we are now doing and following, in order to take some of the time out of it, and in fact to get rid of some of the blurring of the responsibilities between ourselves and the National Audit Office as our external auditors.

We have also engaged with a private sector firm to supply us with sufficient resource. One of the conclusions was that we had not sufficiently resourced the accounts production, because it involves a very intense amount of work in a relatively short period of time. We have now brought in extra resources. We have recruited permanent staff and have brought in contractors. The agencies are now reporting that they are very pleased with the quality of the people that they have and we have them on the ground working now, so we have improved the quality of the people that we have.

Q131 Mr Buckland: Would you say there was any one particular problem that was causing this unacceptable delay? Was it the fact that there are different arm’s-length agencies-NOMS, for example-and it was difficult to coordinate all the information that you needed from the various bodies, or was it something else?

Ann Beasley: CIPFA concluded that there was not a single cause. The presenting cause was that the National Offender Management Service accounts were late compared to the internal timetable, but CIPFA concluded that there were some other issues that meant our accounts production was not working as smoothly as it should. Within NOMS there were two specific issues. One was as to their noncurrent assets where they did not have their balancesheet valuations up to date and were not able to produce the notes to the accounts on time. It had been a problem in the previous year and, although they said that they had sorted it, in practice they had not.

Q132 Mr Buckland: Why was that? One year they identify the problem, and yet they have another year and they fail. It is unacceptable, is it not?

Ann Beasley: It is unacceptable and the individuals concerned are no longer doing that. We have brought in new individuals, who have now resolved the noncurrent asset issues. We are waiting for the National Audit Office to confirm, through their audit, that that is right. They recommended that we produced the notes to the accounts quarterly and we are now doing that. So I have more confidence that that process is working. There is a more fundamental issue with the NOMS accounts, and it is sometimes difficult to get this across without making it look like an excuse. NOMS is unusual as an Executive agency in that it has to consolidate nondepartmental bodies into its accounts.

Mr Buckland: I see.

Sir Suma Chakrabarti: It is 35.

Ann Beasley: There are 35 probation trusts. We have not come across any other Executive agencies that have that element of consolidation. You have two problems with that. One is that it does take you an amount of time to consolidate their accounts into your accounts. It adds two weeks to the process. Also, in order to get the probation trusts’ accounts, they are reliant on pension information that comes from local authorities, who operate to a different timetable. We have been working hard with the Audit Commission to try and speed that up, but the probation staff are a very small element of a much bigger pension. We think we have made a breakthrough this year where the Audit Commission have said that the auditors do not need to wait for the final statement on the pension in order to produce the accounts. But that is always going to push out the NOMS timetable compared to other agencies.

Q133 Mr Buckland: There has also been a problem, has there not, with Her Majesty’s Courts and Tribunals Services?

Ann Beasley: Not with their fundamental accounts, no.

Q134 Mr Buckland: But with the trusts. What impact did that have? That was a very unusual event, was it not?

Ann Beasley: It is clearly not a good place to be, but the HMCS accounts, because last year they were two separate accounts, were produced early and were of good quality without any issues. For the first time, for 201011, the courts had to produce what is called a trust statement. It is part of the transparency agenda and it is about trying to make clearer to the public-to people like you-money that we collect on behalf of the Exchequer that goes back to the consolidated fund. It looks at fines and confiscation orders. This is a new requirement. We received the formal request to produce it in December 2010. That was the statement that the Comptroller and Auditor General said he was unable to audit. This was a conversation we were having last week. The reason you cannot audit it is that, if you pull the information off realtime case management systems that move on on a daily basis, and you have something like 2 million records in these systems, it is very difficult. If you had an accounting system, you would be able to draw a line at a particular date. You would know where each of those cases was and be able to evidence that to the NAO. But, after the event, all of those 2 million records have moved on, or a number of them have moved on. Recreating a position as of 1 April, after the event, was too difficult.

Q135 Mr Buckland: They are living documents, are they not?

Ann Beasley: It is a living case management system.

Q136 Mr Buckland: I understand that. What impact did that have, if any, on the filing of the accounts?

Ann Beasley: It had no impact at all because we had separate resource. In fact, we had some really good-quality resource working on that.

Q137 Mr Buckland: Before leaving that issue, this year are you confident that you will get the accounts filed by the summer recess?

Sir Suma Chakrabarti: Shall I answer that?

Mr Buckland: Yes.

Sir Suma Chakrabarti: I will have to go through several layers. This is exactly what I said to the PAC, so I will repeat it here. It is a position that is agreed with the National Audit Office and with all our independent nonexecutive directors who formed the audit committee. The actual target that the Government have set themselves is a clear line of sight deadline target, which is a new target-for the end of June, in fact, and not even prerecess. It is a month earlier. I have been absolutely clear with the PAC that that target is impossible for this organisation to hit because, for the first time, LSC have to be part of the consolidated accounts.

Q138 Chair: That happens this year, does it?

Sir Suma Chakrabarti: It happens this year for 201112. It is well in advance of the statutory deadline. We have always met the statutory deadline, so there is an interesting issue as to why this target is so far ahead of the statutory deadline. LSC have to be part of the consolidated accounts for the first time ever. It would require LSC to produce their accounts four months earlier than they have ever done before. It is just not feasible to do that, given the amount of testing they have to do on error payments and so on. NAO agree with that, leaving aside the NOMS issues, which are there as well, which Ann mentioned. Our aim was, of course, to try and get it in prerecess, but I do not want to make a commitment that says we will definitely do it, having made that commitment last year and found ourselves wanting, until we have got through what is called the "quarter 3 hard close," which will be during the next couple of months. In early May my plan is to write to the PAC Chair, copied to the Justice Select Committee Chair, saying whether we are going to make prerecess or not.

There are some real issues there. Ann has mentioned, obviously, the NOMS issues, but also at the LSC there are some issues we need to work through. The NAO is fully supportive of that. They also do not want us to make a commitment they would be unable to achieve themselves, because they have to audit the final consolidated accounts and need time to do that. Last year was an improvement on the previous year.

One thing we should say is that all the individual accounts that make up the consolidated accounts were in on time, laid before recess, unqualified. That was an improvement because NOMS missed that last year as well. In that sense it is better, but it is not in a good enough place yet. I would fully agree with that. There is some way to go on that.

Q139 Elizabeth Truss: I want to follow up on the point about the hiring of the additional accounting resource. What has been the cost of hiring that additional resource? Also, what has happened to the staff that were proved to be incapable of putting together the asset register? Has the impact of not having an asset register properly done affected the business of those probation trusts if they do not understand their own cost base?

Ann Beasley: Picking those up, as I remember them, obviously we do have an asset register, but it was not as up to date as it needed to be. Most of the assets on the asset register relate to prisons and therefore do not have a huge impact on probation because most of the property that probation have is leasehold rather than owned by the Ministry. The individuals concerned left the organisation on a voluntary exit scheme as part of the exit. We have now recruited some really good quality people to take that on going forward.

Q140 Elizabeth Truss: What about the additional costs to the organisation of the external people that you have hired?

Ann Beasley: We have recruited-or we have brought in-23 contractors. Most of those we would need. Accounts production is quite a challenging area in central Government. It is not something that many civil servants want to do. We struggle to get the right people to do it, and it is difficult to get permanent civil servants.

Q141 Elizabeth Truss: That may say something about civil service recruitment, if you don’t mind my saying.

Ann Beasley: It is possibly about the amount of money we pay for professionals. We would normally have a complement of about 18 people. We have brought in an additional five or six to give us the extra resource to deal with some of the problems.

Q142 Elizabeth Truss: But you do not have a figure for the additional pot?

Ann Beasley: The contract is of the value of about £4 million.

Elizabeth Truss: £4 million.

Q143 Mr Buckland: One of the other recommendations of the NAO report was further improvement in collection of income-fees, fines and confiscation orders. Looking at the figures, it seems that, although there has been an improvement in collection, the outstanding amount of fines in the last five years has increased by a quarter. What proposals do you have in order to improve the collection of those various streams of income?

Sir Suma Chakrabarti: Ann leads on this as well.

Ann Beasley: Did you want to talk specifically about fines? On fees-

Sir Suma Chakrabarti: We should split them up.

Q144 Mr Buckland: Fees, fines and confiscation orders under POCA or anything like that.

Ann Beasley: I will start with fees. We have now agreed a fee income strategy that has two elements to it. One is that we need to make sure we take opportunities to put fees up in line with inflation where fees are below cost. In a number of areas, that is not the case. In civil cases the cost recovery was, I think, 99%, last year. It is in the kind of family income space where it is below. We need to take those opportunities. That is not wholly within our gift because we need to go out to consultation and agree that. We have made some increases to fees from April that gave us something like £20 million extra in income.

The other thing we need to do is to look at our costs. If you were to go immediately to full cost recovery on family cases-and you are looking at private family cases such as access hearings for fathers wanting to see their children-you would be putting costs up from a couple of hundred to more than £1,000, which does not feel acceptable. Our other strategy is to look at the cost base that we are using. Because we are driving efficiency in the courts anyway, we expect those costs to come down, but we are looking at restructuring the fees in a way that better reflects the elements of the service that the individuals use. We are agreeing that with the Treasury. If an individual settles something out of court and does not require a hearing, they would pay less than if they wanted to take it to a hearing. We are doing the work to restructure the fees and we expect, by the end of this spending review, to have closed the gap. The gap last year was £120 million. We expect it to be about £100 million by the end of this year and to keep closing it.

As to fines, we have collected more fine income in the last year than before. As you say, the fines awarded are going up. We are looking at a new approach to fines. The Courts Service have centralised it now; it is the responsibility of a single director. They are having a number of initiatives, like payment blitzes. They have made it easier to pay fines; you can now pay fines online. There are lots of initiatives like that, but, fundamentally, we need to restructure the way we enforce fines and to engage, probably, a thirdparty partner to look at developing better IT, better methods for fine collection. We are working through that proposal at the moment.

We are also doing some pilots looking at some of the aged debt. We have given some of the old fine debts to four separate private sector companies.1 They are looking at how much of that they can collect. Effectively, we could look at whether or not we wanted to sell off the aged debt book. At the minute we do not know what we would get as a return, so we are doing these pilots to look at what they are able to do that would allow us to set a realistic value for the aged debt book.

Q145 Mr Buckland: What is the time scale for this? It sounds as if it is going to take a long time.

Ann Beasley: If you are looking at something like a public value partnership, it does take a while to procure it and set it up. It is not a completely quick fix. Meanwhile, the Courts Service is absolutely committed to these fine initiatives where we are trying to get better at getting the fine off somebody while they are still in the court rather than getting them to leave the premises. There are also these new nudge techniques such as, if you text somebody using their name, they are more likely to pay up. Obviously, do not tell anybody else that because we don’t want them to stop doing it.

Sir Suma Chakrabarti: I think you just have.

Ann Beasley: These are the innovative things you can do to try and get a better return on fine income.

Q146 Mr Buckland: Is it the same for confiscation orders?

Ann Beasley: For confiscation orders, there is something like £1.3 billion on the balance sheet, for which the Ministry of Justice is only responsible in terms of collection for a very small proportion.

Q147 Mr Buckland: I wanted to ask you that. There is a separate pot somewhere.

Ann Beasley: That is right. We are responsible, by and large, for the lowvalue confiscation orders, mostly ones that are up to £50,000. We collect something like 68% compared with other agencies on the more complex confiscation orders, it is something like 41%. We are in the lowvalue end and we are making reasonable progress in terms of collecting those. The other parts of the confiscation orders are largely owned by the CPS or the Serious Fraud Office and, almost by their very nature, are very difficult to collect. Many of them are hidden; they are abroad. We have been working with the Home Office, who have the lead on confiscation orders, to try and encourage them to improve the progress with that. Their strategy has been much more about asset denial because some of the assets that are still shown on our balance sheet have been frozen by foreign Governments and are not available to the criminal, which is the primary aim of this. Something like 60% of the assets are hidden or denied to the criminal, which is their strategy. We have done some work-I forget exactly what we call it-where we have created an additional order that allows us to go after the people that help criminals hide their assets. We can now start going after accountants and other people who help the individuals to hide their assets. The Home Office have set up the Criminal Finance Board, chaired by James Brokenshire as the Minister, which met last week. They are starting to drive progress on this.

Sir Suma Chakrabarti: Can I add a couple of short things on the financial management point in general? First of all, it is really good that the NAO recognise for the first time ever in their report that confiscation orders are a crossGovernment issue and that we only own 16% of the debt book. That was not recognised before. There is an interesting issue about accountability. It sits there on the Courts and Tribunals Service accounts, but it is not us who has the lead responsibility. The fact that there is now a crossGovernment committee that is going to chase this is a good thing, and with a Home Office lead, I think.

On the fees issue and the question about full cost recovery, that is the aim for 201415, but I think Members here, us and Ministers will need to test this to some extent because it is in the area of family law in particular that fees would have to go up. That is where the gap is. Of course, no one wants to deny access to justice unnecessarily. What we need to do, which we are doing, is some work on elasticity of demand, essentially, as to that to see what would happen. We will have to come back to you with plans on that area.

Mr Buckland: Yes, please, if you could.

Sir Suma Chakrabarti: The final thing I should say on financial management is that the NAO report says in very clear terms that the work we have done delivers very good value for money. It is not something that you see in many NAO reports and it is worth highlighting. There has been a lot of progress in this. We are now at level 4 out of five levels, and the fifth level, frankly, would require far too much expenditure to get to. No one is aiming for level 5 in Government. In two areas we are at level 4 and we are at over 3.5 in three other areas. Other Departments are now coming to us on the back of the NAO report and asking how we did this.

The fact that people in the Prison Service and the Courts Service understand their costs much better-the point I made at the beginning-is a major advance. To go to a prison and have a governor say, "Reception costs this much. The benchmark is this much. I am trying to get close to the benchmark," is something that did not happen before. It is a real change in the culture that is going on because of this work on financial management.

Q148 Ben Gummer: Can I add a couple more questions to what Mr Buckland has asked? On the issue of fees, there seem to be some very easy wins here. For instance, for the Information Commissioner’s Office, on page 12 of the NAO report, there is a £5 million difference between income and expenditure. Surely it would be possible to close that very quickly by changing a fee structure. With the civil courts again, if you see the difference there, there is a slight loss due to income foregone by remission. That surely should be a contingency and it should be able to get parity there. With the family courts, I take your point about fee levels, which is reasonable, but is it not possible to have a meanstested fee regime so that at least those people of high income can be charged a realistic fee for the use of the courts?

Sir Suma Chakrabarti: On the last point, that is one of the things we are going to be looking at as part of the work we are doing now, so I do not rule that out at all. On the other two, on remissions, do you want to take that on?

Ann Beasley: At the moment, we set fees that are guided by the Treasury guidance, Managing Public Money. They do not allow us to recover remissions-fees that are remitted because of somebody’s means-from other fee payers. The rules do not allow it. We are never going to recover that part of our cost that is subject to fee remissions.

Q149 Ben Gummer: So, by definition, you will never, ever break even in those particular areas.

Ann Beasley: No. Our policy, although we call it "full cost recovery", is strictly "full cost pricing", so we price as if everybody was paying. Those elements that are given remissions because of insufficient means fall to the general taxpayer. I am doing some work as part of a crossGovernment fees working group to try and talk to the Treasury about whether or not that is the right policy, but, at the moment, that is their policy.

Q150 Ben Gummer: That is very interesting. What about on the Information Commissioner’s Office?

Sir Suma Chakrabarti: We will have to come back to you on exactly what is going on and how we set the fees there. We do not have the detail to hand.

Q151 Ben Gummer: I do not want to rehash ground gone over by the PAC or by Mr Buckland, but on the general issue about financial accounts, it seems to me that the main concern about the lateness-and it is true that there are particular difficulties the Department faces-is not so much the lateness, but that it reflects a weakness in management accounting. The better your management accounts, the quicker you can produce statutory accounts. The concern that we have is the indication that this shows about lack of strict financial management-the £4 million spent on external accounting consultants that you mentioned would pay for quite a lot of good high-quality internal financial managers-and the effect that has, therefore, on your Transforming Justice programme. That will require very detailed financial management if you are going to successfully outsource, privatise, payment by results and all the things that the Department is trying to do in the next few years. It would be made more expensive and harder to do if your internal management of finances is not up to scratch. Is that a criticism that you would accept?

Sir Suma Chakrabarti: I will ask Ann to pick up the detail, but the characterisation would be fair if it were made two or two and a half years ago. That is roughly where we were. Looking at the progress, I would say that when I started out at the MoJ, if you had scored us against the NAO model, we would have been at 1 out of 5, probably. We were at 2 out of 5 on their own scoring at the end of 2009 and moved up to 3 to 3.5 the following year. We are now somewhere between 3.5 and 4-4 on some of the levels. By Government standards, that is in the upper quartile of Departments, but we have some way to go. The issues that Ann highlighted, and the CIPFA evaluation highlighted too, are that in some areas there were some technical shortcomings in terms of quality of staff and so on. Those staff have been moved on, as we said, so it is not as if we do not recognise the issue. I do not think we are quite as far back as the way you put it in your question.

Q152 Ben Gummer: The point I am trying to make-I am sorry, Sir Suma, and I fully accept the remarkable progress you have made-is that the things the Department is trying to do in the next two or three years are beyond anything that anyone else in Government is trying to achieve.

Sir Suma Chakrabarti: Absolutely.

Q153 Ben Gummer: For that you need exceptional financial management.

Sir Suma Chakrabarti: You need even more than that. You need a different set of skills altogether. I was hoping we were going to talk about some of the skills for the future. The more we move into this area of payment by results, contracting out, there is a whole set of issues on commercial and contract management skills in the Department that we need to make a big push on. That is what our own capability review is telling us. We will be sending you the details quite soon once the board has looked at it. That is the area we have to make a major push on. I do not only mean hiring a lot of people in procurement. Of course, our procurement arm is rather good and we need to keep strengthening that-there is a pay issue we also need to talk about-but it is much more about getting staff more broadly throughout the organisation thinking in commercial terms in a way that they have not grown up thinking. None of us grew up that way and it is quite important that we shift our thinking. That has begun to happen because of PbR. If you look at some of the people who have been working on PbR, they have learned, frankly, on the job, as they have tried to make the market. We are going to have to up the pace on that significantly in the next five or six years as part of the transformation. I agree with that.

Q154 Yasmin Qureshi: That leads on to the issue about the spending review. Recently your Department said that you were trying to spend money responsibly and trying to make savings not by salami slicing the budget, but rather identifying the areas where savings can be made without it harming front-line services. You called this your Transforming Justice agenda. Would you say that perhaps you underestimated the amount of money that you would need to carry out the work of the MoJ, bearing in mind we have heard the former Home Secretary Jack Straw and the Justice Minister say in the past that the MoJ is very demand-led? Therefore, in light of that, do you not think that you perhaps might have underestimated and asked for less than you should have had?

Sir Suma Chakrabarti: I am not sure we were in a position to ask for anything, necessarily. I do not think that is quite how the negotiation panned out.

Q155 Yasmin Qureshi: What I am saying is not you, but the Department itself, it is suggested, did not fight enough to get extra resources that it should have had, bearing in mind that your Ministry is very much demand-led.

Sir Suma Chakrabarti: I can assure you that we fought tooth and nail for our budget. You have an exChancellor as Secretary of State and an exhead of public spending as the Permanent Secretary. We knew all the tricks from both sides of the fence. We got what the Government decided we were going to get. Essentially, they prioritised; we were not one of the Departments that were ringfenced, as you know, and we got this average size of cut. It is very important to lay out that we planned and modelled all the various options in great detail, so we have a very good sense of what the plans are and what we need to do to deliver them. At the time of the spending review settlement we knew exactly where we were going to have to make the cuts and so on, and that is what we have been pursuing. There was a further change midyear, as you know, because of sentencing policy change. Your basic point that we are a demandled Department is absolutely right, which is why it is very important to have the changes to both sentencing and legal aid reforms in terms of reducing demand. That is part of the plan, if you like. But the changes in sentencing policy added a further pressure that we had not budgeted for clearly at the end of the spending review settlement. We did some further modelling, some further efficiency work, and we have had to increase the share of efficiency savings in our overall plans from 50% to 60% to make the plans add up. We have detailed plans all the way through to 201415.

Q156 Yasmin Qureshi: Can I ask you for an example of which areas of your business you have streamlined, and how were the staff and the stakeholders involved in that particular process? Can you give us an idea of some of the areas where you have done your streamlining and how you achieved it?

Antonia Romeo: We took the decision to focus on protecting, where possible, the front line and to take the cost out of management and back office where possible. We have so far taken out 22% from the senior civil service and 8% from the nonsenior civil service, which demonstrates that we have driven to focus on taking out from the top, including a 50% reduction in the number of directors general. We did not want to make arbitrary cuts, so we designed and put in place an operating model blueprint, which looked at reorganising how we did the Department restructuring. We brought our back offices together into a shared services model. Ann may want to say more about that in a moment. We focused on allowing the front line the space to get on, do its job and focus on delivery; and having a smaller, more strategic centre, including the policy group. We have focused on trying, as I say, to reduce efficiencies that have to be made in the front-line and more on taking the costs out of headquarters.

Q157 Yasmin Qureshi: You probably all know what you are talking about, but can you explain to us how you define front-line services?

Antonia Romeo: For example, the NOMS headquarters has been asked to reduce its costs by 37%, whereas the prisons are being asked to find 10% efficiency savings over the SR period. Does that answer your question? By front-line services, I mean courts, tribunals and prisons and so on.

Yasmin Qureshi: I just wanted clarification on that.

Q158 Jeremy Corbyn: Do those figures of 8% and 22% relate to cash or people?

Antonia Romeo: People.

Q159 Jeremy Corbyn: How many senior civil service jobs have been lost compared to the rest?

Antonia Romeo: Currently-I am doing a bit of quick mental maths here-56 have been taken out of the senior civil service since March 2010 and something that looks to be about 6,000, or a bit under, out of the nonsenior civil service.

Q160 Jeremy Corbyn: Of the 6,000, what grades would they be, mostly? Do you have a breakdown?

Antonia Romeo: I do not have a breakdown. I can get you a breakdown if you would like it.

Sir Suma Chakrabarti: On the senior civil service, I know that within Whitehall we have taken more out of the SCS than anywhere else. If you look at the tier below me, there were 13 directors general a year and a half ago and we are down to six. There was a massive cull. That was partly because I wanted to send a very strong signal to the organisation that we have to take our share of the cuts at the top and in headquarters, very much going to the heart of Ms Qureshi’s question.

Q161 Jeremy Corbyn: Of the 6,000 that have gone, how many are from the London head office compared to regional and local?

Sir Suma Chakrabarti: We will have to come back with a breakdown.

Antonia Romeo: I am afraid I do not have that breakdown.

Q162 Jeremy Corbyn: If we could have that information, Chair, it would be very helpful.

Sir Suma Chakrabarti: Of course.

Q163 Yasmin Qureshi: Taking you on to a point about savings, we understand that you have yet to complete your estate strategy programme. It is estimated that, at the moment, the balance sheet of properties owned by the MoJ is about £8.6 billion and we know that you want to reduce the number of administrative properties from 183 to 89 and then maybe close about 142 courts and 100 probation properties. Bearing in mind that is what you are intending to do, but that you do not have an estate strategy in place yet, is it not a bit risky to embark on an estate rationalisation programme?

Sir Suma Chakrabarti: I think there is a bit of a misunderstanding here. Our new estate strategy, which you heard about on your visit, will come into being later this year. We have had an estate strategy, which we have been pursuing, and that has consisted of a number of things on the administrative estate. We are trying to close buildings that are underutilised. In London, a few years ago we were at 22 buildings, then it was down to 18 and now we are down to 13. We will be down to four in the medium term in London in administrative buildings. This Committee knows a lot about court closures. There are 121 court closures, again because of very low utilisation rates. We will have go to further in that area as well because there is still quite a lot of coordination and efficiency to be got out of that.

As to the prisons, four have been closed since the election as well. All of these have been part of a strategy that was bound in with the spending review strategy, which you mentioned at the beginning. Clearly, we have to have a new estate strategy and we are working on that now. We have very much linked it to the Transforming Justice next stage. It has to be linked to that. These plans are enmeshed together. They are not something separate from each other.

Q164 Yasmin Qureshi: As you said, you have closed some prisons and buildings. Approximately-and we are talking about round figures-how much of a saving has the Ministry made, or how much money has it realised from selling these?

Ann Beasley: You mean from the selling of the assets?

Q165 Yasmin Qureshi: Yes, from selling the assets; that is right.

Ann Beasley: At the moment, the total value of the courts, for example, that are due to be closed is about £30 million. We have sold four and that has raised £1 million, or of that order. As part of our capital programme over the spending review we are expecting to sell £250 million worth of assets, which would include headquarters buildings that we do not need and courts and prisons that we are going to close. We are allowed to retain that as part of our capital programme throughout the spending review2. It will be about £250 million.

Q166 Chair: Have you taken a view about market conditions and the extent to which you should defer selling?

Ann Beasley: We always look at maximising the sale value. Quite often where we are selling land that we no longer require, we will seek planning permission for that land to increase the value of it so that when we sell it we get the best value. Sometimes, even where we are not able to do that initially, we put clauses into the contract such that, if the person buying it subsequently gets planning permission and increases the value, we have some clawback provisions.

Q167 Chair: I was also thinking that in some parts of the country it is not a very good time to be a seller.

Ann Beasley: No.

Q168 Yasmin Qureshi: As to the prisons that have now been closed, have the inmates been put into other prisons? In that case, is that one of the reasons the numbers have gone up in the prison system?

Sir Suma Chakrabarti: The numbers are going up for other reasons. Those inmates have been transferred to other prisons, yes. The four are, I think, Ashwell, Lancaster Castle, Latchmere and Brockhill. I think all those prisons have now been closed.

Q169 Chair: Lancaster Castle used to appear in the estates list as the only building that was 1,000 years old.

Sir Suma Chakrabarti: I know, and it was incredibly expensive to maintain, so I am quite pleased we have managed to send it back to the Duchy.

Q170 Elizabeth Truss: You mentioned earlier that civil servants often do not necessarily want to work in the finance function or that there was not a great sort of skills match there. When we visited the Department, the feedback I got from the finance team was that, quite often, a lot of work is done before getting the financials checked out. In terms of some of the policy work, it is driven by ideas first and then the economics second rather than the other way round. In terms of the balance of staff that I observed, there were some pretty large policy teams all working in their own particular area. The finance team seemed to be relatively small. Do you think that the current balance is right, or do you think more needs to be done to make the Department led by economic decision making, given the big focus on payment by results and value for money?

Sir Suma Chakrabarti: I am going to ask Helen to talk about the linkages between policy and the analysts, if you like, and Ann can talk about the finance people. It is much more integrated than it was. Four years ago this Department did not have any analytical sense half the time. Submissions used to go up with no consideration of finance. I used to find that submissions did not have a paragraph covering the financial issues at all. That has completely changed. The NAO report says that it has completely changed. The question is where the analysts or the finance people come into the process. Do they come in at the end of the assembly line or much earlier? What is happening is they are coming into the decision making much earlier now than they ever did before, but I am sure there are some areas where we can improve that further. Do you want to give some examples?

Helen Edwards: Yes. It depends a little on how you define good policy making. My understanding, and the way we are trying to implement it in the Department, is first of all that the task is to understand what it is that Ministers want to achieve, what is the ambition. Then, second, is to pull everyone together-the analysts, the lawyers, the delivery people and the finance people-so that we can work up options that are evidence-based, where you understand the finance, where you know that they are deliverable and legal, and then put options to Ministers. I see it as one integrated package. Are we fully there yet? We are not 100%. We are one of the first Departments to be implementing and embedding the new Policy Professions Skills Framework in Whitehall, which sets out that approach to policy making. As we establish the new policy group, making sure that we work in that way every time is what we want to achieve.

Q171 Elizabeth Truss: Do you think that means, though, that the Department is identifying smallscale and incremental opportunities rather than a transformation? Let me give you an example in terms of payment by results on probation. There are different lots let out for, let us say, Community Payback, which is on a panregional level. You have the probation trusts at a local level and the Prison Service doing their own thing. Because the Department is structured around policy teams focusing on all of those areas, where is the big idea that would transform the cost base? We have heard about taking costs out of the middle layer, if you like, and focusing on the front line, but, quite often, better delivery can be achieved by restructuring the way things are done. There was certainly some feedback when we visited the Department that there are silos still operating in policy. To what extent are those being challenged and led by an overview of how the whole piece could be transformed?

Helen Edwards: I would not claim that we have overcome the silos yet, but we do have a team of people that is responsible for pulling together all the work on payment by results. It is quite a complicated area because it operates differently in different settings. We have a number of pilots, as you know. We have the Social Impact Bond pilot in Peterborough, which is one model. We have the prisonbased paymentbyresults pilots. We have one in the private sector, where they can put money at risk, and two in the public sector where the finances are different. We have another two or three community pilots running with probation. That is in addition to the competition we are running around Community Payback because, again, the context that you are dealing with is different.

Then, in the adult system, we have two local incentives pilots where we are working with all the local authorities and the police in Greater Manchester, and in five boroughs in London with local authorities and the police, to see if, between them, they can reduce the reoffending rate of the most prolific and the shortterm offenders. We have Pathfinder running in the youth estate-in the youth system-because again the context is different, and that is working with local authorities to try and reduce reoffending and the use of custody there.

We are also working with the Department of Health on paymentbyresults initiatives regarding drug and alcohol recovery and with DWP in the context of work. We are doing this in those ways not because we want to be silo-based, but because the context is different. We could be putting the Department’s money at risk as it is quite possible for people to reduce reoffending without the Department’s costs going down because the main costs are in the prisons. It assumes that, if you reduce reoffending, we will have space in prisons and can close them, but many things can drive the demand for prison. So we are running as many pilot schemes as we can. We have an overview and a methodology, and the analysts and finance people are working across all of them, but we are testing it in different contexts so that we really do understand how to make it work and how to manage the risks. Our commitment is to roll out the paymentbyresults approach across the whole of our estate and activity by the end of the spending review.

Q172 Elizabeth Truss: My concern about what you have said is that you are looking at the risk from the MoJ level rather than the entire Government level.

Helen Edwards: No, I do not think that is right.

Sir Suma Chakrabarti: Absolutely not.

Q173 Elizabeth Truss: Or you are looking at the financial risk to the Department.

Sir Suma Chakrabarti: No. The local authority ones are classic examples.

Helen Edwards: With the local authority, we are looking across the whole costs in the criminal justice system, so we are working with all parts-

Q174 Elizabeth Truss: But it is not just about the criminal justice system, is it, because the Health Service and education impact on that? Are the Government structured in the right way? Is the way we carry out the economic models structured in the right way to maximise results? That may not be under your control at the Ministry of Justice, but are we having tails wagging dogs across Government rather than looking at the whole dog? I apologise for that.

Jeremy Corbyn: I am getting a bit confused here.

Helen Edwards: I think we are looking at the whole dog in local authority areas because most of them have set up boards that bring in health, local authorities and all the partners. They are testing the proposition that, if you work together to manage the most prolific offenders, and if you look at all the problems that they present and have a coordinated response, you can make a real dent in that and that brings savings. Then those savings would be shared. We are working on a methodology. It is not confined just to criminal justice organisations.

Q175 Elizabeth Truss: You are saying that the logical conclusion of that is that the budget should be at a local level if that is where they all link up.

Sir Suma Chakrabarti: Quite possibly.

Helen Edwards: That is possible.

Sir Suma Chakrabarti: That is one of the things that Government will have to explore more of.

Q176 Chair: We have been trying to encourage them to explore it for some time.

Sir Suma Chakrabarti: Yes. Some of this was explored in the last Administration as well, as to what extent you can delegate budgets out and so on, and what the right incentives are then. Troubled families would be another good example where we are not a lead Department. DCLG is, but there is no way that that agenda-and it has been a very important agenda for us-can be delivered without lots of players being involved, including us. So we are helping to finance that. There will be plenty of other examples as well. Do you want to say something on the finance policy nexus as well?

Ann Beasley: Yes. I want to correct something. If I have given you the impression that nobody wanted to work in finance, what I was saying was that nobody wants to work in the production of statutory accounts rather than finance. I have a very enthusiastic finance team on the management accounting.

I want to come back to your point about when the analysts engage versus policy. One of the things that we did well during the spending review was to start from a really deep understanding of what it was that drove our costs in the Department. Having done a lot of the modelling work that Suma had set up, we did understand what it was that drove our costs. We started from the base of, "This is what drives the prison population," and then looked to see what the policy options were to stop those drivers, if you see what I mean. We knew, for example, that issues relating to indeterminate public protection sentences were a driver of our prison population. That then fed into the policy options as to what you would do to reduce those drivers. We had to start with an analysis of where we were.

Q177 Elizabeth Truss: Can I ask if you looked at what actions other Government Departments took, if they drove your costs and what-

Ann Beasley: Absolutely.

Q178 Elizabeth Truss: What actions did you take to get those other Departments to change their behaviour?

Ann Beasley: Some of the work is in Helen’s area, but there are a number of things where we have something called the justice impact test. When other Government Departments want to introduce a policy, we run it through our models to see what impact we think it will have on our costs and then we have to have some negotiation about who pays for it. We now have a much better relationship with the Home Office, because they are one of the Departments that quite often drive our costs, where we are looking at how we take account of policy changes that they want that have an impact in our world and how you would pay for those, but this is where Helen is-

Q179 Elizabeth Truss: That is a reactive approach, essentially. Do you have a proactive approach that says, "What the Department for Education is doing here is having a negative impact on youth offending. Therefore, we are going to say to the Secretary of State for Education that we want you to change this policy in this way and this would be the benefit."? If there was a cost benefit, how would you share it between the Departments?

Helen Edwards: By and large, things that the Department for Education does tend to save us money because the more it engages, educates and ensures that troubled families are dealt with across Government, the less demand, hopefully, there will be on the justice system. Through the business planning process, we are trying to get other Departments to assist us in a positive way. Some of the health inputs-for example, prioritising services to offenders in a way that, arguably, has not been done before-should help us with the rehabilitation revolution. In the same way as with early access to the Work Programme with DWP, there is a cost for them, but it delivers a benefit to us.

It is sentencing policy that drives the costs on our system to a large extent. We have lots of negotiations when sentencing changes are proposed, and we do model and then negotiate those. Some of our spending review proposals were designed to limit the demand on our system through changes to that area of policy. Because we have a reasonably good analysis of what drives our cost, but also the benefits we can get from other Departments spending money on our agenda, we are reasonably well placed to have those negotiations in a fairly proactive way, although, obviously, when new proposals come up we are reacting to those specific ones.

Sir Suma Chakrabarti: I should say, again, that the Government are getting better at this, but it is a long way from where you and we would like it to be. I do not think we should be defensive about that because there is a lot of work to do. There was a lot of negotiation that had to be gone into over the financing just to get the troubled families agenda going. The next stage for us on Transforming Justice where we lead-Antonia is going to lead-is going to have to involve much more crossboundary working and questions such as where the budget should be held for those sorts of thing. We are very open to it. It is not that we can pool the budget. If the budget is better held somewhere else because that will drive the outcomes that we care about, so be it. That is going to have to be absolutely central to the next stage of this.

Antonia Romeo: Can I add something about Transforming Justice as setting, as it were, the strategic framework for some of this, coming back to your point about analysis? Of course, Transforming Justice effectively sets the strategy and then the policy is developed as a result of that. The analysts play quite a key role in setting our strategy from the start. If we want to do something bold in terms of doing less within the MoJ, or by the state, and doing more through our partners in the private sector and voluntary and social enterprise sectors, we can then put in place these paymentbyresults pilots specifically to test the different sorts of model. That will give us the evidence that we want to put back in as we evolve Transforming Justice to what we do next. There is a sort of iterative process. Inevitably, pilots sometimes seem small. They are small because we are testing the output.

Q180 Chair: You have one crossdepartmental Minister. I do not want to get into the no doubt significant merits of the Minister concerned, but rather the institutional arrangement and whether that contributes. We observed the empty desks and empty room because we were not there on the day that he is in the Department. Does that mechanism add anything to the process by which you would normally work together with two Ministers sitting around a table with officials looking at matters that are of joint interest to two Departments?

Sir Suma Chakrabarti: I am not going to comment on the particular Minister, but just on the issue of joint Ministers. I suppose I have form in this area. I was Private Secretary to Lynda Chalker when she was ODA Minister and also Minister for Africa in the Foreign Office, so I did run a private office that managed that relationship. I am also, obviously, working with Nick Herbert very closely. Things that make it work, when it works well, are, first of all, a recognition that you have a remit from the relevant Secretaries of State to roam across the agenda. The second is that you have time to challenge established ways of doing things, because one of the things you are going to have to do to join up bits of the justice system, let us say, is to challenge-and Jack Straw would have said this, I am sure-very strong institutions, which are very proud of what they do and have done, and their history. They do not necessarily want to engage in quite the way we might need to, to join them up. You have to have time to do that and time to get out and talk to people in the front line and to citizens about the system as well. Those are the fundamental things, in addition to being well supported and so on.

In the case of the CJS, it makes sense to have a joint Minister as long as you have all those conditions in place. Nick Herbert and I have talked about this. The fair thing to say is that, over the last six months, this has begun to work. For the first year, because he was so tied up with the Police Reform and Social Responsibility Bill and so on, it was very difficult for him to give time to the CJS, but it is because of him that we have been able to challenge some of the things relating to the use of technology in the CJS. He has pushed very hard to have electronic case files. This is not rocket science and the idea has been around for a while, but it did require a Minister with clout to go in and say to us, to the Courts Service, to the CPS and to the police, "For heaven’s sake, you should be able, in this day and age, to have a case file that passes electronically between you." That is what we will have from April, all bar three police authorities. That is amazing progress in six months, but it has required him to have the time to do that.

Q181 Ben Gummer: There are a lot of arm’s-length bodies. In your briefing notes-MoJB 01, evidence to this Committee of September 2011- you said: "4.6 The Public Bodies Bill seeks to abolish a number of ALBs," -and so on and so forth-"This includes the Youth Justice Board." Clearly, events have changed since then. What is the financial cost to the Department of the YJB remaining a nondepartmental public body?

Sir Suma Chakrabarti: It does not really change.

Helen Edwards: It appears relatively small. If we had not had a YJB, we would have not run a board with board members. We would not have needed some of the Government’s arrangements that the Youth Justice Board has because-

Q182 Chair: You were going to have an advisory board, were you not?

Helen Edwards: We were going to have an advisory board, so we were weighing up the cost, but it was fairly marginal either way, to be honest. The real savings that we are trying to take forward with the Youth Justice Board are through things like shared services. Like any other organisation, we do not want to waste money on duplicating backoffice functions. We want to make sure that the money we do have goes straight into services.

Q183 Ben Gummer: I am sorry to interrupt you, but in your evidence of September 2011 you said that this "will allow their functions to be undertaken more efficiently within the Department", but you now say the difference is marginal. One or other of those statements is-

Helen Edwards: If I can finish, it is because we are pursuing the shared services agenda anyway. Whether or not they remain as an NDPB or come into the Department, they will be part of our shared services arrangement for backoffice costs, so we make those savings either way.

Q184 Ben Gummer: Okay; that is an entirely fair point. Now I turn to the Legal Services Commission. Some of us visited the Legal Services Commission at the end of last year. I cannot speak for the rest of the Committee, but, if I may say so, Sir Alan, I found the nonexecutive board members to be lacking in any sense of their fiduciary duties to the taxpayer. We were presented, with some excitement, with the new IT arrangements for case management, which should have been standard practice 10 years ago, and a completely muddled approach to collection of assets. We came away pretty astounded by it. It is very concerning, I think, that the date at which it is going to be absorbed into the MoJ has been extended. Could you explain, please, how we are going to get a real grip on the LSC between now and then?

Sir Suma Chakrabarti: I will go first and Helen may want to add something. First on the commissioners, we now have a set of commissioners who are more focused on the fiduciary and operational risks than we had before. There is a long history as to what went wrong, but something clearly did go seriously wrong with the LSC that led to their accounts being qualified in 200809. We then changed the management, which was the only power we had, as this was an NDPB. Since then, for the last not quite two years, there has been a serious programme of change management taking place, which has involved us seconding people into the LSC to try and improve their operations. In terms of the latest score card I have seen, things are going in the right direction, which I reviewed yesterday. Against their key performance indicators they are doing reasonably well now. Their error rates, which we talk about in terms of the accounts, have come down by over a third in one year. The CAG has commended their work on that, so it is going in the right direction.

Is it in as good a state and as effective as we want it to be? No. The chief executive would say that, not just me. The last chief executive said that it is going to take a couple more years at least to get it into the sort of shape we want it to be in. Part of that will be helped by coming into the Department. I think, personally-and this has crossparty consensus-it was set up on the wrong premise as an NDPB, leaving it far too distant from the Department and the skills and help the Department could have provided. Becoming an agency will help us provide greater support. In effect, we are already running it pretty much like a shadow agency. We are much more intrusive than we ever used to be. Ann is very strongly involved in the financial management side and Helen, obviously, through the policy lead, but she also chairs a transition board bringing them in.

Q185 Chair: Wait a moment. I thought they had shed policy responsibility already.

Sir Suma Chakrabarti: They have, and Helen takes the lead on that. On the transition board, Helen leads that now, which is the board for bringing them into the agency. We have recently selected a new chief executive as well, who has very strong change management skills. They have a very strong finance director now as well, so I am more optimistic than I would have been a year ago about where the LSC is. But it is not the stellar organisation it needs to be.

Q186 Ben Gummer: The difference between our visit to the main Department and to the LSC was very significant, so, even if progress has been made, I would suggest a lot more has to happen. On the issue of skills, again, in your briefing paper of last year, you said: "6.3 The transition of the LSC will allow the Agency to focus on developing skills and expertise in the areas it has responsibility for (commissioning and administering legal aid services)." On the commissioning side, the skills and expertise that we heard left a huge amount to be desired. The whole framework of how they approach commissioning seems to be misguided and yet no one at the moment seems to be challenging that. I know that down the line they want to, but we are talking about two or three years. Is there any way we can bring that forward and we can look at commissioning in the LSC?

Helen Edwards: There might well be. We have a new chief executive about to join the LSC and he will be on the Ministry of Justice board. I am sure he will want to take a very good look at all of that. We would have been ready to bring the LSC into the Ministry this autumn, but, because we will not be ready to implement the new scheme-which, as you know, is still being debated in Parliament-until the following April, when we looked at having changed the status of the LSC but running still on the old scheme, we decided it was too complicated and too dangerous. You need to bring in the new scheme and the new organisation with its new powers, because it distributes powers differently, at the same time.

As Suma describes, we have a transition and oversight board that both Ann and I sit on-because Ann has been running a programme to improve the financial management within the LSC-and that board oversees the implementation of the legal aid reform programme. I am chairing that because it is policy into delivery, so it is important that we do that right. In fact, we have just had a green Gateway Review from the OGC on that programme, which is good, but we also oversee the performance of the LSC in that. We have a pretty tight grip and we do spend a lot of time on it, because, as you say, it is an organisation that is not yet performing as we need it to and we are asking quite a lot of it in terms of implementing change. We think we have as tight a grip on it as we should have. We will take back your view on commissioning and check our plans for improving commissioning-because we do know it needs to improve-to see whether there is more that we can do, but we feel it is moving in the right direction.

Q187 Ben Gummer: I have one final question on ALBs, on NOMS. Again, this is familiar territory. Do you feel that the financial management within NOMS is, to some extent, driving the decisions being made about the structure for PbR contracts or is it flexible enough to look at really innovative ways of delivering PbR contracts much along the lines that Ms Truss was referring to earlier?

Sir Suma Chakrabarti: NOMS do not do this on their own, so it has been a crossdepartmental team. Procurement people under Ann and the policy people under Helen have been heavily involved in designing those contracts. It is not a NOMSonly show there at all. Again, I go back to what I said to Ms Truss. We have to get those skills more broadly across the Ministry, but, in terms of the PbR contracts, there has certainly been a crossdepartmental effort so far.

Q188 Ben Gummer: I have a few questions on staffing and talking about skills again. Paragraph 19 on page 9 of the NAO report says that you achieved very considerable improvements in your financial management within the Ministry itself and achieved these benefits "while reducing the number of finance staff by a quarter". Is that a ratio that could be rolled out across the Department?

Sir Suma Chakrabarti: That is better for less; there you are. That is what is going on elsewhere. If you look at the policy side and the corporate side, we are delivering very good outcomes. I have the score cards all here in front of me, which show we are achieving as good outcomes, if not better in some areas, with fewer staff. The key thing on the finance side is how many qualified staff we have. Again, this was an area where 10 years ago you would have found loads of people who were unqualified working in the finance area. That is not the case any more. We know the numbers of people who are qualified. Even if we were reducing, the question is, are those 75% who are left able to do the job better? I think they are.

Q189 Ben Gummer: None the less, although the changes that have happened in the last few years, in real terms, have seen marginal reductions in your budget, in current terms you have had cash increases. Many organisations in the private sector in that period have reduced their head count very significantly against cash current term budget decreases as well. What lessons are you taking from change programmes in the private sector where significant head count reductions have taken place and using and replicating them in the Department?

Ann Beasley: One of the big lessons from the private sector is using a shared service model, is it not? We started in NOMS implementing a shared service model and we are now rolling that out to the rest of the Ministry. We have also applied that not only to transactional activity, but to more valueadded activity. One of the reasons we have been able to take posts out of the finance function is because we now share much more of that activity and do it once within the core Ministry for everybody. There has been an element of economies of scale in bringing the functions together, but we have also had quite a big change of people. I now have a firstclass senior finance team, almost all of whom are new.

Sir Suma Chakrabarti: Antonia, do you want to add something there, because we are working with the private sector in a number of areas?

Antonia Romeo: Yes. Perhaps first in terms of the capability as a whole, in taking out head count, we have sought to make sure we focus on retaining the people with the right skills. In some cases we have ringfenced particular jobs, obviously on finance and procurement, but in other areas elsewhere. We had very strict criteria for our voluntary early departure scheme, where we looked at skills needed-and this was led by the business-but also operational capability and ensuring that was in place. We have sought to ensure we retain the knowledge, but we have also driven up average skill and talent across the organisation while we are going through this programme, which I think is something that we have learned from the private sector going through similar restructuring.

Sir Suma Chakrabarti: We also have four nonexecutive directors on the main board, but plenty of others on the subsidiary boards. Most of them are private sector people and they are heavily engaged in a lot of this change management stuff, advising us. One of them sits on our workforce committee and he has advised us very strongly on this change process, bringing in examples from the private sector.

Antonia Romeo: One of the key lessons from the private sector is always focusing on the outcomes and then the capabilities you need to deliver that, which is on your point earlier about ensuring that we are building the capability now to get ourselves in the right space for the ambitious programme and performance we have to continue to take forward.

Q190 Ben Gummer: That was certainly apparent talking anecdotally to people in the Department. You can see the voluntary departures programme is working well, especially in the Courts Service.

Can I ask a very quick question on sickness and the figures you provided? Let us take it that the generally accepted figure for sickness in the private sector averages at around four days per annum. If you look at your figures for headquarters, for the lowest grade staff it is running at just under 13 days per annum, an increase over the last three years from eight days. In NOMS, where you would have thought it might go up, given the kind of work that some of the lowgrade staff are doing, it is at 11 days per annum, just over, and has gone down slightly. Her Majesty’s Courts Service is at nine, and Land Registry, for some reason, is at 11 days per annum. How can this possibly be accounted for?

Antonia Romeo: I will start by saying-the point you have made already-that of course our figures are skewed in some areas, for example, in NOMS. I take your point that NOMS is not providing the entirety of the skew, but, of course, there is a huge number of staff in there, so it would drive up the average, because of things like the impact of assaults and accidents and so on at work. We know this is an area we have to focus on. On average, we are at 9.1 days, and we are third. We know there are only two Departments below us in Whitehall and we are very much focusing on taking this forward in with business groups leading this.

Sir Suma Chakrabarti: The key thing is to compare us with the other four Departments that have big delivery arms and private sector entities that have big delivery arms at the front line where jobs are quite risky in comparison.

Q191 Chair: But NOMS is not the worst of your areas for sickness, and NOMS is the area where you are quite likely to be assaulted at work.

Sir Suma Chakrabarti: That is right. NOMS has improved a lot. NOMS’s numbers were way up in the high teens and have come down quite a lot through very targeted work. We have further to go on this. The DWP have made major strides into the area and they are the ones we should be trying to emulate much more.

Q192 Ben Gummer: It is double the private sector rate for this deskbased work.

Sir Suma Chakrabarti: And is now with BIS, so our average will improve. You always have to deal with a denominator in these issues. Land Registry’s numbers got very much worse during the change process last year when we started closing offices. There was a very difficult change process and their numbers did go up.

Q193 Ben Gummer: As a followup to the issue that was raised by Mr Buckland earlier about the team that, two years running, failed to confirm an asset base at NOMS within the finance management team who were part of the measurement of the asset figures, is it the same group-the same people?

Ann Beasley: It was the same team, yes.

Q194 Ben Gummer: Again I am sorry to make private sector comparisons, but if they were running an asset base of that size in the private sector-and comparable estates would have been supermarkets and high street retailers-what action do you think would have been taken against them had they failed to deliver that information to the board for the second year running?

Ann Beasley: I guess it would depend on why it was that they failed to do it, would it not?

Q195 Ben Gummer: What is your gut feeling, Ms Beasley?

Ann Beasley: I suppose what you are leading me to conclude is that they would have been shown the door much more quickly.

Q196 Ben Gummer: But they were not shown the door in your circumstance. This is billions of pounds of taxpayers’ money, and a team which has failed two years running to verify an asset base contrary to the command of the Permanent Secretary has been allowed voluntary redundancy without termination.

Ann Beasley: They did ultimately produce the asset notes for the accounts. They did not do it in a timely enough fashion. It is not that they failed to do it completely. But you are right: they have now gone and we have people in there who we have more confidence in to produce the asset notes in a timely fashion.

Ben Gummer: You can see why it would make my constituents cross.

Q197 Nick de Bois: I would like to turn to external providers briefly, in context, principally, of payment by results and first of all explore the relationship that the MoJ has to try and strike a balance between the use of local and voluntary organisations wherever possible and offering best value to the taxpayer. My concern at the moment-and I am a fan of payment by results-is that, if we are overreliant on prime contractors, which I think is where this is going, and then contracting out to smaller local voluntary organisation, SMEs effectively, this will involve complicated contractual arrangements. It may be top slicing and, therefore, less value for money. Perhaps it makes it rather difficult to monitor. Can you comment broadly as to whether there would be any shift from prime contractors more to local organisations and that general point before I move on to something else?

Helen Edwards: It is probably too early to say because part of the idea of the pilots is that we are testing the method of contracting. We are very conscious of the position of voluntary and community organisations in these arrangements. In a previous life I was at a voluntary and community organisation that was trying to work with the private sector and with bodies like further education colleges, where we often felt we were getting the crumbs from the table. So we are very conscious of the issue. We have a voluntary and community board, which is advising us on how this is going. If we can get this right, it is very much about playing to strengths because private sector and voluntary community organisations bring different things to this. In an area, for example, like Community Payback, the private sector is often very well placed to deal with the logistics and organisational administrative parts of that, but other organisations can be much more involved in the facetoface delivery. All I can say at this point is that we are very conscious of it. We want to get it right.

We are looking at the consortia, and there are some very interesting consortia. In the context of one of our private prisons, they have seconded a member of their staff into one of the voluntary organisations that is delivering part of it to make sure that they are working across. In the Peterborough pilot, of course it is a voluntary organisation-the St Giles Trust-that is contracting. But the problem we are struggling with all the time, as I am sure you appreciate, is that contracting with lots and lots of bodies is more difficult. If we do move to a different form of contracting, in a different field, in victim services, for example, yesterday in the consultation we trailed the idea of those services being commissioned locally so that you can get a different feel. Most of the commissioning will be with voluntary bodies.

Q198 Nick de Bois: It is interesting that you pick up on the work of the St Giles Trust, which is very effective from what I have seen in dealing with the reoffending issue and bringing down reoffending, which we all agree is critical. However, I get a sense that there are barriers developing. For example, some of the most effective people who can help reform are previous offenders. When they are on licence, larger organisations, who may be prime contractors, have barriers to utilising what is turning out to be a very effective resource. We are all aware that using former offenders is an issue, but, if the evidence from the pilots is suggesting that this is successful, can we not break down these barriers so that we are not having a culture of risk drive and hold back what could be a very effective outcome? Can we do that? Can we break down these barriers, or is it that a lot of Departments are not doing it?

Helen Edwards: No. We would certainly want to break down those barriers. Our advice would always be that you carry out a sensible risk assessment. There are certain jobs that you might not put an exoffender into, but, actually, there are probably very few. Having blanket bans on people with criminal records is not at all a policy that we would endorse. We need to look at what the evidence of that is, because, as you say, the St Giles Trust experience is that using exoffenders can be very powerful, particularly in a mentoring support role. If there are barriers, those are precisely the things we want to identify and try and do something about.

Q199 Nick de Bois: I am pleased to hear it, but how will we monitor it? Do you think there will be an effect from the pilots where we will be able to take this on robustly? My fear is that, if you combine that with a bidding system for work that will eventually come in, some of the talent that operates on a smaller, scale such as organisations like the St Giles Trust, will have too many barriers to expand the work that they do. Will you look for some positive action from the pilots to see that we overcome this, if the evidence backs up what we think it is already?

Helen Edwards: I think you are right. We must make sure we extract as much learning from the pilots as we can. The formal evaluation is very much focused on looking at impact on reoffending, but there is a qualitative aspect to this as well. The points you make are very powerful ones. We should take that away and make sure that we are doing the evaluation in a way that will enable us to pick up on barriers.

Antonia Romeo: May I add a point? The word is "partnership", is it not, and what we have to see as we move onward with Transforming Justice is how we create an environment where we can bring all these groups together in partnership? For example, in Doncaster, although Serco run the prison, they are working with the charities Turning Point and Catch22 very closely in partnership to deliver the outcomes. Likewise, if you go to Brixton prison, you would see a group of people round the table such as the St Giles Trust and people focusing on drugs or unemployment. We have to think about how the role of the Government or the state could increasingly be to facilitate these partnerships happening, keeping the bits that the Government should rightly keep to themselves in the public sector, and also critically share best practice so that we do not have problems with local implementation.

Nick de Bois: I do agree, and I have a final point, Chair, because I have been very quiet for most of the meeting. I am anxious that the partners do not ultimately become competitors and then try and block each other out. If I was running a corporation, I would be looking to avoid that, but I know what human beings and instincts are like. They can get in the way. That is what I am trying to highlight. We need to be very clear on it.

Q200 Jeremy Corbyn: The problem your Department has-I suppose like most aspects of public service-is that you are victims of whatever is happening elsewhere. You have no control over how many people are going to be in court or put in prison and yet you have to accommodate everybody at the end of it. What sort of realtime modelling do you have of cases going through court, the likelihood of getting into prison and so on? Last August there was a very large number of young people taken into custody, which in no way you could have planned for, but that could happen again or there could be a general rise in crime.

Sir Suma Chakrabarti: Again, Ann and Helen can talk on this in detail, but we do have modelling that gives us very quick answers now, which we did not have before. After the riots last year, for example, our team-our analysts-were asked to model this. "If this happened again, could we cope? How would we cope? What would happen to the system to adjust and deal with those sorts of numbers?" We were able to provide answers to Ministers very quickly on that compared with before.

Ann Beasley: We have a much more integrated modelling system now so that we can look at the impact of what is going on in the courts and what it is likely to do in terms of prisoners held on remand or sentenced and so on. Over the summer riots we had very close links with the police. We were getting their understanding of who they expected to arrest and were then able to model how we thought that would feed through our system in order to know how many prison places we thought we would need to cope with it. That was a very good demonstration of the system working very well in fast time.

Q201 Jeremy Corbyn: We will take it forward a bit. The prison estate is almost near capacity. If there was another serious outbreak like last August and the traditional system ended up putting 2,000 or 3,000 people into custody, it would take us to 100% or 101% capacity. What do you do then and how much does all that cost?

Ann Beasley: We model the prison population regularly. We publish it annually through the Office for National Statistics, but we regularly monitor the trends in the prison population and forecast going ahead. At the moment, because we have new capacity coming on in April-we probably have another 2,500 places coming on-we are able to model the difference between what we expect the population to be and capacity with sufficient lead time for us to be able to take action to deal with it. Obviously, in extreme cases that is building new house blocks on prisons. There are other things we can do to bring in capacity in a slightly faster time than that. It is reasonably current in terms of what is happening. It does allow us to plan. For next year, for example, we know what we expect to happen to the prison population.

Q202 Jeremy Corbyn: I have another point. On legal aid, if the changes go through as envisaged by the Government, there is clearly going to be a very different geography of access to legal aid. That probably will result in differing costs in court time, for example, with maybe fewer cases coming into court, but more people selfrepresenting, which takes longer and increases costs. What sort of modelling have you done of the legal aid changes and the effect on your whole Department?

Helen Edwards: In our impact assessment we tried to set out what we thought the impact might be. On litigants in person, the evidence is quite mixed. It is hard to evaluate. Active litigants do take longer, but it seems to split in that you can then get inactive litigants and that offsets. Overall, the evaluation we have done, although it does seem a bit counter-intuitive, shows that the impact is not necessarily as great as people might have predicted. Of course our overall approach, particularly with some of the civil and family cases, is to try and resolve more cases out of court because we do not necessarily think that resolving disputes in a court setting is always the right thing to do. Our overall strategy is to deal with more cases through dispute resolution and mediation where we can and then, of course, to allow the courts to focus on those cases that must come before them.

Q203 Jeremy Corbyn: With the cuts that are being made now and planned, do you envisage that times taken for justice will, for the individual, take longer?

Helen Edwards: Not necessarily. It will depend on the case. Our modelling overall has not shown that, but it is something we will have to keep a close eye on.

Q204 Jeremy Corbyn: What predictions are you working on for reoffending rates?

Helen Edwards: Our aim is to bring down reoffending rates through the work we are doing, the rehabilitation revolution and payment by results. Reoffending rates have been coming down, more for young people than for adults. We have not modelled any savings into this spending review period because we think this is a longerterm endeavour, but we would hope that, if we can bring down reoffending rates, then in the next spending review we will begin to see some of that translate into savings, depending on what happens to overall demand on the system.

Q205 Jeremy Corbyn: Quickly on this, how much do you keep in touch with what is happening in young offender institutions and the varying effects they have in success or otherwise on reoffending rates?

Helen Edwards: We do, and we have the figures. We have different institutions, as you know, different settings on the youth side. We have the young offender institutions, secure children’s homes and secure training centres. It is difficult to compare across because they are different and they cater for different populations of young people, but, if you look at the raw figures, the reoffending rates for secure children’s homes are in the region of 79%, for secure training centres 69%, and for YOIs 70%. But, as I say, I would use those figures with caution because they are different ages and different populations of young people.

Q206 Chair: They are all dreadful really, are they not?

Helen Edwards: They are not good, no, but, overall, if you look at the cohort reoffending rates, if you look at the number of young offenders, they have been fairly stable or coming down. If you look at the volume of offences committed by young people, it has come down something like 17% over the last few years.

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Q207 Jeremy Corbyn: But if two thirds are reoffending, that is not a good outcome.

Helen Edwards: It is high.

Sir Suma Chakrabarti: The key area of success in the youth justice system has been in reducing the number of firsttime entrants into the system, which again goes back to the demandled point. The more we can get to these people before they enter the justice system, the better. It is better for costs, better for them and better for society. That has been achieved through very strong prevention work done at a local level between a number of different players working together with the youth offending teams. That has been the great success.

Helen Edwards: Yes. The 55% reduction since 200708 is striking. You could say that fewer young people are coming into the system, so hopefully prevention is working. A lot are dealt with on community sentences and there are quite a lot of intensive programmes for young people, including some reparation, which is built into the youth system, and the number going into youth custody has been coming down as well. Those who do get through into youth custody really are the young people for whom other things have failed rather badly.

Q208 Jeremy Corbyn: Agreed, but there is still a very disturbing figure that, of those that get through into the youth custody system, two thirds, at least, end up reoffending. Those that have been maybe unlucky, or whatever, and brought into the criminal justice system are then likely to end up in a career of crime, rather than a solution. Surely that must be of concern, and also massive cost, to the Department.

Helen Edwards: It is of huge concern. As I say, overall, we have seen fewer numbers coming in and fewer young people going through to custody, but we want more focus on resettlement, working with local authorities, because they have a statutory responsibility to resettle young people. Through the work we are doing on local incentives and the Pathfinder schemes in the youth system, we want to major on that. If we are serious about reducing reoffending, then not doing something about those young people coming out of custody is a missed opportunity to turn their lives around.

Q209 Jeremy Corbyn: How have you been able to build on research of Justice Departments in other countries on their realtime modelling of what goes on and how they predict future behaviour? Clearly, at the heart of the whole justice system is public behaviour.

Helen Edwards: It is. We try and draw from international experience. For example, some of the offending behaviour programmes that we now use with offenders, both in the community and in prison, were drawn in from Canada originally. Those programmes are providing some of the best evidence about what works in terms of reducing reoffending. We look to other systems. Part of the difficulty we have is that other systems are very different from ours; sometimes adapting the lessons is quite hard. We are very keen to do that and we have reasonably strong links with European partners and, as I say, with countries like New Zealand and Canada.

Sir Suma Chakrabarti: During the legal aid reform process as well we did quite an extensive search of what other countries were doing in this area with common law.

Helen Edwards: We did.

Q210 Yasmin Qureshi: Sir Suma, you mentioned electronic files. I know it is a fairly obscure kind of question, and the only reason I ask it-and the Chairman may kindly indulge me on this-is that 10 years ago, when I used to work in the Crown Prosecution Service, we heard about these electronic case files coming through. I am not for one minute saying they are good or bad things, but I wanted to find out how far the Ministry and the CPS are with this at the moment, or is it very far away?

Sir Suma Chakrabarti: This is, I think, a very good example of crossboundary cooperation that really has kicked off over the last year. The Courts and Tribunals Service and the CPS have led the way. It has taken far too long to get to this point. Glacial progress has been made.

Q211 Chair: A lot of money was lost on the way earlier on as well.

Sir Suma Chakrabarti: Indeed. What has happened is that political will and leadership changes in the great organisations-and, of course, the fact we all have to save money concentrates minds-have pushed this agenda very strongly. The issues have been not so much within Government, but more about how to get the legal sector-let us say the defence community in particular-to come along with this. Those have been the sorts of issue. There is an interesting issue coming up, I think, which will link back to the LSC point, about to what extent you can use LSC contracts in future to drive the mandatory use of secure email, for example. Again, I think that would save costs. That is one we are exploring now for future contracts.

Q212 Ben Gummer: I have a final question on collecting the evidence base internationally, and especially in Europe. Evidence to this Committee and elsewhere has suggested that, because of the difficulty of establishing parity across statistical bases, it was very difficult to draw firm conclusions from European studies. I understand that there is a European project to harmonise measurement of criminality/reoffending/imprisonment. Is that the case and is the Department contributing to it, driving it and trying to-

Helen Edwards: I personally do not know about it, but I am sure we will be contributing to it. Rebecca Endean is our head of analysis.

Q213 Chair: Perhaps you can let us know.

Sir Suma Chakrabarti: We will drop you a note. I am intrigued by it myself, so it sounds like something that we should be pursuing.

Chair: Thank you very much, Sir Suma, Ms Edwards, Ms Romeo and Ms Beasley. We are very grateful to you this morning. We will continue looking closely at the Department. We intend to pay a similar visit to NOMS to the one we did to the Department itself. Thank you very much.

[1] Note by witness: The three companies are Marston (a Debt Collection Agency), BT Global Solutions, and Deloitte.

[2] Note by witness: HMT will allow the Ministry of Justice to keep proceeds up to 20% in excess of anticipated receipts (of £250m), any proceeds in excess of that will be given to the consolidated fund.

Prepared 14th August 2012