UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 477-i

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

PUBLIC ACCOUNTS COMMITTEE

CONFIDENTIALITY CLAUSES AND SPECIAL SEVERANCE PAYMENTS

WEDNESDAY 3 JULY 2013

UNA O’BRIEN, SIR DAVID NICHOLSON KCB CBE and SHARON WHITE

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Public Accounts Committee

on Wednesday 3 July 2013

Members present:

Margaret Hodge (Chair)

Mr Richard Bacon

Stephen Barclay

Jackie Doyle-Price

Chris Heaton-Harris

Meg Hillier

Mr Stewart Jackson

Austin Mitchell

Ian Swales

Justin Tomlinson

Amyas Morse, Comptroller and Auditor General, Gabrielle Cohen, Assistant Auditor General, and Simon Reason, Director, National Audit Office, and Paula Diggle, Treasury Officer of Accounts, were in attendance.

REPORT BY THE COMPTROLLER AND AUDITOR GENERAL

Confidentiality Clauses and Special Severance Payments (HC 130)

Examination of Witnesses

Witnesses: Una O’Brien, Permanent Secretary, Department of Health, Sir David Nicholson, Chief Executive, NHS England, and Sharon White, Director General, Public Services, HM Treasury, gave evidence.

Q1 Chair: Welcome. You are far more removed from us than usual, but I hope the acoustics are better so that we will hear you more clearly. This is the first of a new series of hearings that we are having, based on investigations that the NAO undertakes on our behalf. Often, they are issues that are raised by members of the Committee or that suddenly emerge as topical and important issues. We are grateful to the NAO for providing us with the basis of the Report. We would like to draw the attention of all three of you-perhaps you can tell your colleagues-to the fact that these are much quicker reports; they are not the usual NAO inquiries. They therefore require a prompter response from the Departments. If you could take that message away, we would be grateful.

I am going to ask Sharon this one. Do you think it is acceptable that Departments failed to give the NAO access so it could complete its investigation?

Sharon White: I think it relates to your introductory comments, which were really helpful for setting the context of today’s hearing. It is a new style of report. We certainly welcome the timeliness, but it does mean that for some Departments that are not used to this speed-obviously, DCMS is the area where we have the biggest gap-we will certainly want to have a conversation to get us into a slightly speedier mode of operating. There is no sinister reason here. I think Departments have been caught on the back foot a little.

Q2 Chair: I hope there is no sinister reason. I should tell you that we have asked the Comptroller and Auditor General if he will do further work both in DCMS, which failed to give us any information this morning, and in MOD, which appears to think that the NAO does not have access rights. We will expect to see both those Departments very quickly on our return at the beginning of September. It is unacceptable not to give proper access rights to the NAO to undertake this sort of investigation. We will be returning to this probably in a Thursday morning meeting in September.

The other thing I was going to say was a general thing. Sharon, again, I think this is a question for you, because you have overarching cross-government responsibility for this. Do you think we should know how many confidentiality agreements are signed every year across the public sector?

Sharon White: I am going to flip this a bit, but bear with me. The Treasury, as you know, takes a very strong, close interest in these sorts of payments. There is no automatic parliamentary approval for anything that goes outside contractual arrangements. That is why it is very important that there is a central process through the Treasury-often through Paula’s team in TOA-to make sure there is a value for money assessment.

In our opinion, it is also very important that there is reporting and monitoring of special payments and the openness of the confidentiality clauses. Where we might have a difference of view is that it is our strong view that Departments keep consistent, systematic records that can be compared as needs be, and can be easily collated by Amyas and his team. That is one of the reasons why the Cabinet Office will be coming forward with guidance. It will make it easier for that to happen.

Q3 Chair: I was going to draw your attention to the concluding remark in the NAO’s observations in paragraph 20 of the summary. There are two things. I think the Committee’s view will be-hopefully I speak on behalf of the Committee-that there should be complete openness for all sorts of reasons around who signs confidentiality agreements right across the piece. We would include within that local authorities, NHS bodies and private sector bodies that deliver public services using taxpayer-funded money. I don’t mind how you do it. I can see that it would be far too much work for you to do at the Treasury-we want you to be busy doing other finance ministry things. But we think you ought to go away and think about it. Off the top of my head, I don’t see why in everybody’s report and accounts there shouldn’t be a paragraph every year stating how many compromise agreements have been reached, with whom, the amount, and why, so there is complete transparency on this.

Sharon White: Can I just come back on the transparency point? We are, as you know, incredibly supportive of there being transparency on this, and it is one of the reasons why we have a pro forma for the special payments that come through. It is to make it clear that, if there is a confidentiality agreement attached to a special payment, it is clearly open to public scrutiny, including by this Committee and by the NAO. As you know, the Treasury is also responsible for the FReM-the financial reporting manual. It is important that, in remuneration reports, these payments are made clear. As you know, the recording covers both contractual and non-contractual, and there is not yet a requirement that confidentiality agreements are recorded; they sometimes are. There are one or two particular cases, which I am sure the Committee is responsible for, but we are absolutely supportive of the principle of transparency in the accounts of public bodies.

Q4 Chair: It does not happen at the moment. The concluding comment in paragraph 20 says, "There is a lack of transparency, consistency and accountability in how the public sector uses compromise agreements, and little is being done to change this situation." Then there is the argument of why it is unacceptable; I accept that you may not have agreed that. I do agree with the NAO conclusion, and I really want to know this afternoon whether you will go away and, in responding to our recommendations and the Report, come back to us with a system that will ensure that you have proper transparency, proper accountability and proper consistency.

I will say this again. It is across not just the civil service, so not just Government Departments, but all the health trusts, all the academy schools, local government, which is hugely important-I am sure a number of Members will want to come back on that-and the private sector, which again I think Members will want to come back on, where the private sector delivers public services. We want a system-it does not mean that you have to do it-whereby the public, this Committee and the NAO can know what is happening across the piece. Not because of the money, but because it is important that people know, for all sorts of reasons, about this.

Sharon White: As I say, we are very supportive of the principle of transparency. Where we may have a difference of view is whether that is a centralised collected system, or whether that is something that is best done, made transparent, by the individual Department and by the individual body.

Chair: I am not arguing about how you do it; that is down to you. What I am saying is that it will not be good enough if we come back to this in a year’s time and there is a further conclusion saying that it is not transparent across the whole of the public sector-again I stress that this is not just central Government-it is not consistent and it is not accountable.

Q5 Mr Bacon: When you say, Sharon White, that we might have a difference of view about whether it is best done by central Government or locally, I am not quite clear what your view is.

Sharon White: The Report sets out very clearly the question of whether the Treasury-

Q6 Mr Bacon: I am interested in your view, not the Report.

Sharon White: My personal view is that the Treasury should work harder and closer with Departments to ensure that departmental publications and transparency are there for public scrutiny and for easy comparison across Departments. My personal view is that that is not a responsibility that the Treasury is best placed to do, not least because-

Q7 Mr Bacon: Sorry. What is it that the Treasury is not best placed to do?

Sharon White: To collect, to record and, in a sense, to keep a database of all the severance payments and confidentiality agreements.

Q8 Mr Bacon: Okay. I understand that your view is that the Treasury is not best placed to collect all this information.

Sharon White: Yes.

Q9 Mr Bacon: You said at the beginning that the Treasury takes a strong and close interest in this. It says in the Report that the Treasury reviews each departmental request. Since you see everything and take a strong and close interest, how difficult would it be for you, the Treasury, to keep a list? How difficult would it be for the Treasury to keep a list?

Sharon White: I think Paula wants to come in on this.

Mr Bacon: You are Treasury as well-I am happy to hear from Ms Diggle as well.

Paula Diggle: It is actually my team that does this work. We get requests for individual settlements. We give advice on how to handle the settlements. Very frequently, we do not know what actually happens to that advice and what actually happens at the end of the settlement.

Q10 Mr Bacon: That was not my question. My question was not "Do you know what happens to your advice?" but "How difficult would it be to keep a list?"

Sharon White: Can I come in on this? The issue, for me, is not whether it is difficult for the Treasury to keep a paper folder.

Q11 Mr Bacon: Could you answer my question then, please? By all means add other points later, but what I am interested in is your answering my question. If you think my question is irrelevant or not important, you can say so. You are entitled to say what you think. What I want to know at the moment is: given that, to quote from paragraph 14, "The Treasury reviews each departmental request", how difficult would it be for the Treasury to keep a list?

Sharon White: I do not think it would be hugely difficult.

Q12 Mr Bacon: It would not be difficult at all, would it?

Sharon White: I do not think it would be difficult as a practical issue, no.

Q13 Mr Bacon: Okay. Now, you said that the Treasury was not best placed. Assuming that you want all this information in one place so that we can look at it easily, who would be better placed than the Treasury to keep a list?

Sharon White: I guess what I am saying is that-

Q14 Mr Bacon: Who would be better placed than the Treasury to keep a complete list?

Sharon White: The Treasury as a central team would be best placed to keep what we call the value-for-money test. We do not systematically collect information on the confidentiality agreements.

Q15 Mr Bacon: I was actually not asking about the Treasury; I was asking a different question. You said that the Treasury was not best placed, so you must think that somebody else was better placed. Who would be better placed to keep a complete list?

Sharon White: My own view is that it should rest with the Department concerned.

Q16 Mr Bacon: Okay, but that is not a complete list; it is just a list in relation to that particular Department.

Sharon White: That is right, yes.

Q17 Mr Bacon: In terms of keeping a complete list-that is to say, all of them, irrespective of what subsequently happens to them, which simply records the fact that a request has been made; if you want the total universe of these things you need one total list-who is best placed to keep a complete list?

Sharon White: It would either be ourselves or the Cabinet Office.

Paula Diggle: I just want to explain that the kind of list that we could keep at the moment would be a list of requests, not a list of settlements, because we do not have settlement information.

Q18 Mr Bacon: It would be fairly easy, wouldn’t it, on a spreadsheet to add an extra column and record what happened?

Paula Diggle: We would have to chase the information, which would create work.

Q19 Mr Bacon: Since you hold the purse strings and if they do not comply they eventually see financial consequences, I would have thought that that would not be too difficult.

Paula Diggle: One does question the value of this work.

Q20 Ian Swales: Sorry, are you saying that the amount that is eventually agreed is not the amount that you have approved, and you do not know what the amount is?

Paula Diggle: We do not know what the amount approved is.

Q21 Ian Swales: That is a really important point. So you are asked to approve a settlement with a figure, and then they go away and can agree a different figure and you do not have the information.

Paula Diggle: Normally what happens is that the Department agrees a figure within the range that we have given them. We say, "Don’t settle for more than x". They can settle for less than x, but we would not expect it to be more.

Q22 Ian Swales: This list could still have the maximum amounts, for example, on which you have agreed.

Paula Diggle: But that would not be helpful information, because it is not actually what happened.

Ian Swales: Are you trying to say that you do not have the data? That is a bit scary.

Chair: It is clear from the Report that you do not do it all. It goes to various bits of the Treasury; it does not all go to you. That is what the Report says. It does not all come to you. You have inconsistent rules across Government, so education and academies are treated in one way and the MOD is treated in another way. Everybody is treated differently. We have no idea what happens down health. We have pretty little idea what happens down education. We probably have no idea what happens, for example, with the private sector delivering public services in somewhere like DWP.

I do not think that we are going to resolve this here this afternoon, but all we are after is for you to go away-we understand your constrained resources-and find a way to ensure that the public, this Committee and the NAO can access a comprehensive database that tells us how many people each year have a compromise agreement, what it is and any other relevant factors, particularly around confidentiality because that is where there is public concern. I don’t think that is a big ask, and it might not be megabucks. But for all the implications of this area for whistleblowing and other areas of expenditure, it is an important ask, which is why we have done it. We are not asking for an answer this afternoon, but you have got to give one when you come back with the recommendations. You cannot just say, "The Treasury will not collect this"; you have got to come back with a mechanism that enables us to be satisfied, otherwise we are going to call you back, Sharon, again and again and again until we get it. I will just warn you of that.

Q23 Mr Bacon: Two more questions, possibly three, then I will let others come in. One relates to exactly what the Chair just said. Sharon White, how do you think Parliament can hold the Government to account for these confidentiality clauses and severance payments without central oversight?

Sharon White: I think through the scrutiny of the Department’s accounts.

Q24 Mr Bacon: Really? If it is mandatory that it is in the accounts.

Sharon White: Yes.

Q25 Mr Bacon: Because it’s not at the moment, is it?

Sharon White: So the guidance we have-

Q26 Mr Bacon: I am not talking about guidance. I was asking a question about whether it is mandatory to put it in the Department’s account.

Sharon White: No, it is not mandatory currently-

Q27 Mr Bacon: Thank you. That is what I wanted to know. It is not mandatory to put it in the departmental accounts at the moment.

Sharon White: It is not mandatory

Q28 Mr Bacon: So what is the answer to my previous question? How can Parliament hold the Government to account for special severance payments and confidentiality clauses without any central oversight? If it is not mandatory, what is the answer?

Sharon White: I want to be clear: the point that is not mandatory is the confidentiality agreement. It is mandatory to include any special payments within the accounts. That is set out for senior staff, it is set out for payments above £250,000 for other staff, and the aggregate has to be set out.

Q29 Mr Bacon: If we are to hold the Government to account for both the payments and the confidentiality clauses, how do we do it without central oversight?

Sharon White: The point I would say there is that we are planning, through the Cabinet Office, to have more systematic guidance to ensure that this happens more.

Q30 Mr Bacon: Is the answer to my question that we actually do need central oversight?

Sharon White: I think where we agree is that it is important that it is possible to collect and bring this information together. The question for us is whether that is best done by having it set out clearly, consistently and question marked mandatorily in departmental accounts, or whether it is best done by Cabinet Office or Treasury teams?

Q31 Mr Bacon: Could I ask you to turn to page 10, paragraph 21, titled "The Treasury view"? It is all in quotes, so I presume it is a piece of text provided by the Treasury. The last sentence reads: "The Treasury believes that there is no need for central collection of data on this limited area of public expenditure, amounting to less than £10 million a year across Whitehall." Do you think this is mainly about money?

Sharon White: I do not think it is. I think it is about reputation and the best use of public funds.

Q32 Mr Bacon: So the fact that it is a "limited area of public expenditure, amounting to less than £10 million a year across Whitehall" is not really relevant, is it?

Sharon White: I agree. That is not to say that the sum of money is trivial or does not matter-

Q33 Mr Bacon: I did not say it is trivial. To most of us, £10 million is a lot of money. My point is that this issue is not fundamentally about money, is it?

Sharon White: No, I agree.

Q34 Mr Bacon: Thank you. Could you turn to page 54? This describes a case in the National Heath Service. There was an individual who "worked as a consultant for a Primary Care Trust and wrote to senior managers in July 2006, warning that understaffing and poor record keeping posed a serious risk to patients’ safety. In February 2007, the individual became unwell due to the workload and work-related stress (they felt bullied) and was signed off on special leave. In the Summer of 2007, a locum doctor at the PCT saw an at risk child who subsequently died. The individual"-who had worked as a consultant-"asserts that had record keeping been better and a named doctor responsible for child protection, the locum doctor would have had a more complete case history for the child and the death might have been averted." It goes on: "In November 2007, the individual"-the consultant working for the primary care trust-"was offered £80,000 (a year’s salary) to leave which they refused as their objective was patient safety, not financial gain; they remained on special leave. The offer had increased to £120,000 and the PCT advised the individual to take the money or face dismissal. The individual was presented with a draft compromise agreement and asked to sign a related statement that all their concerns had been addressed. The individual’s legal representative advised them not to sign the related statement. In June 2011, following an independent investigation the hospital and PCT formally apologised. After a four year absence on full pay, in November 2011, the individual was reinstated."

It went on: "The individual stated that their ability to make any public interest disclosure would have been severely hampered by the necessity to return all documentation," which would have been a requirement had they signed the compromise agreement. Do you know which case that was?

Sharon White: We have some-

Q35 Mr Bacon: Do you know which case case 13 is?

Sharon White: We have some information on this, yes.

Q36 Mr Bacon: You know which one it is?

Sharon White: Yes.

Q37 Mr Bacon: It is Baby P?

Sharon White: Yes.

Q38 Mr Bacon: The primary care trust was going to use public money, taxpayers’ money, to pay off an individual who had flagged up concerns about Baby P while Baby P was still alive. When that individual refused, the offer was made with an increased amount of money and a threat that they would lose their job if they didn’t accept it. Do you think that’s acceptable?

Sharon White: I don’t know all the details and background on the case, but on the face of it no.

Q39 Mr Bacon: No. Given the propensity of the NHS over many years to use confidentiality and compromise agreements to hide misconduct and malpractice, and to cover up, do you think that we can trust the NHS and all the different bodies in it, of which there are many hundreds, to disclose all the information? Or, would it be better if it were collected centrally so that we could look at all of it, then knowing, mandatorily, that they had to disclose it to a central collecting point-you, the Treasury?

Sharon White: This may not be a very welcome answer but from our point of view, the point that we will focus on in such cases is whether this represents value for money for the Treasury? Does it represent value for money for the taxpayer?

Q40 Mr Bacon: In that case, could you define value for money for me ?

Sharon White: So, we particularly focus on whether a case is likely to be lost at an employment tribunal. We also take a wider view as to whether taking a case forward, even if the chances aren’t high, may be important in discouraging other cases in moving forward.

Q41 Mr Bacon: Do you think value for money includes effectiveness?

Sharon White: Effectiveness in terms of what?

Q42 Mr Bacon: Well, you are familiar with the three Es are you not?

Sharon White: Yes, I am.

Q43 Mr Bacon: Economy, efficiency and effectiveness. Do you think that effectiveness is a component of value for money?

Sharon White: I think it is a component.

Q44 Mr Bacon: Yes, thank you. I do to. Do you think it’s effective to spend taxpayers’ money on hiding this kind of malpractice, as described in case study 13?

Sharon White: As I say, on the details of this case, where the Treasury will have signed off an agreement, we will have looked at whether it makes more or less sense in the interests of the taxpayer?

Q45 Mr Bacon: I can’t believe there is a single taxpayer, at least I can’t imagine there is-apart from those responsible for the death of Baby P and I don’t know whether they paid tax-who thinks it was a good idea or value for money, to spend taxpayers’ money, or to offer to spend taxpayers’ money, trying to keep a consultant quiet when she had revealed this malpractice.

Sharon White: What we would have emphasised in the context of the confidentiality agreement is that that must be open to public scrutiny and that must be open to your, and the NAO’s, purview. The Treasury does not scrutinise the confidentiality agreement. That is a matter-and maybe David and Una can come in on this-to ensure that there is proper practice, proper effectiveness, and proper managerial and performance oversight within the body concerned.

Q46 Mr Bacon: What I am interested in is how we, as a Committee of Parliament, hold the Government to account for both confidentiality clauses and for special severance payments, without any central oversight. You have not explained that to me yet.

Sharon White: It may be that my answer has not been sufficiently satisfactory for the Committee.

Q47 Mr Bacon: No, it hasn’t been satisfactory because I don’t think you’ve explained how it’s possible without central oversight. My point is that if you can have a case like Baby P, where public money is apparently offered to shut up the consultant involved, and you do not recognise the need for central oversight in this circumstance, then what circumstance would it take for you to recognise it?

Sharon White: The case here, the transparency and scrutiny of this case, needs to be, and should be, publicly available in the accounts of the relevant hospital.

Q48 Mr Bacon: The only reason this came to light in this particular case was because the individual refused to sign an agreement, despite being threatened that if they didn’t take the money they would be dismissed. You don’t find that acceptable do you?

Sharon White: As I say, I don’t know-

Q49 Mr Bacon: Just read case study 13. My question is, do you find that acceptable?

Sharon White: From the face of this, clearly no.

Q50 Mr Bacon: Thank you. It seems to me to be inevitable that it is never going to work-with the range of cases going on across the country in an organisation as large as the NHS, never mind that there are other organisations as well-especially given that the Treasury has to see these things anyway because it is asked to do so, just as Monitor is asked to look at them if they are foundation hospitals. The Treasury is the one point that actually sees all of this.

Sharon White: But we do not systematically have sight of the confidentiality agreement. The question is whether the Treasury ought to make that mandatory, but we currently do not.

Q51 Mr Bacon: With a couple of extra columns in your spreadsheet it would be very, very easy. What comes out of this-I am clear about this from my discussions with the NAO-is that, whether it is the Treasury, the Cabinet Office, the Department of Health or the NHS, no one wants to take responsibility for this. That is the problem, isn’t it?

Sharon White: I come back to the point that we completely agree with you that this has got to be transparent and open for scrutiny, and it needs systematically to be available for your oversight through the accounts of the hospitals so that you can ask and be clear about these penetrating questions.

Mr Bacon: I am amazed that you trust the NHS. I do not see how we can after what has happened over the past few years.

Q52 Chair: Just before I bring in Ian, I do not know whether Una or David want to add to that, given the generality.

Una O'Brien: I completely agree that we need more transparency. If I may start in a technical space: in preparing and responding to the Report, I have again looked at sets of accounts. I regularly look at accounts from NHS trusts and foundation trusts, but in light of the Report’s findings-I have spoken to the Comptroller and Auditor General about this-when you actually look at what is in the accounts, there is information but it is not enough, and it is not clear enough. There are reports in the remuneration section of the accounts, and there are reports in the schedule of tables, but clearly, in light of what you have identified in the Report, there is not sufficient clarity and transparency. Certainly, as far as I am concerned, we have no sense of what is actually within the column called "other payments". I am very clear that, notwithstanding what we may see from the Treasury and the Cabinet Office, I really cannot wait now, and I am going to give instructions for the NHS manual of accounts to be changed so that we can see change in the accounts that are being produced for the current-

Q53 Chair: It will not be Monitor. It will not be foundation trusts.

Una O'Brien: And for foundation trusts, yes.

Q54 Chair: It would be NHS-run trusts?

Una O'Brien: Yes.

Q55 Chair: Of which how many are left now?

Una O'Brien: Well, there are one hundred and-

Q56 Chair: You said foundation trusts as well, didn’t you?

Una O'Brien: Foundation trusts as well, yes. I have already spoken to the chief executive of Monitor. They have guidance in their manual of accounts identical to what we currently have for the NHS trusts, and they have agreed that they will make the changes that I am requesting so that we can get greater transparency in this year’s reporting. I only have a certain window before the auditors will-

Q57 Chair: What we want to stop is the use of severance payments and confidentiality agreements to gag people and stop issues that are in the pubic interest. Clearly there will be circumstances when people’s incompetence means that you want them to leave very fast, and the Committee understands that, but you have to provide us with sufficient data for the public to judge that, when a severance agreement is reached with a confidentiality clause, the purpose is not to gag the individual and prevent them from saying something in the public interest. However much the law may say they can, what this Report tells us is that, all too often, they feel they cannot.

Una O'Brien: I completely agree, and I think our Secretary of State has been extremely clear about that. We have also been very clear in our response to Robert Francis’s report, and we have taken a number of actions to reinforce that message further. If I may give you some examples of things that we have done since we last spoke about this, the first thing is that we have now further changed the template. When people come forward either to Monitor or to the Department for onward transmission to the Treasury, we have changed the template so that people have to prospectively sign off that there is clarity in any agreement that it does not in any sense inhibit anybody from making a disclosure in the public interest about patient safety. We are absolutely clear that that has to be written in. Nothing can come forward, certainly through the Department, that does not have that on the template.

Secondly, we are very clear that these agreements should not be used to avoid serious disciplinary matters. They need to be addressed properly. That is also set out clearly at the top of the template. The Report does not go into this, for understandable reasons, but for me it raises a wider set of questions about the quality of HR support that people are getting. When I look at the detail of some of these problems, they need to be dealt with much earlier on and must not be allowed to build up into the scale of grievance, dispute and complexity that they arrive at.

Having said all that, I do think that we are working very hard to scrutinise these things more thoroughly. Certainly of the ones that are coming up through the Department, we have pushed back about half that have come forward in the past 12 months.

Q58 Ian Swales: I would like to follow up Mr Bacon’s line of questioning. It would be helpful to the Committee if you could say a bit more about the assessment process that you use in the Treasury-in other words, what are the boundaries? Is it simply a financial assessment versus salary and that kind of thing? To what extent are you looking at the detail of an agreement and making wider decisions, as opposed to just financial ones?

Sharon White: We look narrowly at the financial question as to whether or not the payment, being non-contractual, is value for money. We do not examine the wider issue of confidentiality.

Q59 Ian Swales: So you would be measuring things such as how fast the person is going to leave versus the salary that they might otherwise receive, and you make no judgment-from what Mr Bacon was saying, this is very important-on whether it is sensible to pay an agreement or not. In terms of the content, you are just looking at the money side of things.

Sharon White: It is just the money side. The key point in making the money judgment is normally whether we expect a case to be lost in court. Obviously an associated payment would be made on the back of that.

Q60 Ian Swales: So for clarity, you would say that the decision to do one of these compromise agreements rest entirely with the management of the Department concerned, and you would expect them to sign it off before you ever see the details.

Sharon White: Exactly.

Q61 Ian Swales: Does it work like that now-are you actually getting that kind of detail?

Sharon White: I think that that is true. The thing that we have strengthened, with every Department having to fill in a business case form, is to make clear that if there is a confidentiality agreement, that is clearly open for public discussion.

Q62 Ian Swales: Going back to Mr Bacon’s question, you make no decision about the effectiveness, beyond the simple pound notes, and we should not be expecting you to do so under the current arrangements. Is that right?

Sharon White: That is exactly right.

Sir David Nicholson: Could I add something from the health perspective, because obviously we deal with it before it goes there? The arrangements that we put into place in 2007 were such that we expect any of these to go to the remuneration committee of the organisation itself. We then expect it to go to the remuneration committee of the strategic health authority, where a wider view could be taken, because don’t forget, many of these issues are very, very complicated, have gone on over many years, and there are piles of information about them. So they make a judgment about that. Then, in the Department, up until 31 March this year, my deputy and the HR director would sit down and go through each one individually. They would look particularly at the issue, which we thought was particularly important, of where we thought payments were being taken instead of taking serious action. For example, if someone was dismissed for gross misconduct, we would normally reject that at that stage.

Ian Swales: I guess that that emphasises the point I am trying to make, which is that we should not expect the Treasury to make a judgment about these payments beyond the pure value for money. It is actually the Department management who are making the decisions. That is something, I guess, that the Committee and the NAO ought to be thinking about. It potentially leads to a conflict of interest if a very senior person might reveal something about the organisation that the top people in the organisation do not want to have revealed. There is a clear conflict of interest in terms of judgment.

Q63 Chair: I think where I would take it, Ian, is that Sharon has to go away and think of a system that provides not just the value-for-money crude one. You have got to come back with a system that is effective.

I know Steve will want to talk about the NHS but I want to raise just one other issue, although there are lots. If DWP is contracting with a private provider on the Work programme, which we have spent some time on, and somebody gets paid off via a compromise agreement, how would we know whether there was a gagging clause, or whether the individual had raised concerns about malpractice or fraud? How would we know?

Sharon White: Unless the Department chooses to put that in its accounts, it would not be public.

Q64 Chair: Should we know?

Sharon White: There is clearly a public interest, given the use of public funds. One of the things that I take away from this is whether the financial reporting manual and the guidance we have needs to be more encompassing.

Q65 Chair: More encompassing is general. I hope it is more specific. The reason I raised that is because of a case reported in the press-maybe right or wrong-about someone who worked for Atos and tried to raise concerns about the way the claimants were assessed as fit for work, in particular people with mental health issues. That rings a bell with me because I get a lot like that coming to my constituency surgery: people who feel they have not been properly assessed by Atos, particularly around mental health. This person said that claimants were not being assessed in an even-handed way, that evidence for claims was never put forward by the company for doctors to use, and that medical staff were told to change reports if they were too favourable to claimants. What happened to him? He was paid off and had a contract with a confidentiality clause, which prevented him from saying anything about it. That is another instance, and in another Department, of behaviour that is not in the public interest.

Sharon White: It is clearly in the public interest given that there is use of public funds.

Q66 Chair: Yes, but it is not in the public interest to use a confidentiality clause and prevent us from knowing what happened.

Sharon White: As you know, a confidentiality clause is still captured by the Public Interest Disclosure Act.

Q67 Chair: Indeed, but you are going to have to think this through. The problem is, as the Report says and this instance-true or not-reveals, people take a severance agreement, sign a confidentiality clause and then think they are gagged. They think they are gagged whether or not that it true. That is what they believe.

Sharon White: From our point of view, the thing we are now specifying is that "any compromise agreement or undertaking about confidentiality leaves severance transactions open to adequate public scrutiny, that there is sunshine thrown on these payments".

Q68 Chair: Does that apply to private companies providing taxpayer-funded public services? Does it go to that bunch of people? I have chosen one in DWP; I could have chosen one in Health.

Sharon White: I understand. We would not have sight of a severance payment for someone who is not a DWP employee.

Q69 Chair: How could we, on behalf of the taxpayer, know that?

Sharon White: For this to be known on a more systematic basis, it would have to be made mandatory. Richard Bacon said that we could collect that centrally, or we could change our guidance, so that Departments need to expose this and make it transparent in their remuneration reports and accounts.

Q70 Chair: Will you take that away? I don’t think we will be satisfied until, with the growth of the private sector delivering public services, you get that accountability. That has to be embedded in there for us to be satisfied that taxpayers’ money has been properly used.

Sharon White: We shall take that away.

Q71 Ian Swales: But you are actually going in the other direction. You have allowed academies to be outside the net, as the Report says. You are actually going in the opposite direction at the moment. How do explain that?

Sharon White: Not quite. Maintained schools, as the Report makes clear, are outside of our oversight, because of the scrutiny through local authorities and local electorates. The new process we have put in-it is temporary and there will be a review-will put academies on the same footing as maintained schools.

Q72 Ian Swales: But the Secretary of State cannot have it both ways. He is taking those schools out of local authorities into his own Department. You have now allowed him not to have scrutiny of them, even though they are in his Department. Why would you do that?

Sharon White: That is not quite right. The new process that we have got, which was put in place in September last year, gives academies that have been through a financial scrutiny test discretion on granting payments of up to £50,000, as they would have had they stayed in the maintained sector. That was a policy decision by Government. We will review it and we will need to ensure that the academies have not misused that discretion, but it is discretion that they would have had in the maintained sector.

Q73 Ian Swales: You only need to read the press to see that academies misusing funds is an issue. I am really surprised that that has happened. Maybe you need to go away and look at that.

Sharon White: This has been in place since September last year. We will have a review to see if there has been any misuse at the end of the year.

Chair: We have had three commitments.

Q74 Stephen Barclay: Ms White, the Department of Health confirmed to me in a letter this morning that it spent more than £73,000 on external consultants in preparing for just one hearing of the Public Accounts Committee. That was 52.5 days of external consultancy spend, initially at a cost of £1,714 a day, and then reduced to £1,000 a day. Is that value for money from a Treasury perspective?

Sharon White: It is not something that we have had sight of. It clearly depends on what one sees as the benefits against that spend. We are not against consultancy spend per se, but it may be better for my colleagues to pick that up.

Q75 Stephen Barclay: I am asking in terms of managing public money and the duties of an accounting officer. Is it the Treasury’s view that it is consistent with the managing of public money for Departments preparing for Select Committee hearings in Parliament to spend money-in this case more than £73,000 for a single hearing-on external consultants?

Sharon White: The accounting officer would need to satisfy herself that the benefits of doing so outweighed the costs of that outlay.

Q76 Stephen Barclay: Are you planning to review in the Treasury whether such coaching is more widespread?

Sharon White: We are happy to take that up.

Q77 Stephen Barclay: The Treasury signed off the compromise agreement, including a gagging clause, for the chief executive of Morecambe Bay hospitals trust. Could you explain why the Treasury signed that off?

Sharon White: We do not sign off compromise agreements, in the sense that we do not sign off the confidentiality clause. We sign off whether the payment represents value for money.

Q78 Stephen Barclay: Could you explain to the Committee why you felt that a large pay-off to the chief exec of an organisation that was under police investigation a couple of weeks after a damning report by external consultants PwC and which had warning notices from CQC and various other issues of concern, was not worthy of consideration from a disciplinary point of view? Instead, the chief exec was subject to a large pay-off.

Sharon White: In the earlier part of the hearing we said that from the Treasury’s point of view we would expect the Department and the NHS to manage, and to have satisfied itself on, the HR managerial and disciplinary procedures. In that case, we will have examined, as in all cases, whether the taxpayer would be better off as a result of an early settlement that avoids cost down the road, normally through a tribunal.

Q79 Stephen Barclay: But why would it be value for money? That is the point that the Treasury is approving-that it is value for money.

Sharon White: As I said, the financial test for us is whether the outlay of the special payment is less than the expectation of losing the case and the associated payment at an employment tribunal.

Q80 Stephen Barclay: In your own guidelines, in annex 4.13.11, it says, "Departments should not treat special severance as a soft option, e.g. to avoid management action, disciplinary processes, unwelcome publicity or reputational damage." Did you not think that that applied in the case of Tony Halsall?

Sharon White: I am making a slightly different point, which is that we rely on the Department and the NHS to satisfy itself that those guidelines are adhered to and that a payment is not being used to avoid what ought to be an HR-managed disciplinary case. That is not something on which the Treasury is in a position to give additional scrutiny or make a different judgment.

Q81 Stephen Barclay: I am trying to establish exactly what scrutiny the Treasury gave. It is unclear to me whether the compromise agreement was in February 2012 or March 2013, but the hospital said, "The compromise agreement that he"-Mr Halsall-"and the Trust signed in February 2012 contained a confidentiality clause." So it is suggesting that he signed a compromise agreement in February 2012. He was then paid for a 12-month secondment to work at the NHS Confederation, and for a further six months after that. That is 18 months’ payment, which appears to be three times his contractual entitlement. Could you explain why someone in the organisation, subject to such public concerns, would be paid three times their contractual entitlement?

Sharon White: We would have made the judgment based not on the size of the payment, but on whether the payment would have been exceeded by the loss of a case at an employment tribunal.

Q82 Chair: So the presumption on which you base your judgment is that you would lose.

Sharon White: What the Department, through the NHS, would have provided in that case would have been a business case setting out why the later costs at a tribunal would have exceeded the contractual-

Q83 Chair: But on the presumption that you would lose, which sounds extraordinary.

Sharon White: That is a presumption on the judgment from the Department that we would have lost.

Q84 Stephen Barclay: There are further concerns. For example, the chief exec concerned was aware of a report by Dame Pauline Fielding, which he did not share with the regulator, and baby deaths happened after he had been in receipt of that report. It is not for the Committee to run an employment tribunal for the chief exec concerned; what I am saying is that your own guidelines say that pay-offs cannot be used as a way of avoiding disciplinary action or reputational risk, but this seems to be a clear case of where that happened and the Treasury approved that.

Sharon White: Again, I absolutely stand by the guidance. The issue is that we will be relying on the management-the Department and the NHS-to be ensuring that payments are not being inappropriately used as a sop or replacement for proper disciplinary procedures.

Q85 Stephen Barclay: In relying on those individuals, are you confident, in this case, that there were no conflicts of interest?

Sharon White: We would have been confident on the judgment, based on approving the severance payment.

Q86 Stephen Barclay: The chairman who negotiated in February 2012 with the chief exec was the former chairman of the North West strategic health authority. That authority is heavily criticised in a number of quarters, but if I read from the Grant Thornton report, paragraph 3.278 says, "the local SHA, the lead agency responsible for the performance management of UHMB, provided the Regulator with assurances as they considered UHMB’s responses to the incidents and its progress satisfactory." The charge is that the chairman of the North West strategic health authority was responsible for an organisation with a statutory duty to intervene in maternity issues at Morecambe and failed to do so. He then moves across to Morecambe, where there are very serious concerns raised and, three weeks after the PwC report which lists serious failures or concerns, he signs off an 18-month pay-off to the chief executive. Does that not look like a conflict of interests?

Sharon White: I am afraid that I cannot judge without the details. The issue for the Treasury, narrowly, is to ensure that the NHS senior management has assured itself that these are proper payments and that it has assured itself that the guidelines set out are adhered to.

Q87 Stephen Barclay: A further conflict of interest appears, because the chief executive of the North West strategic health authority, who provided reassurance that the concerns at Morecambe were unfounded was Mike Farrer, who is now the chief exec of the NHS Confederation, a charity that derives almost all its funding from NHS institutions. It makes no money from voluntary donations. Mike Farrer is now paid more than £200,000 as the chief exec of that charity. That is the charity to which Mr Halsall, the chief exec of Morecambe, was then seconded for 12 months.

So we have a damning report on the back of a police investigation into Morecambe. Three weeks after the PWC report, the chief exec is able to walk out of the door without disciplinary action, go on secondment for 12 months to the NHS Confederation, a charity, where the boss is Mike Farrer, the chief exec of the North West strategic health authority, and the deal is done by the former chairman of the North West strategic health authority, who used to be Mike Farrer’s boss. Does that not seem like some sort of cosy club of comrades doing a deal together?

Sharon White: All I can say is that, from our perspective, what is key is that the management of the NHS ensures that there is not a conflict of interest which the taxpayer is then almost complicit in. That is absolutely clear in the guidelines that we set out.

Q88 Stephen Barclay: One of the other players at Morecambe was the Care Quality Commission. Obviously, people are well aware of the failures. Indeed, this Committee had a hearing last year where we criticised its poor leadership. That did not stop glowing tributes being given to its outgoing chief executive by the Department of Health when she left.

It is striking that Martin Yeates, the chief exec of Mid-Staffs, got a pay-off and then goes to a charity-IMPACT Alcohol & Addiction Services-which is funded by the NHS. Cynthia Bower leaves the Care Quality Commission with tributes and goes and works for Skills for Health, on their board, which is funded by the Government, by BIS. Tony Halsall goes to the NHS Confederation, another charity, in this case one deriving all its money from the NHS. Mike Farrer, the chief exec of the North West strategic health authority, who people like Mr Titcombe, whose son tragically died at Morecambe, is critical of gets himself a £200,000 perk running another charity, the NHS Confederation.

I do not know whether it is sort of a retirement home for lame ducks and sitting ducks, but there seems to be a trend where bodies like the NHS Confederation are using public money to park people who have failed within the NHS and the Treasury is signing off the deals as value for money when they leave.

I go back to your own guidelines: "Departments should not treat special severance as a soft option." Are you satisfied that it is not being used as a soft option?

Sharon White: In the cases that we have signed off, we will have been satisfied by the judgment taken by the Department-in this case, the NHS concerned- that they are not using public funds instead of taking a proper, appropriate HR route of disciplinary action.

Q89 Stephen Barclay: Could you tell me how many hospital bosses have had their compromise agreement turned down and dismissed with no pay-out?

Sharon White: I do not know. Others may. There are certainly cases that we will not approve-

Q90 Stephen Barclay: I am not talking about where perhaps they have stolen something or there is gross misconduct-something clear-cut-I am saying over performance.

Sharon White: I do not know the answer to that.

Q91 Chair: Do you know, Una?

Una O'Brien: No, I do not know the answer to that.

Q92 Chair: David?

Sir David Nicholson: No.

Q93 Stephen Barclay: So we are not aware of a single case, is what you are saying.

Una O'Brien: I am not saying I am not aware of a single case.

Q94 Mr Bacon: Name ones you are aware of, then.

Una O'Brien: What I am saying is that I do not know the answer to it-

Q95 Mr Bacon: Can you name the ones you are aware of?

Una O'Brien: I will certainly look into it.

Q96 Mr Bacon: If you are not saying you are not aware of a single case, which you have just said, can you name the ones you are aware of?

Una O'Brien: There may be cases. I do not know. That is what I am saying.

Q97 Mr Bacon: You just said, "I am not saying I am not aware of any cases". The implication of that is that you are aware of some cases. Which ones?

Una O'Brien: I do not know the answer to the question.

Q98 Chair: What about Sir David?

Sir David Nicholson: I have said that I do not know the answer to the question.

Q99 Stephen Barclay: I was quite surprised, given the very generous remuneration that Mike Farrar is receiving-indirectly but in essence from the public purse-that he appears to have an interest in a health consultancy, Unique Health Solutions. That was reported in the Health Service Journal. Tony Halsall, I understand, has an interest in the health consultancy T29 Solutions Ltd. I do not know whether any of the others have. Are you aware of how much has been spent with any of these health consultancies? If not, can we have a note?

Sir David Nicholson: By the NHS? I do not know.

Q100 Chair: Can we have a note?

Sir David Nicholson: Yes, of course.

Q101 Stephen Barclay: Would it concern you, Sir David, if someone about whom there is a great deal of public concern, such as the outgoing chief executive of Morecambe, had received any public money? Would it concern you if Mike Farrar, given his high-profile role lobbying the Government-funded by the taxpayer, but lobbying the Government all the same-had interests in a consultancy in addition to his £200,000-plus remuneration? Is that something that he has ever declared to you?

Sir David Nicholson: I am aware of it, because I read it in the Health Service Journal.

Q102 Stephen Barclay: And did you discuss it with him?

Sir David Nicholson: No, it is a matter for him and his employer.

Q103 Stephen Barclay: Is it an interest that he registers or gives visibility at the various conferences or dinners that you have?

Sir David Nicholson: I am sorry; I did not catch the first part.

Q104 Stephen Barclay: How is his personal interest reflected if he has a side interest in a private lobbying company?

Sir David Nicholson: I have never heard him talk about it.

Q105 Chair: Who would he have to reveal it to?

Sir David Nicholson: The confederation, his employer.

Q106 Stephen Barclay: Is there not a conflict of interest if someone who is so high profile and lobbies on Government policy, funded by the taxpayer, has a private health consultancy and does not have to declare it to anyone?

Sir David Nicholson: I think that is a matter for his employer, not for us.

Q107 Stephen Barclay: His employer is a charity, but they receive £23 million, they do not get a single voluntary donation and they spend £8.5 million on staff. Ms White, do you think that charities such as the NHS Confederation spending £8.5 million on staff to lobby on Government policy is an effective use of public money?

Sharon White: I do not feel that I am in the best position to comment on that, or indeed on the activities of the confederation.

Q108 Stephen Barclay: Perhaps you would be more able to comment on the Treasury’s interpretation of its own rules. As colleagues will know, I have raised judicial mediation on a number of occasions; indeed, Sir David gave the Committee an assurance that he then unilaterally chose to break without informing us.

In a letter about judicial mediation dated 15 August 2011, the Treasury gets its own rules right until the last line. On page 1, it talks about judicial mediation involving no contractual entitlement or any form of legal judgment, which is correct. As I am sure you are aware, Ms White, judicial mediation is not a court order; it is a discretionary payment, and as such it falls within the definitions of what should be declared. In the final paragraph, however, the letter’s author states that, because the settlement reached is likely to be the same as or less than would be awarded by the judge if the case completed the employment tribunal, they are satisfied that Treasury approval is not required. That is incorrect, isn’t it?

Sharon White: It is. We made a mistake.

Q109 Stephen Barclay: So the Treasury got its own rules wrong?

Sharon White: We made a mistake, and we have been clear about that and subsequently reviewed the cases.

Q110 Stephen Barclay: So why is it that even though this is the third Committee at which the issue has been raised, we still do not know how much the NHS has spent on judicial mediation?

Sharon White: I am afraid I do not have those figures. All I can say is that these are now captured by the approval process in the Treasury.

Q111 Chair: Una, do we know?

Una O'Brien: I know this was discussed at your last Committee. I think the issue that we discussed last time-forgive me; I was not here, so I did not get the full tenor of the discussion-and was particularly a concern of the Committee was that people were gagged or that they would feel gagged by those agreements, which had not come through any other process. So we have followed up on the commitment that we made at that meeting to contact all the trade unions and professional bodies to reach as many people as were involved, so that the message gets out-

Q112 Chair: To be honest, the simple request was about how much had been spent on settling cases through judicial mediation-how many and how much?

Una O'Brien: We do not know the answer to that, because-

Q113 Chair: Can you get the answer to that?

Una O'Brien: I suppose it is technically possible to get it, but I do not have the answer right now.

Q114 Stephen Barclay: Your own guidelines required NHS bodies to keep a record of judicial mediation.

Una O'Brien: And indeed those payments should be reflected in the accounts of every single organisation, although they are not delineated-

Q115 Stephen Barclay: I am sorry, but that is very misleading, because they are reflected in the accounts as part of the overall staff cost. There is, therefore, absolutely no way of knowing. Judicial mediation is not listed as an individual item in the accounts.

Una O'Brien: Correct. It is not listed as an individual item, but it does have to be referred to. I mentioned earlier that I did not think that the categories were clear enough. There are two categories: one to capture redundancies and another to capture other payments. In the "other payments" group, it is not sufficiently delineated-

Q116 Chair: At the end of the day, you are the accounting officers for the money that Parliament gives you to spend on the NHS. We simply want to know the number and amount of cases that have been settled through judicial mediation-just a list. That is not a crazy request and ought to be met. If you cannot provide that, it is a systemic issue. It is not one for the trusts. We are not getting the accountability to Parliament that we are obsessed with here. We cannot follow the taxpayer’s pound. You have to provide that for us. If that means beavering away and getting your systems right, it may help you in future, but in the end you are accountable for that money.

Una O'Brien: I accept that. We have certainly changed it for anything from now into the future.

Mr Bacon: We are not only interested in now and the future.

Una O'Brien: As I understand it, judicial mediation has been used between-we are talking about the period between 2009 and the financial year that has just completed. Those are the years for which we do not have that information.

Chair: Those are the years for which we are asking you to collect information.

Mr Bacon: Your guidelines say that the trusts involved should have collected the information, so you just have to ask them to get it. If people across the system had been following my earlier advice to the Treasury and keeping a central list, you could just look it up, but since you have not done that, you now have to create one.

Q117 Chair: That is another issue, but I just wanted to pick up on one thing that arose from what Stephen said. What you, Sharon, consistently said in response to Stephen is, "We assume that the health body responsible for a particular settlement has been following our guidance." On the assumption that everything that we have is correct, what has emerged from the exchange is that your presumption that the health bodies are sticking to the guidance is misplaced.

Sharon White: When we get a case for a severance payment, what we ask for and obtain for the Department is something that sets out the view about how it was taken forward. There is no tick-box element. They need to set out for us and lay out clearly what the management response has been. We cannot second-guess that.

Q118 Stephen Barclay: To clarify, the reason why it cannot be working is because either the compromise agreement was from February 2012, in which case it covers 18 months, so the statement from the hospital that he got no more than what he was contractually entitled to is wrong, because he was not contractually entitled to a 12-month secondment to a charity, or he did a 12-month secondment and then the agreement was reached in March 2013, in which case there were clear grounds for disciplinary action under your own guidelines. I do not know which of the two it is, but I cannot see how either is compliant with your own rules, yet you have nodded it through when the issue is of huge public interest.

Sharon White: We ask the Department to explain and set out clearly what management procedures have been followed. Clearly, the Treasury’s expertise is in ensuring that financial probity has been followed; we are not in a position to second-guess or do detailed scrutiny on the management procedures of Departments.

Q119 Mr Jackson: Why are you not in a position to do that?

Sharon White: We just don’t have the expertise.

Q120 Mr Jackson: You have said it is not a tick-box exercise: it is a tick-box exercise. You are not in a position to judge the accuracy, veracity or efficacy of these decisions: you just sign them off. You can’t make a value judgment on whether there is any conflict of interest-Mr Barclay has very eloquently drawn attention to that-you just sign them off.

Two things strike me. One is that you need to have some regulatory oversight or investigatory powers if it is still happening, or else you needed to have that. You also need to get proper legal advice on employment practices: as the Chair has said, your fall-back position seems to be to say, "We are going to lose the employment tribunals, so basically you can put any number of noughts at the end of the amount," as long as that is less than what you at the Treasury decide-on the basis of no demonstrable evidence, as far as I can see-might be the likely costs if you lose the case. That is not a satisfactory use of public money. It is a complete disgrace, frankly. You should not just sit there and say, "We don’t have any capacity to look at this"-essentially, you are saying, "It’s not our problem, guv." That is not good enough. You should be looking at this. If you are signing these payments off at the trust level through the Department, you have a responsibility to do that.

Sharon White: Can I say a couple of things? First, we do not sign off all the proposals that come through to us-quite the reverse. As Paula has mentioned before, it often turns out that end payments are less than what we approve. Secondly, I am not saying that we are abrogating responsibility; we are saying a different thing, which is that the expertise and the management oversight for the disciplinary or other HR procedures being followed in detail do not rest with the Treasury. It is not an entirely tick-box exercise, because the Department needs to lay out the procedures that it has followed, and indeed the procedures it has not followed.

Mr Bacon: Surely, the litany of stuff that we have heard makes it abundantly clear that you cannot trust the NHS and the Department of Health to mark its own homework. That is the point, isn’t it?

Q121 Mr Jackson: We have just had examples of clear conflicts of interest, where people have been bunging public money to people to shut them up and keep them quiet because they have fallen out over very important issues about clinical governance and safety; yet, as Mr Bacon quite rightly says, you are going to people who are marking their own homework, and you are ticking a box and paying them money. There is no proper oversight. You have not acknowledged that. That is the serious worry I have. If you said, "Yes, there is a flaw in the process; it is clearly unsatisfactory and is not good value for money," I would be slightly reassured. But you are stonewalling and saying, "Well, it’s just one of those things; we just have to trust these guys." It is just not good enough.

Sharon White: I am not saying that it is just one of those things, actually.

Sir David Nicholson: Can I say something?

Mr Bacon: Not at the moment. I am still trying to get things out of Sharon White.

Sir David Nicholson: I am trying to help.

Q122 Mr Bacon: I know you are, but could you just wait? I am still looking for an acknowledgment that central oversight is required and is insufficient. Paragraph 3.15, on page 27 of the Report, says: "The Treasury’s record keeping is cause for concern. The records suggest that the Treasury does not monitor centrally overall trends in the data and cannot provide assurance that…value for money considerations are robust". I thought that was what you were saying that you are trying to do. That paragraph also says the Treasury cannot provide assurance that you are taking "a cross-government view", that you do not identify "unusual trends in the data", and that you cannot provide assurance that "lessons learnt in one department are applied, and replicated more widely across government." So none of that is happening: somebody has to take responsibility for this and provide central oversight, otherwise nobody can account to Parliament for this money and how it is being spent.

Sharon White: Currently we don’t keep records, but, in response to the earlier exchange, it is something we will take a look at in connection with the Cabinet Office.

Q123 Chair: Can I emphasise that this is not just the Department of Health? Paul Stephenson, the former commissioner who left because of his relationship and links with the News of the World, got over £176,000 after he’d signed an agreement. John Yates also left after the phone hacking scandal; he got £86,000 on top of his £120,000 salary. It is not just NHS oversight. You will have signed those off.

Sharon White: I don’t know the detail of the cases but there is a general point for the Treasury to take back on the basis of this discussion which is whether and how we might have a system that is more-

Q124 Chair: I tell you what astounds us, which is why you are getting uniform shock around the table: these are high-profile cases we are talking about. These are not cases where it could well be that Paula Diggle or her officials in the Treasury would not have heard of them. Morecambe Bay is high profile. North Staffs is high profile. The Met Police and phone hacking is high profile. Yet somehow they get signed off through the Treasury.

Sharon White: In the case of the police, this is not part of our approval process. We would not have signed off those individual cases.

Q125 Chair: Again, this brings me to the second point, which is why we say Parliament wants to be satisfied across the public sector, whether it is the NHS and its trusts, whether it is local government and its organisation or whether it is private organisations providing services paid for by the taxpayer’s pound. We have not had it so much with the NHS, but it is not good enough for any civil servant to come to us and say, "It is not in my brief. It is somebody else’s responsibility." We are the Committee now that has to be accountable for all these organisations. You see these huge amounts in high-profile cases with compromise agreements when people have allegedly done wrong and it shocks the public.

Sharon White: The Committee feels strongly about this. We will look at whether there is more we can properly do to provide central oversight through guidance or other means.

Chair: I think this Committee won’t be satisfied until we have proper accountability for this area of expenditure. It is because of what it says about how we spend public money rather than the quantum. It is a statement about the integrity of the expenditure of public money. That is what is so important.

Q126 Stephen Barclay: On the quantum, it is very misleading. The exposure to clinical negligence is enormous, but the patient safety harm as a consequence of clinical negligence is also enormous. So it is misleading if the Treasury focuses on the size of these payments and thinks that that reflects the size of the problem. These payments are an early warning sign of organisations that have problems. If people had been listening more in Morecambe to the warning signs, we would not have had the subsequent baby deaths. We will spend over £3 billion this year on clinical negligence. I am sure Ms O’Brien will know the figure.

Una O'Brien: It is in that category.

Q127 Stephen Barclay: It is over £3 billion so it is very misleading to look at this in terms of the size of the payouts. Those payouts do not include the legal costs. They don’t include the several years that people are often suspended on full pay. But they hide the harm done to the patient by the surgeon who butchers people and should have been stopped years ago. Then there is the cost to the taxpayer in fixing those problems caused by clinical negligence. That is why the Committee finds this issue of grave concern. Judicial mediation has often been used for the higher end, like the Gary Walker case. He was a chief exec. That is why the figures on judicial mediation matter because often they were used in the more complex, high-profile cases. The Treasury does not seem to recognise that.

Q128 Austin Mitchell: I will move on to another point that you raised with the Treasury earlier, Chair, about the confidentiality of agreements made by commercial undertakings working for the DWP. I assume you were referring to things like AFE or AFU or whatever it is called. I should like to transfer that to the Department of Health. You are quoted in the Report in respect of arm’s length bodies in the health service. I assume that could mean private contractors but probably means social enterprises working in the health service. You say: "The Department does not request, or hold, compromise agreements relating to arm’s-length body staff as these are confidential documents between the individual and the employer." That seems to vitiate the whole purpose. Questions of disclosure and whistleblowing are more likely to arise with smaller, less adequately supervised bodies. Staff are, in the main, transferred under TUPE employment undertakings to the private sector. They are spending public money, yet we cannot be told about any agreements that they reach. Why is that? Is it justified?

Una O'Brien: The arm’s length bodies referred to in the report refer to two things. The first is the agencies of the Department of Health: that is, the Medicines and Healthcare products Regulatory Agency and Public Health England, although Public Health England only came into effect a few weeks ago. The second is those organisations sponsored by the Department that are set up statutorily as non-departmental public bodies. That would include, for example, the NHS Litigation Authority, the NHS Business Services Authority and NHS Blood and Transplant. It refers to those bodies, which are not in the private sector.

The first point to make is that any severance payment proposed from any of those organisations has to come through the Department and be scrutinised by the Department before it goes to the Treasury. A number of them are knocked back. They do not get through because they do not meet the criteria, which are not simply about value for money. A group of people in the Department considers those cases and pushes them back if they are not acceptable for whatever reason.

The point made in the Report to which you refer is the specific observation by the National Audit Office when it comes to the agreements that were made. It is factually correct that we do not have them in a document file held by the Department.

Q129 Austin Mitchell: Well, shouldn’t you have them? Don’t we need to know this?

Una O'Brien: I have listened with great care to what has been discussed in the last hour, and I am deeply concerned about any suggestion that there could be any conflict of interest whatsoever. It causes me to reflect on how we could tighten up our arrangements to make sure that there is proper validation at the point at which things are being considered.

Q130 Chair: I’ll tell you where you can tighten it up. You can open it up.

Una O'Brien: Absolutely. This is not an element-you have raised it in relation to ALBs-that we have previously considered with the seriousness that it deserves. It needs looking at. I am not aware myself of any case where there has been such a situation, but I am clearly concerned to think that there could be.

Q131 Austin Mitchell: But unless they are required to notify, you wouldn’t be aware, would you? What the Committee is saying about the ability to know and to make this accountable applies to arm’s length bodies as well as to the health service.

Una O'Brien: Yes, I can see that. I would certainly be aware, in relation to the arm’s length bodies, who was making the proposal and the individuals concerned, because we are talking about a much smaller group of employees in that context than we are about the whole of the NHS, which as you know employs over 1 million people, so you cannot know those things to that degree. Nevertheless, there is a legitimate point about conflict of interest that bears further checking that we have assistance in place to capture it should it occur.

Q132 Austin Mitchell: It says at 4.12: "The Department’s arm’s-length bodies are independent employers but are required to submit all special severance payments to the Department." What are the special severance payments that they are required to submit, and how do they differ from all the others that they are not required to submit?

Una O'Brien: These are exactly as set out within the rules. Any payment from the arm’s length bodies that is non-contractual or non-statutory, according to the Treasury guidance, must be submitted with the business case to the Department. It is scrutinised by the Department. In the last 12 months, half of those put to the Department were rejected, and the remainder were put forward to the Treasury for approval.

Q133 Austin Mitchell: I hope you will give consideration to ripping this veil of secrecy aside. How will you ensure that staff who want to whistleblow or raise problems with such organisations are able to do so and bring them to the attention of the health service itself?

Una O'Brien: Certainly within the Department of Health as an organisation, we take our own procedures for whistleblowing extremely seriously, and I also constantly work to ensure that all the arm’s length bodies, which are national organisations that have a role in relation to the health and care system themselves, have effective whistleblowing policies. I am very open to any feedback that they are not effective, but we are taking this issue extremely seriously. It must always be possible for staff to raise concerns with senior managers so that those concerns are dealt with properly.

Q134 Austin Mitchell: I am glad to hear that, but can you ensure that they are not punished or paid off for raising these points?

Una O'Brien: I will absolutely seek to do so. Equally, I would add that the Secretary of State, in response to the Francis report, has made it very clear to Parliament that that is his expectation.

Q135 Meg Hillier: Stephen Barclay and other colleagues have mentioned serious issues around child deaths, and so on, where a pattern could have emerged had they been scrutinised more closely. Sir David, perhaps I can start with you. What about lower-level patterns of behaviour where perhaps a trust, a health organisation or any part of the NHS family had an issue with, say, discrimination of some sort? A lot of lower-level compromise agreements have been put in place. Would you be in a position-you say you oversee them-to see a pattern of management behaviour masked by such agreements?

Sir David Nicholson: We get the data through the processes that we have just described, which the Treasury use. We do not routinely collect the kind of low-level data that you describe. We do not do that. We have had a national staff and patient survey every year for the past seven years-we have 160,000 staff-and we publish all those data. For every hospital, every community service and every mental health service, we publish detailed information about the way in which those staff are supported and the way they feel about how they are dealt with. All of that is in the public domain, and it is the responsibility of individual organisations to take action to put that right.

Q136 Meg Hillier: Okay, so that is qualitative work, depending on who responds. Surveys have their place, but that is not all that I am talking about. If I were a chief executive of a hospital trust and I had a bad manager who is a problem in a department in which a lot of staff were taking action, perhaps on the grounds of race discrimination, but a compromise agreement had been struck with them-if you are on a low salary and in a relatively small family like the NHS, the hassle, the reputational damage and the stress of moving on and dealing with that situation might make it quite tempting to take a compromise agreement-I might think that is an easy way of dealing with the problem if I was not particularly on top of my job.

Who, above me-apart from the governors and trustees, if it is a trust-would actually be watching for such patterns of behaviour, which can lead to really bad morale and some of the bigger things that Stephen Barclay and others have raised? Who would be watching that low level stuff? You are saying that you would not see that.

Sir David Nicholson: No, we wouldn’t see that. It depends on the type of organisation. If it is a foundation trust, it would be its governors and members.

Q137 Meg Hillier: But I have to say, with all respect, that the governors in my area would not be watching that level. They would not be privy to the level of detail in agreements.

Sir David Nicholson: That is the accountability system that has been set up. We have a set of members and governors who do that. One of the things that has come out of the light the Committee has shone on all of these kinds of issues is to think about what the responsibilities of commissioners are in relation to that-so your local CCG. In the guidance we have sent out to the service, we think it is a commissioner responsibility if such information becomes available to them. Certainly on compromise agreements, we would expect commissioners to have that, and we would expect them to take action.

Q138 Meg Hillier: So my CCG should know which compromise agreements the hospital has?

Sir David Nicholson: Certainly the large ones that come up are put in the guidance to them, because we think that that is potentially an important indicator of what may be happening in the hospital, and the potential that it has for patients.

Q139 Meg Hillier: I would agree with you completely on that last statement, but it just worries me that we are relying on local management. I agree there is a system in place, which neither you nor I has control over, but the idea that the governors as a body would know about those individual compromise agreements-let us say it is a staff nurse or a lower level-is not really going to happen, is it? They will not be privy to that information, are they, Una O’Brien?

Una O'Brien: Let us be clear about it. All compromise agreements in a properly run organisation should come to the remuneration committee of the board. That would be my expectation and I will certainly be taking steps to make sure that that is the approach that is used in the governance, because they have to be seen at board level. I have spent four years working in a hospital-6,500 people in a highly complex organisation-and the board of that organisation has to have a grip on what is going on inside that body. If it does not, any degree of externality will only be running to catch up. We need stronger external regulation, but we need strong boards inside organisations.

When it comes to a compromise agreement, they do not all involve severance payments or payments, but most specifically where they are involved in payment, they should be going to the remuneration committee of the board, which involves non-executive oversight.

Q140 Meg Hillier: I think I would agree with you there, but, as you say, they do not all involve payments. The remuneration-the money side-is not all of it, so you are relying on good hospital management, which we always hope for, but the cases we have highlighted are where the hospital management has broken down. So you are basically saying, just to be clear, that there is no external oversight saying, "It’s funny that this hospital has had rather a lot of staff nurses going off with agreements. What’s going on in that neonatal department or in that geriatric ward?" No one can actually see that picture.

Una O'Brien: As we build the new system for the chief inspector of hospitals, I know Professor Sir Mike Richards is keen to find any information that will give a sense of early warning of problems or indicate a sense in which there is something not quite right.

Q141 Chair: We are always told that things are going to be brilliant in the future. What I would love to hear is something that is happening now that gives us confidence.

Una O'Brien: What is interesting is that we have had three goes at getting this inspection right-10 years-and now we can see the importance of transparency around these matters and how poor relationships between members of staff, which might get revealed through a compromise agreement, would be an important area for an inspector to investigate, and I think we need to tie things up in that new regime. I would agree with you on that and let’s hope it happens.

Q142 Ian Swales: This question is for Sharon White. I have some freedom of information data that relates to the now defunct One North East regional development agency that shows, over a period, gagging orders to 12 people totalling £363,000, and, at the same time, pension contributions over and above contract levels of nearly £1.8 million, so five times as much as the gagging orders. Can I ask whether your financial analysis takes into account pensions?

Sharon White: It will do, yes.

Q143 Ian Swales: So if people are given instant pensions or whatever, you would factor in the full cost to the state pension system of that-yes?

Sharon White: That is right, yes. We will take into account any pension that would accrue as part of the calculation. One of the things I should have said earlier, partly in response to the earlier questions, is that we will look at the legal advice that has been made in connection with the likelihood of losing an employment tribunal, alongside the evidence that we take into consideration.

Q144 Ian Swales: But you are taking the full cash benefit to the person, including pensions. Related to that, I want to return to the question of boundaries. By the end of today we ought to know in this Committee what area you approve now, what part of the public sector you would expect to approve and, therefore, what bits are not approved. We have bodies such as the BBC frequently in this room, and I guess you do not approve them. Can you explain the boundary of the areas you do approve? For example, would you have approved these One North East payments? I guess not.

Sharon White: No, we wouldn’t.

Q145 Ian Swales: So can you describe what you do and whether you think it is changing?

Sharon White: Yes, I will, and Paula can correct me if I get the boundaries wrong. Essentially, it will be central Government and related arm’s length bodies. We do not approve bodies that essentially report in to the local authorities. That is why we had the previous exchange about maintained schools and academies. We do not approve bodies that are publicly funded but independent arms outside Government, such as the BBC because of its trust status.

Q146 Ian Swales: So you don’t even approve local authorities themselves?

Sharon White: No. Even CLG will not have sight. Local authority chief executive-

Amyas Morse: Our findings were that the Treasury does not always include the contractual elements of the payment or legal advice. Forgive me, I want to say it now so that we don’t go back and restate.

Sharon White: We should do.

Amyas Morse: Yes, I know, but you don’t at the moment. So, if it is contractual elements such as pensions and so forth, they will not be included. It will be just non-contractual elements.

Q147 Ian Swales: To be absolutely clear, my question was about pension payments, over and above contract. Would you be involved?

Amyas Morse: You look at them, but not things that are contractual and not payments in respect of legal advice.

Chair: You have added years.

Simon Reason: We sometimes found that the business cases did not split up the contractual and non-contractual elements and we refer to that on page 26, paragraph 3.14 subsection (d).

Sharon White: Your question is the right one. In principle, we are looking at what rests above the contractual element.

Q148 Ian Swales: Returning to the subject of boundaries, you have given us a definition. On the one hand that is good, but on the other hand, as we often find on this Committee, it leaves us with enormous concerns about a huge range of bodies, where the sort of Treasury oversight that you might give-

Chair: Sharon White has been absolutely clear, Ian. She has promised to come back-I am going to say by September, when we reconvene to interrogate MOD and DCMS-with an accountability structure across public expenditure. That is really important, particularly with local government, with the Audit Commission going. We are not going to leave that one alone either.

Sharon White: I have promised to come back on a response to your right request to know what an improved system should look like.

Q149 Ian Swales: Exactly. I would be concerned. I know people would say that a local authority has democratic accountability, but we know that there are lots of parts of the country where local authorities stay under the same democratic mandate for ever. I am from the north-east.

I would like to be sure that you are satisfied that the kind of scrutiny that you place on the areas that you do scrutinise is taking place in the areas that you do not look at. To follow the Chair’s point, are you looking at that? Are you checking that the kind of things that you would not be satisfied with in the areas you do look at are not happening in the areas that you don’t look at?

Sharon White: Currently, we have no sight at all. As I said, CLG has no sight at all, for the principle that you say, which is if it is working well it is the local electorate that is providing the scrutiny and accountability.

Q150 Chair: You have no approval. It is up to central Government with their responsibilities for accountability to set the systems that allow that transparency. It may be that you do not approve them. We want systems that ensure transparency, so that you can see across the piece, wherever it is the taxpayers’ pound. I’m sorry, Ian, if I am boring, but it is wherever it is the taxpayers’ pound.

Sharon White: Okay. It will be in the accounts, as we have talked about before.

Q151 Ian Swales: That leads me on to a question that Ms O’Brien perhaps can answer. It is a similar question about boundaries. You talked about arm’s length bodies. If such a situation happened in what you defined as an arm’s length body, you would know about it, I think you said. If a compromise agreement was done or whatever, did you say it would be reported?

Una O'Brien: Under the rules, we have a system in the Department, which I think is set down in the Report. Arm’s length body proposals have to come to the Department in relation to their own staff.

Q152 Ian Swales: Can you confirm whether such arrangements relate to private sector contractors? In the rules, are they regarded as arm’s length bodies in your terms?

Una O'Brien: Not in the terms in which I talk about an arm’s length body. There are two different things, really. Perhaps David can comment on the National Health Service, but you raise a legitimate question, because among that wide group of organisations there are 15 A or Bs. Some are self-contained organisations and all the staff are public sector employees, and others have contracts for the supply of work. I will certainly take away from this Committee that I must check what the arrangements are for those A or Bs in relation to how it works with contractors, because I don’t know the answer to that today.

Q153 Ian Swales: To be specific, not long ago the Committee had a hearing about the Cornwall out-of-hours service. Part of the thrust of that was about the data being manipulated. One could imagine a case where the management of the Cornwall out-of-hours service wanted to deal with a whistleblower and could easily put together some kind of compromise agreement, and you would never hear about it. Or would you? That is really my question-if we are concerned about transparency and ensuring that faults in the system are reported, do we need to reach out to the private sector contractors in some cases?

Sir David Nicholson: Yes, I think we do. One of the things I said earlier was about the importance of commissioners getting transparent information about their providers and what they do. We are currently exploring the way in which we use the standard national contract in order to include in it a clause around transparency and getting information about the kinds of things that you described from any provider, whether it be NHS or private sector.

Q154 Ian Swales: Will you be specifically listing compromise agreements, for example, in such a contract?

Sir David Nicholson: Yes.

Ian Swales: Okay. Thank you.

Q155 Mr Jackson: I believe that the Treasury comes out of the Report in a very poor light indeed, in so much as it makes the Department of Health look like a paragon of virtue. What concerns me is that it seems to be a sort of Gus O’Donnell credo that Departments are responsible only to their Ministers, and not really to Parliament. I think it is a major concern that, about a year ago, when the Committee published its report, "Managing early departures in central government"-the Public Administration Committee published a similar report-it specifically referred to the issues in the Treasury that we have covered today. At the time, the Government stated: "Since details of such payments are already placed in the public domain, the Government sees no need to duplicate these records centrally bearing in mind the Treasury does not have the resources to do so." The attitude seemed to be: "Well, it’s only £10 million a year. We have bigger fish to fry, so we’re not going to do it."

The Treasury hands over 5,000 individual e-mails to the Comptroller and Auditor General and says, "You get on with it. See what you can find here." You do not keep any records. You do not have consistent legal advice. You do not have any investigatory or regulatory powers. All that is shambolic and shows a degree of cultural arrogance when it comes to responsibility for value for money and the public pound.

When you come back with your improved system, you must take on board two separate reports: the one from this investigation and the one from last year. You have to understand the significant concern about conflicts of interest and about the fact that you cannot pass the buck on these issues. They are very important and, as Mr Barclay quite rightly says, they are often signs of serious systemic failures, which, in the case of the health service, mean that people may very well die. I believe that, as a Department, the Treasury has failed to take on the ramifications and the serious warnings in the report that they received last year, which is not good enough. Will you respond specifically to that?

Permanent Secretary, this issue of judicial mediation and the payments arising from that has been on this Committee’s radar for about a year. I find it astonishing that we are now rolling out real-time information for tax returns for small business so that we can tell, to the penny, tax revenues-in theory, anyway-as well as universal credit and so on. Yet, in a year, you failed to collate payments arising from judicial mediation for a limited number of health trusts. Again, that speaks volumes of a disdain for parliamentary sovereignty and for the authority and autonomy of the Committee. That is not good enough; you should have had that information weeks-if not months-ago.

Sharon White: If the Committee has got the impression that the Treasury does not take this seriously because these are somehow small sums of money, I want to correct that fulsomely. This is an incredibly important area and we hear the very strong views because these are huge reputational as well as value-for-money issues.

The point that we have made, which is obviously reflected in the previous report, is that our view has been that the way that this best gets public airing is through departmental records rather than through a central repository. I hear very strongly from Richard Bacon and others for a very strong push for the Treasury and/or the Cabinet Office to have central record keeping, which we will come back on within the accounting officer framework. That means that every accounting officer needs to be taking these payments very seriously indeed.

Q156 Mr Jackson: That would be all well and good, but you specifically disagreed with the recommendation. So it is no good coming back now and saying that you hear what we are saying, that we understand that record keeping was an issue and we did not disaggregate between contractual and non-contractual obligations. Over a year ago, you essentially said to the Committee, "You do not know what you are talking about. We disagree. We do not need to take any note of your comments because the Departments are handling this in an appropriate way." That is clearly not the case. You had an opportunity to put in place remedial procedures and you failed to do so.

Sharon White: I am not saying that there is not more to learn from here. On the back of last year, we strengthened the guidance that we give to Departments in connection with the public scrutiny of the confidentiality agreements. Now, with the Cabinet Office, we want to make sure-as the letter from Richard Heaton to the Chair makes clear-that there is more systematic collection. But I think that, rightly, in response to the discussion today, we will come back to the Committee to see whether we can go further with more systematic sight from the Treasury within the constraints that we have.

Q157 Mr Bacon: On this point, you referred to my view that perhaps the Treasury or the Cabinet Office needs to do more. I should make it clear that we are not interested in information for information’s sake or stamp collecting, as it were. What we want to know is: where is the information being held in such a way that there is somebody looking at it across the piece? For example, who is looking at patterns in these payments not just, say, vis-à-vis the Department of Health, but right across government? Who is looking at patterns of, for example, repeated payments for similar reasons, or repeated cases of overpayments in excess of contractual entitlement? Who is doing that across government now?

Sharon White: At the moment, that does not happen.

Q158 Mr Bacon: Right. Good-I am glad that you said that, because I did not think that it happened. That is what needs to change. You say that you are looking at it purely from a value for money perspective, but I do not understand how you can form a sound, robust, value for money judgment without that information. And, at the moment, as you just said, that is not happening.

Sharon White: As I say, the value for money judgment that we form is on the individual case. What we do not do is to make those comparisons Department by Department-

Q159 Chair: If you look at the Report, on page 25 it says that the median figure for the MoJ is just over £26,000, but the median figure for Education is £7,000. Can you explain that to us?

Sharon White: This comes to the point about whether there is consistency or not. One would expect to see some-

Q160 Chair: Do you know why? Can you explain it to us? Not what one would expect, but why it is different.

Sharon White: I do not know for the departmental comparisons that we have here. Often, it is because you have got variation in salary or variation in pension entitlement.

Q161 Chair: Or is it that they are being more generous in one or the other?

Sharon White: I do not know the answer to that.

Chair: It would be helpful to know, wouldn’t it, for managing public money better? It would be helpful to know whether the MOJ is just letting people go with a bigger amount than the Department for Education.

Mr Jackson: Or DFID.

Chair: Or DFID.

Q162 Mr Jackson: Can the Permanent Secretary come back to me on the time scale for more information on payments in judicial mediation?

Chair: I was going to say at the end of the session that we will re-meet in September to look at DCMS and the MOD, and we will want your first take on everything else then. Then we are coming back to it in October or November.

Una O'Brien: May I respond to the question that Mr Jackson put to me a moment ago? I have heard what the Committee has said to me today about historical information on judicial mediation, and I will take that away. I have very much focused on putting it right for the future, and I think that has been my first priority, to make sure, first, that that loophole was closed and that we also got it closed on the Treasury guidance. We have also been focusing on responding to a number of systemic issues, which we have not yet discussed at this Committee in the follow-up to the Francis inquiry. I have taken that on board. I think your point about patterns is well made, and I will take that away and see what we can do. You sometimes cannot see a pattern if you look at one or two, but you might if you look at a 12-month span of data.

I have already been talking to Monitor. We have not mentioned them today, but a number of the payments to which you referred earlier come through that route rather than through the Department. I think more could be done there. They do scrutinise payments, but you can see patterns on a bigger scale when you put the information together. They have done some work for me just on the last 12 months, and there are some patterns that would cause you to ask further questions.

Finally, if I may say so, this point about connecting this information at the trust level-duty of candour, which we are going to legislate for, for all trusts-is part of the jigsaw. Making sure that there is that duty of candour-that responsibility that sits on the local board to make the information available, particularly to the chief inspector-will give us a complete source of ensuring that this information comes into the public domain appropriately.

Q163 Mr Bacon: Can I thank you, Una O’Brien, for that answer? I think it is very helpful and also quite revealing that you are seeing patterns already in just one area, namely health. Of course, it is a very big area, so it is certainly big enough to expect that, if you looked, you might find patterns. Sharon White, do you accept that the same could be true across the whole of the public sector, comparing health with transport, culture, the Home Office and so on, and that therefore that work does need to be done somewhere?

Sharon White: I agree.

Una O'Brien: I just wanted to make one final point. I know you have asked Sharon a lot of questions today about the role of the Treasury, but, in truth, I think that the people who are closest to the system are more able to make a judgment. We should be looking more for patterns, but if we take everything into one place across the whole of the public sector, it is going to be a very long way away from the reality.

Q164 Chair: I was very careful to say that it does not mean the decisions are taken centrally. We just have to have confidence that those decisions are well taken, and we have to be able to compare across. I was going to ask you just one specific question. I have been told that the NHS Hertfordshire primary care trust-I accept that it is now defunct-refused to comply with an FOI and release information on the compromise agreements.

Una O'Brien: We will take that away.

Sir David Nicholson: There will be a successor body, so we can take it up with them.

Q165 Chair: They should be releasing the information, shouldn’t they?

Sir David Nicholson: Yes, absolutely.

Chair: This is an article from 8 May 2013, so it is only six weeks old.

Q166 Stephen Barclay: As I raised with you last time, Sir David, seven hospitals refused to give me the data. I do not know whether you followed that up.

Sir David Nicholson: You sent a letter on Friday, which people are examining at the moment. We will certainly pursue it.

Q167 Jackie Doyle-Price: Una, what you have just said has taken us to a debate that I just want to note here. You have identified the problem quite clearly, which is that we have confused accountability. The Treasury looks at it from a value for money perspective, which is a narrow aspect of value for money-it is just cost-and there are broader value for money considerations that need to be borne in mind. But we will leave that for a moment.

You have highlighted that there is a lack of accountability and therefore everything should go into one place. Dare I say that the classic bureaucrat’s answer is, "Let’s invent a new process"? Can I turn that on its head and say, "Shouldn’t we be looking freshly at the values that we expect our public servants to display as they execute their behaviour"? It seems to me that it is very easy for an organisation to say, "Well, here is our recommendation. Let’s get it signed off by the Treasury and avoid the accountability that follows from that", when actually, if we go back to case study 15, that in itself was not a value for money decision, because it was not addressing the lack of fitness for purpose of the organisation.

Una O'Brien: I completely understand that. It is interesting, isn’t it? Part of what I think the NAO and you yourselves are saying to me and the community of accounting officers is that we need better bureaucracy around this-record keeping, proper accountability at the right level, people scrutinising the information, challenging and asking questions, and transparency. To me, that is good bureaucracy and what we should be doing, ensuring that those systems are in place.

One of the areas where we will and should learn more lessons-this takes us back-is employee relations, good HR practices and good management. The cases that we have dealt with in the Department often reveal weaknesses in those areas that lead you into having these in the first place. I do not know whether David wants to comment, because there is a wider set of issues about values and the work we are doing on the NHS constitution.

Sir David Nicholson: The Committee has shone a light on something that is really important. I think it is incumbent on everyone in the system to think and look at it in different ways. With my new responsibilities, I now personally look at any compromise agreement that comes forward. When you go through the detail of them-we have been going back to look at them-you find that they are incredibly complicated things, which have involved highly paid people, in some circumstances, falling out with their colleagues, losing confidence in their employers, and having their employers lose confidence in them. There have also been elements of sickness. All these things, when you read them, are quite complex. But the important thing is that we are now starting to read and look at them, and to make judgments on the things that you have just described. NHS England has had one since 1 April. You are absolutely right. When you make a decision about it, you are really making a decision from a point of view of values and principles, which is about, "Does this look right for the public sector? Does this look right for patients?"

Q168 Jackie Doyle-Price: But we are seeing so often that it doesn’t.

Sir David Nicholson: Would I say that this happened everywhere in the NHS in the past? No, I don’t think I would. I think that there have been some good things that people have done in scrutinising these payments, but the light has been shone on it, in the light of what we are trying to do generally, which is to take the NHS through this very difficult transition from a professionally dominated culture through to one that is transparent and open. You can see, day by day, the pain that the NHS and its leadership are going through to get it there. I think you can see how we can make progress and be positive both for people who work in the service and for patients.

Q169 Jackie Doyle-Price: There is a flip-side to that question for Sharon. Essentially, we have a culture of accountability where you are relying on accounting officers to be satisfied that they are using the money voted by Parliament to them to deliver a service that is fit for purpose and efficient, but essentially this is a machinery based on the Victorian values of civil service and public service. What we actually have is a massive public sector and a public sector "salariat" who rotate around these positions and get ever-inflated salaries.

Sharon White: We try to make sure that that is not happening quite so much.

Q170 Jackie Doyle-Price: But, essentially, that is true. If you look at the health service, that is exactly what has happened. Sir David has just articulated that, most often, these cases happen when people get found out for not actually doing the job very well, so you end up with this mess. Do we need to look at whether the Treasury’s oversight of this is fit for purpose in 21st-century Britain, with a public sector that is as large as it is and that relies not only on public employees, but, increasingly, on large monopoly providers to deliver services? Do we need to go back and say, "Let’s look at the outcomes here."? Have we got the machinery to look at this properly?

Sharon White: I think that is right. It also relates to the Treasury’s ongoing relationship with Departments. Obviously, we are looking today at one topic-I would not say narrowly, because severance payments and confidentiality agreements are incredibly important. We will be looking with every Department at their broader financial management, their ability to implement projects on time, their working style and their management practices. These things need to be joined together.

Q171 Jackie Doyle-Price: But it is human behaviour that is at the heart of this.

Sharon White: Yes, I understand.

Q172 Jackie Doyle-Price: So the Cabinet Office has to be properly involved. Who is going to own the culture of public service?

Sharon White: It seems to me that one of the things that has come out of today is that there is probably a bigger role for the Cabinet Office. It is talking about guidance, but in terms of follow-up and support, the HR practices, the culture, the values and the civil service reform agenda of Sir Bob Kerslake and team, this is a good opportunity to use a practical problem that we have in this area to drive things through.

Chair: Although I have to say that one of the worries is that one case is that of the managing director of Kent county council, who was paid off with nearly half a million pounds after less than 20 months and ended up in charge of civil service reform.

Stephen Barclay: It’s beyond parody.

Mr Bacon: That was what was said about Henry Kissinger after he got the Nobel peace prize-it is beyond satire.

Chair: It is a serious issue. It demonstrates that, all too often, somebody gets a compromise agreement out of one bit of the public sector and pops up elsewhere in a very lucrative job.

Jackie Doyle-Price: They might deserve to.

Chair: £420,000 after less than 20 months.

Q173 Mr Bacon: We are having a private conversation, which is very rude, but I have another question for Una O’Brien. Figure 3 on page 19 of the Report talks about the cases requested of the Departments by the National Audit Office and the cases that were obtained. In the case of Health, there is a big gap. The NAO requested 23 cases and received 12. Note 4 at the bottom of the page says that of the 23 cases, three were from arm’s length bodies, 10 were from trusts and 10 were from Monitor. Monitor provided nine cases, as well as confirming that one case did not have a compromise agreement because it was settled through the employment tribunal process, as it were, which made 10 cases. The note then says, "The Department was not able to provide those for other Trusts as it did not hold these." The trusts involved were not foundation trusts, so they are directly responsible to the Department. Why did you not just ask them to provide the NAO with the information?

Una O'Brien: I think we did everything we could to help in the time that we had. I think these are NHS trusts.

Q174 Mr Bacon: That’s right, they are NHS trusts. You could just send each of the trusts an e-mail followed by a phone call, saying, "Please send the National Audit Office the information it has requested," couldn’t you?

Una O'Brien: I don’t know the reason why that was.

Q175 Mr Bacon: Could you make sure that the National Audit Office gets all the information it has requested, please? We will be following this up. Is that a yes?

Una O'Brien: Absolutely. My understanding was that we did our absolute level best to work with the NAO to do this Report. It was done very quickly, and compared with other Departments we did our best.

Q176 Mr Bacon: I know that it was done quickly, but the chart suggests that many trusts did not co-operate. I think generally-especially if they are not foundation trusts-they would be minded to listen to what you told them, if you told them.

Una O'Brien: Yes.

Mr Bacon: Thank you.

Q177 Chair: My very final question-I think we are almost there-is actually case study 3 on page 48. I can’t believe we used a compromise agreement with a civil servant:

"Following a political change of direction for the employer".

I just could not make head nor tail of that one. If it was a SpAd, their contract would have terminated-they were clear-but what civil servant would need to leave because they disagreed with the new Government’s policy? This is completely against the whole ethos of the civil service.

Sharon White: I’m afraid I don’t know the details of the individual case.

Q178 Chair: Do you know, Paula?

Paula Diggle: I don’t. I’m afraid you would have to ask the Department for Education.

Q179 Mr Bacon: Did the Treasury sign it off?

Paula Diggle: Apparently. I didn’t look at the case myself, but-

Q180 Chair: Can you help us, from the NAO? It’s your case.

Simon Reason: It’s our case study, but I don’t have any specific information other than to say that an approval was made by the Treasury for the payment and a compromise agreement was signed.

Chair: It’s pretty shocking stuff.

Stephen Barclay: It’s a case study in the Report; it just seems odd that people are not aware of why it was signed off.

Chair: It doesn’t fit with everybody’s perception of what the civil service should be all about.

Thank you very much indeed. You have made a whole range of commitments, which I hope have been faithfully recorded by Hansard. We look forward to seeing you again in September.