Select Committee on Defence Minutes of Evidence

Examination of Witnesses (Questions 180 - 199)



  180. Had we had to do the land entry I would agree with your point.
  (Mr Tebbit) Chairman, I will just mention that in terms of joined-up war-fighting, the reason why we have, for example, a rolling programme of large, joined-up war-fighting exercises, such as Swift Sword, is to make the forces, as it were, continue to be capable of that type of skill and operation, not just in peace support. Could I possibly just go back on the balance of investment issues? I think it is still quite important. There is a real distinction between the sort of issues we face over targeted retention problems—for example pilots—which are not about the overall amount of money we have at our disposal, it is about very difficult questions of retention and labour markets and morale, and that sort of thing, and, at the other end of the spectrum, this wider issue of trends. The most important trend, if you are looking for a balance of movement from equipment, as it were, to front-line people would be, for example, in the logistics organisation. The business change programme we have there is needed, because at the moment we have got over 40,000 in our logistics—

  181. We are just coming to that later on.
  (Mr Tebbit) It is in those areas where you can look for bearing down on people, positively, not just as a negative thing.

Mr Hancock

  182. We are just coming on to that. I have got a brief question at this stage on the way in which we are disposing of surplus sites. In your previous documentation you have laid great emphasis on trying to bring your activities on to large core sites, so freeing up other sites for disposal. The policy there is that only in "exceptional circumstances" would these be offered to public bodies or local authorities; in the main you are going for the maximum gain. I would be interested to know whether you see that as a significant change of policy. I would also be interested to know whether or not you think that that policy conflicts with the Government's intention of trying to exercise some environmental control over disposal of their own land so as to influence what happens on it. The contradiction there, surely, is, is the environmental benefit outweighed by the financial gain to you, and how do you balance that? Who makes that decision? Who makes the judgment? The final question is: are you using any of the money you get from the estate specifically targeted to improve the existing estate? We have been told by experts who have given evidence before us that at Aldershot, for example, just to improve the overall accommodation for young soldiers will take 10 years to bring it up to an acceptable level. One could argue, and they would, that some of that resource you are getting from the disposal should be specifically targeted to improve what you are intending to keep. If that is so, where is that documented and what proportion of it is in the programme?
  (Mr Hoon) Let me try and start at the beginning of your first question, because I think, actually, that will answer most of your concerns. Clearly, it is in our interest and in the interests therefore of all those who work directly and indirectly for the Ministry of Defence that we maximise the return on the disposal of surplus sites. That is not to say that we will always look to the very highest price, we will certainly take account of other factors—Government policy elsewhere and environmental issues and so on—but, nevertheless, I think it is fair to say that you would have to persuade me quite hard if you were objecting to the policy that we should not try and maximise the return for the Ministry of Defence. In doing so, it does then increase the resources that we have to be able to do precisely the things you are encouraging us to do. I do not entirely accept the suggestion that it would take 10 years to improve accommodation. We have, for example, very recently put in some accommodation at Northwood, which was done in a very short space of time because the kind of modern system building techniques that are available I, personally, think are perfect for the kind of single accommodation that is largely deficient. I want us to be rather more demanding than you are suggesting in terms of improving single living accommodation.

  183. We are more demanding. I thought it was you who were not being more demanding, because the experts were telling us it was the MoD who were dragging their feet. Presumably, you are the MoD for the purposes of Parliament and if you are not dragging your feet who is?
  (Mr Hoon) I have made clear to you on previous occasions that accommodation is an important priority as far as I am concerned, and therefore it is an important priority for the Ministry of Defence. A great deal of effort is being made in this spending round in order to secure resources to improve accommodation.

  184. Can you then just explain the "exceptional circumstances"? Who would have to make that decision? Would that be down to you?
  (Mr Hoon) Ultimately, yes, but, as I say, these are matters that we look at pragmatically. I think it is fair to say that my approach is that I would expect to look to the maximum return for the department of any particular sale, unless there were compelling reasons otherwise. You indicated some of those potentially compelling reasons, they might well be wider Government policy, they might be environmental concerns, or there might be specific reasons for making a contribution to other areas of the country's life, but I have to be persuaded that that was justifiable because in taking such a decision I would inevitably be depriving the Ministry of Defence of resources that would otherwise be spent on defence.

  185. I entirely understand that. Is it possible for you to let us have a look at the guidelines that you use to dispose of sites and how the judgments are made? I would also like the answer to the question about the proportion of the assets sold and the way in which the proportion of that money is actually reinvested in the estate as a pre-determined policy. If that is the case, where does that feature in any of the reports that we have so far seen?
  (Mr Hoon) All I say is that it is not a pre-determined policy. It would not be sensible to have such a pre-determined policy because asset sales, for example, are inevitably going to fluctuate year on year, according to the particular sites that become available. There cannot be a fixed amount because it will depend on all sorts of factors quite outside our control—the property market being the most obvious one. Equally, it also follows that it will depend on where those sites are and when they are available for sale, because clearly a Central London site is going to realise an enormous amount of money compared to some of our remote rural sites, where, frankly, the only use may well be for housing, and only then if a local authority judges it appropriate. It may be that, in fact, some of the rural sites cannot be used for any purpose at all because of planning restrictions. So the amount that that is likely to realise will be very modest compared to a Central London site. If we have a big Central London site that appears in our accounts for any given year it would be foolish to say that that was a pre-determined way of making those spending allocations. Again, the accounting officer may know a bit more.
  (Mr Tebbit) I would only add one or two points. Firstly, the decisions on disposals of estate are taken jointly by the budget-holders who own their land (there are 11 top budget-holders) and by our estates organisation chief executive, who clearly has an incentive to maximise asset use. We get better incentives because with the introduction of resource accounting and budgeting there is a capital charge and depreciation on this, the budget-holder is paying 6% year on the valuation of his estate and therefore he has incentive to get rid of stuff. Otherwise, quite apart from the central policy directions about this, we have targets, as you know, of £700 million worth of asset sales over the four-year period, and we are on track for that. We do not apply those simply to single living accommodation, it goes across the whole of the budget, and the estate, of course, is all of our operations as well as just housing. So we do not have a fixed figure, but I would be very surprised if the budget the Secretary of State tells me to implement next month does not include a seriously large hike in the amount of money we devote to single living accommodation. We are also looking at better ways of spending money wisely through prime contracting, through grouping and bulking our contracts to get better value for money, along best practice lines.

   Mr Hancock: That is good news.


  186. What still rankles, Secretary of State, is that the Treasury took £1.5 billion over the sale of housing to Nomura. Perhaps we should claw some more of that back. When you see the size of the problem and the amount of money that the Treasury got and the amount that is being handed back, there is a good source of funding to improve the housing estate.
  (Mr Hoon) You tempt me to make a cheap political point about who is responsible for that!

  187. Have you found the agency structure inside the MoD provides you with useful management information on cost generation and so on?
  (Mr Hoon) What is impressive about the agency structure is it does give, in particular, organisations an identity that allows them then to manage their activity more effectively than perhaps would be the case if they were part of a very large organisation like the Ministry of Defence. I have tried to visit a number of the agencies, although there are now 37 of them so we have a considerable number, in order both to understand what they do and how they do it but also to get a sense of whether we are demanding enough of them, and I have been very impressed by what I have found. The fact they have the ability to manage their own affairs has given them a sense of purpose and direction that I suspect they might not have had as part of a much larger organisation.

  188. You would expect that and I would too, but do you really believe they are delivering the goods in the way you would have expected? This government did not introduce the system, of course, but do you believe it is delivering the goods that the previous government thought it would?
  (Mr Hoon) Having to put myself in the position of a Conservative minister is a strain that I will not ask of myself but all I would say is that I came to this somewhat sceptical. The Labour party had not necessarily enthusiastically endorsed the concept of agencies and, therefore, coming into government I was keen to see whether they would work or not. As I indicated to you earlier, I am prepared to recognise that giving this kind of identity to particular government functions and activities has been a success because it has given the people who work in those agencies a real sense of ownership of their own activities in a way that would not otherwise have been the case. That has meant that, in a sense, they also are able to look outwards with more confidence than perhaps they would otherwise, winning business away from their traditional sources of work.

  189. Are they as accountable to you as they would have been if they had been departments or sections of departments?
  (Mr Hoon) Ultimately yes, because ultimately they are responsible to the Ministry of Defence, and I think the test of this is that you as a member of Parliament can ask me as Secretary of State a question and demand, ultimately, that I give you an answer. Now, in the process it may well be that you get an answer in the first place from the agency but the likelihood is that you will get far more detail from that process than you would by simply asking a Secretary of State a question across the whole range of activity. I think a good test of accountability, therefore, is the extent to which a member of Parliament can get information about that particular function.

  190. Do you intend to expand the number of agencies or contract them or remain the same?
  (Mr Hoon) We have actually reduced the number in recent times. I gave you the figure of 37: there were at one stage 44 agencies within the Ministry of Defence, and that is partly because we have looked at, particularly in the logistics area, better ways of organising delivery. Particularly in logistics in the past we had tended to see vertical organisation of the agencies but in a sense what we have now with the DLO is a much more horizontal approach looking right across the department at common functions, particularly between the three services, to try and find ways of organising their work more efficiently. That really explains the reduction in the number. All I would say is that I judge these areas pragmatically. It seems to me that we should not be approaching the concept of agency on anything other than a "Does it work?" basis and, if it does work, then I have no idealogical objection to it.


  191. I think your eulogy of agencies will form the basis of my first question to the Baroness, and simply add "Why then flog them?"
  (Mr Hoon) And I am sure in your normal very fair way you will also say I used a pragmatic test to determine my approach to it.

   Chairman: We have yet to be exposed to the pragmatism; we know what the financial arguments are. One topic we are all vying to ask concerns defence medical services and there the government cannot have all of the blame. One of the best reports this Committee ever produced was in the period of the last government on the demolition of defence costs studies 15, and the consequential catastrophic decline of the defence medical services. Laura Moffatt, who knows a thing or two about changing bedpans, will add her professional experience to this question.

Laura Moffatt

  192. Secretary of State, you said earlier—and I totally agree with you—that one of the areas where we can look to share our capabilities with other nations is in defence medical services. When we go abroad and see our units working together, if there is a common language then, on the whole, it is about health and medicine, so I think it is an area that we can usefully exploit. I do have to say that I completely and utterly agree with the way in which this government has tackled the issue of defence medical services and I believe that we have the right ethos now to develop the service but—and there is a "but"; of course—as somebody who has worked in the health service for 25 years, you can create structures and provide equipment reasonably easily, but the difficult part is making sure you have the people with the skills and the expertise to be able to take advantage of that. We have a really good structure and a way forward with the centre for defence medicine and with the MDHUs, which I believe are functioning extremely well, but it is the same problem as in the health service—getting the people in place to do those jobs.
  (Mr Hoon) I do not particularly disagree with that; I would simply, though, invite you to recognise that there is a connection between structures and people—

  193. I did.
  (Mr Hoon) —particularly in medicine because one of the problems, not simply for defence but for the National Health Service in general, is ensuring that the structures are of, for example, an appropriate size—and this has been a particular difficulty for us in terms of both recruitment and retention—so that doctors and consultants, for example, can maintain the necessary professional standards in order to be able to continue to practise in particular disciplines. It is not simply a problem of defence medical services but for the National Health Service generally. It does mean, for example, and I certainly have to face this problem in my constituency and I am sure the same is true of many colleagues, that smaller structures do pose difficulties in terms of retaining particular kinds of skills because, if doctors or consultants are not gaining sufficient experience in particular disciplines, then they will lose their professional accreditation and necessarily want to move. In a sense that is a problem we have had to face up to in defence medical services as much as the National Health Service will generally.

  194. I completely agree and I am going through that pain in Crawley at the moment about not having accreditation for particular specialties. Moving on from that point and referring back to the performance report, it clearly indicates that you feel that we are on course to be able to solve many of these problems. Is the evidence there to say that we are on course?
  (Mr Hoon) You have taken a far more optimistic interpretation of what we put in the report than we have!

  195. It does say "on course", "on course", "on course"?
  (Mr Hoon) "On course" but I would say that there is still a lot to do. I am not pretending that there is anything other than a great deal of effort that has to be made in order to deliver effective medical services, so we are starting from a very low base. There have been some signs that measures taken in very recent times are beginning to be successful but I would want to see sustained improvement over a number of years before I am confident of being able to say to you that there are the kind of medical services available to the armed forces that I would like to see.

  196. And I think we would have loved to have seen a starred bit below this that says "The Secretary of State says that we are nearly there but not quite yet"?
  (Mr Tebbit) I would add that last time when I was here I said I thought we had stabilised and were beginning to make a bit of a difference. We did check the figures after that and it is very small beer and not enough but we have managed to increase the trained defence medical services strength over the last year by 74. It is by no means enough but have turned the corner, and on the TA we had 200 professionally qualified people moving into the TA last year, its first year, and now we are moving into the second year. It is by no means enough but it is a mark of the efforts that we are making and at least it is encouraging people. They are seeing it getting a little bit better than it was; they can see a trend.

  197. Further on in that same report, in paragraph 72, you speak of the new fast track system for referral for serving personnel and that is down as "achieved". I wonder what measures you took to make sure that that happened and is achieved?
  (Mr Tebbit) In detail, we have taken contracts with particular institutions—I cannot remember which ones now—to make sure we can get them referred.

  198. Could you write to us about it and let us know?
  (Mr Tebbit) Yes.


  199. We were very pessimistic when we said some years ago that we could sense the decline of the defence medical services and that we doubted whether it would ever recover, so somewhere between that pessimism and Laura's optimism you think we are nearer one side of the continuum than the depressing side?
  (Mr Hoon) All I would say, using Kevin's phrase, is that I believe we have turned the corner; that the measures we have taken are beginning to show some signs of improvement, but I want to see those signs of improvement sustained year-on-year rather than as a result of a single year's statistics.

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