Select Committee on Public Administration Minutes of Evidence


Examination of witnesses (Questions 920-939)

WEDNESDAY 24 JANUARY 2001

THE LORD SIMON OF HIGHBURY, CBE, THE RT HON DR DAVID CLARK MP AND THE RT HON MICHAEL HESELTINE, CH, MP

  920. That is one kind of blockage which you identify. My impression of government now is that it is immensely frustrated by the gap between the setting of policy delivery targets and the delivery of those things on the ground and it feels somehow in its bones that there are blockages in there that are stopping this happening. Lord Simon, you were, as I understand it, brought in to "think the unthinkable" about all this. What is the unthinkable?
  (Lord Simon of Highbury) I do not actually believe that this is a problem where you have got to continually think "outside the box" if that is what you mean by the unthinkable. Managing a system—and this is a very big system, 600,000 people, executive agencies and administrators, so it is a very, very big company to manage—you do have to think very clearly about leadership, the planning structure and the performance structure and you can separate those three things out relatively clearly. I think whilst it is interesting to listen to Michael Heseltine talking about the system he experienced, if you look at the system which I experienced, the public sector agreements (PSAs) are a very good planning basis for most departments. They separate out strategic objectives, medium-term objectives and short-term objectives and the dialogue between the ministerial team and Civil Service management can be very effective if it is handled professionally. The issue is the consistency of quality and the consistency of synergy between the ministerial team and the administrative team and the understanding of the system through those objectives and who is responsible for what. It is no different than most businesses. There are not miracles in businesses. There is just a lot of hard work, a lot of planning and a lot of consistency about performance management. I do not think you have to think the unthinkable. You just have to be very clear and very consistent about professional management in my experience, which we are not. For all the reasons that have been explained, in a dynamic system of politics there is very little consistency. So how you manage the system becomes much more professionally important in this structure than in other ones. There is a very good theoretical structure in place. The issue is to make it work better. I think that is professionalism not something outside the box or unthinkable.

  921. So the idea you have some kind of radical plan in your back pocket is simply not true?
  (Lord Simon of Highbury) No.

  922. Could I ask you finally on this same area, you were involved in the Treasury's Public Service Productivity Panel which reported last August. I have not read the report but I read press reports of the report, and my reading of it is that your conclusion and that of your colleagues' was that it was a political failure to provide what you call "visible, committed leadership". There was a problem here, the problem of conflicting priorities and so on. Is it the case that you concluded that it was really a failure at political level rather than a failure at administrative level that you were identifying as a key factor here?
  (Lord Simon of Highbury) I think it is a relative failure of both. As I say, if you look at the private sector you will see relative failure in many companies, either the failure of the board to have its strategy consistent and clear or the failure of the executive team to deliver appropriately. There is no perfect company in that sense. So what I think this report Meeting the Challenge of Productivity tries to point out is means by which both parties, the political leadership and the administrative leadership, can improve by professionalism of management. So, no, I do not think there is a total failure on the political side and I do not think there is a total achievement on the administrative side. What I do think is important is that if you have vertical structures (which government is) with departments of state whose accountability to the public at large through Parliament is always vertical, then the management of the horizontal issues, of which there are many in government, becomes professionally very difficult. If you did that in a company you would find it much more difficult to manage a company. So there are particular challenges in political management which are horizontal issues. Take an issue like Europe, how do you manage that across many departments when there is vertical accountability through the management structure? Quite difficult.

  923. You have put your finger on precisely the dilemma but have you found the answer to this dilemma, the vertical and horizontal? Is it in a more muscular centre that can enforce its will throughout the entire system? Is that the direction that—
  (Lord Simon of Highbury) I do not think there are any absolute answers to that question, Chairman. It depends on the issue and the dynamic of the market-place. That is not to make things difficult. The issues are dynamic and to say that for every issue we need to solve in government all we need to do is strengthen the centre is like a company saying they have not got enough people from head office who can walk around saying, "I am from head office. I am here to help you." We know that problem. It is not to load the centre all the time that is critical. It may well be that if you empower and allow people within the system to do more work themselves and to go up and down the organisation chain less, you will get more out of the system, particularly if it is a non-critical issue. If it is a critical issue, and that is about priorities and focus at the political level, you may want more centralisation. I do not think there is an absolute management answer to that. Each problem needs to be analysed and you have got to decide where you have got to apply the pressure to get improvement in delivery.

  Chairman: Thank you very much. Mr Tyrie?

Mr Tyrie

  924. Before I ask any questions I saw Michael Heseltine writing furiously at one point and I just wondered if he had anything he wanted to add.
  (Mr Heseltine) I was toying with the question you put to Lord Simon about thinking the unthinkable. I have had seven small thoughts.

Chairman

  925. Seven unthinkable thoughts?
  (Mr Heseltine) The first is that you should recommend separating the Treasury, from its present overarching and dominating and, in my view, stultifying influence over the management of our economy, into two parts. One is essentially an accounting part, the second is what you might loosely call an office of the budget which takes strategic views and is "for" things as opposed to just being "against" things. The second is that you should give the Audit Commission the responsibility to audit national government as well as local government. The Audit Commission has saved massive sums of money in local government by production of comparative statistics in many different services proving you can measure the public sector perfectly effectively, but it is not applied to central government and it should be. The third thing is that one should ask oneself why do we need civil servants? We need civil servants to give the best policy advice to Ministers and appropriate bodies. The classic civil servant is very sophisticated, very clever, and very difficult to find. We have got 600,000 who do not conform to this rather refined definition because huge numbers of them are in delivery of services as opposed to giving advice to Ministers. I believe strongly that the evidence is overwhelming that service delivery should be the result of competitive tendering with private sector organisations delivering because they will inevitably deliver more effectively in terms of quality of service and price than a bureaucracy which lacks the discipline of the private sector. So that would mean that you could concentrate on recruiting the quality of civil servants that we associate with the concept and leave the delivery of objectives to people whose job depended upon delivery and who would lose contracts if they did not deliver. The next thing I would want to see is that there is proper management information of the sort of quality that you would get in any worthwhile private company about the detail and costs of departments set out in language and of a statistical form and numeracy that people can understand. Sixthly, I think that the targets set for agencies in the public sector should not be set by civil servant because they are too close to the agencies and often part and parcel of the same process of decision making. I think there should be an external discipline on the setting of targets. Time and again we found when targets were being set they were worse targets than the ones that had been achieved the preceding year and Ministers were too busy to be bothered with attention to all this stuff. So there should be a public/private sector scrutinising process on the targets that are set for agencies. And, seventhly, there should be much more cross-discipline recruitment between the public and private sectors. If I have got a few more minutes I will come up with some other ideas.

  Chairman: I am glad Andrew Tyrie asked what you were writing.

Mr Tyrie

  926. I do not seem to need to do very much here. Perhaps I should just ask Lord Simon to explain the changes in his physiognomy as he listened to that list which varied a good deal as Michael spoke.
  (Mr Heseltine) In what way did it vary? I could not see.
  (Lord Simon of Highbury) The occasional smile of support! I think the area where I would feel most uncomfortable is on the issue of definitely deciding that services are always delivered better in the private sector. I am not convinced by that argument necessarily for either the health or school system for instance. I think a hybrid system works quite interestingly and whether it were government policy or not (and it appears to be) having both systems available and choice to the people seems to me to be a very good principle. I was smiling slightly at the thought that we had to have public tender for every service and progressively privatise all the system. I am not sure about that. I smiled with interest on the reorganisation of the Treasury, Michael. One might think about re-organising the Treasury but I would probably think about it in a different way and have it concentrating on macro economic management and the issue of money and its relationship with the Bank and to try perhaps to think of micro economic management and the role of the DTI relative to the Treasury in a slightly different light. Those would be issues. I think the days of the Treasury as a one-year cash accounting system saying no to everything have disappeared with the PSA structure and I think the PSA structure has been one of the great advances in the general management and professional management of the political system in the last four years, as I have observed it. So I certainly believe that the Treasury could be encouraged to take more risk and involve itself with greater flexibility in strategy and policy development, but I think it is moving in that direction and that would be my inclination.

  927. Between the two of you, you have abolished the Treasury, have you not? Monetary policy has basically been given to the Bank of England anyway so when you say give them responsibility for looking after monetary affairs the lion's share of that has already gone. Michael wants to create an Office of Budget like the OMB in the United States, I presume, probably supervised by an equivalent organisation here to the Congressional Budget Office. There is not a great deal left if you also hand the micro supply-side responsibilities across to the DTI. Is this a fair description of your combined views, that it amounts to a dismemberment of the central department which is, if I may say so, a very radical proposal, the dismemberment of the first and most powerful department in Whitehall.
  (Lord Simon of Highbury) It still has to handle such small issues as tax revenue and collection and balancing the budget for the nation.

  928. Tax!
  (Lord Simon of Highbury) My view of it, Andrew, is that—and I know you are tempting me to say more—the answer is it is a very small department already and the chances are that it will become smaller because of the focus of change in monetary management and budgetary management within the system. But abolish the Treasury? Good heavens above.

  929. "Dismemberment" was the word I used. Michael?
  (Mr Heseltine) I think, as Lord Simon said, there are essential jobs that come with the collection of revenues and the setting of the budgets and the monitoring of expenditure and I do not quarrel with any of that, but anyone who has seen the pervasion of influence of the Treasury understands that it is a very negative force. Everything is rejected as a matter of principle and then you have a huge battle. They are always trying to find ways of cutting the budgets of departments. There is never any strategic appraisal as to where the problems are in society over which they have such an influence. I understand their problems because of course the whole question is expenditure, but a classic example of this, which I suspect has certainly been the case in all governments up until the present one (and we cannot pass judgment on that one because it is in its early days) is the way in which capital expenditure has been slaughtered because people would not take the difficult revenue consequences on the revenue programmes, so in the end you always cut the capital and, without any doubt, over a long period of time this country has suffered in its infrastructure in the widest sense of the word precisely because of that failure to invest in the education system and the transport systems, for example. Water was slaughtered as a programme in the 1970s, I happen to remember. So you have to have a Treasury, a finance director, an accounts department, whatever it may be, but I think you need to have, as you rightly said, an Office of the Budget to try and take a strategic view as to what the requirements of the economy are.

  930. Could I probe a little bit further what the task of the Implementation Unit is, which I think you head up—
  (Lord Simon of Highbury) Nothing to do with me guv!

  931. So this stuff we have had in the press about the Implementation Unit linked to your name is—
  (Lord Simon of Highbury) No.

  932. Could you tell us what you do?
  (Lord Simon of Highbury) I offer advice if asked.

  933. And how many days a week do you find yourself devoted to offering advice to the Government?
  (Lord Simon of Highbury) Some weeks none, some weeks two or three. I have only been doing this job for 15 to 18 months so it is hard to see a pattern.

  934. How many man days have you devoted to giving advice over the last 18 months?
  (Lord Simon of Highbury) I have no idea because I do not charge for my services so I do not have to keep a record.

  935. You do not know whether it is ten days or 50 days?
  (Lord Simon of Highbury) It may be over the last 500 days 300 days of thinking time and 60 days of activity.

  936. Do you have any position as an adviser? Do you have any formal position in any respect whatsoever?
  (Lord Simon of Highbury) None. As an unpaid adviser I give advice if people ask for it.

  937. Do you do that on the basis of government papers? Do you see government papers from time to time?
  (Lord Simon of Highbury) I have seen government papers from time to time like the draft of the Public Services' Productivity paper which the Chairman was talking about from the Treasury. Since I was one of the panel I drafted some of it and you will see my name put to some of it. The same with Modernising Government and the reports on Civil Service reform. Those, as they have been drafted, I have seen in part as they have come through.

  938. Do they come via the Cabinet Secretary?
  (Lord Simon of Highbury) Via the Cabinet Secretary or one of the Departments. I am a member of the board of the Centre for Management and Policy Studies (CMPS).

  939. Do you hold or have or attend meetings with the Cabinet Secretary at which Civil Service reform is discussed?
  (Lord Simon of Highbury) Yes I have done. The board discusses that matter. It is mainly about the training and learning side, the development of programmes.


 
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