Select Committee on Public Administration Minutes of Evidence

Examination of witnesses (Questions 940-959)



  940. The reason I am asking these questions is to get a clear view of where the lines of accountability lie for an unusual person like yourself around Whitehall. There have not been very many of these over the last quarter of a century. You are accountable ultimately for what you do in Whitehall to whom? The Prime Minister? To whom do you answer? Suppose you get something wrong, suppose you collect one of these papers from the Cabinet Secretary and leave it in a restaurant and there is a row, who is responsible?
  (Lord Simon of Highbury) I would be responsible if I left it in a restaurant, but I doubt very much whether it would be the end of the accountability because the person who had given it to me would no doubt be accountable, so if it had come to me through the Cabinet Secretary or it had come to me through one of the other Civil Service channels, no doubt they would be held accountable.

  941. You have brought a good deal of business experience to bear on Whitehall and Michael has made a point about the need for more exchanges across disciplines. Do you think that a multiplication of Lord Simons across Whitehall is going to achieve much?
  (Lord Simon of Highbury) It would not achieve much multiplying me because giving advice is not the same as doing the work and delivering. I think much more important is the target of 100 private sector experienced people coming into the management machine, the 3,000 civil servants who are what we call generally the management level. I think that cross-fertilisation is extremely useful and long may it continue. Having open tender for jobs within the system and fewer barriers to movements between departments is all to the strength of the system. I think that is what will improve the professional management.

  942. Can I end by asking Michael Heseltine how he thinks that cross-fertilisation should be built up. What are the main impediments to it? Is it the lifetime career civil servant approach? In years gone by almost everyone who joined British Petroleum thought they might spend a whole career there. I joined British Petroleum in 1981 and a high proportion of people thought they were joining for a lifetime. Everybody knows now that is not true in large sections of industry but it is still true in a few professions, one of which is the Civil Service. People enter it in their early 20s and spend a lifetime in it. How are we to get this cross-fertilisation?
  (Mr Heseltine) I do not have statistics but I think it is worth probing that assumption because, if I think of some of the most talented civil servants with whom I have worked, several of them have moved out into the private sector and I think this was not uncommon. I can think of some who came in from the private sector, but again I have no statistics for that. It is not too difficult if you are determined to do it for a Cabinet Minister to bring people into the department. I personally am very much committed to the view that special advisers—non-political special advisers—are an enormously valuable asset. I brought in people like Tom Baron from the house building world, Peter Levene from industry, Tom Burke from the environment world, and they worked within the departments as special advisers. What their politics are I have no idea. Certainly they were not all Conservatives. I brought a hundred export promoters into the DTI in order to act as a liaison between the national markets and the Department of Trade and Industry. There were already people there—innovation advisers they were called—in the DTI, so it can be done. So it should be.


  943. Can I pick up one point from that exchange, and it is a Treasury point again? Lord Simon said that he thought the PSA system was the most important innovation for some years, and of course this is Treasury driven. Having abolished the Treasury as it were on the one side—
  (Lord Simon of Highbury) Sorry, Chairman; I did not abolish it.

  944. Having separated out various activities we have got the fact that now the Treasury is performing what you were describing, Lord Simon, as this most important innovation in government, driving from the centre, from the Treasury, these agreements right through the public sector in terms of performance targets and delivery. Should the Treasury be doing that? If the Treasury did not do it who would?
  (Lord Simon of Highbury) Again, if you think of the private sector analogy, you would probably have a team involved at the first level setting the strategic plan for the company, and at the second level allocating resource in the appropriate direction. You would put together a group of people to perform those functions and that would be, referring back to your earlier conversation, the strong centre. It would probably have representatives from the financial function, representatives from the strategic planning function and representatives from the operating divisions and you would make, as you said yourself, Chairman, a strong centre. As it happens the way the system at the moment works it looks more like two separate functions: a financial strategy function, which is certainly now more effective than a revenue control function because it gets into strategy objectives, as you said, at a much wider level, but you also have at the centre in parallel a strategic planning function and a policy advisory function which is more Number Ten and the Cabinet Office running in parallel. Effectively you have a choice. You can either run it like that as a two-headed system or you can try and structure something which puts together all three parts at the centre. Companies run these things in different ways but, excuse me, I always think in a private sector model, a company model, because that is the administrative system I am used to.

  945. Therefore you are predisposed towards thinking about a more collegiate, more board, view?
  (Lord Simon of Highbury) Yes, I am more predisposed towards that model, particularly where you have very strong departmental walls for public accountability reasons. The horizontal management of the system has always seemed to me to be the greatest challenge and when you start to allocate resource across departments of state to achieve a strategy, how you manage that horizontally and play the tunes on it is the most difficult part of the professional management system.

  946. So your enthusiasm for the PSAs goes alongside the belief that they would work even better if they were somehow collectively owned?
  (Lord Simon of Highbury) Yes, that is fair to say.

Mr Turner

  947. Can I first of all apologise to the three witnesses? I have to go shortly. It is nothing personal, I assure you, and I look forward to reading the transcript of the rest of the meeting. I would like to take up with Michael Heseltine the government offices that he set up. You did set up those in the late 1990s. Can you tell us why?
  (Mr Heseltine) Yes. I think they would come initially from the urban challenges that we faced where you had a range of government departments acting in their own interests, I do not mean selfishly but clearly they were in pursuit of their own objectives in these areas with their own officials and their own officers, and it seemed to me that the problem of the urban world actually required a much broader approach. The policies we had been pursuing from the 1980s onwards were all about trying to regenerate comprehensively and you cannot do that unless the education and crime and the roads and the environment and the housing all come together to try to raise the particular area you are preoccupied about. We talked about it internally and came to the view that it made sense to create integrated offices of government in the regions. I think it was the right decision. We managed to deal with the inevitable clash about who was going to take over whom by dividing the regional directors amongst the departments that were defending their sovereignty and providing they all got their share of the top jobs it worked extremely well and I think the regional directors have one of the most exciting jobs in government today. I think it has been a considerable success. That is why we did it.

  948. You say it has been a considerable success. You think that they are still working there?
  (Mr Heseltine) Certainly I had a lot to do with the regional directors; I saw them regularly. To my knowledge they thought the job was extremely attractive and it was much more effectively administered once it had been fused, and unless they were telling me what I wanted to hear (which I do not believe), undoubtedly it was a very sensible and overdue step.

  949. I get the impression from my own regional office that one of the difficulties is the one Lord Simon was referring to in the horizontal management sense that, whilst what is now the DETR elements worked quite well, it was very difficult to get the education and those other departments to work quite as closely as they should.
  (Mr Heseltine) I think I am right in saying that education was not involved.

  950. Exactly. That is the point I am making, that you are saying it should have been.
  (Mr Heseltine) Of course it should be. One of the things that is not as appreciated as it should be, and it is slightly outside what is relevant to what you are talking about, which we discovered in this whole initiative, was the way in which the local authorities were divided in battalions which saw their command structure going direct to their sponsoring department in Whitehall. That was very serious in that of course they were very much creatures of Whitehall. Much more serious was the fact that they were relatively indifferent to what was going on in the other parts of their local authority. In other words, the housing guy was looking to the DoE and was hoping at the end of the year to get a bit of extra money, but he was not particularly preoccupied by crime in the locality because that was the Home Office. You can repeat that pattern. One of the great benefits that came out of the concept of City Challenge is that these local authorities, incredibly, for the first time had to talk within themselves because they could not win the City Challenge process unless they had put forward corporate plans which were based upon the general interest of the community that was bidding for the City Challenge money, and of course they could not do it if they did not involve the private sector as well or the tenants or the Chief Constable or the headmistress or the teachers. For the first time in the process of putting money up for grabs we brought together the individual local authorities at a local level and the local community at the local level in a way that previous systems prised apart.

Mr White

  951. So why could you not do it at the central level as well?
  (Mr Heseltine) We are of limited ambition. We did bring them together in a sense. There were Cabinet committees that brought them together and actually that Cabinet committee process accepted and drove forward City Challenge and, if we had been elected for another term, we were on the verge—and I believe this very strongly as an idea—of moving from the limited concept of a corporate plan for, say, a community of up to 30,000 people, to bid for the extra cash, to the point at which local authorities bid for the whole of their corporate plan. That would have been the next step and that is what needs to be done. If I had been one of the directly elected chief executives it would have been done immediately.

Mr Turner

  952. This is interesting in the sense that we are going to Newcastle to look at how the north east looks at that. Maybe Lord Simon can come in on this horizontal management aspect. Is it the politicians who are preventing this from happening in the way that most of us would envisage any regional government office working, and involving departments in that? Do you see that as a political problem or do you see it as an administrative problem?
  (Lord Simon of Highbury) I do not really have the experience to answer that because in my brief ministerial career, particularly as it were coming straight from the business world, I tended to focus on two projects which I knew I needed to get done within a specific time and not worry essentially about the organisation of government through to the local government regional office. I worked with the regional offices because of the DTI policy, but not in looking at it as a co-ordinated structure. The issues of co-ordinating structure are the ones that one has had to face as a minister at the top of the system. No doubt the more problems you have in co-ordination and horizontal management at the top of the system the greater will be the difficulties at the bottom. They are usually magnified if you look at it in the private sector, so your question is extremely important but I do not think I know enough about the regional office and local authority management structure to comment.

  953. Do you see it as part of a devolution process?
  (Mr Heseltine) Yes, very much. We are desperately over-governed. People talk about the freedom of local government. I once got the forms that had to be completed in local government housing departments before they got authority for capital expenditure on houses. By the time you had dealt with the colour of the brick and the slope of the slate and the 80 questions that those local authorities had to fill in, the language of freedom for the local authority had no meaning whatsoever. I do not have the slightest doubt that the same thing went on in the Department of Education and all of that. If we had got to this stage I was trying to take my colleagues towards of a corporate plan and a competitive process for bidding between local authorities for the funds that were available, then one of the prizes that I saw in that was that central government could stand back and allow local authorities to be different. I happen to think that Newcastle is one of the more interesting examples of a coherent local government because—and heaven knows, the north east feels a bit beleaguered for very understandable economic reasons—they have co-operated much more effectively than the equivalent public/private sector or local authorities in other parts of the country. I do think that if we got this really powerful local figure, a working community, a devolved relationship through the government regional offices (I do not believe in regional assemblies, by the way; it is just another tier to get in the way) then I think Whitehall could have a bonfire of its controls. The unitary authorities are a very important part of this package. You have got them in the north east but they should have them in the shire counties as well. Then you could say, "These are big, mature people and they must be allowed to experiment and do things differently". That would then be a very substantial devolution of power from the centre.

  954. What about accountability in a direct sense? You have the accountability of central government, you have the accountability of local government, you have got these government offices in the north west and north east and so on, working in there, you want them to have freedom and yet you do not seem to want them to have any direct accountability to the people they are bringing services to. You talked about the regional directors reporting directly to you rather than to the people whose services they are delivering.
  (Mr Heseltine) First of all, there is a very real supra-authority relationship. The road programme is a national road programme, for example. The police forces operate very much on a national scale, so there are big central issues. There is a whole allocation of funds issue, there is a whole accountability to the use of the funds issue. The role of central government is unavoidable in such circumstances. That is what the regional offices are there for. One was trying to get them into a position where they took a positive view of their role. They were going to help as opposed to saying, "Fill in form 43 and we will let you know". That became an interesting and exciting job. The accountability seemed clear. The regional office is there to represent central government and be accountable for the decisions of central government. The local authorities are there to carry out their responsibilities, and the difficulty for the Member of Parliament of course is to try and recognise that he is not a local councillor. If you are in a marginal constituency the temptation is to be a district, county and goodness knows what councillor. That is very corruptive of the system.

  955. I must admit it did sound very Roman. It is quite good if you are a Caesar but not very good if you are further down the scale.
  (Mr Heseltine) I did not get very far with Latin myself.

Mr Wright

  956. You mentioned the fact that you were opposed to regional government. Do you not think that there are so many tiers of government at the moment that something needs to be done to put the balance back?
  (Mr Heseltine) I have just indicated one area where we did. We got rid of the two tiers in Scotland and Wales with great success but that was largely because there were not any Conservative seats to lose so it was not a hugely controversial thing from my party's point of view. It was much more difficult when we tried to do the same thing in England. We set up the Local Government Commission for England and look where it got us. That was one way of getting rid of the tier. I am a unitary authority, county based man myself. That gets rid of a tier. It gets rid of the districts. Do you then recreate the regional tier? I say not. There are certain things; I can understand that there is a regional road programme for instance, but actually it is mainly a national road programme, so regionalising it probably creates a tension there between the central planning and the local one. From my knowledge and experience of most parts of this country there are not regional identities. People in Preston do not think of themselves as Liverpudlian, and certainly Mancunians do not think of themselves as Liverpudlians, and so trying to put the whole lot together just creates another forum for a great row. In the north east arguably it is different. I am not sure whether Northumberland thinks of itself as Newcastle, but certainly it is closer. I am making the right point, I see.

Mr Campbell

  957. Newcastle thinks it is Northumberland.
  (Mr Heseltine) That is right. So creating this regional tier is just another row and another tier. But you have to have the regional offices of government. That is not the same thing at all.

Mr White

  958. One of the things I found interesting as somebody who reformed the local authority I was on and backed your reforms in the early nineties and tried to think the unthinkable and create new structures within local government, was that one of the things that came out of that was that public services do not have the involvement of the community. They did not at that time and still for the vast majority of the public services, community involvement is minimal. Consultation is at best patchy (real consultation, that is) as opposed to, "We have decided what we are going to do here". How do you go about bringing the public into the mechanisms of government?
  (Mr Heseltine) This was to me one of the most exciting things of City Challenge. There were those to whom it was anathema (not my party but there were parties who did not take so kindly to the idea of City Challenge) because they said, "You are going to penalise the unsuccessful." I said, "Yes, we are", and we did. If we had 30 local authorities bidding for the money that was available and it was five million pounds a year for seven years for these deprived areas, then only ten or 11 won, so 15 or 20, whatever it was, lost. I was prepared to take the flak of that, believing, hoping, that the effect would be that the 20 would not sit and sulk but would say, "Sod that, we are going to do it right next time", and that is what actually happened. The ten that won became the role models and the other 20 immediately rushed off to see how they had won and we managed to ensure the following year that a lot of the 20 won as well and so it worked out. One of the conditions of City Challenge was the community involvement. Ministers judged City Challenge. I personally with my ministers went round, listened to the 30 bids we had, made a decision. We were dealing broadly with Labour authorities. There were no party politics in it; there was an element of philosophy in that we wanted private sector involvement and that sort of thing, but by and large it was totally about trying to help build communities. One of the most distinguished authorities lost when the leader (we made the leaders do the presentation of their bids) was asked by me, because I was doing the judging in this case, what did the local teachers think of this. He said, "We will explain it to them". He lost at once because he had not consulted the teachers. We asked the same question about the Chief Constable. "You want this money to revive this inner city area. What does the Chief Constable think about your plans?" If anyone said, "He of course will keep the law", then finish. If you could not take the enthusiasm of the head teachers and the Chief Constable you were wasting your time trying to improve housing in these large areas. If it is still a crime rat run you have had it. That was the whole philosophy. The best example of it all, tear jerking as a matter of fact, was the Hulme Estate in Manchester. This was one of the worst slums in this country, and arguably in western Europe, deck access, rotten as hell. Everything was wrong. The fact is that we got the local authority with the benefit of AMEC, Sir Alan Cockshaw, in partnership to consult the local tenants and devise a strategy to save the Hulme Estate, and today the Hulme Estate is a highly attractive and desirable part of Manchester. Interestingly enough, it was that team concept that did the City Challenge with the Hulme Estate that, when the bomb went off in central Manchester, the Labour leader of Manchester was only too happy to take from to rebuild the centre of Manchester. We were accused of centralism because we insisted that they did their job of involving the community. I called it devolution.

  959. How do you get that involvement into central government services? That is where I find difficulty.
  (Lord Simon of Highbury) With great respect to City Challenge, and I am not trying to make a political point at all here, the problem of all intermediate organisation between central government, Westminster, and whatever level you want to call it: regional or county and so on, is that it falls apart in community and democratic terms if the assets it is controlling do not offer appropriate service to the consumers. The consumers are not interested in intermediate government and its shape. They are interested in the school or the hospital. It seems to me that what government is trying to do now and rethink now—and I do not want to presuppose the organisation because I am not a party to intermediate organisation—is to ensure that the quality of the delivery from the asset—from the hospital or the school—is more controlled by the local people so that it is either your schools council or your trust board. But there is intervention from the community and accountability to the community much more strongly felt at the level of the asset management. I think the big debate in government, as it will be in the private sector, is what layers of intermediate management are appropriate or do you even need when you have a fully effective asset management system where the local people are running their own asset? Of course they are going to be accountable. Is their accountability to the centre centre (Westminster) or to an intermediate centre? Many of the problems, if I may say so, of the last administration were that they may have thought a lot about the intermediate levels of government but they did not concentrate enough on the delivery at the asset level and the accountability to the local people.
  (Mr Heseltine) Well, I do not agree with that.
  (Lord Simon of Highbury) I was not trying to make a political point. It is an organisational point.
  (Mr Heseltine) Yes indeed, but the whole process of publishing results from schools and parent/teacher governors was precisely to do what you have just defined. Like so much of life, there is a perversity about it because the parent/teacher governors became very closely involved with the teachers and they were not prepared to recognise the failure of their schools even when the statistics glared in their face. The whole process of what you have described as asset management is that what we thought would be a grip by the local parents to get results actually became a sort of redoubt defending the indefensible. I do not think asset management hits the essence of the problem of either communities or deprived communities because there is so much inter-relationship between all the things that go to make the community that if you just concentrate on the school or the hospital and the other bits are wrong, those other bits will alienate the chances of restoring optimism and growth to the whole community. I think you do need intermediate systems and the ideal one to me is the directly elected chief executive of a local authority. That should be the person. It is preposterous that if you live in a British provincial city today the chief executive of the local authority will be paid more than practically any manager in the city whilst the leader will be grubbing round trying to eke out what is a pathetic expense allowance. It is utterly and absolutely incredible.
  (Dr Clark) Michael, I have been listening to what you have been saying and I certainly do not take much issue with the initiative you took in the eighties and nineties in pushing forward things like the Next Step agencies, performance targets, financial management initiatives. I go along with those. I would raise some questions. I do think we have ducked the issue because I then ask the question, "How does this affect our constituents who are wrestling with the problems of going from pillar to post and from one government department to another government department at a local level looking for housing benefit, unemployment benefit, social security benefit?" There is just no cohesion at all. They are in different buildings, they are staffed by different people, and there is no need for them to be so. We are back to the point that Lord Simon mentioned and we have ducked it, because the most difficult one is, how do we tackle horizontal management? Actually the reforms of the eighties and nineties, which certainly increased public service productivity and empowered a great many civil servants and managers, made the problem worse because they created the silence and they made horizontal management even more difficult. I believe that if we do not take a serious look at this problem we are going to have great difficulty in retaining the support of our citizens for government, whether it be local government or central government. I can see that they should operate in terms of powers but also in terms of the delivery of services. I was, when I was in the Cabinet Office, looking at ways in which we could possibly look at ways of delivering central government services through local government. Often they do very much better than central government. You might then have a bid in process but I just do not think that we have been radical enough in our thinking on this. Whilst I have got the floor can I just pick up one of Andrew's points about the interchange with industry? It is very welcome. Both parties have tried to encourage it but probably we want something much more radical than that. It is not good enough to have somebody going off for 18 months to work for ICI or BP and vice versa. We really ought to be thinking of something like the French system. God forbid, we would not want the elitism there but people do come in and perhaps spend ten years in the civil service there.

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