Examination of Witnesses (Questions 100-106)|
WEDNESDAY 7 NOVEMBER
100. You mentioned the Home Office and DEFRA
as being particularly recalcitrant departments. To use Mr Trickett's
phrase they are the "villains", the people not keeping
up. What interests me in relation to these particular departments
is given your limited powers, given the power you do have, and
give that you know the situation in relation to how they are performing
in relation to the other departments, do you phone them up and
say, "Most of the other departments seem to be getting this
right more or less. You still seem to be making a complete horlicks
of it. What are you going to do?" What then happens to the
relationship between the Treasury and a department like DEFRA
or the Home Office in terms of trying to ensure that things start
improving rapidly? What special measures do you try to put into
effect in those circumstances.
(Professor Sir Andrew Likierman) Can I just make quite
clear that the word "villain" is one I wish to disassociate
101. You will leave "horlicks", will
(Professor Sir Andrew Likierman) I said that the plans
of these departments were perhaps most at risk, which is slightly
different from being villains, because of the complexity of the
task involved. There are other departments which have got problems
but they are less complicated than these. Sorry, I have lost your
102. It was basically what special measures
do you take for departments like DEFRA and the Home Office, apart
from threatening to apply hot coals to the accounting officers
(Professor Sir Andrew Likierman) We write to them,
we phone them up, we get progress reports from them, we encourage
them, we warn them, we try to help them, anything we can. There
is quite a lot of interaction between departments and the Treasury.
But as I have indicated, there is ultimately a limited amount
that we can do. We cannot force them to do certain things.
103. At the moment.
(Professor Sir Andrew Likierman) We can try and do
what we can to encourage them. I do say again these are very complicated
matters, they really are. The two departments you mention are
in highly complex areas where there is a backlog to be made up.
So they are not starting from a neutral position, they are starting
from a position where the system is already weak and they have
had continuing problems. Other departmentswhich is why
I took exception to the notion that this was all a "can of
worms"have overcome them magnificently.
104. Can I ask you a question about cash before
we finish. I noticed this as well about the Culture, Media and
Sport Department allowing a reduction from £240 million to
£70 million. It is less than a third of what they had before
in the bank. Martin Sorrell famously made a lot of money for Saatchi
& Saatchi when he was their Finance Director in the private
sector simply by better use of cash. The Government spends £400,000
million a year. I am not asking you to stand by this figure but
just as a speculation, if all the cash in the public sector were
managed with the rigour that this example suggests it could be,
how much would be released do you think?
(Professor Sir Andrew Likierman) I should say that
cash control within central government as a whole is based on
a central account, it is not held in penny pockets all around
Whitehall. My suspicion in this particular case, going back to
Mr Jenkins' question, is that for various reasons this cash may
have been held in a separate account. But we will certainly let
you have the details on this. In theory there should not be much
opportunity for saving because the account should be run very
much on a centralised basis and cleared centrally, but there may
be, and indeed there were occasions we have discovered, where
departments were in some cases not holding the cash centrally.
105. Is it not likely that if a private sector
firm could get it so sufficiently wrong that someone like Martin
Sorrell could come along a transform an organisation by what he
did, that in the public sector the opportunities are even greater?
That is my point.
(Professor Sir Andrew Likierman) I would need to consult
my colleagues here who deal with the management of central government
cash and the management of that account as to what might be so,
but I believe that we have made some one-off savings. That comes
back to the question of some of the benefits which we have achieved,
but I think there is a limited scope for this.
106. Once you have consulted your colleagues
could you write to us about that. Very finally, this is my final
question, Chairman, in paragraph 33 of the Comptroller and Auditor
General's Report he says: "The overall test, however, is
whether departments are routinely preparing and using, as appropriate,
accruals-based resource information as well as cash figures in
planning and taking decisions and then in controlling and monitoring
their implementation. That is the change that lies at the heart
of the resource accounting and budgeting initiative and that is
the fundamental change in departmental management that the Committee
has previously looked to see achieved." Would you care to
speculate on when the happy day is likely to arise when that will
be routine across government?
Chairman: That is quite a good question to end
(Professor Sir Andrew Likierman) Some departments
are already doing it. The introduction of resource budgeting is
critical in terms of the question you have just asked. My belief
is that once we have full resource budgeting as a result of the
2002 Spending Review, which is from the 1st April 2003, that will
be a real crunch point. Departmental budgets will be on a resource
basis and the control will be on a resource basis. This really
will be the turning point. I am not saying it will happen overnight
but the incentives will be quite different to what they have been
before and where there has been not much encouragement to change.
That is why we are doing the training now and why, going back
to my previous point, we are doing it specifically for the senior
Civil Service to try and make sure that they are aware of what
the possibilities are.
Chairman: Thank you very much, Sir Andrew. This
has been a very interesting session. It might seem a dry subject
but it is of fundamental importance to the whole culture of government
and changing the attitude of senior management in government.
We have certainly come up with the novel doctrine that apparently
the Treasury has no power! Thank you very much.