Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 100-106)

PROFESSOR SIR ANDREW LIKIERMAN, MR DAVID LOWETH, MR CHRIS RICHARDS AND MR ADAM SHARPLES

WEDNESDAY 7 NOVEMBER 2001

  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 myself from.

  101. You will leave "horlicks", will you?
  (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 question.

  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 concerned?
  (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 departments—which 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 with.
  (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.





 
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