Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 1-19)




  1. Thank you very much for coming to see us, Chief Secretary, we are very grateful. You have been very kind, as I said in the House today, and you have made sure your officials worked closely with the NAO and we are very grateful for that. We are very grateful for all you have conceded to Sharman. We feel it has been a very good operation and everybody deserves congratulations. I am not going to go on at you again and again about the Civil List and the BBC. I have made the point and other members can come in. When do you think we might expect legislation for these rights of access which are present by agreement but which have to be put on a statutory footing?

  (Mr Smith) Thanks for this opportunity of appearing before you; an unusual event, for the second time, but it does represent the delivery of the commitments I made when I appeared before the Committee originally when there was general acknowledgement that with good will and hard work and all that sort of co-operation we would get a good outcome on this. I believe that has happened and I should like to echo what you have said about the very constructive and positive way in which all the officials, Treasury, NAO, have worked together on this. In terms of the access arrangements, that depends on orders being made under the Government Resources and Accounts Act. We would anticipate that might take something in the region of nine months.

  2. There is some doubt about this validation of performance measurement system. That is what you are giving us at the moment. Inevitably it is going to come about that the Comptroller and Auditor General has to look at the data as well. You did not mention this in the House this afternoon because there was not time but I think you conceded in your longer reply that this is a first step. Is that right? I think we feel that it does not really make much sense just to look at systems, you have to look at data itself. Are you prepared to accept that?
  (Mr Smith) I have not represented it as a first step. Lord Sharman did in his report. As I said in the House, I do believe the important thing is validating the underlying systems. That having been said, if there are areas where the Comptroller and Auditor General has particular doubts about the reliability of statistics, it would not surprise me if, as part of his audit of the underlying system, he were at least to take samples of statistics and check for their reliability. As I said, where systems are already subject to collection and validation by the Office of National Statistics or the Audit Commission, I would not anticipate that he would need to do very much further work, but ultimately that would be a matter for him. I do believe that under his existing powers and indeed on some of the studies which you have undertaken, for example quite recently on the subject of hospital waiting lists, this is an area he is at liberty to investigate anyway.

  Chairman: I am sure we can find a way through this.

Geraint Davies

  3. May I first of all echo the view of the Committee that we are extremely happy with the Government response in terms of the additional scrutiny it enables Parliament to have through this Committee? May I take you slightly away from that to make the simple point that it seems to me now that the only area of considerable public accounts, ignoring for the moment the debate on the BBC and the Royals, which does not receive parliamentary scrutiny is the whole area of local government which the Audit Commission looks after. I appreciate that the Audit Commission does audit all of this but that is the only massive area which does not actually feed through a parliamentary select committee. You said in the House that you were not running with that agenda, but I simply use this opportunity to consider whether it might be a good idea at some point in the future to consider whether there are means by which MPs may be able to scrutinise and interrogate people responsible for very considerable amounts of public expenditure which have been audited but in this case by the Audit Commission. Do you have any thoughts on that?
  (Mr Smith) First of all, my answers in the House were intended to avoid setting any hares running about some amalgamation of audit bodies on which I am sure members of the Committee have views. In principle this is an area where it is no bad thing if there is plurality of responsible bodies co-operating and working together as they do and will under the public audit forum. On the question of accountability of local government, of course this is outwith the terms of Lord Sharman's inquiry which was about central government audit and accountability. It is perfectly in order, as indeed select committees do, to examine programmes, through DTLR or other departments, which are delivered, at least in part, through local government. Your question is rather how more centrally might local government be brought into the arrangements for central accountability and scrutiny. I am always prepared to reflect on these matters. I think we would have to be mindful though of the constitutional accountabilities in these areas where the Government is accountable through Parliament for Government matters and local government is accountable through councillors to local electorates.

  Geraint Davies: Just to be clear, I was not proposing for a second that the Audit Commission be merged with the National Audit Office. I was simply saying that given that central government do decide how much is spent in local government in aggregate and then disaggregated, parliamentarians understandably might think that there should be some mechanism where with the help of the Audit Commission they can query the value for money and economy and efficiency of that expenditure. This happens to be the only Committee of Public Accounts but we could always set up another one which the Audit Commission accounted to. I do not necessarily want you to elaborate. I just wanted to make clear my view and I do not know whether there is likely to be any further thinking some time in the future on that.

Mr Rendel

  4. I first want to repeat the point that I personally, after the work I have done, am absolutely delighted at the Government's response. I did not believe that you were going to be as good as you have been in terms of doing what is almost unique in my experience in Parliament and that is relaxing government powers to some extent, giving away some government powers, certainly control over information and passing that over to Parliament. It must be very good news that that has happened, which makes it all the odder that there is this one peculiar exception for which there really does not seem to be a good reason. I have to say that I thought your reply to me in my own question in the House just now, when you more or less said you had talked about the BBC so you were not going to talk about it again and that was it, was frankly feeble. I think the arguments I was putting, and I know a lot of people wanted to put the same arguments, that this is not a question of the editorial independence of the BBC being threatened by government, because nobody was suggesting that the audit should be reported to government; that would be worrying, all of us would agree that if the editorial independence of the BBC were controlled by government that would be very seriously worrying, but that is not what anyone is suggesting. . . . What they are suggesting is that the audit should be controlled by the National Audit Office which reports to Parliament and therefore to the people and that is a very different thing. I do not see that the argument for editorial independence applies. Frankly, if I did think it applied, I should be just as worried as you about the suggestion that the NAO should take over. I think the feeling of the House today was absolutely clear that on all sides there were objections to this one point in your response about the BBC and none of us could really see why, having done what you had done in all the other cases, you should make an exception in this one case and do what none of us wanted to do and none of us thought you had any good reasons for doing. Frankly your explanation was feeble and it was obvious that it was feeble. It was obvious to everyone in the House that it was feeble. I would plead with you to go back and reconsider whether this is really necessary. All I can say is that if this is a point you are going to stick with, the impression is going to be given everywhere that somebody is pulling a hell of a lot of strings in the background. Your response to the rest of it is so out of line with your response to this that I can hardly believe it is Mr Andrew Smith who is doing it.
  (Mr Smith) May I say first of all that it certainly is not a question of people pulling string? I would not for one moment allow anything like that to happen.

  5. It is certainly the impression you are giving.
  (Mr Smith) The argument I put in the House is the position which I can but repeat here and it is that these matters were reviewed by the Davies review and the Government reflected following that as to whether the change which is being suggested was desirable and came to the conclusion that it was not. Further reflection has taken place in the light of Lord Sharman's recommendations and we are not persuaded of the case for change.

  6. Who is not? Everyone else is persuaded.
  (Mr Smith) The Government is not. There is one important respect in which the proposals which we have announced today would make it easier in the future for the Comptroller and Auditor General to conduct value for money studies or be the auditor even of the BBC if that were what future government decided in that presently the charter of the BBC specifies that the audit must be undertaken by an auditor in accordance with the Companies Act and our proposal, subject to legislation, to make it possible for the Comptroller and Auditor General to audit companies would make that possible were such a decision to be taken, but that decision is not being taken.

  7. I can only plead with you to go back and reconsider it because I believe you will get an awful lot of stick on it. You are going to suffer for it electorally, but I do not suppose that will worry you, though it should do. The feeling of the House today was absolutely clear right across the parties.
  (Mr Smith) The important thing in all these matters is to do the right thing and ultimately the electorate are very good judges of that for themselves. I believe that there are legitimate issues of editorial independence which do enter into a sensible consideration of these issues.

  8. Why do you think editorial independence will be affected?
  (Mr Smith) What I said in the House was an impression that editorial independence was being more closely drawn into the political process would be very unfortunate and undesirable.

  9. Clearly at present there is a feeling amongst quite a large number of the population that the BBC is to some extent politically controlled. There are constant cases in which the BBC seems to have withdrawn programmes which they claim they had good reason to do and it was entirely their own decision and no, no government pressure was put on and no, nobody threatened the BBC would have less money next year. There is constantly an impression among the people of the country that actually there is a certain amount of political control over the BBC. What I am suggesting to you is that if you go down this route, you have a better argument for saying, "Look, we are deliberately making the BBC more independent if anything of political pressure".
  (Mr Smith) That is an ingeniously and seductively constructed argument but it is one which has not persuaded the Government.

Mr Williams

  10. I said on the floor of the House and I meant it genuinely and David who has been in from the start of the negotiations with you, as the ex Chairman, David Davis, that we have got further than we ever expected and we are delighted at that. However a couple of questions on the BBC and something on the Civil List obviously, as you would anticipate. I have not seen any argument in detail other than the repetition of a mantra from the BBC as to the threat that this Committee would represent. They are never able to give any detailed explanation of why the audit process, which we are involved in, would endanger their programme and editorial independence. They just throw these out as general catch-all phrases and they think that will protect them. What I should like, if you would, is for you to use your good influences with them, since I do not expect to get any progress this evening—and I do not mean that in a nasty sense—and ask them if they would provide a detailed defence of their position in terms of independence, bearing in mind the nature of this Committee. You come here as a Minister and you know you can come to us and talk to us on your main work and this Committee will not be asking you policy questions. If we do try to, our Chairman would rule it out. It is a discipline which we all, other than when you are brand new and getting used to what you can and cannot ask, self impose. This Committee, as I am sure your officials will tell you, does quite calculatedly avoid policy and if any witness tells us that it is a policy issue then the Chairman will normally give them backing and stop any further questioning. So the Committee is able to self-discipline itself in carrying out its audit checking functions. Why do you think we are incapable of doing that and differentiating between editorial independence and dealing with questions of profligacy, waste, on issues of public money which is a different matter altogether in the administrative context?
  (Mr Smith) I should stress that this is a decision which the Government has taken not a decision which the BBC has taken. As I said in the House, I have every confidence in the Comptroller and Auditor General and the National Audit Office and the greatest respect for members of this Committee and its work. Nonetheless, at the risk of repeating what I have already said, I think there are sensitive considerations here which we would do well to consider very carefully. Obviously I shall reflect on what the right honourable Gentleman and colleagues have said on these matters, but let us also recognise that we have had the Davies review and consequent reforms and it is sensible to allow those to bed down and see the benefits. I personally do not have a closed mind on these issues at all, but it is wise to be very careful before we suggest changing this.

  11. I understand what you are saying, but in that case as you have had to defend the situation would you use your good offices to get the BBC to provide this Committee with a detailed argument of the risk we pose to editorial independence and let us have a look at that?
  (Mr Smith) As I said earlier, that is a judgement and a decision which the Government should make rather than the BBC.

  12. That is a different matter.
  (Mr Smith) In that sense, we have to make the judgement as to how we best fulfil our role and responsibility because I am sure everybody, whatever their views on this particular issue, would support that editorial independence should be safeguarded. The other thing it is important to stress is that it is not as though the BBC is not professionally and properly audited, it is not as though its report and accounts are not submitted to this House and to the DCMS Select Committee and scrutinised, they are.

  13. I shall leave that for the moment but it does seem strange that you commissioned two independent reports, particularly the one specifically geared to the BBC, financed by public money, but then the only item to which you take objection seems to be this one. Switching to my old hobby horse, the Civil List, bear with me if I just put a little background for colleagues who do not know the background. It is an anomaly because the Civil List is not money which goes to the Queen for the Queen's income, it is money in support of the monarch, as are the palaces, as the flights and so on, to carry out the duties. Seventy per cent of it is spent on salaries for the royal civil service; the other goes on things like garden parties and so on. For some reason, there has been an absolute resistance to allowing us access to this information. What we get is a ten-year retrospective so that the Civil List is announced for a ten-year cycle and at the end of the ten years you get a couple of pages as a report in which there is a ten-year retrospective on which you can do absolutely nothing. All this arises as a result of a select committee report in 1972 and you have to try to pitch yourself back that far, to your school days, to consider the attitude towards the monarchy at that stage. The fear was that if there were analysis—and this is what the report stated—if this were made available to Parliament, royalty would become a public football. We know we have full access to the information on the palaces, full access to the information on travel, they have not become political footballs and it is an out of date argument. I always work on the basis that where we moved in there have been dramatic improvements in the costs the Government, whichever Government is in office, have had to make in grant in aid: the palace costs have tumbled, the travel costs have tumbled. In this case, it was pure coincidence I admit, what I did when I started looking at this was a ten-year analysis of court circulars working out the engagements carried out by members of the Royal Family. I then did an analysis of that in relation to the money they received from the Civil List and I found—and I am sorry because of the timing it is an unfortunate one—that Princess Margaret fairly consistently was receiving 4,200 a week backup to carry out two engagements a week. I thought this sounded somewhat extravagant. I had The Guardian and one or two other papers publish this report, but fortunately about 18 months later the Palace suddenly decided that they did not need the long Civil List with all the extra relatives on it. So they still remain notionally on it but the Queen takes the money and then, we understand from Treasury, gives it all back again; which I am sure means in effect she does not get it in the first place. What I do not understand is why it is such a sticking point. It does not matter a jot, other than as a matter of accounting principle. It should be treated on the same basis as the other grant in aid because that is basically what it is. It is a form of grant in aid to the Palace to carry out its duties. What is the mystique?
  (Mr Smith) I should say that Lord Sharman was silent on recommendations on the Civil List. I recognise my right honourable Friend's long-standing interest, expertise and knowledge in these matters. I have to say we have not seen good reason to change the long-standing and widely supported, indeed bipartisan arrangements which govern these matters and in an unwritten constitution how far these matters of practice become constitutional is an area one would have to think very carefully about before changing.

  14. A point of information and clarification. The reason Sharman did not say anything, and David will remember the arguments at the meeting and the anger of some of the members other than myself because I was not surprised, because I am use to sycophancy when I am dealing with royal issues, was that he said he had looked at it and decided that although his remit covered all public money, he did not feel that it enabled him to look at the Civil List, which somehow is not public money although it comes from the public purse. He was taken to task, as David will remember, not so much by myself, because I get rather resigned to these pre-determined answers, but by the independent members on the committee, because it just did not add up. As to the bipartisan point, since the previous Chairman of the Committee of Public Accounts has not actually taken our party whip yet and the present Chairman of the Committee of Public Accounts has not taken the Labour Party whip and David Rendel, who is hoping we will all take his party whip, we are actually a tripartite body here, with possibly one, maybe two exceptions because we have not discussed this before, so I do not think this is a party issue. I think this has just become a meaningless symbol and no-one will move on it.
  (Mr Smith) I do not think it is a party issue either and that was rather the point I was making. It is not only the Government who is not persuaded of the case for change in this area.

Mr Jenkins

  15. I should like to get my head round this. It is not good to look at the accounts of the BBC because it would impair their independence and their editorial freedom, but it is okay for the Secretary of State to come to Parliament to make a recommendation on their income and Parliament can vote that through and that does not in any way impair their independence and editorial freedom. If I were sitting outside and you put that argument to me, I would start to think I was going daft. I should say I should be more influenced by your control of my income rather than you looking at my past expenditure. I should worry more about that impinging on the BBC than an accounts committee of sad anoraks going through the figures and saying they should not have spent this on that and maybe they could have spent that on this. In all honesty it does not stack up. I think someone needs to do a paper to justify how and why the BBC should be independent and how we can retain that independence if it were felt by Government that we should not be looking at that public money.
  (Mr Smith) I do not claim that there is no force in the arguments that you are putting. I am listening very carefully to the arguments which are being presented but I think we have already made changes in the light of the Davies report. There is already an audit regime in place, there is already the scrutiny, including the matters to which you refer and we are not persuaded that there is a conclusive case at this time to go further.

  Mr Jenkins: Just take one more step.

Mr Davidson

  16. It strikes me that in everything the Committee of Public Accounts looks at almost without exception improvements result, not necessarily just by what the Committee of Public Accounts brings but the actual experience of going through the exercise. Is either the BBC or the Civil List perfect already or are they so bad that they would not stand scrutiny? I was unfortunately not in the House this afternoon due to other commitments, but your arguments to both of these do seem astonishingly thin. While I appreciate we are unlikely to see a sudden bolt of lightening and a conversion as you sit there, it is something we would want you to take back and reconsider in a generous mood.
  (Mr Smith) Let me say on both of those issues that it is not as though matters have been absolutely static, so in terms of your question on whether things are perfect, they can never be improved, I do not think anybody is supposing that they cannot be improved nor that improvements have not been made nor should be ruled out for the future. The public considering these issues would appreciate that in relation both to the Civil List and to the BBC there are particularly sensitive considerations and those warrant very careful thought before going in the direction you are advocating.

  17. Could you just clarify for me what the particularly sensitive issues are in relation to the Civil List?
  (Mr Smith) Constitutional relationship between the Sovereign and this House.

  18. How is that different from the areas where we already have the right to explore and examine where we have brought about enormous savings to the public purse?
  (Mr Smith) You ask what the particular sensitivity is and I say that is the sensitivity. There is the question of how far the arrangements which are already in place are formally part of our constitution. That does not mean they cannot be changed, it does not mean there is no case for changing them, what it does say is that we have to think very carefully before we do so.

Mr Bacon

  19. I should just like to make one quick observation about the BBC and the Civil List and then I shall ask you about management and innovation. To reiterate the point Mr Rendel was making, speaking as a Conservative member, I think there is a tripartite view that the arguments you put forward about the BBC were a little specious in that while it plainly would be a grave error if the impression were created that the BBC's editorial independence might be compromised, I did not hear a convincing argument as to why transferring the scrutiny to the National Audit Office would in any sense compromise the editorial independence. I would ask you to go back and think carefully about this because there is a consensus across party that there would be no issue. On the Civil List, certainly Sir Michael Peat said in a hearing that scrutiny, openness and accountability had improved the management of the Royal Household and we looked at the issue of royal travel by train and air and the cost has been cut from 17 million to 5 million. I wish we could say the same for the whole of central government. I take it you are in favour of scrutiny and openness and accountability and that generically you think those things improve matters. If that is true, then it is also true for the BBC and Civil List. I want to ask you about management and innovation because as a relatively new member of the Committee one of the things which has really struck me is that the constant emphasis comes out about risk management; no matter what we are looking at, there needs to be an emphasis placed continually on proper procurement, on proper risk management and ongoing proper project management. While there have been many reports from the NAO and this Committee on the issues of proper procurement, proper project management and proper risk management, those issues are far from being embedded inside the Civil Service culture, indeed Peter Gershon said explicitly that there was something about the Civil Service culture, inherent in the Civil Service culture, not found in the private sector, which tended to inhibit good project management. I should be interested, in light of this fifth recommendation about accepting Sharman's points about management and innovation, whether you could say something on where you see Government management going in terms of promotion inside the Civil Service recognising that actually having run something successfully should be a key criterion, a sina qua non perhaps, for promotion to the top reaches of Whitehall.
  (Mr Smith) On your first two points I hear what you say and I would not want to be attacked as being too conservative by a Conservative. On the question of procurement and public management, I agree very strongly that there is a need for continuing culture change, not just within the Civil Service but within the public sector more generally. Moreover I do see a readiness to change and to reform and an increasing understanding of how important that is, not only to value for money and efficiency, but to the public service delivery agenda. I chair the supervisory board of the Office of Government and Commerce and I think that Peter Gershon and his colleagues are doing a terrific job in improving procurement practice across government. Both for example through the introduction of the gate procedure, where especially major and complex projects have to be evaluated by a process of peer review through key stages and through the development of harder, better trained and more experienced project managers across government and indeed in fulfilling the OGC's targets for savings in procurement, it is making good progress. I could say a lot more about this. It is a very big and important area. I would argue that we have made a start, a good start, but certainly there is a lot more to do. If you ask whether there has been something inherent in the Civil Service, I would not put it quite as strongly as that. What I would say is that in the past, status and reward has accrued disproportionately in the Civil Service traditionally to those whose expertise is in policy formulation and advice rather than in the management effectively of delivery. That is now changing, it was a key part of the Bichard proposals for reform, just as recognition of performance is a crucial part of the Makinson proposals for reform on remuneration. Change is under way and we will all see the benefits.


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