Select Committee on Public Administration Minutes of Evidence


Examination of Witnesses (Questions 440-442)

SIR STEVEN ROBSON, MR JONATHAN BAUME AND MR JACK DROMEY

THURSDAY 29 NOVEMBER 2001

  440. So I am just trying to get to the point of, what do you see as the role of the Treasury in the delivery of public services; is there a role for the Treasury?
  (Sir Steven Robson) There obviously is a role for the Treasury, because the Treasury, in the end, is a conduit through which all the money flows, and the money is what makes the public services happen or not happen, in part, but not in whole; so there is clearly a role for the Treasury in setting and monitoring budgets. And there is a legitimate role for the Treasury as the guardian of the taxpayers' interest, in trying to ensure that those budgets secure value for money.

  441. But is not one of the issues that the Treasury's definition of what is public spending actually skews this whole debate, and actually people find PFIs or PPPs, in fact, the whole tube debate, is about trying to get round the definition of public sector borrowing requirement, rather than a definition of whether that particular service should or should not be managed?
  (Sir Steven Robson) The test that is applied to PFIs and PPPs is whether they are providing better value for money than the public sector comparator. If they do not do that, they do not get passed.
  (Mr Dromey) Just very quickly on this. It may be my Catholic education lets me down, but my understanding is that, when Moses came down from the mountain, on the tablets of stone were not Treasury Rules. They are the manufacture of man and minister, and they should change, in particular, in terms of the powers of the public sector to borrow and trade. That is crucial, both in terms of a level playing-field, so that any partnership arrangements are not shot-gun partnership arrangements driven by a public finance imperative, on the one hand, but also in terms of the flowering of public sector entrepreneurship, on the other hand. And, as I have argued, much of that public sector entrepreneurship is actually done then on a partnership basis with others.

  442. The Victorian entrepreneurs who in the public sector created most of our infrastructure now would not be allowed to do it under the current rules, so you could not create gas companies, you could not create electricity companies, you could not create water companies, as the Victorians did. But, I am just curious, how do you actually see the Treasury, and given your experience in the Treasury, what is the Treasury's way of operating; what should be the way that the Treasury operates, should it be involved in the Public Service Agreements, or should that be down to Departments and local authorities to decide their own local budgets? Is that balanced and central, local, I am trying to get that, given that the point you made fairly early on is that we have not had very good management and you cannot control a command economy?
  (Sir Steven Robson) The trouble is that the public sector we have at the moment is, in Jack's words, quite a Stalinist creation. You have got, going back to one of your phrases, essentially, monopoly organisations, and an attempt is made to drive those monopoly organisations to be efficient and effective by setting targets. Now, clearly, if the approach of having monopoly organisations driven by targets was a successful one, the Soviet Union would not have collapsed.
  (Mr Baume) Two very quick points on that. Steve is an expert on this, but I would suggest that the Treasury now is more powerful than at almost any time in your 30 years in the Treasury, and dominates all of this debate. Just a second point, and I agree very much with Jack about spending rules, essentially, our perception is that, within Government, if there is anything that goes beyond the sort of three-year spending review then it has to be delivered through a PPP or similar vehicle, which, of course, sets costs potentially for 25 or 30 years. And I think we are storing up a major problem down the track, as more and more of the monies that are going to be allocated to areas are already committed for long periods ahead through these long-term contracts, which future Governments, of different political colours, whatever, or changes within New Labour, or whatever, will find extremely difficult to amend, change or repeal, even if public needs and requirements have long since gone. Just as an anecdote, I was talking to a corporate lawyer, very recently, who was saying he was negotiating on behalf of the private sector contracts for the disposal of hospital waste in 25 years' time; and it just does not, in some ways, seem to make a great deal of sense, and that is a problem that we seem to be storing up for future Governments.
  (Mr Dromey) Perhaps you can invite us back, by the way, on 29 November 2031, so we can review how things have gone.

  Chairman: Make a note of that, yes. We have had a fascinating morning. I feel that Stalin and Lenin have been here in surrogates, we have been extraordinarily productive, and we have broken up the Health Service, we have privatised the police, we have turned the Government over to BP, we have had a terrific time. Thank you very much indeed for a genuinely fascinating morning, which we shall look forward to reading the transcript of and learning from. Thank you all very much for your time.


 
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