TUESDAY 15 JANUARY 2002

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Members present:

Mr John McFall, in the Chair
Mr Nigel Beard
Mr Jim Cousins
Mr Michael Fallon
Mr David Laws
Dr Nick Palmer
Mr James Plaskitt

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Examination of Witnesses

RT HON ANDREW SMITH, a Member of the House, Chief Secretary to the Treasury and MR ADAM SHARPLES, Director, Expenditure Policy, examined.

Chairman

  1. Good afternoon, Chief Secretary, and welcome to the Committee. Mr Sharples, you have been here before, you are a regular, welcome again. We are being broadcast today and I think we are being webcast, we are one of the first committees to be webcast. Can I start off and ask about the Review, there have been a number of comments since it was implemented, that perhaps insufficient consultation has taken place, we are mindful than an election was on the horizon, but there is a need for more consultation. Can I ask you what was the stimulus for the Review in the first place?
  2. (Mr Smith) As I set out in my letter to the then Chairman of the Committee in October 2000, with this being quite a major change we thought it sensible, notwithstanding the previous memorandum, to conduct a review to take stock to see if this really was the best way of proceeding and, of course, to consult as part of that. We did endeavour, as you know, to seek the views of this Committee, and that letter was copied to the Public Accounts and Procedure Committees. As you said, there was a delay, a general election has intervened. I do not think anyone would have foreseen in the autumn of 2000 that half of last year the select committee would not be meeting. Nonetheless, as Adam Sharples reported at your last hearing, the Review Group was constituted to reflect relevant interests, and surveys to users were issued. As I wrote to you this last October, I am very concerned that whilst this year's inevitably in the circumstances would be something of a sort of interim format for the reporting but that there would now be, albeit a somewhat iterative, an opportunity for this Committee and for Parliament to influence the way in which the departmental reports are presented this year and to take full stock of the situation in the light of those reports. Might I also add, Chairman, whilst I acknowledge that as things have turned out, neither the timing of the handling of these changes nor the involvement of Parliament has been quite as I would have wished and, therefore, I am sorry that we must regard, as I just explained, this in some sense as an interim position. Can I also say that faced with the situation as it was last Autumn I believe the decisions I have taken are the right ones and that the proposed shape of this year's report will actually serve Parliament and parliamentary accountability better than had I sought to implement the original RAB proposals or indeed repeat last year's format. Can I just mention the three key reasons why I take that view, first, having commissioned a review I think it would have been foolish of me not take notice of it. Secondly, under the original RAB proposals I think Parliament would have been deprived of performance information or could have been deprived of performance information for an unacceptably long period, which especially the public and Parliamentary focus on performance we would have been understandably criticised for. People would have said, we are accustomed to seeing performance information in the Spring Report, now we are not getting it, why not, are we going to have to wait months in order to get it? The third reason is that having had drawn to my attention the inadequacies and errors which resulted from physically accommodating the estimates in the departmental reports last year, not a single estimate free of error, and not meeting, for the most part, the 21 day reporting requirement to Parliament, and those are serious matters of Parliamentary accountability, having had that drawn to my attention and having had the recommendations of the Review Group on that that it was right for me to act accordingly.

  3. Thank you. Can I turn to the sales figures for the departmental reports, one thing that strikes us straightaway is that Parliament itself is very much a minority user of these reports. If you look at the table, we have been surprised, it was an average from 167 to 199 on that. Nonetheless, these documents remains important to Parliament and are you satisfied that the outcome of the Review takes adequate account of the Parliamentary function?
  4. (Mr Smith) As I have already acknowledged, the consultation with Parliament is incomplete and will be so until this Committee has had the opportunity of reporting and others in Parliament have had an opportunity to comment about it, notwithstanding the efforts which I have said that we made. I think it certainly was acknowledged in the Review, obviously, that Parliament and MPs and select committees, perhaps, in particular are a prime audience for these reports, but we should also not forget the wider function of public accountability they fulfil. They are documents of wider record, they are used by researchers, academics, journalists and by some members of the general public.

  5. Given that comment, then, can I ask you why the 2001 Treasury Report was priced so high? Again, if you look at the table you will find it is 55, and the question is, does that relate to the cost of production? Why were the costs so high? Surely that is a real disincentive to public sales, particularly when we find that the Treasury document costs 55 for 249 pages, yet the Cabinet document was 21 for 248 pages and the Department of Culture, Media and Sport was 30, almost half, for 232 pages. The message that the Treasury is putting out is a pretty expensive message, is it not?
  6. (Mr Smith) A good value message, Chairman. I accept that that is lot of money and some of the other charges are a lot as well. Obviously I have looked into this and I understand that the pricing is simply in order to cover, if you like, the marginal cost of production, it is influenced obviously by print runs, graphics, especially last minute printer's changes. In that sense the costs do not reflect the full cost of producing these reports. I would add, of course, that electronic publication also makes them very much more widely accessible at a much lower cost.

  7. If you look at the Chancellor's Department, your department, and the Cabinet Office we find the print runs are almost the same, yet the cost for the Cabinet Office is less than half what the cost for the Treasury is. Surely there is a way to look at this?
  8. (Mr Smith) I asked about that as well, Chairman, and I was told the reason was the difference in the number of late changes that had to be made, which is something that we will try and minimise in the future.

  9. The answer to yourselves was the same as myself, a pretty inadequate answer?
  10. (Mr Smith) It is the answer. How far we want to adopt a different basis for pricing these reports, how far the Committee believes they should be further subsidised, I can see the case for that in terms of accessibility, which is something that we take very seriously.

    Mr Laws

  11. Chief Secretary, when we saw Mr Sharples in November we were talking about the justification for making the changes to the nature of the departmental reports. In an answer to us Mr Sharples acknowledged they were never going to be best sellers as documents but he said, "Huge organisation of this kind", in other words government departments, "ought to be producing documents about their activities which are accessible and clear". Do you think that in any respect the current reports are inaccessible and unclear?
  12. (Mr Smith) They are not as accessible or as clear as they might be nor as accessible or as clear as, in my view, they should be nor as accessible and clear, in my view, they will be if we adopt the revised format. They are very long, especially with the integration of main estimates with them. There are a very large number of tables. As I think Adam Sharples pointed out at your last hearing, there is pretty straightforward information which MPs and certainly members of the public would expect to get out of these reports which is not there or is not very accessible. In the Home Office Report, how much is spent on the police, there are pages and pages of tables and information but that is not one figure that is readily accessible. I believe that with the format that we are proposing will set out straightforward things. If you look at the DFES report you will be able to see how much is spent on primary schools, how much on secondary schools and how much on higher education, again information which is not as readily accessible in the present report as it might be. At the same time those who have an interest in the wider financial information, the detail of the estimates and how they reconcile to the RAB counts, they will be able to find that as well. It is important in the new format that the read across from one table to another, one report to another sub report, that that is clear and, obviously, I endeavour to make sure that is the case.

  13. Are you expecting to change the readership or increase the readership of the departmental reports as a consequence of these changes?
  14. (Mr Smith) I would hope that more people would find them accessible and the word would go round that they were worth reading.

  15. You do not look very confident?
  16. (Mr Smith) We will have to be judged by experience about that.

  17. You do not look very confident about that, if I may say so. Chopping 100 pages off the Chancellor's department annual report is not necessarily going to lead people to rush into WH Smith to buy it. The type of people that look at departmental reports specifically are, perhaps, a narrow field, do you not think, therefore, and that there is less of a problem with the complexity of the existing reports than perhaps you seem to be indicating?
  18. (Mr Smith) I agree that the prime audience is a relatively narrow one. I would have thought, frankly, it is important for that audience that this information is in as clear and accessible form as possible so that they do not spend an awful lot of time trying to find out how much is spent on the police or how you add together the different components and bring together primary education, it will make Members of Parliament, select committees and journalists jobs easier as well. Obviously the public's interpretation of this, far and away, is most likely not to go to the primary source but to rely on press reports.

  19. Would you be disappointed if the sales of departmental reports did not bulge in some way?
  20. (Mr Smith) I am resisting any temptation to say that the much needed and, I am sure, the attractive and informative and clear representation of these reports is going to result in an instant increase in sales.

  21. Can I ask you or Mr Sharples whether you have had complaints, either from the users of the reports or from departments, about the existing format to which you are responding by these changes?
  22. (Mr Smith) It was evident from the survey of users that we conducted that a significant proportion did not find them clear or accessible and many found them inordinately long.

    (Mr Sharples) If I can quote one figure on that, as you know we asked all the select committee clerks for their views on the reports, only one of the nine committee clerks who replied regarded the current reports as clear and easy to use. Obviously that was something which weighed with us.

  23. Can I ask you whether you also received representations from the departments that they wanted to be able to package their departmental information in a different way?
  24. (Mr Smith) We did take views from departments and equally they did not find the format that was used last year as clear or accessible as they would like it to be.

  25. Are you concerned at all that some people might suspect that as part of repackaging these departmental reports departments would be given the flexibility to present their performance in a particularly favourable light? Mr Sharples' evidence in November said that part of the message of this report is that departments should be given more flexibility to design reports which meet their needs and which allow them to explain their activities clearly. The view from departments is that they have been operating, to some degree, within a strait-jacket and if we loosen that strait-jacket too much you may well find departments presenting their performances in a very favourable light each year. Is that not a risk?
  26. (Mr Smith) I understand the reason for the suspicion and possibly even some cynicism about it. I would seek to dispel it, first of all, by stressing we do take seriously, and I do take seriously, the importance of these documents and records and accountability to Parliament. We have made it clear that the alteration in the format and the presentation is not to deny Parliament information, indeed all of the information that was available in last year's report will be available in the new style reports. What is more with the supplemental autumn information on the performance there will actually be extra updated information that was not available previously. Moreover, Adam Sharples, as he said in his testimony to the Committee, was emphatic that it is the explanation of what is in the reports about which departments want greater flexibility and not the content.

  27. My last question is, as Chief Secretary will you be policing the consistency of the information produced in the report to make sure that departments do not decide to put a favourable gloss on their performance when you expect them to present their performance in a comparable way each year and a very straightforward way?
  28. (Mr Smith) Yes. The guidance that was circulated made clear, for example, that performance against hearsay targets must be full and should be objectively presented, and I will be keeping an eye on that.

    Dr Palmer

  29. Since I was elected in 1997 I do not recall ever having had a letter from a constituent or a lobby group or an interest group or a journalists, or any other figure at any level, referring to a departmental report. I do accept that it is important that this data is available in some form, given that the people who were requesting it, as you say, are almost entirely professionals in the field in one way or another, journalists or economists. Is there actually any case for maintaining them in printed form rather than electronic form, it imposes unnecessary delay and it imposes extra cost. Is there any demand out there for the printed version?
  30. (Mr Smith) I take your point about the ready availability of the electronic form, the web based reports, especially to specialist readership. I think to deny the opportunity for somebody to have a departmental report physically in their hand, be they an MP, be they a researcher or be they a member of the public, there will be some of them who do not have ready access to the web or do not like accessing information in that way. I think it would be a serious step to say you have to have the core information in an electronic form. This is something that we can review with the passage of time, with the take-up and with the ways in which people access this information. I do not think now is the right time to move towards the abandoning of physical records of departments for activities, performance and financial information.

  31. Can I ask if it would be possible for you during the coming year to review or to monitor the frequencies of access to the website compared to the actual sale of these reports so we can see how people are, in fact, accessing it and then, perhaps, we can come back to it in future years.
  32. (Mr Smith) I would be very happy to do that. DTI has monitored this.

    (Mr Sharples) It was 1,000 hits a month.

  33. Which compares with total sale of 976 hard copies.
  34. (Mr Smith) Yes.

  35. It is probably fair to say that not every person who received a hard copy has read it with equal zeal. Returning to my original question, are you sure, Chief Secretary, that we are not actually producing a product for which no real demand exists?
  36. (Mr Smith) I am sure, because MPs, select committees, commentators in the area expect and, indeed, have a right to the sort of information that is in departmental reports. The fact that they do not have a huge readership is not a reason in principle for not producing it nor, indeed, is it a reason for not trying to make the information clearer and more accessible, indeed it is a reason for trying make it clearer and more accessible. Certain sorts of straightforward questions about expenditure and performance, of which I gave examples earlier, can be accessed.

  37. My final question, I entirely accept what you just said, do you think that it might be possible to encourage the trends to seek the electronic version by attempting to provide updates to the information more frequently on-line than in the printed version, where available? You mentioned yourself that the Treasury version had been subject to many last minute updates. All of us who have ever published anything are familiar with the correction that arrives the day after it goes to press, would it be helpful to try to have a six monthly update on the web?
  38. (Mr Smith) Of course as far as performance is concerned the framework we are suggesting will provide a six monthly update both on the web and in written form. It would be possible and I would be quite happy to explore how far one can go further than that. I think there is just one qualification I would make, I think that there has to be an authoritative record so that researchers and others can compare like with like and not get the impression that the information is changing so fast that you are never quite sure what you are comparing today's performance with. The only other thing is I would say that more can be done to make this information usable and helpful to be used by links, perhaps, to comparative information in future years, and so on. Certainly we are encouraging departments to illustrate their reports in a way which makes them helpful electronically as well as wanting to improve the formula.

    Mr Fallon

  39. Chief Secretary, you have taken your decision on the Spring 2002 reports, have you not, and you said earlier in evidence today that these have been altered rather than reduced. It is a fact, is it not, that these reports will contain less information, not the same amount of information?
  40. (Mr Smith) No. If you look at the annex to the guidance to Parliament, which I believe has been circulated to the Committee, there is a diagram there where you can see, this is the diagram that I am referring to, and the core report is smaller, but it is clearer and contains the information that readers, as a whole, are going to want to have. As I said, expenditure on things like education, how much on primary schools, how much on secondary, how much on higher education, both in the resource and in the capital, they are basic reports on performance. You then have the estimate produced separately and then supplementary budgetary information. The diagram attempts to set out how the different components of what are in the reports and estimates at the moment are reflected in the new format. As I explained earlier, with the suggestion of the autumn performance information there will be some extra information coming forward meeting Mr Palmer's desire for a six monthly update.

  41. The information available in 2002 in departmental reports will be no less than last year?
  42. (Mr Smith) Yes.

  43. Your own letter in October to the Chairman says, "Departments will be given freedom to produce streamlined reports".
  44. (Mr Smith) Let me be clear.

  45. Is that a publishing term?
  46. (Mr Smith) In referring to the annex to the guidance what I am pointing out is that the main departmental report, yes, it is more focussed, yes it is slimmed down. What I am saying is the information which was otherwise in the departmental report last year will appear either in the estimates, which will be a separate document, but we can produce and present it alongside for Parliament, if that is what the Committee wants, and there will be also be supplementary budgetary information which is not going to those lay readers but, nonetheless, is important to specialists and is a document of record.

  47. You must have misheard me, the departmental report itself will be a thinner volume than last year?
  48. (Mr Smith) Yes.

  49. It will be thinner. What you have taken out of it are some of the core financial tables, that is right, is it not?
  50. (Mr Smith) Things like the estimates, yes.

  51. You say the report will contain a reduced set of financial tables?
  52. (Mr Smith) Reduced from 12 tables to six tables.

  53. Right. It will be more difficult for the reader to make comparisons between previous years, previous governments, et cetera?
  54. (Mr Smith) I do not think it will be. First of all, if you are talking about previous years and previous governments it was the practice in the past, of course, for the estimates to be published separately in any event. As I said earlier on in my answers, I think it is very important, indeed, to have the ability to read across from one table in one publication say to the estimates or to the supplementary budgetary information so that is a clear avenue for the people who want to undertake those comparisons. I do actually see some advantages in the estimates in written form being physically separate. We have all had the experience of thumbing through a very thick volume and trying to compare one table in one part of the report with a table in another part and you can actually physically put the tables along side each other to check the reconciliation. I do take seriously the comments that were made when Adam Sharples was in front of the Committee last time and members were making the point that it is very useful to have these documents alongside one another. Depending on the Committee's views I am very willing to do what we can in actually publishing the information to Parliament physically by ring-binder, or whatever, to have the estimates alongside the departmental reports if that is what the Committee feels would be most helpful for MPs.

  55. What I am trying to get absolutely clear is there will be no overall loss of comparative information?
  56. (Mr Smith) No.

  57. That is the position, is it?
  58. (Mr Smith) Yes.

  59. In the Review Report, paragraph 21, it says, "These financial tables are too complicated to be meaningful to the non-expert reader, while the expert reader would also benefit from improved presentation". Which are you?
  60. (Mr Smith) Which am I?

  61. Yes?
  62. (Mr Smith) I published the thing so I am the expert reader.

  63. Do you read them all?
  64. (Mr Smith) I do read through them all, yes.

  65. Do you not think in trying to improve the take-up of departmental reports there is some danger of people being referred to other documents and being expected to get hold of estimates or the autumn figures, or whatever, losing the sort of central integrity of a single departmental report that says what the department is about, what it has achieved and what it is going to achieve?
  66. (Mr Smith) I think there is a danger and that is why it is important that where there is a read across to other documents, that is clearly spelt out. Let us not lose sight either of the gain that there will be with a clear focus on the information which most readers are most interested in, which is basically where their money is going, what they are getting for it and how departments are performing. I sincerely believe that that will emerge more clearly from the reports representing this year. Of course the proof of the pudding will be in the eating. You and other committees and other members will look at them. Indeed, were it helpful to the Committee for the Treasury, or us jointly with the select committee, to survey MPs of what they thought of the departmental reports, what format they wanted them and what they thought of the revised presentation I would be very happy to do that.

  67. Finally, you refer in a letter or, else where, to the enormous amount of resources this whole exercise consumes in Whitehall, that being one of the reasons for the Review, to make sure that resources in Whitehall are used efficiently. Have you made any estimate of the savings in resources that will result from the new approach?
  68. (Mr Smith) I think it is very difficult to make such estimates, either on the cost of the production of the reports as they were last year or, indeed, exactly what it would be under the new proposals. The reason for that, of course, is you have some people who are working largely or solely on the departmental report and, yes, you could allocate their salary to the cost. Obviously as is reflected in the cover price, you can have the costs of printing and layout and graphics. In practice when a report is produced it is drawing on the resources very extensively of the department, of the accounting officers and also policy officers. I suppose one could go through and try and estimate what the cost would be, and that in itself would not be an uncostly exercise.

    Mr Plaskitt

  69. The Spring documents will include a report assessing performance against public service agreements, is that right?
  70. (Mr Smith) Yes.

  71. That will be the case in all of them?
  72. (Mr Smith) Yes.

  73. How exactly is that going to be presented?
  74. (Mr Smith) As clearly as possible, in other words target by target what the progress is. We will have the dual aspect this year, of course, of the Comprehensive Spending Review PSA targets, of which we are at the third year, plus year one of the Spending Review 2000 and targets. Again, the guidance to departments says departments must make clear in the case of the 1998 CSR targets what the progress has been against them, if ones have been consolidated into a Spending Review 2000 target how that has been done and if any have been dropped which they are and why.

  75. Will your guidance ensure that as we read from document to document to document we are really comparing like with like in terms of assessing how departments are doing in terms of their meeting PSAs or are we going to have to search through and find it in different parts of the documents presented in a different way in different sorts of language? Will it be completely harmonised so we can tease out the performance of these PSAs with ease?
  76. (Mr Smith) I would not go so far as to say completely harmonised, I am not quite sure what that would mean. That each report must enable the reader very clearly to see what progress is against targets to make comparisons is one of the objectives. Indeed the guidance specifically says that if a department in its report wants to report targets in different sections, you can imagine if you are organising a report by functions of a department it might not be a bad idea to do that but there should be, separately, a consolidated table that brings the targets together to ease precisely the sort of comparison we are seeking.

  77. It seems to me that this may be one of the most attractive --- attractive is the wrong word, this may be one of the biggest draws to come in and read this report because assessing how departments are doing on PSAs is a pretty central task for Parliament to do, certainly for the press and for large sections of the public as well.
  78. (Mr Smith) Yes.

  79. In that sense I am pleased to hear you say that there will be a consolidated table contained in each of the reports. Do you think there is a case for extracting those from each of the departmental reports and publishing one document which shows how across Government performance is against Public Service Agreements?
  80. (Mr Smith) Certainly I will give consideration to that. I can see the case.

    (Mr Sharples) Perhaps I could add on PSA reporting that departmental reports published over the last two years have included such a table at the beginning of the report reporting against each target. What we want to do is try and build on that by improving the reporting and, as the Chief Secretary says, if departments are to decide to publish details of performance against targets in each chapter of the report, for example, certainly they should include a summary table at the end. You will have seen from the guidance that we have issued to departments that we have given a very strong steer that reporting must be objective reporting on progress and that departments should think about how they can use graphics, for example, using graphs to demonstrate the trends against the target. We do feel that the new approach as well as giving twice yearly reports on performance, whereas in the past we only had once a year reports on performance, will also give better presented reports on performance as well.

  81. You have invited departments to think about ways of presenting this information clearly but that opens the possibility of different departments coming to different conclusions about what amounts to clear presentation because then cross-referencing it is not going to be very easy. Have you given any thought to that?
  82. (Mr Smith) First of all, key core financial information is brought together in standardised tables, that is an area where the department does not have discretion. Equally, as we have said, they have got to report comprehensively and objectively on their performance against the PSAs and we have suggested that it is consolidated in a table if they have decided to separate it out. So those key bits of information will be available on a standard basis to the reader of cross reports.

  83. I am just anticipating that one issue readers will want to settle is how departments are doing against each other in terms of delivering on their PSAs, not just within a department, and for that purpose it is going to have to be very easy to dig into each of the documents and make sure you are looking at something pretty standardised to arrive at a fair conclusion and an accurate conclusion.
  84. (Mr Smith) Yes.

    Chairman

  85. I notice in your Public Expenditure Assessment Guidance that you say in paragraph 2.4 that a rigid model is not imposed but departments must observe the general principle that they have to read the report objectively. I presume that is clear.
  86. (Mr Smith) Yes.

    Mr Cousins

  87. Because the Strategic Rail Authority document was published yesterday I happened just to look back at, as it then was, the DETR Annual Report for the year 2001. I do have to say it would have been very difficult to anticipate what has taken place from the report. The PSA target established new targets for rail performance in 1999, progress targets published in transport 2010, the ten year plan and so on. Is there going to be any element of review of these things to anticipate risks and challenges?
  88. (Mr Smith) I do not think you can expect a departmental report to anticipate every contingency that is going to arise, even some serious ones. They do set out departments' plans but in the best world plans do not always correspond to exactly what takes place. When it comes to evaluating risk I would expect if particular projects or particular programmes had a particular element of risk that would be an appropriate thing for attention to be drawn to, not simply in main departmental reports but within the overall body of information that we are talking about, part of which, of course, are the departmental investment strategies.

  89. One has to say looking back at this - I confess not to have read it in any degree of thoroughness at the time - an element of self-congratulation, which has proved not to be warranted, although in fact some of the indications are in fact there, for example punctuality. "A Second National Rail Summit was held in May 2000 to assess progress with the industry's commitments to include rail service. Since the Summit there has been a disappointing decline in punctuality across the rail network". There is no indication, of course, of a Third National Rail Summit, heaven forfend what might have followed that. Some of the indications are in fact there but they are not easily teased out. It is slightly infuriating from that point of view because it is almost as if some of these issues are in fact being referred to but not in an especially clear way.
  90. (Mr Smith) I think there is a balance to be struck between the accurate reporting of plans and programmes and what could be taken to veer into the area of speculation. I do not think committees or Parliament would thank departments for reporting things which were speculative.

    Mr Beard

  91. Can we just talk about the relationship of the Spring Report and the Autumn Report and again going back to the PSAs that James Plaskitt was talking about. Is it that the Spring Report is going to deal with the PSA targets in a non financial way? What I do not understand is the relationship, in publicising the progress towards PSA targets, the relationship between the Spring Report and the Autumn Report?
  92. (Mr Smith) Okay. They will both be providing information showing the latest progress against PSA targets and in that sense there is a real addition in the information which is being provided to Parliament. One particular frustration which there has been in the Spring Reports - and this was evident last year - is when departments are reporting, and their report has been prepared before the end of the year on which the performance is being reported, you do not have the fourth quarter information usually, for example. Therefore if you want to take the performance reporting as covering the year that is being reported on, there is an element of estimating whereas what should be available in the autumn will enable you to compare what was set out in the report in the spring with what actually happened. I think that is a gain. The other stimulus, if you recall, from the RAB reforms to performance information being reported in the autumn is that one of the principles of RAB reporting is the allocation of expenditure by objectives and being able to see an outturn. Now it will be good when we are able to have the resource accounts alongside the supplementary autumn information, that is certainly the objective we want to work towards. When I said earlier that had we left the original RAB recommendations in place Parliament could have gone an unacceptably long time without performance information, what I was referring to was the fact that under the original RAB proposals, the Spring Report was just going to be forward looking and it was the Autumn Report which was going to report performance. Well, of course, if you delay that autumn performance information until the resource accounts themselves are available, which might not be until early in the following year, you could go a very long time without performance information being reported to Parliament. Just to be clear, what I am suggesting is this autumn performance information, whilst we want to have it alongside the resource accounts, I think we should do that by trying to bring the resource accounts forward rather than delaying the performance information. Where there is a gap we will give the performance information.

  93. Are you saying in this then that the Spring Report will be a comprehensive report that will enable one to judge to what extent the PSA targets are being met -
  94. (Mr Smith) On the latest information.

  95. - both on performance measures and, say, in comparison of spending against budget?
  96. (Mr Smith) Certainly the latest information on the performance measures, and obviously setting out the current year estimates as well as the plan for the future year.

  97. Will we be able to judge for instance in the Spring Report whether the department is underspending or not?
  98. (Mr Smith) Provisionally I think is the right answer to that and you will know definitely with the Public Expenditure Outturn White Paper but I will ask Adam if that is broadly correct?

    (Mr Sharples) That is right. We publish in July the Public Expenditure Outturn White Paper which gives the best estimate of what the outturn is for the previous financial year. The departmental report will be published in April which will give the best estimate at that point. There may be some further information coming through between April and July.

  99. Just for clarity, we are saying really that the Autumn Report is really clarifying and making sure that the second decimal place is right of the figure that the Spring Report produces?
  100. (Mr Smith) Not quite, no, it is adding later performance information.

  101. And adding for the last month.
  102. (Mr Smith) Yes.

  103. But only in the Autumn Report will we have the resource account budgeting?
  104. (Mr Smith) We will have the resource accounts. We want to have them in the autumn. I have to say it has proved harder to get them as early as we would have liked and we are still working on it.

  105. If we do not have the resource accounts or some estimate of the resource accounts in the spring, how do we judge how well the department is doing on its capital spending?
  106. (Mr Smith) You have got an estimate of the current year and as Adam Sharples said earlier then in the July Public Expenditure Outturn White Paper you have got more final figures. Those figures themselves, of course, can be subject to later revision. It is a definitive record.

  107. There will be some estimates in the Spring Report that indicate how the resource accounts are going?
  108. (Mr Sharples) The Spring Reports will include the budget figures for the previous financial year, so the best estimate available at the time of the outturn against those budgets for that financial year. The point about the performance reporting that I would emphasise is that the focus of performance reporting is the Public Service Agreement targets. The broad principle that we try and follow is that whenever we report on progress against PSA targets we give the latest available information, now in the case of exam results it might be the results from the previous summer, in the case of crime surveys they might be done every two years. Some information is available more frequently but at the point the report is published we would give the latest available information. The other significant point is that most PSA targets do not depend on financial year information for their reporting. So, it is perhaps a bit of a misunderstanding to imagine that there will be a strong link between the outcome on the finance side for a financial year and the performance for that financial year because the PSA target will be often working on a different cycle to the financial year cycle.

  109. Will there not be a link in terms of capital spending for that particular year? The extent to which you have spent capital in that year will indicate how well you are progressing with your investment programme even in the Spring Report.
  110. (Mr Smith) Yes, that will broadly be the case.

  111. That will be in?
  112. (Mr Smith) Yes, but of course if you are linking it with performance, the performance even on the delivery of a capital programme obviously is not an end in itself. The end in itself is the health service or the education or transport services which are provided.

  113. There is no proxy for it in many cases?
  114. (Mr Smith) Yes.

  115. One final thing, the resource accounts for this last year, only 25 per cent of them were available on 1st November.
  116. (Mr Smith) Yes.

  117. Is this view that we will have resource accounts available for the Autumn Report wishful thinking?
  118. (Mr Smith) That is why I said earlier that where we can publish the performance information alongside the resource accounts, clearly it is desirable to do so but the view I have come to is it would be a mistake to delay the performance information to await the resource accounts. Meanwhile we and all the other parties involved need to work to get more of the resource accounts available by November.

    Dr Palmer

  119. Just a small supplementary on this point. I remember when resource accounting was debated in Parliament, we all grappled with it with a certain amount of difficulty. I wonder whether your view of the delays in the introduction of resource account reporting is that this is due to departments having certain technical difficulty in adjusting to opportunity costs and so on or is it more a question of priority?
  120. (Mr Smith) Do you mean what we have just been discussing, the resource accounts not coming forward as early in the year as we would like?

  121. Yes.
  122. (Mr Smith) I do not think this timeliness of accounts problem has been unique to resource accounting, I think we have not had the cash accounts as early as we might have liked either. Obviously changing to a new system does involve a process of education and training. No, I think it just is that we have got to do more to examine best practice of those departments that are able to get it in a timely fashion and work with the National Audit Office and others to make sure that we do better.

    Mr Laws

  123. Chief Secretary, Mr Cousins' intervention highlighted the danger with these types of reports that they can tend to highlight the good news and play down the bad. Could you just let us know what the role of Treasury and non departmental staff is in preparing the annual reports and the departmental reports and scrutinising the information that is in them?
  124. (Mr Smith) First of all, of course, the example which Mr Cousins gave did include one where punctuality was disappointing, I think was the phrase he used. So it is not like a positive spin was being put on everything even in that report.

  125. I was reading Mr Prescott's introduction.
  126. (Mr Smith) We have supplied already to the Committee the guidance which we put out. We have not only set out there the financial information which is required in the tabular form it is to take, the PSA information and progress which is required to be reported objectively and, of course, as the reports come in officials and ultimately I have the responsibility of clearing that presentation jointly with the department concerned.

  127. Given how important the PSAs are in particular to the whole of Government and given the danger both in Government and business that when people produce an annual report part of it is for information and part of it is to persuade their bosses and others that they are doing a good job and to protect the high salaries or whatever awards connected with their work happen to be, is there not a serious argument for taking some of the work involved in producing the reports and in commenting on performance against, for example, PSAs and placing that outside the department, either in the Treasury or in some other auditing body so that the analysis of the performance, at least in part of the reports, can be considered to be as objective as possible?
  128. (Mr Smith) Let us remember that a substantial proportion of the information which is in the reports in fact already meets the criteria which you have set out because the information is national statistics information or because it is audited by the Comptroller and Auditor General and certainly, as I have said, Treasury officials are involved in putting this together. On the broader question of external validation of performance, that is something, of course, which the Sharman Review examined and I hope to be in a position to report the Government's response to the Sharman Review quite soon.

  129. The last question on that. I accept that most of the statistics used will have had some independent validation and also that some targets which appear in the annual reports are easily quantifiable and hopefully easily measurable. As you know, quite a lot of the elements of judging departmental performance, even though they have statistical information built into them, require quite some element of judgment. If you look through the PSAs' resource departments you will find all sorts of ties which are set in a very broad way, preserving macro economic stability and things like that, which really require some measure of independent judgment about whether they are actually being achieved. It is very easy for departments to tick those off in particular years if they are monitoring themselves but perhaps somebody else should be having a look at these things and perhaps it should be their judgment which appears in the report.
  130. (Mr Smith) Something like macro economic stability is very objectively measured actually, it is not something you can fudge very well, as previous governments have discovered.

    (Mr Sharples) I would add to that, the Government does publish for each of its targets a technical note which sets out in some detail precisely how that target will be measured. It is possible to track back to that.

  131. Can I just ask, I am sorry to have to come back to that, what is the principal argument against having an element of external validation of the performance against PSA?
  132. (Mr Smith) I think there are powerful arguments for an element of external validation. As I say, these are matters we will be responding to in our response to the Sharman Report. There are other considerations as well though. Going back to when I was at the DFE, I was always struck when I was carrying forward the New Deal programme at the discontinuity between the management information that you needed to have to drive a programme forward, the information that a Job Centre manager needs to have on their desk to know what they need to do on a Monday morning for that week to make sure the programme was on track, and the information that you actually needed to satisfy national statistics and that was properly validated which inevitably came in some time later. If you try to deliver and guide the programme on the basis of the externally validated pukka statistics, it is a bit like driving a car on the basis of a film of where you were ten minutes ago. Let us remember that there are other requirements for information in departments if programmes are to be successfully delivered. As far as possible, of course, it is good if you can get a correspondence between the management information that you need to make a success of programmes and the information which it is useful to report to Parliament and to the public on progress. In some cases that is the case but in others, for reasons of timeliness and the means by which information has to be gathered, it is not so readily achievable. I think there is a balance to be struck there but I do appreciate the importance of the objectivity and public confidence in the performance measures they are using.

    Mr Cousins

  133. Chief Secretary, do you think there is a case for departments also reporting on some of the issues raised in the Performance and Innovation Unit issues which are inherently cross-departmental? For example, the PIU Report on difficulties with public sector computing systems which everyone would recognise is a big issue across Government, do you think there is a case for expecting that departmental reports would, perhaps not routinely and mechanically but about significant issues like that, pick up on PIU Reports and marked progress?
  134. (Mr Smith) Not simply the PIU Reports, of course. One of the things which departments are specifically asked to include in their reports are points taking up observations and recommendations which the National Audit Office has made. Certainly there would be a case for them covering issues which have been raised by the PIU or other units and I will reflect further how that might be done. You actually allude to another important area that it can be a bit tricky to get right and that is how cross-departmental initiatives are properly reflected in departmental reports. As you will have seen from the notes of guidance that we circulated to the Committee, there is provision for how this should be done in the accounts. We do need to make sure that there are clear accounts of progress on departmental initiatives in the departmental reports as well.

    Mr Fallon

  135. I am still not quite clear, coming back to the decision to reduce the core financial tables in each report, who actually decides? Would it be, for example, that the department decide they would like to conveniently cut out one of the tables this year and then the Treasury would be the guardian of the public interest and say "No, no, we published that last year, we must go on publishing it"?
  136. (Mr Smith) No.

  137. Or could it be that the Treasury might say "This is all rather embarrassing politically" and the Permanent Secretary would say "We published it last year so we must go on publishing it"? Who decides?
  138. (Mr Smith) This is one of the issues over which departments do not have discretion. In the information we have supplied to the Committee you can see there the tables which would be required of the main departmental report, which tables will go into the estimates and which tables will go into the supplementary budgetary information. Those tables follow a common prescribed format and will be available, therefore, on a consistent basis.

  139. It is the Treasury's decision in the end which of the core financial tables must be retained?
  140. (Mr Smith) In this proposal, yes, and in the guidance we have given. One thing I would say is that mindful, as I said earlier, of the incompleteness of consultation with Parliament on this, obviously if this Select Committee or others have got particular views about this, either in advance of the presentation of this year's reports or in the light of the experience of this year's reports, then I am very concerned that we take this on board, I am very mindful that these reports are not simply the property of Government or the Treasury, they are the property of Parliament and the public as well.

  141. One guardian of public interest here is the Office of National Statistics. Did you take advice from the Office or the national statistician when you decided which financial tables are now going to be left out?
  142. (Mr Smith) Was the Office consulted or represented on the review group?

    (Mr Sharples) No, the Office of National Statistics was not consulted as part of that process. These tables are essentially concerned with budgeting information which is not part of the national statistics.

  143. Not national statistics?
  144. (Mr Sharples) The National Audit Office was part of the group and, in fact, we had a representative from the Chartered Institute of Public Finance and Accountancy. We did seek to gather views. The point I would emphasise about the core tables is that this is simply an issue of where the information is published, it is not a question of what information is published though some tables we think we can make clearer than they have been in the past, some tables have become redundant now that we have moved through the transitional phase. As the Chief Secretary says, the core tables we feel will give a much clearer statement than has been possible in the past of how each department is spending its money. Now the content of those tables is being discussed extensively with departments to make sure that we have a shared view of what is the clearest way of presenting the information but the sum total of the tables in the departmental reports in the Estimates and the supplementary budgetary information will cover all the information which was available previously.

    (Mr Smith) To be clear, Mr Fallon, in answer to your question, the tables which are being included in the core report, they are set out here: the summary, the resource budgets, the capital budgets, the capital assets, the administration costs, the staff, these are surely the core tables which, alongside the progress on the Public Service Agreements, are what you would expect. As I say, if you have got observations as to what might be added to that or could be subtracted, I will pleased to hear them.

  145. You have just said, Chief Secretary, these surely are the core tables. I would expect the national statistician to be consulted as to which tables should be in or left out of the departmental reports. I am surprised at Mr Sharples' suggestion that budget estimates are not within the scope of national statistics.
  146. (Mr Sharples) What national statistics are primarily concerned about is the public expenditure totals on a national accounts basis which is something slightly different from the budgetary totals which are used for administrative purposes within Government. There are some transitional mechanisms needed to move from one system to the other system and those appear in the accounting adjustments that we publish.

  147. You have made it clear that the ONS was not consulted.
  148. (Mr Sharples) Not about the tables in the departmental reports, no. As I say, that is not something that the Office of National Statistics has a direct interest in.

    Mr Beard

  149. This question is really to Mr Sharples. The position, as the Chief Secretary has outlined it earlier, is quite clear, that the Spring Report is one which subject to certain reservations about accuracy would enable you to see how you could better use the PSA targets. In the guidelines that were suggested by your working party, Mr Sharples, you referred to this being as a forward looking report, the Spring Report, implying that it is setting out departmental plans now. Then you referred to the Autumn Report as the backward looking departmental report as though that is one that is checking up on how well you have done. There must have been some change between these proposed guidelines of your working party and those which have gone out to departments now, would you like to comment on that?
  150. (Mr Sharples) You are quite right, there has been a change. What you are quoting there is the old proposal that we should move to split reporting with a forward looking report in the spring and a backward looking report in the autumn. That was the old proposal. What is being proposed now is that we have a comprehensive report in the spring which looks forward and sets out forward budgets and forward targets but also sets that in the context of performance so far. So it is both forward looking and backward looking. The argument put forward is that having a comprehensive report will give readers a much better view of the departments' activities as a whole. What is proposed under the new proposals is that there should also be in the autumn a supplementary performance report. So we are not moving away completely from the idea of spring and autumn reporting; we are simply changing the emphasis a bit so that in the spring there is still a comprehensive report.

    (Mr Smith) That is what I was referring to, Chairman, when I said earlier that had we stuck rigidly to the original RAB proposals there would have been what I think Parliament and the public would have found an unacceptable gap in reporting information because under the original RAB proposals there would have been no backward looking information in this coming Spring Report and if the autumn performance information was delayed to wait for the accounts, we might in the case of some departments have had a gap as long as from March 2001 through to February 2003, which I do not think people would put up with.

    Chairman

  151. Could I just ask a couple of final housekeeping questions. The Core Requirements make clear that departments are not obliged to use The Stationery Office for printing, but failure to do so will prejudice the production by The Stationery Office of the reduced-cost full sets of reports (of which over 150 were sold last year). Have any departments changed publishers for 2002 and, if so, will the Treasury seek to make other arrangements to secure the continued availability of boxed sets at a discounted price? I am thinking here of university libraries, schools and community libraries and the not inconsiderable cost of these reports. I believe to buy the reports individually costs about 492 and the boxed reports will be much cheaper.
  152. (Mr Smith) I will ask Adam to answer on whether the Treasury is aware that any department is not using the TSO but I will give a commitment that we will examine, in the event of any department doing so, what could be done to retain the boxed sets at a discounted price. I take your point.

    (Mr Sharples) As far as I know, all departments have used The Stationery Office as their publishers for the 2001 reports and intend to do so for the 2002 reports. Some departments do use other printers but then pass it on to The Stationery Office to publish. We also attach great importance to the availability of a full set of reports at a discounted price so this is something that would concern us as well if some departments were moving away from that.

  153. Finally, Chief Secretary, last year there were 22 departmental reports but the review recommended that the smaller departments should go ahead and publish their own reports. Can I ask how many reports there will be in 2002 and how many departments will be publishing their own reports?
  154. (Mr Smith) The smaller departments will be doing their own reports under the guidance of the parent department, if you like, which will include such information as is necessary and relevant to the fulfilment of their PSAs but not clutter up the report with superfluous information, if that information will be better in the agency's or small department's own report. I do not know the answer on the exact number but, obviously, I can let you have that.

  155. If you could give us a note on that for the record it would help very much.
  156. (Mr Sharples) I do not think that we will be able to give an exact figure at this stage because discussions are still continuing between departments and the smaller departments in some cases.

  157. Could I thank you and Mr Sharples for your attendance today and as you indicated at some stage during your evidence that you are willing to work along with the Select Committee, we would be very grateful for that because already I have written to other select committees asking for their comments on their view of departmental reports and it is an issue which could be live.

(Mr Smith) Thank you very much for that, Chairman and I thank the Committee for its questions and deliberations. There is a further point I might ask you to reflect upon. I do appreciate that you are doing a wide-ranging inquiry and it will take time to conclude that. It is obviously a matter for you but you may want to look at the final shape that the reports take this forthcoming spring. I wonder if I might ask if on the basis of your deliberations so far there are any pressing observations you would like to make in relation to immediately forthcoming reports - and obviously they are going down the slipway and some changes can be made but some it will be harder to make - if we had some interim observations, obviously without prejudice to the final conclusions the Committee is going to come to, if you wanted to do that, we would be pleased to receive them, but it would need to be as soon as possible.

Chairman: We are conscious of time here and, indeed, we have discussed this issue and we plan an interim report in February. We will get that information to you and we are mindful of the comments you have made. Thank you very much for your evidence this afternoon.