Examination of Witnesses (Questions 80-99)|
WEDNESDAY 7 NOVEMBER
80. I just make one final point. The Treasury
itself, which you are part of, failed to account for £6 billion
which had been excluded from its balance sheet in terms of subscriptions
to financial institutions. The Lord Chancellor may have forgotten
about an antique chair or twoalthough given his reputation
it is rather surprising he didbut the Treasury to forget
about £6 billion is extraordinary, is it not?
(Mr Loweth) The Treasury did not forget about the
£6 billion. There was a question as to whether that should
properly be shown on the Treasury's resource account or as part
of a wider Government account.
81. You accept that the Treasury got it wrong?
(Mr Loweth) As I recall, the Comptroller and Auditor
General's qualification for the year 1999-2000 did not include
the international subscriptions.
82. Do you accept the Treasury got it wrong,
as this Report says?
(Mr Loweth) As with any accounting issue it is a matter
of judgment. Personally I do not accept that the Treasury got
Jon Trickett: Your judgment and mine are obviously
Chairman: Thank you Mr Trickett. Brian Jenkins?
83. Now for the easy questions because I do
not even understand all this so I am going to ask you to take
me through one or two parts. Looking at the overall scheme and
not the details, when you put this scheme in there was always
going to be a cost and there was always going to be a risk that
the existing scheme fell over. So someone sat down and did a plan
and all the risk assessments and they worked out the extra resources
that would be required to put this system in. How much was it
going to cost?
(Professor Sir Andrew Likierman) We knew when we started
that there were going to be a number of elements of cost which
were not specifically related to this project but which were related,
as I indicated earlier, to the replacement of systems, so when
we replaced systems we did not always look at the question of
how much the additional elements associated with those systems
were to do with this particular project. That is one dimension.
The second is that we knew there would be training but we did
not know how much training there would be because quite of lot
of the training that we have undertaken, and are still undertaking,
is basically training that we should have undertaken before regardless
of this project. So this is not associated with resource accounting,
it is associated with basic financial understanding in government
departments, for which this is a very useful vehicle. When consultants
were brought in to sort out problems, some of the problems were
associated with this project and some of them were not, so we
cannot always disentangle one element from the other. The answer
is there is not a straightforward answer to your question about
the incremental cost of this project. We cannot disentangle the
incremental cost from the cost of a lot of the replacement of
systems, the training and other elements of improvement that we
have undertaken during the course of it.
84. If I was going to go from A to B I would
have a map and if I did not know the area I would have a very
good map. It appears that you set out without having sufficient
detail on your map to know where you are at any point in time.
(Professor Sir Andrew Likierman) I hope that is not
true because what we did is that we set the timescale, we set
the parameters of the project at the beginning, and we knew therefore
what it was we were seeking to achieve. On the question of the
route, there were a number of possible ways to travel the route
and things which, over time, we changed in order to achieve the
objectives we set out originally.
85. You referred to training and the need for
training, which I consider to be vital in any area. Obviously
you are monitoring the training. Who actually monitors it? Who
physically monitors the training? How big a team do you have?
(Professor Sir Andrew Likierman) What we do is we
give departments indications about how they can train, we give
them material, we give them ideas, but it is up to them to decide
how to do the training and how to monitor it. I can tell you how
we in the Treasury, monitor it because what we do is we look at
not only assessments of courses people go on but we also look
at the question of whether it has been useful to them in the way
they undertake their jobs. We look at outcomes as well as the
outputs, if you like, for training. Individual departments have
their own ways of assessing the training they have got. Again
it is not for us to look at every element of the way that training
86. There is an old saying in industry that
"if you want to learn, sit next to Nellie". That was
good as long as Nellie was a good operator but if Nellie was not
a good operator you just got two bad ones. So who is monitoring
(Professor Sir Andrew Likierman) That is for the sections
involved with departmental training to do, not for us. We cannot
monitor training around Whitehall to say how well has the training
been, how good are the outcomes. What we can do is to make sure
we know that training has been delivered especially in departments
where we feel there is a need for training and that is something
we are continually doing.
87. I would be very concerned if I did not have
some degree of monitoring and some degree of assessment and some
degree of feedback to ensure that departments met certain standards
and criteria at each stage and I got the best use of resources
that we were utilising.
(Professor Sir Andrew Likierman) At the risk of raising
another laugh as I mention another book
88. Not a pink one!
(Professor Sir Andrew Likierman)We have a produced
a pink book and the pink book has in it on page 26 how departments
can evaluate their training, and this sets out very clearly how
we suggest the departments should do that evaluation, the criteria
they should use, and the way in which they might know it was successful,
but we cannot then do all the monitoring ourselves.
89. Okay. Training is expensive, it has to be
by its very nature; where does the money come from?
(Professor Sir Andrew Likierman) Departmental training
90. Are there sufficient funds in the departmental
training budgets to overcome what is apparent to us a very great
need for training?
(Professor Sir Andrew Likierman) I think one has to
take it department by department. We have no indications yet that
a department has said, "We cannot do the training simply
because we have not got the funds", so we have not seen as
yet a resource constraint associated with training. Indeed, since
we regard this training as extremely important, we have pressed
departments to make sure that in as far as there are allocations
of training budgets that they go on training associated with better
91. I can appreciate that when you are implementing
a system all the easy work goes out very quickly and when you
get to the more difficult situation and you are going to have
to find out the details and go through the process, it does take
time, and that is one of the reasons why the delay occurred, but
reading the documents another reason for the delay is the fact
that they did not have sufficient resources to put in the scheme,
they were short of trained personnel, and there was a problem
(Professor Sir Andrew Likierman) I would agree with
that in a number of cases.
92. One of the departments you mentioned was
MAFF or DEFRA and that has suffered dramatically from a lack of
staff at all levels for years.
(Professor Sir Andrew Likierman) I am afraid to say
that this is not only so for this project. Yesterday, since I
am the senior responsible officer for the Whole of Government
Accounts Project, I went on a training course organised by the
Office of Government Commerce and we looked at the reasons why
projects get into trouble. Not putting in enough trained manpower
applies not just for the public sector but also the private sector.
I am not saying this by way of pride, but I agree with you, there
was in some cases an under-estimate of the need for sufficiently
93. This is an indication of what I consider
to be poor management.
(Professor Sir Andrew Likierman) All I can say is
that I think one of the benefits of this project has been to focus
on the need for better financial management and better financial
training throughout Whitehall.
94. When reading the documents I noticed very
very often they referred to "better management systems".
I kept thinking why because the information is only as good as
the people who are going to use it. I just want better management
please and we do not seem to get that. When we go back into this,
and it is a very complicated time-consuming process and it is
nice that we have one set of gamekeepers looking after another
set of gamekeepers in this situation, with regard to the project,
as my colleague Mr Davies said, the question is how does this
affect the taxpayers, how does this affect the punters? It is
outcomes, it is not process. If there are no defined outcomes
and we are not seeing those outcomes appear, we have to worry
about the people in charge of the process and we have to go back
into it. We have used targets in the past and we have agreed levels
where, I remember only a couple of years ago we said to the police
"you will find two per cent of your budget through increased
efficiency". We have set precedents in the past and I see
no reason why we cannot go to departments and just chop their
budget by a percentage, bearing in mind that with all the new
management systems they should find improved efficiency. What
is wrong with that?
(Professor Sir Andrew Likierman) I cannot comment
on the question of budget allocations in that sense. Perhaps I
might ask Mr Sharples to comment on that.
(Mr Sharples) It sounds to me like an excellent idea!
We are very happy to take advice from the Committee on this point.
Your basic point is obviously a very important one, that the financial
information systems are only part of good management. Good management
is also about being clear about what it is you are trying to achieve,
what results you are trying to deliver. It is precisely to achieve
clarity on those points that we have introduced quite a well-developed
system of targets for departments in the form of public service
agreements which are set as part of the spending review. I think
each of these is a component of the overall framework for good
management in departments, but I think the parts do fit together.
You cannot manage well unless you know what resources you are
using but, equally, you cannot use the resources well unless you
know in what direction you are heading.
95. Unfortunately, I am suffering from only
having one book prior to coming to this Committee, and I notice
on page 8 of the blue book you looked at Ministry of Defence and
one of the outcomes you have written down here is "The Ministry
of Defence now budgets for its £7 billion of stock on a resource
basis." Brilliant. "This means that the stock is included
as a cost in the resource budget when it is used, rather than
when it is purchased (as it was under the cash budget). This better
reflects how much stock is being consumed in one year." So?
I do not even understand why you look at that as being an outcome,
to be honest. It is probably the wrong department to pick at the
present time, but all departments would be the same. I would be
asking whether it is valid to have £7 billion worth of stock,
what sort of stock controls systems are in place, have they done
it historically? And if I am putting a new system in I would ask
what advantage am I going to get out of the new system? What is
our new target?
(Mr Sharples) That is precisely what these new arrangements
have achieved and it is to the enormous benefit of the Ministry
of Defence. Under the old system stocks scored when cash was spent
on accumulating them and once they had been purchased people tended
to lose track of those stocks. There was no central record of
the stocks held, so the process of constructing a balance sheet
for the department led to the unearthing of all sorts of information
about the stocks being held. The new arrangements mean that people
know what they hold and they know what they are consuming out
of those stocks. This is only part of the financial information
flows and the information that is available to support good management.
It does not guarantee good management but it does provide what
I would regard as an essential information flow to help good management.
96. Yes and maybe we can get some better stock
controls and we can ask you to reduce the price of the stock.
After all, grey paint has got a one-week delivery and so we do
not need a million gallons in stock.
(Professor Sir Andrew Likierman) Mr Jenkins, may I
add as a supplementary to that. When we started the project I
do not think we quite anticipated just how important and valuable
the information would be on the working capital held by central
government. We tended to focus at the beginning very much on fixed
assets, on buildings and land and so on. What we have identified,
that was not identified in the cash account, is just what very
large quantities of working capital there are around central government.
Managing that working capital is a potentially huge benefit for
97. I feel like a double act here because I
am going to move on to the green document on page 3 to the Department
of Culture, Media and Sport where they have managed to reduce
the amount of cash they held at the bank for the BBC from £240
million to £70 million, which is laudable. I think anyone
who has got that sort of money left in the bank and is not out
utilising that cash and not moving it around departments is a
criminal act in resources. Where did the £240 million go?
We have got £70 million in the bank now, if it has not gone
to the BBC and it is not held by the department, where did it
(Professor Sir Andrew Likierman) I look to my colleagues
on this point.
Mr Jenkins: Can you drop me a note on that one
because I would like to know where the cash had been utilised
if it was not lying in the bank. This is the outcome of good management
with information to make decisions and to streamline the system
but the end product must be, as I say, delivery. It is outcomes
which is our target and although we have read and we have seen
the progress you have made, it is apparent that it was under-estimated
just how difficult a task it was. I would love to have seen the
risk assessment and what the criteria set out. I would like to
see the plan. I think that is the only thing missing. I would
like to see if you are realistically on target to meet the plan.
Thank you, Chairman.
Chairman: Thank you very much. I think Mr Bacon
has one last question.
98. I would like to go back to this question
of responsibility without power because that is how you describe
your positionyou are the Treasury, you have responsibility
but you have no power. As I understand it, generally speaking
it is thought that the person who has the money has the power.
"He who pays the piper" and all that. If you look at
the federal system in Washington or Canada or if you look at the
arrangements between Brussels and bodies, be they local government
or any other kinds of bodies in the Member States that want money,
it is what one might call the federal level or the Washington
level or the Brussels level which says "jump" and the
people who want the money who say "how high?" You have
got the money, you are the Treasury. At the moment it may be because
Parliament has not given the Treasury the right powers that you
are unable to do what you would like to do, I accept that may
be the case, but what powers would you like to have that you currently
do not have?
(Professor Sir Andrew Likierman) I would need to think
quite carefully and take advice, if I may, before I could answer
that question. It seems to me that the question has quite significant
implications for the relationships between the Treasury and the
departments and the National Audit Office. I do not wish to make
a foolish statement.
99. Would you like to write to us on the subject?
(Professor Sir Andrew Likierman) I will certainly