UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 1847-i

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

PUBLIC ACCOUNTS COMMITTEE

ACCOUNTABILITY

WEDNESDAY 22 FEBRUARY 2012

SIR JEREMY HEYWOOD and SIR BOB KERSLAKE

Evidence heard in Public

Questions 1 - 66

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the Public Accounts Committee

on Wednesday 22 February 2012

Members present:

Margaret Hodge (Chair)

Mr Richard Bacon

Stephen Barclay

Jackie Doyle-Price

Matthew Hancock

Chris Heaton-Harris

Meg Hillier

Fiona Mactaggart

Austin Mitchell

Ian Swales

Amyas Morse, Comptroller and Auditor General, Paula Diggle, Treasury Officer of Accounts, Gabrielle Cohen, Assistant Auditor General, National Audit Office, and Keith Davis, Director, National Audit Office, were in attendance.

report by the comptroller and auditor general

Cost Reduction in Central Government: Summary of Progress

Examination of Witnesses

Witnesses: Sir Jeremy Heywood KCB CVO, Cabinet Secretary, and Sir Bob Kerslake, Head of the Home Civil Service and Permanent Secretary Department for Communities and Local Government, gave evidence.

Q1 Chair: Welcome to you both. Welcome again, Sir Bob. Jeremy, is this your very first appearance at a Select Committee? I was astounded that somebody said that.

Sir Jeremy Heywood: Not first Select Committee, but first PAC.

Q2 Chair: Okay. Welcome, and I look forward to a positive and constructive relationship with you both in your new roles. Today is a sort of "getting to know you" session and we shall be exploring some of the issues that are top of our mind and seeing how you in your new roles will respond to them.

I don’t know who wants to pick this one up, but in looking at how you have defined your roles, it looks a little bit as though policy sits more strongly with Jeremy and implementation sits with Sir Bob. Our experience as a Committee is the endless frustration about ill thought-out policy failing to be implemented, with exactly the same issues arising time and time again, whether it is capability in the civil service, or project management skills, or the senior responsible officer, accountability-whatever it is, it is the same ruddy issue. Even 18 months into the job, we all get frustrated by the repetitive nature of the problems that arise when there is poor management and implementation.

There is a bit of a worry that the division of your role will not help improve the quality of implementation.

Sir Bob Kerslake: Shall I start on this? The first thing to say is, I understand how that impression has been formed, but it is not the way we see it at all, actually. I am very clear-I know Jeremy is as well-that you have to have policy and implementation together, and then when you are developing the policy, you have to have very clearly in your mind the implementation and how you are going to deliver it. We are both as exercised about good policy making and good implementation.

I think the distinction between our roles is that Jeremy’s role focuses on support to the Prime Minister, Deputy Prime Minister and Cabinet in their work, which is about both policy and implementation, and mine is about the capability, the capacity and the professional leadership of the civil service. So in that sense we are both interested in policy and implementation, and we are absolutely clear that these two things have to go together. We have to learn the lessons from the past, which your Committee has I think very clearly highlighted, about how important the implementation element is. We are in no sense of a view that that will get lost; in fact-

Q3 Chair: That doesn’t appear in the way your roles are defined. It doesn’t appear in the way you have divvied up the responsibilities for Departments. That is a good thing to say, and I would expect you to say it really, and particularly with all your background and experience, you would recognise it, but it doesn’t appear in the accountabilities, the Departments for which you have responsibility, or the way in which you have tried to differentiate them. I just have to say that. We do not want to re-do the stuff that the Public Administration Committee did, but we are interested in better value for money-that is our remit. It does not look as if you are going to be able to deliver what you articulate, there.

Sir Bob Kerslake: If we have not expressed it clearly enough-

Chair: In the definition.

Sir Bob Kerslake: -in the documents, that is something that we should listen to and acknowledge. But that is clearly how we see it, and we will sharpen the story to make that very clear.

Chair: Jeremy.

Sir Jeremy Heywood: The only point that I would make about that in addition is that although we have tried to define what we each take the lead on, we are both going to do both, in a sense. Bob is going to lead on civil service capability, but I will retain a very close interest in that issue; obviously, the fundamental capability of the civil service is really important when we are talking about the quality of policy making, the policy of delivery and so on.

I cannot be at all indifferent to the capability of the civil service. I sit next to Bob as he chairs the Civil Service Board, which looks at that issue all the time. Equally, he is very concerned about delivering an implementation policy. I will have the lead role in a sense, of the two of us, in advising the Prime Minister and Deputy Prime Minister on policy and implementation, but often Bob will be in the room as well. In the end, one of us has to take the lead responsibility, but we are both involved in both.

Q4 Chair: If you are both interested, will the danger be that you will duplicate? Will there inevitably be duplication? In developing policy, you will have to consider whether there is the capability to implement within a particular Department or set of Departments. Alternatively, you will have to set up mechanisms for ensuring consistency of approach. Both are filled with danger.

Sir Bob Kerslake: Let’s be clear. We have distinct roles, and we are clear about those. But there will be issues on which it is absolutely essential that we work together; that is why we have a shared private office and why we talk-

Q5 Chair: Somebody worked out that your office is more than a mile away from the Cabinet Office.

Sir Bob Kerslake: No. I will have an office in the Cabinet Office as well.

Q6 Chair: How often will you sit there?

Sir Bob Kerslake: I have two days a week when I work on Cabinet Office-

Q7 Chair: You will sit in the Cabinet Office, will you?

Sir Bob Kerslake: Yes, for most of that time I will be in the Cabinet Office, and that is what I do now. Obviously, sometimes I will be out and about visiting services, but in so far as I am in an office, I will be in a Cabinet Office office-let’s put it that way.

Going back to your point, we do have clear and distinct roles, but there will be areas where it is absolutely essential that we work together. I will give you an example of that. I take the lead on the civil service reform plan, which is due to be published in the spring. Clearly, that plan has to address both the policy capability of the civil service and its implementation capability. Jeremy has a very strong interest in making sure that those issues are properly addressed through the plan.

Clearly, that is something that I lead on, but Jeremy will be involved in it. I do not think that that is duplication; it is just recognising that there are issues on which we need to work together. But we are very clear about who leads on what and that nothing can fall between the cracks.

Q8 Stephen Barclay: Sir Bob, can I bring that to life with an example? Sir Jeremy used the phrase "both are going to do both". Let’s take Cabinet sub-committees-who will set those up? Will it be the Prime Minister through Sir Jeremy? Who will administer those? Will it be the Cabinet Office? If there is a cross-cutting role to the Cabinet Office, it is interesting that the Cabinet Office is going to report not to the Cabinet Secretary but to you two days a week. Could you talk us through that as a practical example?

Sir Jeremy Heywood: Yes. Cabinet agenda, Cabinet sub-committees, Cabinet sub-committee membership, Cabinet sub-committee minute taking-all that falls under me. I am in charge of the Cabinet Office secretariat function.

Take a Cabinet committee that is discussing why a particular policy outcome has not been delivered so far. That will require an analysis under a lead Department, stress-tested by the Cabinet Office and the Treasury, usually. The debate will often come down to whether there is a fundamental policy misdesign or whether there has been a lack of management information that means that a perfectly good policy has not been delivered with sufficient vigour and pace.

Fundamental questions might be asked about whether the civil service Department involved has the capacity to do it. Coming out of that sort of discussion, there might well be a series of work strands to follow up-those that involve looking again at the policy. If the overall conclusion is that the policy itself needs to be reconsidered, I will probably take the lead on that. If there is a view that actually there is nothing at all wrong with the policy but there is some fundamental problem with the Department-that it just is failing to grasp something-Bob would probably take the lead on that.

But frankly, life is complicated. We will have to keep in touch with each other all the time. Never mind having offices next to each other, we come in to work from Smithfield two or three days a week in the same car, so we have plenty of opportunities to talk to each other, and I think it is really important that we do so.

Q9 Stephen Barclay: You are travelling in the same car. The difficulty is, from a parliamentary point of view, how we get clarity as to who was accountable for something when it goes wrong. If the difficulty is with the implementation in Sir Bob’s Department, given his other hat as a Permanent Secretary, then he will be reporting to you in that instance, will he not?

Sir Jeremy Heywood: Mm. And none of this interferes with the normal responsibility-accountability-of Permanent Secretaries to Parliament in their accounting officer roles. I am not interfering with that normal accountability strand, or Bob’s accountability to his Secretary of State for policy within that Department.

Q10 Chair: That is a very important point. I was going to raise a similar point to Steve: were a Liam Fox-Adam Werritty thing to arise in DCLG-I’m sure it never will-and you have to have an inquiry, do you then do the inquiry?

Sir Jeremy Heywood: My recollection of the Liam Fox-Adam Werritty stuff was that it started off with the perm sec of the MOD doing the inquiry, and then-

Q11 Chair: No, it went to the Cabinet Secretary.

Sir Jeremy Heywood: And then it became a Cabinet Secretary one.

Q12 Chair: Yes.

Sir Jeremy Heywood: So if that issue arose again, we would have to decide whether-

Q13 Chair: No, in DCLG.

Sir Jeremy Heywood: Yes.

Q14 Chair: Or what happens if a fire control fiasco arises and now arises on your watch rather than on somebody else’s watch?

Sir Jeremy Heywood: It is difficult to answer in the abstract, to be honest.

Q15 Chair: I know it is abstract, but they are pretty real to us, day in, day out.

Sir Bob Kerslake: You raised two points, which I think we need to address. The first point you referred to is who do we performance-manage, and I do performance-manage the perm sec at the Cabinet Office; that is one of my responsibilities, alongside others. Does that mean that Jeremy will not have connection-conversations-with the Permanent Secretary at the Cabinet Office? Absolutely not. But somebody has to be in charge of performance-managing individual Perm Secs, and we have clearly divided that out as to who does who. That doesn’t mean we don’t talk or link with those people in any way, and when we come to do their performance review, one of the people I will ask for a view about how they performed is Jeremy. So I think that is fairly clear.

On the issue you raised, Chair, about what if there is a fire control issue, to me that accountability as a Permanent Secretary hasn’t changed. I would expect that first of all, I would take responsibility as the accounting officer, CLG. If there was an issue that you wanted to challenge me on, you would no doubt invite me here as Permanent Secretary of CLG and I wouldn’t expect any different treatment from you because I also happen to be head of the civil service.

Q16 Mr Bacon: Who performance-manages you as Permanent Secretary of the Department for Communities and Local Government?

Sir Bob Kerslake: Well, the Secretary of State ultimately takes responsibility for that, but I will be performance-managed in my role by the Prime Minister, as head of the civil service, so-

Q17 Mr Bacon: I am just taking as an example the very handy chart at page 27 of the Public Administration Committee report, which lists the Permanent Secretaries who are line-managed by Sir Jeremy and those who are line-managed by you. Most of the line Departments, whether it is DCMS or DEFRA or DECC or the Department for Education, are line-managed by a full-time official-you-and in the case of DCLG, another line Department, no different constitutionally from the Department for Education or DECC, they are line-managed by Ministers-by the Secretary of State and by the Prime Minister-because you are head of the civil service. Is that what you are saying?

Sir Bob Kerslake: What I am saying is this. If you look back to Sir Gus’s situation, he was both head of the civil service and Cabinet Secretary and indeed ran a Department, and he was accountable to the Prime Minister. My position is the same on that.

Q18 Matthew Hancock: As the Chair said at the start, one of the frustrations for this Committee is repeated problems-usually down to problems of accountability and problems of information, and then a host of associated problems. So you would not be surprised to hear that the Committee is not against doing things in different ways, because madness lies in attempting to do the same thing the same way and expecting a different answer. None the less, you will appreciate why there are questions about how you are going to split the role and how we ensure that the two of you are clearly accountable, given that there is overlap and you will both be doing both. Could you first set out why you think that this is the best set-up? What advantages can you foresee, given that having such a dual head is new?

Sir Bob Kerslake: Shall I kick off on that? The reason why I think this is right for the current situation is that the distinct roles that Jeremy and I play allow us to focus on particular issues. My very distinct role will be on professional leadership and the capability and capacity of the civil service, so I can single-mindedly focus on the sorts of issues that the Committee has highlighted-systemic weaknesses in the civil service, such as programme management, commissioning and all of those things. We have seen improvements in the civil service, but we have to be honest that we are not there yet, which gives me a single-minded focus on that set of issues. At the same time, Jeremy can single-mindedly focus on some of the very challenging issues that come with a coalition Government.

Sir Jeremy Heywood: My starting point is that I was a huge admirer of Gus, my predecessor, but to some extent the job had become unmanageable, given the challenges on both the policy and delivery side and the capability side presented by the current situation. To take a simple, symbolic example, he had 35 direct reports. I do not know how many members of the Committee have been in management, but it is very difficult adequately to manage 35 people directly. That is just one small part of his job. In addition, he was the principal policy adviser to the Prime Minister and Deputy Prime Minister, the custodian of Cabinet procedure and he conducted inquiries at the Prime Minister’s request into ministerial propriety issues; he was also head of the entire civil service and the Permanent Secretary of the Cabinet Office. That vast job involved policy expertise, management-of-change expertise, line management expertise, and so on.

The Prime Minister, when he came to look at this again, thought, "Well, actually, why do we need to try to find one superman or superwoman who can do all three of those very different roles at a time of enormous fiscal challenge and enormous challenge for the civil service as a whole? The civil service is living within much tighter budgets and there is a complicated coalition agreement that requires constant attention to ensure that the coalition mechanisms work properly, and so on. I am proud of Cabinet government, so we should make that part of the job much stronger. I want a full-time Cabinet Secretary working all the time on policy, delivery and propriety for me, the Deputy Prime Minister, the Cabinet, and so on."

Equally, he wanted an equal-status person running the civil service as a whole, and this is the model to which we came. The model has the advantage, to which Bob alluded, of allowing two people with different backgrounds and skill sets, but with equal status within the system, to give attention to the two areas they have been allocated.

Q19 Matthew Hancock: What are the biggest risks that you have identified? I am not asking you to publish your risk register-there are very good arguments for not doing so-but what are the risks that you have identified, and what are you doing to mitigate them?

Sir Bob Kerslake: With this model, I pick out two risks. One is that we were not clear about our respective responsibilities, so one of the things we did before we took up the jobs was to sit down and ask, "Who is doing what?" We communicated who was responsible for managing whom. That was one risk.

The contrary risk was that we would run our own separate areas and not talk to each other. We needed to build in structural things that reduced the risk of that happening: the single private office, the regular meetings, and so on.

Those were the two key risks that we picked out.

Q20 Mr Bacon: Isn’t there a third? This is really a question for you, Sir Jeremy. One of the things that Andrew Turnbull said to the Public Administration Committee was that the person holding the Cabinet Secretary job has to be very clear which side of the green baize door he is. He gave the example of Cabinet Ministers feeling that they needed to talk to the Cabinet Secretary because they felt they had a problem in their Department, without necessarily thinking that it would all automatically and instantly be replayed to the Prime Minister, and that the Principal Private Secretary function, which you carried out with distinction some years ago, is a separate No. 10 function, and that the Cabinet Secretary qua Cabinet Secretary is not sucked into the No. 10 machine. Is that not also a key risk that you have to manage?

Sir Jeremy Heywood: Yes. I think that is a risk, and it is obviously a particular risk with a person moving from one job to another-changing their spots as quickly as they can. In reality, although it is for others to judge, it is not turning out to be a huge problem. The fact of the matter is that I have moved my desk. I now work full-time from the Cabinet Office. I spend a lot of time with the Deputy Prime Minister in ways that I didn’t previously, so the Deputy Prime Minister has clearly concluded that I have now changed my job, and I can be trusted to be his adviser as well. I certainly don’t have any difficulty getting access to or being invited by Cabinet Ministers to talk to them. All I can say at the moment is that that does not seem to be a problem. My job feels very different from how it felt before Christmas. It is definitely true that I spend more time in No. 10 with the Prime Minister on prime ministerial meetings than my predecessor did. That is inherent in the job, and one of the reasons why we have made the job change.

Q21 Mr Bacon: Sir Bob, you have mentioned capability several times. The National Audit Office did a survey of the capability review programme that was initiated by Sir Gus almost exactly three years ago, in February 2009. The NAO welcomed the programme, and one of the things that its Report, and this one here, identified was that there was no immediate link to delivery, and no clear way forward. Paragraph 11 of that Report says: "There is now some uncertainty in departments about whether or how the programme"-the capability review model-"will continue…The Cabinet Office developed the Capability Review model and process iteratively and has not set out a clear forward plan beyond the second-round reviews."

Hopefully, that is a bit out of date, but can you say how things have changed and why Departments should have confidence, because they were crying out for the right kind of help from the centre? Why should they now have more confidence?

Sir Bob Kerslake: Yes, there are two or three things. First, I believe the capability review process was a very powerful driver of improvement in the civil service, and a welcome challenge process. In fact, we are going through another round-

Q22 Chair: Do you agree with that, Sir Jeremy?

Sir Jeremy Heywood: I do, actually. The first two rounds were very successful.

Sir Bob Kerslake: We are doing a further round to update those reviews as we speak. We are going through Departments. Some have been published; more will be on the way. I think it has been a powerful model, and it continues to be a valuable model. My personal view is that we will need to look, going forward as part of the civil service reform plan, at whether the model needs some refreshment and updating in the way it works. One issue that we need to address in the model is the decision to decouple delivery from capability, which is part of the original model.

Q23 Chair: Say that again. I don’t follow.

Sir Bob Kerslake: The point that was being made by Mr Bacon was that the original capability review model did not look at the issue of delivery and performance. It looked at capability. I think one question that we will need to look at if we refresh the model, which is something we are exploring at the moment-

Q24 Mr Bacon: There are a number of ifs in there, Sir Bob. One of the questions we "may"-your word, my emphasis-need to address if we refresh the model.

Sir Bob Kerslake: It has to be a decision ultimately by Ministers as part of the civil service reform plan, but I am signalling to you that I think there is a case for refreshing it, and a case for linking delivery more closely.

One final point is that the thing we didn’t have at the time when the original capability review model was developed was the new non-executive model we have in Departments. I think they play a critical role in the issue of challenging and testing capability, and that needs to be more systemically built into the model.

Q25 Mr Bacon: One quick question. In the Report that we will shortly be looking at this afternoon with the Treasury, the most shocking sentence for me in the entire Report, "Cost reduction in central government: summary of progress", is, "Few departmental systems can link costs to outputs and impacts, making it difficult to evaluate the effect of cost changes on what departments deliver."

I remember the financial management initiative. I was an undergraduate at the time, in 1982, when it was launched-I used to say that it was 29 years ago, but it was actually 30 years ago. Part of the emphasis of that was to find out where the money was going, what it was being spent on, and what the outputs and outcomes were as a result, but here we are, 30 years later, and the National Audit Office is saying "Few departmental systems can link costs to outputs and impacts." Isn’t that the most extraordinary indictment of 30 years of civil service reform?

Sir Bob Kerslake: I think it is fair to say that systems need to go further. My personal view is that we have in the civil service significantly improved financial systems and the professional capability in finance. That has been a genuine achievement, for which Gus needs to take credit. What we haven’t gone far enough on yet is what I would call financial and management information. In other words, we have good backward-looking systems, accounting systems-they are better-but we do not yet have good quality financial and management information. That, I think, will be another priority for the reform plan.

Q26 Chair: I am conscious of the time, and three people want to ask questions, but I just want to pursue this a tiny bit. You’ve mentioned two areas where you think there has been improvement, but you say there is room to go further in civil service reform. Give me some ideas of what else you are looking at. What do you think has worked well in the past? There have been attempts at civil service reform certainly since I have been around here. What has worked well? What has not worked well? Where are you looking? What still needs to be done?

Sir Bob Kerslake: A few things, actually. The professionalising of the civil service has taken big steps forward. You can see that across every Department. That is one example of where there has been genuine progress. The civil service has become more diverse in many respects.

Q27 Chair: You even have a job share at the top of the civil service.

Sir Bob Kerslake: Indeed.

Chair: Not women yet.

Sir Bob Kerslake: It is not a job share, we would say. At one point, the ratio of women and men was 50:50 for Permanent Secretaries. Sadly, we have moved away from that point since it was recorded. But there has been genuine progress on diversity. There is no question in my mind about that. We can also see a greater focus on implementation. Genuine progress has been made in the civil service in a number of important areas where it needed to get better.

Q28 Chair: What didn’t work?

Sir Bob Kerslake: So what needs to go further? There are some key areas around programme and project management. Your Committee has, I think, identified that as a key weakness, a systemic weakness. We have the Projects Academy. That’s a key thing. We need to be much stronger on commissioning than we are at the moment, and I don’t just mean procurement. This goes beyond procurement. I am talking about the whole capability on commissioning. We have a lot of lessons to learn about the right model for commissioning in different services.

There is a third area where we need to go further, and this very much touches on the policy area. We need to get more confident about using different tools to deliver Government outcomes. If I look to the last decade as somebody who was not in the civil service, Government achieved a lot of what they wanted to achieve from a combination of money, targets and regulation. All three of those now are things that we are trying to-the reality is that we cannot rely on those and cannot look to those. We have to use different ways of achieving outcomes.

Q29 Chair: What does that mean?

Sir Bob Kerslake: Well, things like the work that has been done on using nudge thinking-influencing others to-

Chair: I want us to look at nudge and see what nudge has done.

Q30 Mr Bacon: You are taking forward all Sir Gus’s behavioural stuff, are you?

Sir Bob Kerslake: The short answer is yes, but let Jeremy say a few words.

Q31 Chair: Go on. Are you Mr Nudge?

Sir Jeremy Heywood: I am Mr Nudge. Well, I’m not Mr Nudge, actually. I chair the-

Chair: Is that Pinky or Perky?

Sir Jeremy Heywood: I don’t recognise that description. No, I chair the behavioural insights steering board. We had a very interesting meeting of Perm Secs this morning-Wednesday morning was devoted to nudge. It is a really good example of how at no cost, frankly, just redesigning forms or whatever can raise tax revenue, sharply increase compliance with the law and so on. I think it is a very interesting area.

More broadly, if you were to ask me this question, I would highlight the policy agenda. Traditionally, the civil service has patted itself on the back and considered itself to be world-class in this arena. I think many countries around the world do look to the British civil service as an exemplar in policy development and so on, but we cannot be at all complacent. We have to be constantly asking ourselves the question: how can we be even better?

Why did it take so long for us to take the nudge concept seriously, for example? How can we get the most out of the transparency agenda that the new Government brought in, which was previously resisted? With payment by results, a whole new vista is opening up. It is really interesting. There are some difficult technical questions about how to transfer risk into the private sector or the third sector. None the less, it is genuinely interesting stuff. I have launched-well, not launched, but piggybacked on other people’s launching of the concept of a NICE for policy making, where we are much clearer about which social policy or other policy interventions actually work and offer value for money. Let’s make sure that Departments do not waste money on interventions that the evidence suggests do not really work or do not offer cost-effective solutions. There is a rich seam here to be mined on improving the quality of policy making, all driven by tighter budgets, but all leading to better outcomes per pound spent. I would hope for the Committee’s support in that agenda.

Sir Bob Kerslake: Can I just add quickly, because I know time is short, that another area where real progress was made under Sir Gus was moving towards a stronger sense of a top 200 leadership in the civil service? That was a real advance. We need to take that a stage further and move to a corporate leadership. One of the things that we have done is form a new Civil Service Board, which will give a much clearer sense of management leadership across the civil service.

Q32 Chair: Can you manage all that without the National School of Government, which is going?

Sir Bob Kerslake: I think so, because while learning and development is important, our view is that you need different models to deliver learning and development. The National School of Government did some very good things, but there is a strong case to say that learning and development is not about off-site training in the way the National School of Government did it.

Q33 Austin Mitchell: In this Pinky and Perky division of roles-it could be Perky and Pinky, because I am not sure which way round it goes-Sir Jeremy is responsible for policy and great thoughts; he is the chap at the top. Sir Bob, being the rough engineer from Sheffield, has a spanner with which he occasionally hits the machine. He is responsible for ensuring that it works okay-the implementation. My question is practical and goes to Sir Bob. First, we have been troubled on a number of occasions and in a number of inquiries by the lack of a senior responsible officer for projects who sees them through and is accountable at the end, because they have usually moved on. Nobody has that overview and control from start to finish. Secondly, we have been concerned about projects where the flow of information, which would allow people to detect what is going wrong, was totally inadequate. Student loans are an example of that. The Rural Payments Agency is another. We are entering a period now of greater change in the civil service. Numbers will be reduced and there will be more turmoil and more moving about. Capability will be reduced by that process. How are you going to ensure that those two problems, which have troubled us, are controlled and defeated?

Sir Bob Kerslake: I think that they were both fair challenges, I have to say, that came through. The two you make are fair challenges. What are we doing about it? I pick out two things. One is that we have established the Major Projects Academy, which I referred to earlier. It is really important to say that the focus of the Major Projects Academy is on the senior responsible officers. It is not on the technical programme managers per se, but exactly the people you describe: senior responsible officers, who have to take responsibility for big projects.

Q34 Austin Mitchell: But there will be more turnaround and more movement.

Sir Bob Kerslake: Well, no. Let me just finish this point. We are being clear that when people take on big projects like this, we want them to stay with the project. Notwithstanding the fact-

Q35 Mr Bacon: For how long? We had this conversation with Andrew Turnbull many years ago. I remember having it with him when he was Permanent Secretary to the Treasury, about seven or eight years ago, and he said, "Yes, we are trying to get people to be appointed for longer, so that they do a tour of four years in one post." Are you saying that you want an SRO to stay with the project until the project is completed, and that if you have to pay them more in post, you will?

Sir Bob Kerslake: I think that it is as long as it takes to see the project through.

Q36 Chair: Including defence?

Sir Bob Kerslake: Including any part of Government-it makes sense.

Q37 Stephen Barclay: That contradicts Lord Browne’s evidence, because Lord Browne said that you cannot keep people fresh for the length of a long-term project. You need to-he is advising on the boards, as I understand it-have interim milestones linked to the appraisal system, not to keep people for the duration of the project.

Sir Bob Kerslake: Most people would accept-I think Lord Browne would-that you should keep SROs on projects as long as you practically can, but equally, you cannot rely entirely on someone staying for ever, for all the reasons that we know about. They may get promoted or they may decide to do something else.

Mr Bacon: It is really a case of-

Sir Bob Kerslake: May I finish answering the question, because I am in danger of losing your second point, Austin? On the first point, we are clear that you want to keep SROs with projects for as long as you practically can, but you must have milestones, and points where you can change if you have to.

As for how we deal with having fewer people, I think that goes back to the point that I made earlier about working much more corporately across Departments, so that when we develop people with real skills and capabilities, we keep them on a major project for as long as we can, but then see whether they might take on a project in an entirely different part of government, so that we manage that skill as a corporate resource across government. That is the only way we will ensure that we have the capability in a period when we are reducing in size.

Chair: Meg wants to come in quickly, and Austin has not finished.

Q38 Meg Hillier: This raises quite a fundamental issue about career progression in the civil service. Currently, you have to move around. As one young man said to me, "I have to get management experience now, at this stage in my career", and that was two years in. Someone else, having managed two projects that came in under budget and ahead of time, said, "I have to move on now, or my career won’t progress." How will you tackle that? Additionally, what is your message to very junior civil servants about this change? Will it be a radically different civil service under the leadership that you both provide?

Sir Bob Kerslake: There are two questions there. I am not suggesting that people should not ever move around. When people get to senior positions in the civil service, we want them to have had a breadth of experience. In particular, we want them ideally to have had both policy and implementation experience, if possible. We need to guard against unstructured, unplanned moves around and, in particular, moving people off critical major projects at critical points; that is what we should avoid.

Q39 Meg Hillier: I am sorry, but under the current structure, are there not critical times when people have to move to get to the next grade? They cannot stay in the same job and go up a grade.

Sir Bob Kerslake: I think we should recognise that if somebody is required to stay with a project, we have to develop them, and we have to look at whether there is potential for them to move in their position within a project.

Q40 Meg Hillier: Like the career teacher.

Sir Bob Kerslake: One of the things that we have to look at is career development while you are staying in a particular role.

You made a point about whether things will change radically. I think that there will be radical change, not because I think the civil service is universally bad-quite the opposite; I think that there are massive strengths in the civil service, but the truth is that there are systemic weaknesses that we need to deal with, and there are changes in what is expected of the civil service. The MCO has been right in saying that we will be the kind of civil service that the Government need only if we are flatter, more flexible, and more skilled in the way that we do our jobs.

Q41 Mr Bacon: Sir Bob, I want to go back to the point that I made a moment ago about Andrew Turnbull, because he said precisely that-we have to look at the way that we can promote people in-post. Sir Peter Gershon said to this Committee years ago-actually, no, he said it at a conference, but he often appeared in front of this Committee-that too many project proposals appeared to have been written on the back of a cigarette packet, and that we had to develop that, too, but you are saying that we have to look at it, seven or eight years after the then Permanent Secretary to the Treasury said the same thing.

What confidence can we have that something will actually happen, or that there will not be the same old massive force that Meg Hillier was talking about, which requires people to concentrate on going upwards rather than anything else, and which means that people are pulled off projects at the wrong times? Helen Goodman, a former member of this Committee, made the point in a book published by the Smith Institute that we have to make sure that the same good people are not hoiked out for projects again and again, because they are the ones who are okay at it and trusted; they are then burned out by the time they are 50.

Sir Bob Kerslake: I would say a couple of things. First, no doubt you will have us back here again, and will test whether we are making progress on this. We are very determined to make progress on it. I have a personal motto, which is "nothing ever changes until it does," and we should look at it in that way.

The other reason why we have to be serious about change this time-this is exactly the point that was made earlier-is that we will be smaller, but the challenges are not getting smaller; they are getting bigger, and that means that we have to get better at what we do. It is not a choice.

Q42 Austin Mitchell: I have a question about accountability for Sir Jeremy. I was exercised by a letter that Gus O’Donnell wrote to our Chair, which more or less said that this Committee is getting too bumptious, shoving its nose into areas of policy that do not concern us, and treating the legal officer of HMRC rather badly. I would have thought that was a personal letter to the Chair, so that she could warn us off and tell us about it, because she is very disciplinarian. It turned out it was released to Sue Cameron, published in The Daily Telegraph and plastered across the civil service. I wrote to Sir Gus to ask what it was all about-he was hitchhiking in Thailand or somewhere exotic. What was it all about? Was it meant to call us in, tighten our leash and say we have to be less aggressive and less naughty, or was it to inspire confidence in the senior civil servants who were being bullied so atrociously by this Committee and had to have some backbone saying somebody up there loves you still? What was it?

Sir Jeremy Heywood: I cannot speak for Gus and I do not want to go over that old episode.

Q43 Austin Mitchell: You are not disavowing the letter?

Sir Jeremy Heywood: I am certainly not disavowing it, but Gus can speak for himself on that. Bob and I want to have a good relationship with the Public Accounts Committee. We are keen to do that. We were pleased to come along today. I really do not want to rake over that one unless you press me a lot harder.

Q44 Austin Mitchell: But what is the moral we are supposed to draw from it?

Q45 Fiona Mactaggart: Can I press? I thought that was an invitation.

Sir Jeremy Heywood: Obviously, that episode was not a happy episode. It was not a happy episode for the civil service. You will have to make your own mind up about whether it was a happy episode for the Public Accounts Committee. But we are very determined to have a good relationship with the Committee. Obviously, we see your prime role as holding accounting officers to account for value for money. There are lots of other Select Committees that get involved in holding people to account for policy. That is the distinction that I think Gus was trying to remind people of, but I do not really want to say more.

Q46 Stephen Barclay: But do you have accountability as a senior civil servant to Parliament?

Sir Jeremy Heywood: No-

Q47 Stephen Barclay: I understand the legal principle that normally it is the accounting officers that are accountable to Parliament. Sir Gus made that point. There are obviously concerns around areas such as HMRC, which do not have ministerial oversight, for very good reasons, so there is a concern as to whether officials are making decisions without ministerial oversight or MPs’ oversight. That is a separate discussion, which I agree is probably not one for today.

Taking the table on page 27 of the Public Administration Committee’s report, you have line management responsibility for a number of Whitehall departments, which will have accounting officers responsible to Parliament for value for money, but you are their line manager. It is interesting that this is your first appearance before this Committee, even though you have been in an extremely powerful position for many years. Moving forward, it is interesting to know what accountability you will have to this Committee in terms of your new duties. Perhaps you could clarify. Do you see that you have any accountability to this Committee on value for money issues?

Sir Jeremy Heywood: No, I don’t. I am not an accounting officer. Nevertheless, I am happy to come along to the Committee to discuss any issues that you want me to discuss-clearly, as a matter of courtesy. But I was careful to say earlier that the line management responsibilities that Bob and I have do not interfere with the accounting officer relationship with the Public Accounts Committee in Parliament. The line management role of the exercise does not in any way interfere with the accountability that accounting officers have to Parliament.

Sir Bob Kerslake: Can I also just say that from my point of view we are very clear there is no issue about robust challenge from this Committee to accounting officers. That is a part of your job, frankly. As somebody who has sat in front of a local authority scrutiny committee, this is a walk in the park.

Q48 Chair: Actually, Sir Bob, your background gives you a much better understanding than some of your colleagues have of what we are trying to achieve. I am sure this debate will continue elsewhere.

Q49 Ian Swales: I was going to say more about capability, but I know you have already said something about that. Certainly I welcome the strides that have been made. I just think that we need to see a lot more, because the common themes are often about lack of professionalism-not professionalism as civil servants, but professionalism in procurement, project management, IT, finance and so on. To extend that, I wanted to touch on another area. Those of us who have a private sector background have seen plenty of fiascos in the private sector as well. What always surprises me as I sit at this table are the time scales of everything-not just how long things take, but how long they are scheduled to take. Look at the fire control project to build 10 call centres; it was over six years-the actual programme of work. It was absolutely absurd. There is a big hidden cost in that. We heard on Monday-I can see the visitor from Monday at the back of the room-that the hidden cost of PFI is partly about the length and complexity of our procurement, and our witnesses were talking about that compared to France. My question is how are we going to speed things up and make things simpler, when sometimes the imperatives that you might have in the private sector are not there.

Sir Bob Kerslake: It is a fair challenge. There will be projects-take universal credit-where there is a long timetable for them and they will need very careful management and clear milestones, and very tight accountability for delivery of those milestones. But generally we should always ask the question if a project is going on as long as the fire control one was, why is it doing that? Have we over-engineered it? Have we thought the question through properly? It is particularly true-you are talking to Ian later-of IT projects. We have learnt the lesson of large-scale, over-complex IT projects that, frankly, are out of date by the time you have implemented them. Even if you do them well, they are out of date. There is an emphasis on pace and on asking the question: if we are going to take this long on it, have we actually got the project right?

Ian Swales: So in addition to just straight engineering project management, are you intending that you see change management in a wider sense as something that you want to build? I have been on the other side of this in a previous life, and one of the things that you see is an over-reliance on consultants in the change management area. To be cynical, perhaps consultants have a vested interest in long time scales and complexity, because the bills are a lot bigger. To what extent are you going to have that change management expertise spread in-house?

Sir Bob Kerslake: We absolutely do need it in-house, and the civil service staff survey tells us that one of the things that we do not score well on is change management, so we have to have it in-house. Again, I do not want to steal Ian’s thunder, but we have seen a pretty drastic reduction in the use of consultants now.

Matthew Hancock: Following up on that specific point, you were talking earlier about the split between the roles-policy advice versus corporate management-in the civil service. A lot of the repeated areas that we have seen have been when policy changes are made halfway through a project-the Ministry of Defence being the worst case in the past decade and longer, but it happens in many projects. That is a key area where the interaction between the two different roles means that both of you need to be in play and that relationship needs to work. So how can you ensure that the problem gets better not worse, given the new structure?

Sir Jeremy Heywood: It is the same answer that we gave before, in the sense that we have to make sure that we are keeping each other closely in touch with things that rise to that sort of level. Obviously small MOD projects will largely remain in the MOD and they will not surface up to the head of the civil service or the Cabinet Secretary. I would expect us both to be involved in significant changes in policy that really move the dial.

Sir Bob Kerslake: The problem is that there will be changes in policy along the way if it is a very long project. We can’t avoid that. Where it goes wrong is that people do not do the proper analysis and the proper change control processes so that they know what the impact of that policy change is. They just, frankly, drift into it without even realising sometimes that the policy change has happened.

Ian Swales: Can I just build on another point you have made? You mentioned leadership across the civil service and having the board. To what extent will the board look at projects that, by their nature, are cross-departmental? I am thinking particularly of the example you gave of universal credit, where the early noises are that what Ministers expected-in terms of a unified system by a certain date-will not be delivered because the two key Departments concerned are working separately on their own systems. I have some inside information on that. To what extent will your joint board take a hands-on approach to resolving issues in areas like that?

Sir Bob Kerslake: The first stage would come through the responsibilities of the accounting officers, and the challenge process that goes on for the gateway reviews, which are pretty rigorous, through the major projects group that reviews projects. Universal credit is rigorously reviewed and challenged along the way. If you saw that repeated, and it came up in a series of reviews, I think there would be a responsibility on us to take stock and to say, "Why isn’t that issue being addressed within that project?" The first one is rightly something you do within the project; the second one goes to either culture or capability.

Q50 Ian Swales: But as Jeremy said earlier, most projects within the civil service are single-Department, but there will be some, and often mission-critical ones such as universal credit, which are clearly cross-Department. As I said, this is not hypothetical. The noises are that the two Departments are not going deliver the unified system and approach on the time scale that Ministers expected.

Sir Bob Kerslake: May I just finish off, and then Jeremy wants to come in? I don’t want to answer specifically on universal credit, but I will respond to your comments. I wanted to make the general point that, yes, there are cross-Government projects and, yes, you have clear senior responsible officers within one Department, but they must work across those Departments. One of the key things that I would expect the major projects review group to look at through its gateway reviews is whether the cross-departmental bit is working.

Q51 Mr Bacon: On project management, Sir Bob, earlier you were talking about the professionalisation of different parts of the civil service-whether IT, finance or HR-and plainly each of those disciplines has greater professionalisation. We have seen a lot of that in finance, as you said, with professional qualifications. There are those who say the same is true of project management. Some members of the Committee have been approached regularly over the past two years by the Project Management Institute, which is based in the US, but has chapters all over the world with 600,000 members, and whose membership is growing fast, and faster in Brazil and India than here. Do you think there is a role for professional project management to be seriously developed as a discipline within the civil service?

Sir Bob Kerslake: The short answer is that you do need professional project managers, but you also need the senior responsible officers to be skilled and capable. It’s both.

Q52 Mr Bacon: What I really meant-I asked the question more shortly than I should have done-is, do you think we should have professional project managers who, by showing skill and success in managing bigger and bigger projects successfully, end up getting to the very top of the civil service, and that that’s how to become a Permanent Secretary.

Sir Bob Kerslake: I think if they have done very successful projects, and they have the wider capability, there shouldn’t be anything that gets in the way of them moving up there, and we should recognise achievement in delivering bigger-

Q53 Mr Bacon: Should it be a professional discipline with a qualification?

Sir Bob Kerslake: There is a professional discipline already on project management, and it should continue to be there, and be strengthened.

Q54 Chair: I shall just say that we have had Sir Gus here a number of times saying, "Oh, this is impossible." He said we would never keep these guys and women in the civil service, whether they are project management people, people with commercial or financial expertise, or whatever-the key skills. He basically threw his hands up and said that it was undoable. Was he wrong?

Sir Bob Kerslake: I wasn’t there, so I don’t know whether Gus meant to say that it was undoable.

Q55 Chair: I think all of us remember him saying that.

Sir Bob Kerslake: I don’t think it is undoable, because people who go into the civil service go in for different reasons. They go in because of the varied and interesting nature of the work, and because they are making a real difference on something that matters. That’s all the feedback I have, and people-

Q56 Chair: And the 28%-29% turnover in the Treasury?

Sir Bob Kerslake: That is one Department that has always had a high turnover. Other Departments are not seeing that.

Q57 Chair: But those are the financial and commercial skills that we need.

Sir Bob Kerslake: They are not the only place where we have commercial skills. Let me deal with your substantive point, which is whether it is undoable. I do not think it is. We must look at pay and reward, we must look at developing people’s skills, we must look at recruitment, and we must particularly be open to people coming in from the outside, as well as people going from the civil service outwards. I think it is perfectly possible to retain high-quality, capable people in key professional disciplines.

Q58 Chair: Okay. We are running out of time. Meg, then Jackie.

Q59 Meg Hillier: To pick up on that, we have gone round the houses a bit on the specialists issue. Do you think you will see more external recruitment into the civil service to get some of the specialists you have talked about?

Sir Bob Kerslake: I think we should see more external recruitment. I don’t think we should assume that it should be external-it should be on merit-but we should be open to movement into the civil service at all levels.

Q60 Meg Hillier: Do you think we will see, under your watch, a more fluid civil service, with people coming in and out?

Sir Bob Kerslake: I would very much want that to be the case, yes.

Q61 Meg Hillier: I do not know whether it is possible to get a note on turnover by professional group. You say the Treasury’s is higher because of the nature of its background, but it would be interesting to see whether there is a higher turnover of procurement specialists and finance specialists in all Departments.

Sir Bob Kerslake: We can look at that. I suspect it would be quite difficult to get the data, but we can look at it.

Meg Hillier: I can always ask each Department, but if you are able to help, it would save a lot of time and money.

Sir Jeremy Heywood: May I just add a gloss on this? It is obviously important that we are open to external recruitment, and that will continue, but it is intrinsic in the idea of setting up a project management academy that we try to grow more of our own specialist project managers. It would be good if we could achieve that over the lifetime of this Parliament.

Q62 Jackie Doyle-Price: Just a quick question to you, Sir Bob, in response to what you said earlier about tools. We are shifting away from money targets and regulation to using other tools, such as transparency and transferring risk to the private sector. Ultimately, this is quite a significant cultural change, which needs powerful leadership. From where you are sitting, to what extent will that leadership come from within the civil service, as opposed to being driven by Ministers?

Sir Bob Kerslake: I think it is both, but I would want it to be as much something that the civil service takes responsibility for as something that is pushed by Ministers. We, as the civil service, have to own that change, recognise the importance of it and lead it within the civil service. That is critical. That does not mean to say that Ministers are not going to challenge us and push us, but these things have to be owned by the civil service, as well.

Q63 Jackie Doyle-Price: I can see where some Ministers really have been driving things passionately. If some officials are slow at responding to this agenda, to what extent will you two be able to force a transformational change?

Sir Bob Kerslake: I don’t think we can do it alone, but if we, as a group of Permanent Secretaries, take a view that this is the direction of travel, based on the guidance from Ministers, it is something you build in. I would expect each Permanent Secretary to take a lead in championing the change in their Department and to recognise it in their appraisal and assessment of staff. Those who recognise the change will advance, and those who don’t, won’t.

Q64 Stephen Barclay: Why do you think being head of the civil service is a two-day-a-week job?

Sir Bob Kerslake: The explanation I would give is this. First, why is it a split job? Well, it has always been a split job, if you go back; there has never been somebody who has, full-time, been head of the civil service. That is the first point to make. The second point to make is that you gain a lot from being in charge of a Department and being head of the civil service; the two work off each other. It is hard for people to say to me, "You don’t understand the realities of doing these things in Departments," because I do. Why is it two days, rather than three? It is a judgment of how much time I think the job needs. I will keep that under review over time, but, so far, it works out well.

Q65 Stephen Barclay: So were some of your predecessors wrong? Lord Wilson said there was better synergy between the two roles Sir Gus was carrying out than between your role as Permanent Secretary and your other role. The time Lord Wilson and Lord Turnbull spent carrying out the role of head of the civil service was estimated at 40% to 45%. You have set out many of the big challenges you have, which, one would assume, would need an increased amount of time. Given the demands of handling a major change programme in two days, combined with your role as a Permanent Secretary, which you are doing as a three-day job, when all your equivalents do it as a five-day job, you seem to be setting yourself quite a big challenge.

Sir Bob Kerslake: It is a big challenge; I am not going to deny that. I think it is doable. So far, it has been pretty much how the time has worked out. I think it is perfectly possible to balance the two in that way. Time will tell, obviously, and, as I say, I will keep that under review as we move along. But the key reason why I think it can be done in this way is that I don’t expect to do all this myself. It only works if there is corporate leadership by the Permanent Secretary and the senior leadership cadre of the civil service. Our role is to harness that capability in the change programme.

Q66 Chair: How will you measure success?

Sir Jeremy Heywood: That is a very good question. I don’t have an answer off the top of my head, but I think one question is whether this model endures. I would expect it to, for all the reasons we have set out as to why we think it works, but if at the end of this period-I think we basically agreed to do this for four years-people turn round and say, "Actually, our fears about that work were misguided and didn’t crystallise," that would be good. Obviously, the main purpose of the job from my perspective is to make sure that the coalition priorities are driven forward and Ministers’ confidence in the civil service is maintained. That, fundamentally, is what drives us on.

Chair: What would you say, Sir Bob?

Sir Bob Kerslake: I would say that the civil service strengthening in its capability, notwithstanding the fact it will become smaller, is a key measure of success. The second test of success will be that we develop the civil service reform plan and see that agreed and being implemented over the next year. The third one is that we don’t find you saying you are hearing about the same mistakes on change. As somebody once said to me, "I don’t mind people making mistakes. I just wish it wasn’t the same mistakes." That’s a fair point to make. We have to tackle the systemic weaknesses.

Chair: Good. Thank you very much for this initial appearance. We look forward to co-operating with you in the future.

Prepared 22nd March 2012