HC 494-ii Annexes, minutes & evidence

2. Because central government distrusts elected councils it has constructed a series of ad hoc mechanisms to deliver its new initiatives, in child care, urban regeneration, training, schooling etc. The map of service delivery locally has become complicated, making accounting and accountability more difficult.

3. The Whitehall civil service, as at present constituted, brings little to this party. Traditional tools such as audit and inspection have become hypertrophied.

— reconstituting the civil service and local government staffing as a single "public service" with common training and professional development;

— a new culture of central-local relationships which recognises that elected local government has had its day as a service provider with any claims to autonomy; and

— a major overhaul of the centre, recognising that departmentalism is the enemy of effective delivery.

1. Traditionally the UK system of government has been thought of as well-run and efficiently organised, and a suitable model for exporting to other countries, but we need to recognise that in the last 20 years UK policy-making has suffered from a recurring tendency to make large-scale mistakes which can subsequently only be remedied at considerable cost. Any possible listing of entries for this category in this period is intensely controversial, but my tentative listing would include:

— many major IT projects in the public sector (including the attempted computerisation of London Ambulance Service in the mid-1990s; the collapse of the Post Office/Benefits Agency POCLE project 1995-2000; the Passport Office's new PFI project with Siemens Business Systems 1996-99; the NISR2 contract between the Contributions Agency and Andersen Consulting 1996-2000; and so on);

— some very substantial MOD procurements (including Trident, ordered in 1982, but paid for mainly in 1993-94, when its intended target had largely disappeared; and the Eurofighter);

— many key regulatory issues (notably the handling of the BSE crisis, as explored in the Phillips report, and the long-running delay in Oftel securing from British Telecom unmetered internet access in the UK);

— aspects of the privatisation and PFI programmes (including under-pricing of initial sales such as British Telecom and British Gas; under-valuation of some railway assets sold in trade sales; the structure of the privatised railways; and the failure to protect the public sector from PFI deals being refinanced without gains for tax payers);

— some major commitments by publicly funded bodies (including the THORP re-processing plant; and the Dome); and

— current slow progress on putting government on the Web (which entails retaining high cost administrative systems for no good reason: for instance, there are still 10,000 civil servants in Inland Revenue who do nothing else but key in paper forms to IR databases).

The cumulative direct bill for most of these mistakes runs into billions of pounds of public money, while others have long-run adverse implications for economic growth and development. To a great extent these problems reflect broad defects in the political system (such as the "fastest law in the West" style of Westminster legislation, inadequate checks and balances in the policy process, and the very large scale of decision-making in the UK before devolution and in England subsequently), but they also suggest that there are major structural problems with the civil service and its arrangements for advising ministers.

2. One key problem is that the civil service structure and personnel systems are still set up on early twentieth century lines as a generalist, bi-partisan administration, principally to handle issues such as government succession and policy succession which are organised in left/right terms, but many current political issues do not fit neatly into left/right categories. Instead they are "risk" issues, requiring a more technical approach and more systematic methods for determining policy options and selecting a robust way forward.

The UK system for handling civil service interactions with politicians has a very weakly-defined boundary between "policy" issues which are appropriate matters of political determination, and "expert" aspects of policy implementation where political interventions are inappropriate. A government which decides to commit strongly to making any "expert" judgement as an article of faith can in effect establish that as a "political" matter, about which civil servants cannot then raise issues or queries. For instance, the visitor target for the Dome was set at 12 million people, even though no UK attraction has ever pulled in more than 4.5 million people in a year: this target was then fetishised as a government commitment for the lifetime of the decision-making process. Planning proceeded on the presumption that the target must be met—without any sensitivity analysis of what would happen financially or in marketing terms if it was missed.

3. The UK civil service is increasingly unusual in comparison with other advanced industrial countries in:

— recruiting for life-long career paths straight from undergraduate courses; and

— having a relatively low proportion of people with post-graduate education, either at Masters or PhD level in policy-relevant ranks and positions;

— investing very little in the graduate education of people heading into the senior civil service (especially by comparison with investments made in secondments to the private sector).

The consequence is that most senior British civil servants have a pretty weak educational background by modern professional standards. They will rarely have had an opportunity to stretch their intellectual capabilities and will instead be offering advice based on a very distant undergraduate education (often not in a relevant subject for modern policy-making issues), a lifetime working from cardboard files, and a very few poorly organized and academically uncertified in-service training courses. This is an inadequate approach for securing expertise at the top, and there is no sign that recent civil service reforms will address this issue. For instance, the civil service had no corporate targets for graduate education or securing the necessary expertise at the top to handle risk issues.

4. The UK civil service is very poorly organized at the core to handle either risk issues or the development of modernization. The Cabinet Office has a byzantine internal structure of many small units, most of whose work cross-cuts each other, and which has very weak and hard to follow central co-ordination by senior staff or by ministers. Most civil servants even at senior level could not be expected to understand how the Cabinet Office works, or where lines of responsibility run for strategic development of the civil service rests. The division of functions between Treasury and the Cabinet Office is also opaque and serious problems have already occurred—for instance the non-progress on electronic transactions targets, which barely featured in the first comprehensive spending review targets.

5. The development of "joined-up" governance has made a small amount of progress, but appears to have reached some kind of hiatus. The immediate prospects are for a reconfiguration of Whitehall departments on "client-group" lines in an implicit recognition that departmental and ministerial fiefdoms are too strong for cross-departmental efforts to have much impact.

This brief written evidence provides a summary of the work conducted by the PIU since its establishment in 1998.

i. The Performance and Innovation Unit (PIU) was established in 1998 as a result of Sir Richard Wilson's review of the centre of government.

ii. It provides the Prime Minister and Government departments with a capacity to analyse major policy issues and design strategic solutions.

iii. The PIU primarily works on individual projects, using small teams drawn from within government and the wider public, private and voluntary sectors. Recent projects have covered topics as varied as e-commerce and the rural economy, the future of the Post Office and trade policy. Most of the topics are long-term strategic issues that cut across departmental boundaries.

iv. The PIU brings a distinctive approach to bear, combining rigorous analysis of the evidence; extensive consultation, particularly with practitioners; and creative thinking to break out of the confines of conventional wisdom.

v. The Unit works very closely with No10 Downing Street, the Cabinet Office and HM Treasury. It reports directly to the Prime Minister through the Cabinet Secretary, Sir Richard Wilson.

vi. There is a strong emphasis on practical results. Most PIU reports are published as agreed Government policy and move quickly into implementation.

vii. Current projects include: privacy and data-sharing; workforce development; resource productivity and renewable energy; global public health; the modernisation of government loans; and a study on the UK's readiness for the future.

viii. The Unit has about 50-60 staff at any one time. It is based in Admiralty Arch, just off Trafalgar Square.

1.1 A short-term project commissioned by the Prime Minister in February 1999 to run alongside a longer term PIU project on e-commerce. Report published in May 1999.

— The need to strike a balance between the aim of making the UK the best place in the world for e-commerce and the aim of ensuring that it remains a safe country in which to live and work.

— Identification of acceptable trade-offs between increasing consumers' levels of trust in e-commerce through the use of encryption technology and preserving law enforcement's need to intercept and retrieve data.

— Identification of the key techniques or systems necessary to sustain law enforcement capabilities in the face of increased use of encryption technology by criminals.

3.1 The voluntary licensing of encryption providers will improve consumer confidence and support the development of e-commerce. But there should be no mandatory requirement for licensed providers to retain "decryption keys" or to lodge them with third parties.

3.2 The Government should adopt a new approach based on co-operation with industry.

3.3 A new Government/industry joint forum should be established to discuss the development of encryption technologies and to ensure that the needs of law enforcement agencies are taken into account by the market.

3.4 A new Technical Assistance Centre should be established, operating on a 24-hour basis, to help law enforcement agencies derive intelligence from lawfully intercepted encrypted communications and lawfully retrieved stored data.

3.5 The UK Government should work with foreign governments with a view to seeking support for a new forum to promote co-operation.

3.6 The report has helped to establish a new approach to encryption based on closer co-operation between Government and industry. This approach is being pursued through a Government-Industry Forum on Encryption and Law Enforcement.

— Part I of the Electronic Communications Act 2000 provides for a Government approvals regime for cryptographic service providers. These providers are helping to develop the environment for secure business-to-business and business-to-customer transactions using cryptography.

— Part III of the Regulation of Investigatory Powers Act 2000 establishes the provisions to maintain the effectiveness of existing law enforcement powers in the face of increasing criminal use of encryption.

1.1 Project commissioned in the wake of the Competitiveness White Paper published in Autumn 1998. The White Paper set the aim of making the UK the best environment for electronic commerce. The project report, [email protected], was published in September 1999.

1.2 The project identified four key challenges to the achievement of the Government's aims:

— Lack of a clear regulatory framework and of clarity in some areas of tax policy.

— Low understanding of the potential benefits and challenges at all levels in the public and private sectors.

— Inter-connected issues relating to access—and especially of delivery of on-line services at a local level.

— The extent to which businesses and consumers lack trust in e-commerce systems compared to physical channels.

4.1 The project made 60 detailed recommendations grouped around three key priorities:

— Overcoming business inertia—the best UK companies are world class, but many are lagging behind. There is a clear need to bring all companies up to the level of the best, with particular emphasis on small businesses.

— Ensuring that Government's own actions drive the take-up of e-commerce—immediate appointment of an e-Minister and e-Envoy to drive through a sustained programme of activity on electronic service delivery and electronic procurement.

— Ensuring better co-ordination between Government and industry—to gain maximum benefit from existing and proposed programmes on such things as access, regulatory framework and tariff structures.

3.1 This highly influential report defined Government thinking and policy development on e-commerce. It led to the establishment of new mechanisms to co-ordinate and drive forward policy-making, including the appointment of an e-Minister and e-Envoy to lead work on the Information Age agenda across Government.

3.2 The report led to an accelerated timetable for getting all Government services online (brought forward from 2008 to 2005) and to the development of the UK online brand as a focus for communicating all the Government's work in delivering electronic services. It also led to a re-evaluation of the appropriate regulatory regime for the converging sectors of telecommunications and broadcasting and to a liberalised regime for the re-use of Government information in digital form at marginal cost. A detailed summary of actions taken is available on the e-envoy's website.

2.1 Project commissioned in December 1998 to clarify the Government's overall objectives for rural economies. Report published in December 1999.

— rural communities are facing a myriad of problems as a result of social and economic change;

— the current policy framework (rooted in the 1940s) has failed to keep pace with changing priorities, and without policy changes, these problems will only get worse;

— a radical new approach to policy is needed based on a clear and coherent vision for the future of the countryside.

3.1 The Government should aim to encourage and support the creation of productive, sustainable and inclusive rural economies. This needs action in four main areas:

— Economic policy—including: making the planning system more supportive of economic development and diversification; introducing measures to develop the telecommunications infrastructure in rural areas; enriching the rural skills base through the roles of the Regional Development Agencies and University for Industry; and providing better business advice in rural areas.

— Environmental policy—including: the development of new policy instruments such as offset mechanisms and impact charges; consideration of a national framework for basing the protection of land on its environmental value; and directing more agricultural support to agri-environment schemes.

— Agricultural policy—including: making the reform of the CAP the key priority in future negotiations; using the provisions of the CAP's Rural Development Regulation to re-direct a proportion of direct payments to farmers into agri-environment schemes and rural development.

— Social policy—including: innovative approaches to service delivery; a specific commitment to boosting the role of market towns; support for social housing; and improving access to private, public and voluntary transport.

4.1 This well-received report formed the basis of the Rural White Paper that was published on 28 November 2000. The White Paper aims to ensure a fair deal for rural areas by delivering high-quality services, tackling social exclusion, encouraging economic diversity, protecting the countryside and increasing local choice through parish and town councils.

4.2 Specific proposals include: an extra £37 million extra for market town regeneration; £240 million for rural transport schemes; provision of 9,000 affordable homes; and increased help for farm diversification and conversion of redundant buildings. In addition, the White Paper put in place a number of measures to ensure the "rural proofing" of Government policies and 15 new indicators covering all aspects of the countryside to be reported on in an annual Countryside Report.

3.1 Project commissioned in December 1998 to look at how Government can better deal with cross-cutting issues, and what can be done to remove some of the barriers to "joining up" the Whitehall "machine". Report published in January 2000.

— There is a tendency to take a provider-centred perspective rather than thinking about the service user.

— There is little incentive or reward for organisations to contribute to corporate goals or those of another department or organisation.

— The skills and capacity to develop/deliver cross-cutting solutions are often absent.

— Budgets and organisational structures are arranged around vertical (functional) lines rather than horizontal (cross-cutting) lines.

— Systems of accountability and the way risk is handled can militate against innovative cross-cutting working.

— The centre is not always effective at giving clear strategic direction and conflict resolution mechanisms can be weak.

5.2 The report's 42 recommendations were aimed at bringing about fundamental changes in six key areas:

— stronger leadership from Ministers and senior civil servants—to create a culture which values cross-cutting policies and services, with systems of rewards and recognition to reinforce desired outcomes;

— improved policy formulation and implementation—to take better account of cross-cutting problems and issues, by giving more emphasis to the interests and views of the those outside central government and who use and deliver services;

— using budgets flexibly—to promote cross-cutting working, including using more cross-cutting budgets and pooling of resources;

— using audit and external scrutiny—to reinforce cross-cutting working and encourage sensible risk taking;

— using the centre (No10, Cabinet Office and Treasury) to lead the drive to more effective cross-cutting approaches.

3.15 The report has significantly influenced thinking and the direction of reform in a number of areas (eg Civil Service reform). Cross cutting approaches were a central theme of the 2000 Spending Review which established a number of cross-cutting budgets (eg £800 million over three years for Neighbourhood Renewal and £450 million over three years to tackle child poverty), and feature prominently in a number of Public Service Agreements. A Policy Innovation Fund has been established to provide £50 million a year from 2001-02 to support cross cutting initiatives between Spending Reviews. The CMPS is organising new training programmes and other activities for Ministers and civil servants based on cross cutting working.

4.1 Project commissioned in December 1998 in the wake of the Modernising Government White Paper to look critically at the role of analysis and modelling in policy making. Report published in January 2000.

— The demand for good quality analysis is not embedded in the culture of central government.

— External pressures (eg EU negotiations, manifesto commitments) can constrain the scope for analysis.

6.1 The report identified actions in five key areas in order to bring about a fundamental change in culture:

— the need for leadership from Ministers and senior civil servants—who should expect and demand soundly based analysis in support of policy;

— the need for incentives for the highest standards of analysis—both through new financial arrangements and increased openness to scrutiny;

— the need to plan analytical provision so it matches policy needs—with departments preparing analytical strategies as part of their business plans;

— the need to spread best practice—through such things as better networking between specialists in Government;

— the use of more innovative approaches to recruit and retain the best analysts—such as better use of promotion and increased use of secondments.

4.14 Good progress has been made in bringing about the fundamental change in culture sought by the project. On the demand side, most departments are now planning to ensure that the selection of policy instruments is based on evidence. An Evidence Based Policy Fund has been created with a budget of £4 million over two years to help fill gaps in research and analytical work. The Treasury has developed a template for Departments to assess whether their PSA objectives are underpinned by evidence.

4.15 On the supply side, the heads of the Government Economic Service and other professional groups are taking forward a review of the numbers/type of analysts needed in departments to promote evidence based policy making.

5.1 Project commissioned in December 1998 with a brief to look at how the co-ordination of central government activity at a regional and local level could be improved. Report published in February 2000.

— Central Government initiatives which affect the same people in local areas are not co-ordinated.

— This lack of co-ordination is reducing the effectiveness of these initiatives, not least in the areas that need them most.

— Regional networks of Government Departments are fragmented, with no part of central Government responsible for bringing its contribution together to assist local areas.

Establishment of a new Regional Co-ordination Unit based in DETR but overseen by an external Minister to strengthen co-ordination of policy initiatives.

Government Offices to continue to work closely with Regional Development Agencies.

Greater focus needed on strategic outcomes of central Government initiatives affecting local areas, with success judged against these.

4.1 The Regional Co-ordination Unit (RCU) was established shortly after publication of the report and an increased role for Government Offices in the Regions was also announced. The RCU is overseen by the Minister of State for the Cabinet Office, reporting to the Deputy Prime Minister.

5.2 Decisions in the 2000 Spending Review explicitly reflected several of the report's conclusions—in particular, the consolidation of regeneration programmes and the creation of Local Strategic Partnerships to achieve better local integration.

5.3 New posts in the Government Offices, including regional directors, are being recruited to carry out the role envisaged in the report.

5.4 In October 2000, the RCU published an action plan outlining how the Government intend to modernise the way it works at regional and local level, in line with the PIU report. The plan set out the aim of involving GOs more fully in a wide range of policies, including neighbourhood renewal, local government, rural issues, education, health, crime and drugs, asylum, prison and probation issues, culture, media and sport, and legal services.

7.1 Project commissioned in December 1998 to assess the implications for Government of the sharp decline in the number of people working in their 50s and early 60s. Report published in April 2000.

6.1 In the past 20 years, the proportion of men between 50 and State Pension Age who are not working has doubled. A third of men and women in this range (2.8 million people) are now not working.

— Most have not left work voluntarily and almost half receive most of their income in state benefits. Early exists from work contribute substantially to poverty.

— People who leave work early often experience growing disillusionment and exclusion. They are not replacing paid work with community activities such as volunteering.

— The total economic cost is high. The cost to the economy since 1979 amounts to £16 billion a year in lost GDP and £3-5 billion in extra benefits and lost taxes.

Changing the culture—by setting out the Government's vision of the role and value of older people in society, and by Government setting an example in its own employment practices. Consideration of age discrimination legislation if the current Code of Practice on Age Diversity is found to have been unsuccessful.

Enabling and encouraging over-50s to stay in work—by encouraging and supporting employers to create better and more flexible working arrangements and improving occupational health. Reducing perverse incentives to leave work early, particularly regarding occupational pension schemes.

Helping and encouraging displaced workers to re-enter work—by building on measures that reach out to such people (eg New Deal 50plus) and ensuring that neither the Employment Service/Benefits Agency assume that individuals cannot return to the labour market.

Helping older people to make use of their skills and experience for the benefit of the wider community—by improving access to, motivation towards and availability of volunteering opportunities.

4.1 A Cabinet-level Champion for Older People was appointed to take forward implementation of the report's conclusions. A government-wide strategy is being taken forward by an Inter-Ministerial Group. Progress to date and programme for future action were highlighted at a National Event for Older People on 17 May 2000. The DfEE have commissioned research to support evaluation of the Code of Practice. A number of changes to social security benefit rules have been introduced or are being considered. Improved training for ES staff has been introduced, and the revised Annual Performance Agreement for the Employment Service allows priority to be given to the New Deal 50+, which is receiving funding of £35 million over three years.

7.1 Project commissioned in October 1999 to look at the financial aspects of crime and what role pursuing the money trail can play in the fight against crime. Report published in June 2000.

The UK has had extensive legal powers to confiscate criminal assets since 1986. But there are anomalies in the legal regime and significant deficiencies in the use of legislative provisions.

In the last five years, confiscation orders have been raised in an average of only 20 per cent of drugs cases in which they were available, and in a mere 0.3 per cent of other crime cases.

Pursuit and recovery of criminal assets in the UK is failing to deliver the intended attack on the proceeds of crime.

Adoption of a more strategic approach, with joined-up action from all relevant parts of the criminal justice system.

Better trained and supported law enforcement officers able to pursue complex financial investigations.

A simpler and more robust legal regime, including extended civil forfeiture powers.

6.1 The Home Office has published a Regulatory Impact Assessment on the measures contained in the report which shows that if just 10 per cent of the estimated amounts are seized that they would still exceed the regulatory compliance cost. An interim Head of Asset Confiscation is being appointed and, together with a new cross-departmental committee, will be responsible for developing the strategy. Plans are in place to establish a National Confiscation Agency and Centre of Excellence next year.

6.2 The EU is currently considering a Second Money Laundering Directive. This will extend the scope of money laundering regulations to include operators outside of the financial professions, including accountants and solicitors who form companies. It will also add to the impetus for police and customs to investigate money laundering cases.

6.3 The Home Secretary will publish the first annual report on the progress of the Asset Confiscation Strategy next year.

8.1 Project commissioned in October 1999 to look at options for modernising the Post Office network. Report published in June 2000.

The Post Office network has been slow to modernise in the face of a rapidly changing business environment.

The network is slowly shrinking as sub-postmasters retire or give up their businesses and replacements cannot be found.

The network has become dependent on a few lines of business and needs to diversify the products it offers to respond effectively to changing needs and preferences.

The most important line of business is over-the-counter payment of social security benefits. In May 1999, the Government announced that, from 2003, it plans to change the normal method of payment to automatic credit transfer (ACT) direct into bank accounts.

— a much more entrepreneurial and more efficiently run Post Office—that seizes opportunities to diversify into new lines of business including: a Universal Bank; e-commerce; and one-stop shops for Government information and transactions;

— maintenance of an extensive network of post offices in rural and urban deprived areas—by preventing avoidable closures in rural areas and investing in improved post offices in urban deprived areas;

— modernisation and re-invention of the Post Office network—through rationalisation of the existing network and creation of a smaller network of bigger, brighter post offices that are open longer hours and offering better services to customers.

3.1 The report put in place a strategy backed by additional funding of £270 million to modernise and safeguard the Post Office network, with plans for new Universal Banking Services to be delivered across post office counters from 2003, a firm Government commitment to protect the rural network until 2006 and funding to modernise post offices in urban deprived areas.

3.2 Plans for the modernisation of the urban network over the next 3-5 years are well underway. Innovative pilot schemes for post offices to act as Government General Practitioners or one stop shops for information and advice on government services have been given Government backing.

9.1 Project commissioned in February 2000 as a contribution to the Prime Minister's review of adoption policy. Report published in July 2000.

The role played by adoption has changed over the last three decades from one of providing homes for relinquished babies to providing permanent families for children of a range of ages—often with challenging backgrounds.

Currently, many children wait in care for too long, with adoption often seen as a last resort. There are wide variations in local authority performance.

There is widespread concern about the fairness, clarity and consistency of the process, and the time the whole procedure takes.

3.1 Recommendations aimed at increasing the number of adoptions of looked after children and put the needs of the child first, were made in the following areas:

— Attracting, recruiting and supporting more adopters—by stepping up recruitment activity, setting up a National Adoption Register and establishing new National Standards.

— Achieving a step change in the performance of Local Authorities—through establishment of a clear national policy for permanence and setting up a Taskforce to tackle poor performers.

— Making the court system work better—through review and reform of care proceedings, introduction of judicial case management of adoption proceedings, clarification of best practice and improved training.

— Changing the law—by aligning the Adoption Act with the Children Act to provide a consistent basis for planning for permanency and introducing new Placement Orders.

4.1 Work is currently being taken forward by Department of Health on the establishment of:

— a National Adoption Register to co-ordinate those waiting to adopt with children needing new families;

— new National Standards which local authorities will need to follow, setting out clear timescales for making decisions about children and clear criteria for assessing adopters;

— an Adoption and Permanency Taskforce to spread best practice, tackle poor performance and help all local authorities to reach the standrds of the best;

— a rapid scrutiny of the backlog of children waiting to be placed with adoptive families.

4.2 The report's other conclusions were open to public consultation until 6 October 2000. A White Paper has been published outlining the new approach.

10.1 Project commissioned in November 1999 to set a strategic framework for the electronic delivery of Government services in line with the Government's target of having all services available on-line by 2005. Report published in September 2000.

Government services are largely delivered through a single, often paper-based, channel involving face-to-face interaction and frequently attuned to the needs of the service producer rather than the user.

New technology provides the opportunity to transform the way that government services are designed and delivered.

But it also provides a number of challenges that will have to be met in order for the full benefits to be realised.

Government has set itself the aim of having all of its services available on-line by 2005.

Electronic service delivery needs to be driven by the use that citizens make of it—with better co-ordination of initiatives to ensure that citizens have the skills, information and equipment to interact electronically. There should also be measures to give people mediated access to electronic services where they want and need it. Government must also respond more effectively to citizen preferences and make investment decisions on the basis of service use.

Electronic delivery of government services should be opened to the private and voluntary sectors—competition will improve service quality, stimulate innovation and improve value for money.

New incentives, levers and institutional structures need to be put in place to make the transformation happen—including new funding and sharpened financial incentives to promote electronic service delivery and the creation of a government incubator to develop new service ideas.

The Government must continue to implement its rolling programme of priority services—with a significant number of priority citizen services funded for full implementation within the current financial year.

11.10 The Office of the e-Envoy has been restructured and expanded in line with the report's conclusions. The e-Minister and e-Envoy are producing monthly progress reports. The project has already helped to shape major spending decisions as part of the Knowledge Economy strand of the latest Spending Review. The Prime Minister has announced £1 billion of new funding for the next three years to fund implementation of the report's recommendations for putting government online.

10.11 DfEE are working closely with partners in co-ordinating and delivering community based access initiatives. DCMS are actively working with other departments and the industry to promote rapid take-up of digital interactive TV

11.1 Project commissioned in December 1999 to provide the UK Government with a policy framework for balancing social, health and environmental objectives with that of increasing trade liberalisation. Report published in September 2000.

An open and rules-based trading system brings great opportunities and benefits to both consumers and businesses.

But trade liberalisation also presents challenges on the environment, conditions at work, human health and animal welfare.

Consumers want more and clearer information about how and where products are made. And yet there is a danger that these issues may be used as a cloak for increased protectionism with negative impacts for all—and especially developing countries.

There is a need for a more informed public debate on the issues and a clear framework for what Government can do to influence policies at an international level.

Opening international markets can be expected to benefit social, health and environmental standards over time by raising living standards—but only if supported by the right policies.

Developed countries and international institutions need to do more to help poorer countries gain market access for their products and to implement supportive policies—unilateral trade restrictions will almost always be counter-productive.

World trade rounds are not suitable as the main forum for negotiating non-trade issues.

The role of the World Trade Organisation is poorly understood, but it provides an effective framework for trade.

The trade rules need more clarity and transparency in several areas including production processes, product labelling and the precautionary principle; improvements are also needed to the dispute settlement processes.

More multilateral agreements are needed to address social, health and environmental issues, with these agreements and trade rules mutually supporting each other.

There is much that business and consumers can do to influence standards and government can play an enabling role in encouraging voluntary initiatives by business and better product labelling.

12.13 The report is unique in addressing these issues from a government perspective and it has been widely influential within the WTO, European Commission, UNCTAD and other international bodies. The Government is using the report's conclusions to inform its thinking on each of the relevant policy issues as they come up for review and to achieve a more informed dialogue with stakeholders. It is encouraging other governments and institutions to take the report's conclusions into account in their own thinking.

8.1 A joint research project with the Home Office looking at the social and economic impact of migration. To be published shortly.

8.2 To consider the needs of public sector leadership in the future, identify and assess key existing development programmes, develop best practice to help public sector organisations to get good leaders into place, and identify practical ways of increasing diversity in public sector leadership. Concluding in early 2001. Sponsor Minister Estelle Morris.

8.3 To consider the broad range of issues involved in privacy and data-sharing, including public concerns on privacy and confidentiality; current government, private sector and international practices; structural and technological issues; and current legal parameters. Concluding in Spring 2001. Sponsor Minister Lord Falconer.

8.4 To consider what incentives Government can employ to harness the efforts of the pharmaceutical industry to combat HIV/AIDS, TB and Malaria in developing countries. Sponsor ministers Peter Hain and Stephen Timms.

8.5 To consider the contribution that the development and application of renewable energy technologies can make to economic growth and environmental protection within the context of more efficient use of natural resources and sustainable development. Sponsor minister Yvette Cooper.

8.6 To examine the case that the UK under-invests in workplace learning and development, and to propose a strategy for tackling problems that are identified. Sponsor minister Lord Macdonald.

8.7 To consider the principles of when to use loans rather than other forms of government intervention and what form these loans should take once a case for intervention has been made. Sponsor minister Andrew Smith.

8.8 The unit is also following up work it carried out in 1999 to identify the key medium and long-term strategic challenges and opportunities facing Government.

1. This memorandum outlines developments in the Office of the e-Envoy since the publication of e-government: A strategic framework for public services in the Information Age in April 2000. Twelve copies of e-government have been sent to the Committee with this memorandum.

2. The September 1999 report from the Cabinet Office's Performance and Innovation Unit, "[email protected]" was the catalyst for the creation of the e-Envoy post. From the beginning it was envisaged that the e-Envoy would play a dual role, aiming to make the UK the best place in the world for e-commerce by 2002, and driving towards the goal of making all government services available electronically (initially by 2008, subsequently brought forward to 2005). To this latter end, the Central IT Unit was absorbed into the Office of the e-Envoy in October 2000—including its remit to carry forward the information age work arising from the Modernising Government White Paper.

3. The Office of the e-Envoy is divided in to three Groups: e-Commerce, e-Government and e-Communications. Ann Steward is the Director of the e-Government Group, which is tasked with making the UK Government a global exemplar in its use of the new technologies by:

— working closely with central and local government and the devolved administrations on the development and implementation of their e-business strategies;

— monitoring the Government's targets for electronic service availability, take-up and quality;

— overseeing central IT projects, like the UK online portal and government gateway;

— reviewing the effectiveness of, and learning from, significant public sector IT projects.

4. It should be noted that the Office of the e-Envoy is working closely with the new Office of Government Commerce on the implementation of the last function. Copies of Successful IT: Modernising Government in Action, from which this function is derived, have been sent to the Committee with this memorandum.

5. It should also be noted that the Performance and Innovation Unit published a report entitled e.gov—Electronic Government Services for the 21st Century in September 2000. All the recommendations in this report have been accepted by the Government.

They call for action by departments and agencies across the public sector. However, the e-Government Minister Ian McCartney, supported by the e-Government group, will be overall champion of the report's recommendations across Government.

6. Finally, the Knowledge Network project is owned and administered by the Centre for Management and Policy studies, although there is close co-operation with the e-Government Group's work on technical and data standards.

We are investing £252 million to establish UK online centres in our most disadvantaged communities in England, including the 2000 most deprived local authority wards taken from the DETR index of deprivation, rural areas with significant transport or deprivation problems and pockets of deprivation within more prosperous areas. These centres will be based wherever best suits the needs of local people and will meet the needs of those with low, or no ICT skills and who do not have the opportunity to use ICT facilities in their home or place of work.

The centres will cater for many different types of people but we are specifically targeting a number of client groups:

Although we are very clear about the people UK online centres should reach, we recognise the need to be flexible about the way this is achieved. Consequently the centres will vary in size and shape from small PC-based facilities in a village hall, community centres and mobile centres, to major ICT facility in colleges, training organisations or shopping centres.

These UK online centres will be conveniently located where people live and work, or in leisure facilities such as libraries, pubs and sports centres. They will offer a safe and supportive place that will give people the confidence to explore ICT and the Internet. The centres will have flexible opening hours that match community needs including evenings and weekends, and take account of the particular needs of those with caring responsibilities.

The UK online centres will be designed specifically to meet the needs of the local people they are trying to attract. We recognise that in order to encourage people to use the centres we must provide facilities which meet their specific local needs. Examples of innovative ways of attracting people into centres include a centre within a public house, a centre in a professional Football Club, a mobile centre which is part of a funfair travelling around Birmingham, centres offering music and media facilities, digital photography and centres offering healthcare packages. It is hoped that by offering the non-traditional learning in a convenient location people will be more likely to visit centres and benefit from what ICT and the Internet can offer.

As not all disadvantaged areas are the same, differences in social, employment and cultural traditions will need to be reflected in the design and style of the UK online centre and in how they are owned and managed. The aim is to give more people greater opportunities to engage in society and to improve their prosperity and the quality of their lives.

Towards the end of the session, Neil Turner MP asked about the operation of the Government Office for the North East (question 1041). I agreed to look into this and attach a note which, I hope, will reassure the Committee that the Government Office operates in an integrated, rather than DETR-driven, way.

I understand that the Cabinet Office are preparing a note on pensions, as Andrew Tyrie MP requested (question 1017). This will be sent as soon as it is ready.

1. At the Select Committee hearing on 31 January 2001, Mr Turner commented that during the Committee's visit to Newcastle he had gained the impression that GO-NE seemed to be a DETR-driven regional office (Question 1041). This note sets out the background to GO-NE's work on behalf of a number of Government departments.

2. The mission statement for all the Government Offices is "To work with regional partners and local people to maximise competitiveness and prosperity in the regions and to support integrated policies for an inclusive society". As part of this, one role of senior staff is to communicate policy to the region and to provide feedback to Departments on the views of opinion formers, across a very wide range of policies.

3. GO-NE's functions cover the full range of regional work for DTI, DfEE and DETR; an important crime reduction remit for the Home Office; and the regional presence of DCMS. In addition the office has secondees from the NHS, Police, Local Authorities and Asylum Seekers Support Service; and a European Programmes Secretariat, aimed at socio-economic development, which includes about 15 staff seconded from partner organisations in the region. From April 2001 the office will gain a Rural Directorate of seven staff from MAFF, led by a senior civil servant from MAFF.

4. The office carries out two particular national functions throught the Residential Training Unit for DfEE, and the Local Authority Orders Unit for DETR. GO-NE is co-located with COI and the Drugs Prevention Advisory Service, and currently accommodates Trade Partners UK and the Small Business Service's regional management team for DTI; it works closely with all of them.

5. Government Offices work on the principle that, although staff are nominally allocated to specific departments for pay purposes, all are GO citizens who can be posted—on merit—to jobs outside their original department. This is an illustration of the principle of joined-up working, set during the foundation of the GOs and reiterated in the PIU "Reaching Out" report. In GO-NE over half of the staff either work for a Department other than the one they joined, or work for several Departments on cross cutting issues.

6. The departmental origins of the GO's Senior Civil Service team are as follows:

In addition there are three Grade six Directors, just below SCS level, one each from the Home Office, DfEE and DETR.

7. Approximately 30 staff (21 per cent of the current staff in post) have direct experience of working in departmental headquarters. Most of the staff were originally recruited to the civil service from the North East, and have spent their careers in a variety of offices in the region.

I understand that at the Public Administration Select Committee evidence session on 31 January with Sir Richard Mottram and Sir Michael Bichard, the Committee asked for a note from the Cabinet Office about the new pension scheme, in particular how it supports movement into and out of the Civil Service.

I attach a note prepared by my Civil Service Pensions team. Please let me know if you require any further information.

1. We understand that at the Public Administration Select Committee evidence session on 31 January with Sir Richard Mottram and Sir Michael Bichard, the Committee asked how the Civil Service pension arrangements are being changed, with particular emphasis on mobility. This note gives details of changes being made to Civil Service pension arrangements.

2. Cabinet Office (and HM Treasury) took the view that a real step change in pension arrangements was appropriate to support the Civil Service in the 21st century. And they believed that employee choice represented the best way of tackling the recruitment, retention and reward issues highlighted in the Civil Service reform agenda.

3. Work on new pension arrangements has been taken forward by the Cabinet Office in partnership with employers and the unions. The aim is a scheme which better reflects the current needs of employers and employees without increasing employment costs. The remit is that new arrangements should be cost-neutral over time—that is better benefits will be financed by increased employee contributions.

4. A "better and more flexible pension scheme" forms part of the Civil Service Reform Action Plan as part of the "better deal for staff". The Civil Service reform agenda looks to a Civil Service which, amongst other reforms, supports a greater degree of permeability; this is likely to impact most on those grades which have not, traditionally, been those into which the Civil Service has recruited. Increased movement—both into and out of the Service—is expected to involve those with experience in other public sector bodies as well as those from the private sector. The new pension scheme will support the greater degree of openness by providing a fair deal on pensions for those who only come into the Service for a relatively short time.

5. While the Civil Service reform programme recognises the importance of a regular infusion of "fresh blood", it also recognises that the Service will continue to provide a long-term career for many of its staff. Indeed, in high-turnover areas, managers will continue to seek to stem the leakage of trained staff. The reform programme challenge is for the Service to provide reward systems (including pensions) which operate in an even-handed manner by recognising good performance regardless of whether people are career civil servants or mid-career entrants. Retention and development of talent will be vital, both in continuing to provide a long term career for many, but also in preventing the loss of individuals key to the delivery of results. Performance management will have an important part to play, but so will the pension scheme in supporting the wider corporate objectives and reward strategies.

6. The pension scheme represents a significant proportion of the remuneration package for most civil servants, with employers currently contributing some 13.5 per cent of pay (on average) to the scheme. It is essential that this expenditure is perceived by a range of stakeholders, including employer, employee and potential recruits, along with the taxpayer, as providing value for money and a good and fair deal. The pension scheme should, together with pay and other benefits, help to recruit and reward valued staff who demonstrate the corporate behaviours, taking account of the diversity and characteristics of the workforce.

7. The Civil Service Management Board have concluded that our needs as an employer require the continuation of a service-wide scheme based on two elements, a defined benefit (DB) (final salary) scheme, re-structured to give it a modern look and feel, and a new defined contribution (DC) arrangement. All new entrants, at all levels and at all ages, will have a choice between DB and DC alternatives. Choice will provide a fair and better deal for all civil servants—both those who join anticipating a career and those who join for a short time only. Existing staff will have a choice between remaining in the existing scheme or moving to the restructured DB scheme on its launch. Existing staff will not be given the option of participating in the new DC arrangements, although they will continue to be able to access DC via the Additional Voluntary Contribution scheme. Staff earning under £30,000 pa will, additionally, be able to invest up to £3,600 pa in a stakeholder pension under the Government's "concurrency" concession to members of defined benefit schemes.

8. The DB scheme being developed follows a major staff consultation exercise; unions and employees have been closely involved throughout. The intended scheme has the look and feel of good occupational pension schemes in the private sector. DB provision plays to our need as an employer to:

— reward achievement and retain effective performers in whom there will have been considerable investment in training and development;

— allow easy movement between the Service and the rest of the public sector (nearly all of whom have DB provision); and

— take our staff with us. Feedback from the member consultation exercise showed that staff greatly value the security of the DB model.

9. But to cope with our need to widen our appeal to those who are not anticipating a long career in the Civil Service, we cannot rely exclusively on a DB system. Good quality DC arrangements are therefore to be introduced. These will be delivered through a small panel of stakeholder pension products. The DC employer contribution scale will be commensurate with the costs to employers of the new DB option for those expected to be attracted to the DC scheme.

10. We have not set any targets on the take-up of the DC option by new entrants, but we expect the arrangements to be attractive to:

— those who expect to change jobs frequently—short stayers may fare better under DC arrangements than under DB arrangements;

— those who have a history of DC arrangements. With the advent of low-cost portable stakeholder products, it is expected that more and more people will have DC pension "pots" which they take from job to job;

— those without dependants or who place less emphasis on insurance-type benefits. In this respect, DC arrangements can be more flexible than DB, with members more able to structure their benefits to suit their own circumstances;

— those who put a premium on take-home pay—there will be no minimum member contribution under the DC option (except to the extent of the higher National Insurance contribution); and

— those who wish to link their pension savings to long run stock market performance.

11. The new DB arrangements will generally provide better benefits than the existing Principal Civil Service Pension Scheme (PCSPS), and a comparison of features is attached as an Annex. In particular the new arrangements will provide an improved accrual rate, survivor pensions for partners (not just spouses) and an increased death-in-service lump sum. The entire cost of the changes will be recovered through increasing member contributions from the current level of 1.5 per cent to not more than 3.5 per cent of pensionable earnings. The new arrangements, like the existing PCSPS, will not be funded. The employer contribution scale will be the same for both schemes and will continue to be based on the Government Actuary's periodic assessment of the level of accruing pension liabilities, taking into account performance of the underlying notional fund. Members will, as now, have the choice between a preserved pension and a transfer value on leaving the pension scheme.

12. The DC arrangements will be delivered by the employee choosing a stakeholder pension plan from those offered by a small panel of providers to be selected to work with the Civil Service. Employers will make contributions based on the age of the scheme member. Members will not be forced to contibute (other than to the extent of the higher National Insurance contributions) but, if they do, the employer will match the employee's contributions £ for £ (up a maximum of 3 per cent of pay). Use of the stakeholder model means that the DC arrangements will be funded.

— the Cabinet Office can work up the detailed rules and the associated software changes; and

14. PCSPS transfer values are calculated on a basis consistent with the requirements of Social Security legislation, and provide the cash equivalent of the value of accrued benefits. They go further than those requirements by allowing all leaving members to take a transfer value even if they have not been members for two years. Those who join the Civil Service and bring with them a transfer value from another occupational pension scheme may use the payment to provide an additional period of reckonable service in the PCSPS. Full value is given by the PCSPS in calculating the period of additional service. Special arrangements apply in relation to transfers to and from other public service schemes. These arrangements, which operate on a reciprocal basis, are designed to provide a length of reckonable service in the receiving scheme broadly corresponding to that given up in the former scheme.

15. A design feature of Stakeholder pension arrangements, through which the DC element will be delivered, is their portability. In such an arrangement contributions paid by employer, employee or in the form of National Insurance rebates, accumulate in an account identifiable to the member. The contents of that account are available to be transferred at the member's option. This form of DC arrangement engenders a feeling of ownership on the part of the member, as well as making transparent the amounts accumulated for pension and available for transfer to another scheme. The DC element will be able to accept transfer payments from other schemes—whether DB or DC. For those already in a DC scheme, the option of a simple transfer to the DC section may be attractive. Offering both DB and DC options will enable the Civil Service easily to accommodate transfer opportunities, whatever the form of the previous or succeeding pension arrangement.

16. The new pension arrangements with their emphasis on choice and flexibility will address not only the changing needs of the Civil Service highlighted in the reform agenda, but will also support the Government's aim of improving opportunities for people aged 50-65 as set out in the Cabinet Office report, Winning the Generation Game. Subject to changes in tax approval arrangements being developed by the Inland Revenue, a structure will be put in place which, at a time of demographic change, supports age diversity and flexible retirement policies developed by employers.

PCSPS	Feature	New defined benefit scheme
Civil servants and members of "schedule 1" bodies. Scheme to be closed to new members from 1 October 2002	Membership	New entrants meeting PCSPS criteria and joining after 1 October 2002, also PCSPS members who decide, at the time of the options exercise (only), to join.
60 for most members. 55 for pre-Fresh Start prison officers. Individual pension age for those with scheduled service	Pension age (age at which members have right to take accrued benefits without reduction)	60 for all memebrs.
1.5% of salary/wages (note: in some cases contributions are not paid on items which count for pension purposes)	Contribution rate	3.5% of all pensionable earnings.
All service which counts for pension	Reckonable service	Broadly as PCSPS, but service "transferred" from PCSPS will be reduced to take account of the better benefit structure.
Best year of pensionable pay in the last three	Final pensionable pay	Last 12 months' pensionable earnings for most people; scheme will also consider earnings over last 10 tax years (+ price indexation) where this gives better result.
1/80th x pensionable pay x reckonable service. Pension reduced by "NI Modification" for those with pre-1980 service	Pension on retirement	1/60th x pensionable earnings x reckonable service. (Pension about 8% higher than under PCSPS if same lump sum is taken).
3/80th x pensionable pay x reckonable service	Lump sum on retirement	Achieved by commuting (giving up) pension on the basis of £1 of pension for £12 lump sum. Maximum lump sum as PCSPS.
Lump sum of 2 x pay—to specified nominee	Death-in-service	Lump sum of 3 x pay—can be split between multiple nominees.
Spouse receives short-term pension at rate of member's full pay for three months (longer if there are dependent children)		No short-term pension.
Pension paid to surviving spouse on basis of half member's pension (based on service on which full contributions paid, plus enhancement). Pension ceases on remarriage or cohabitation		Pension paid to surviving spouse or financially interdependent partner (annual amount as in PCSPS, but paid for life). Pension subject to actuarial reduction if member is more than 12 years older than spouse/partner.
Lump sum reduced by 1.5/80th x enhancement x pensionable pay		No deduction from lump sum for enhanced service.
Children's pensions paid, at 50% of rate paid to spouse (maximum of two children). Higher rate if no spouse		Children's pensions paid, at 80% of rate paid to spouse/partner (maximum of two children). Higher rate if no spouse/partner.
If member dies within two years of retirement, spouse receives balance of two years' pension	Death in retirement	If member dies within five years of retirement, spouse/partner receives balance of five years' pension.
Spouse receives short-term pension at rate of member's pension for three months (longer if there are dependent children)		No short-term pension.
Spouse then receives pension at half of member's rate. Pension ceases on remarriage or cohabitation		Spouse or financially interdependent partner receives pension of same annual amount as in PCSPS, but subject to actuarial reduction if member is more than 12 years older than spouse or partner. Pension is paid for life.
Childrens' pensions paid, at 50% of rate to spouse, to dependent children born before leaving service (maximum of two children). Higher rate if no spouse		Children's pensions paid, at 80% of rate paid to spouse/partner, to dependent children at date of death (maximum of two children). Higher rate if no spouse/partner.
More than two years qualifying service: choice of preserved pension or transfer value	Benefits on leaving service before retirement	More than two years qualifying service: choice of preserved pension or transfer value.
Less than two years qualifying service: choice of transfer value or reinstatement into State scheme plus refund of contributions if unmarried		Less than two years qualifying service: choice of transfer value or reinstatement into State scheme.
Pension to surviving spouse and dependent children as for death in retirement	Death in deferment	Pension to surviving spouse or partner and children as for death in retirement.
Preserved lump sum pension benefit paid to member's nominee		Lump sum of five x deferred pension paid to member's nominee (or nominees).
Early retirement from age 50 with actuarial reduction	Effect of retiring early or late	Early retirement from age 50 with actuarial reduction.
Service after 60 reckons to a maximum of 45 years in total		Service after 60 reckons. Pension actuarially-enhanced to take account of late payment (subject to further discussion with GAD).
Immediate payment of pension, with service enhanced for those with more than five years' service. Service doubled for those with five to 10 years service, and enhanced either by 62/3 years or to 20 years (if greater) for those with more than 10 years service. Pension lump sum reduced by 1.5/80th x enhancement x pensionable pay	Ill-health retirement	Upper tier benefits for those who cannot work again—immediate payment of pension on the basis of service being enhanced to pension age. Lower tier benefits for those who cannot continue at their current level—immediate payment of accrued pension benefits. Minimum pension is based on 10 years' service. No deductions from lump sum for service enhancement.
Service and pay calculated on full-time pro rata basis	Part-timers	As PCSPS, but subject to Inland Revenue limits for part-timers.
Added years purchase by lump sum (first year of service) or periodic contributions. (Permanent staff only)	Topping-up benefits	Added years purchase by periodic contribution (all members).
Money purchase AVCs/and, from April 2001, concurrent stakeholder membership for those earning less than £30,000pa		Money purchase AVCs/concurrent stakeholder membership for those earning less than £30,000pa.
Refund of part contributions possible if unmarried on leaving the scheme	Contribution refunds	None.
Contracted-out of SERPS	Interaction with State scheme	Contracted-out of SERPS.
Lump sum compensation for those under 50 or with short service. Those over 50 have pensionable service enhanced and receive immediate pension lump sum (and possibly some compensation lump sum). Annual compensation payment paid until pension comes into payment at pension age.	Compensation on loss of job	As current provisions for those under 50. Over 50s to receive benefits of equivalent value to current provisions, but recognising that pension lump sum will not come into payment in advance of pension. In practice this will mean larger compensation lump sums on departure, and the effect of service enhancement being capitalised into a further lump sum paid at pension age.
Scheme may not conform entirely with Inland Revenue limits (particularly in relation to historical provisions)	Tax status	Pension benefits subject to Inland Revenue limits. Main impact is that pension cannot exceed 2/3 x pensionable pay.

1. The Centre for Management and Policy Studies, which incorporates the Civil Service College as a Directorate, was established in June 1999 in order to:

(i) ensure that the Civil Service is cultivating the right skills, culture and approaches to perform its task;

(ii) ensure that policy makers across government have access to the best research, evidence and international experience; and

(i) developing and encouraging an approach to policy making which draws on evidence and rises above departmental boundaries;

(ii) evaluating new approaches to policy making and identifying and promoting best practice, inside and outside the Civil Service, in the UK and internationally; and

(iii) the training and development of Ministers and civil servants based on leading edge thinking.

3. These areas of activity are closely related. For example, the development of new approaches to policy making and the accumulation of best practice feed into our training programmes (with some 35,000 customers expected this year). The reflections and suggestions of those who are taking part in training programmes are fed upwards into new and improved forms of management and policy making. In these ways, we play an important role in helping the Civil Service to draw upon the breadth of its talent and experience.

4. Although the main focus of our work is the Civil Service itself, we also aim to influence the quality of management and decision-making across the whole public sector. We need strategic partnerships with a range of key public sector organisations to help us in this role. CMPS will always be a small organisation in relation to the size of its task: partnership and networking will always, as a result, be a central feature of our work.

(i) Corporate Development and Training Directorate (CDT) is responsible for the main corporate development programmes used for training present and future leaders of the Civil Service, and for organising high level seminars which bring together Ministers, civil servants and senior figures from outside government. It is also responsible for a programme of Departmental peer review.

(ii) The Civil Service College Directorate (CSC) provides training and development for civil servants and their international counterparts. At home, the College's products, which are offered in a competitive market, take the form of open programmes and events tailored to meet the needs of customer organisations. Internationally, the College provides assistance to emerging democracies and transition states.

(iii) Policy Studies Directorate (PSD) is a centre of expertise, advice and information to support excellence in policy making at all stages, from formulation to evaluation. Drawing on the latest developments in IT and knowledge management and experience in the UK and abroad, PSD seeks to encourage and actively promote the best in policy development and review and, in particular, an evidence-based, cross-cutting approach.

6. Although a broad division of labour is evident, each Directorate is involved to a greater or lesser extent in all three aspects of our core mission. This means that all Directorates have to work closely together in a flexible and co-operative way. To assist that process, we have created a Business and Resources Directorate (BRD) as a lean central resource designed to knit together the work of the different Directorates into a coherent business strategy, and to project CMPS as a whole to our external stakeholders and customers.

7. Taking each Directorate in turn, the main thrust of its activities, the way in which it contributes to the process of modernisation, and its key priorities in CMPS's Business Plan for 2000-2001 are the following:

The focus is on developing sustained cultural change, better leadership and more effective government. Priorities in the current Business Plan include:

(i) The re-design and re-launch of the entire suite of corporate training programmes for members of the Senior Civil Service, doubling access and attuning training to key stages in an individual's career. The emphasis is on practical leadership responses to real issues, and learning from peers in the public and private sectors.

(ii) Developing a comprehensive programme of learning for Ministers, including induction workshops for new appointees, regular monthly seminars for junior Ministers and events focusing on particular topics relevant to Minister's leadership roles.

(iii) Designing and delivering a rolling programme of Departmental Peer Reviews, in which Departments learn from a constructive examination of their business by a group of independent peers; and disseminating the key learning points.

(iv) Organising a programme of high level joint seminars for Ministers and senior officials, focusing on key aspects of policy making.

The focus is on training designed to support modernisation at home and abroad. Priorities in the current Business Plan include:

(i) The design and delivery of a new and ambitious range of training, which supports the "Modernising Government" reform agenda in priority areas such as leadership, project management, business planning and diversity.

(ii) Making systematic use of the results of research and data on best practice, and feeding them in to the design of high quality training products.

(iii) Greater use of the Internet in delivering training to customers, and following up regularly in order to encourage feedback and more continuous learning.

(iv) Working in accession states in support of the necessary skills development for civil servants commensurate with membership of the European Union.

The focus is encouraging and sharing information about new approaches to policy making. Priorities in the current Business Plan include:

(i) Encouraging an approach to the use of analytical evidence which cuts across Departmental boundaries, through the co-ordination of Departmental initiatives, the development of Knowledge Pools and the establishment of a central information unit to bring together analytical evidence from the UK and across the world.

(ii) The development of a programme of research and fellowships to evaluate new approaches to policy making and to examine the policy process; and to identify and promote best practice through the most effective means.

(iii) Working with evaluators within and outside government to establish, for the civil service, a centre of expertise and advice in policy evaluation; conducting a programme of reviews.

(iv) Advising overseas governments and individuals on UK public sector reform and arranging itineraries for visitors to the Cabinet Office.

11. CMPS is funded as a net sub-head of the Cabinet Office vote and has its own Accounting Officer, the Director General, who reports annually to Parliament. Compared to other parts of the Cabinet Office, we are unusual in that over 80 per cent of our budget comes from earned income from training and similar events. The financial targets for CMPS are therefore expressed in net cost terms, as our 2000-01 plan indicates:

12. CMPS currently has some 350 staff, of whom the majority are based in the Civil Service College Directorate in Sunningdale.

1. Regulation[[2] has attracted increased attention in contemporary public administration as other policy instruments (notably state ownership) have declined in importance in the western countries. So it is not surprising that over the last twenty years the search for ways of achieving "better regulation" and of assessing the quality of regulation that has become central to the policy agenda in the UK and numerous other states.

2. The UK's "principles of good regulation" as announced in 1998[3] represent a valuable first attempt to spell out desiderata for good regulation[[4]. But those principles, and their application, are limited in at least three ways.

3. Indeed, the whole question of how to develop design principles for the burgeoning regulation of public sector bodies deserves to be a central question for the next government, and there is a case for establishing a Royal Commission or similar body to investigate the matter in depth. There are at least three reasons for making such a recommendation:

4. Regulation of both the public and private sectors is closely linked to the management of risk to organisations and their stakeholders (including overall levels of risk exposure, risk distribution and risk/risk trade-offs). Business risk management has become increasingly salient in the private corporate sector in recent years, as a result of experience with high-profile system failures, more regulation and litigation, and developments in corporate strategy. Similar issues arise in the management of the public sector, where organisations must handle major policy, business and systemic risks[[7].

5. In principle a business risk management approach can make a constructive contribution to public-sector management, to assist with balanced judgement over risks and help public managers to steer the difficult course between casual risk-taking and excessive caution. However, private-sector approaches cannot be carried over wholesale to the public sector, or at least key parts of it. That is because private-sector business risk management approaches tend to be focused on a single organisation or profit centre, measure risk largely in terms of shareholder value and do not place the main focus on systemic risk.

6. A public-sector-specific approach to business risk management would need to focus on regimes or policy delivery systems rather than single organisations alone, on systemic risk as much as risk affecting one organisation, and on encouraging intelligent deliberation rather than mechanical routines. Developing such an approach is a major challenge for the future management of public services.

2 a Broadly denoting control of individuals or organisations by sending rules and standards and attempting to secure compliance with those standards. Back

3 See Better Regulation Task Force, Principles of Good Regulation 1998 (http://www.cabinet-office.gov.uk/regulation/1998/task-force/principles.htm. Back

4 See Industry Forum in Association with the Smith Institute, Empowering Government: Reforming the Civil Service, London, Industry Forum 1999. Back

5 See C Hood, R Baldwin and H Rothstein, "Assessing the Dangerous Dogs Act: When Does a Regulatory Law Fail?" Public Law Summer 2000: 282-305. Back

6 See C Hood, C Scott, O James, G W Jones and A J Travers, Regulation inside Government Waste-Watchers, Quality Police and Sleaze-Busters, Oxford, Oxford University Press 1999; C Hood, O James and C Scott, "Regulation of Government has it Increased, is it Increasing, Should it be Decreased?" Public Administration 78 (2) 2000: 283-304. Back

7 See C Hood and H Rothstein, "Business Risk Management in Government: Pitfalls and Possibilities" Appendix 2 in Report by the Controller and Auditor General, Supporting Innovation: Managing Risk in Government Departments. HC864 1999-2000, London HMSO 2000: 21-32. Back

736. Good afternoon, everyone. We are delighted to have with us David Walker, the Analysis Editor of The Guardian, and Professor Patrick Dunleavy, Professor of Government at the LSE, both experienced and acute observers of British Government and both, it could be said, critical observers of British Government and, we hope, people who have got some reforms to suggest to us as part of the inquiry that we are doing. Could I start by asking both of you, before we go into ideas about how we might change things, if you could try and tell us in a nutshell what is wrong? Why do we not celebrate the system of government, this splendid example of stability with these wonderful distinctions between politicians and administrators, impartial, neutral civil servants, all the things that we have learned at our mother's knee, rather than having to worry about reforming it?

(Mr Walker) I had prepared one or two remarks in so far as my initial memorandum was rather sketchy. They do, I hope, give an answer to that.

737. You remind me of my duties. Normally I do invite people to give us a brief introduction. By all means, if you have one, we would be very glad to hear it.
(Mr Walker) What I want to say first of all is that I am a mere journalist and you all have had dealings with journalists and know that we are simply responsible for the output that we have in terms of writing and broadcasting. We are not in any way responsible in the way that you are to your electorate.

738. Humble seekers after truth.
(Mr Walker) Or in the way that public managers are, so there is that disclaimer, certainly from me. What I was going to say was that the rubric that you have had in making government more effective seems perhaps to have not addressed one thing which I might hopefully make a contribution towards, which is evaluating the organisation and culture of the Civil Service in terms of delivering public services as they are understood by your constituents. Immodestly, I wanted to call to your attention this booklet, Living with Ambiguity, which I recently wrote for the Joseph Rowntree Foundation, intended simply as a contribution to the discussion, its point being how difficult it is—impossible even—to talk about effectiveness without thinking about local services, local governance, to use the portmanteau phrase, and so the future of elected local government. The pamphlet concludes that the revivalist scenario sometimes sketched for local authorities, a rebirth of local democracy perhaps around executive mayors, is not going to happen as long as the people of England—and there are differences obviously in Scotland and Wales—desire uniformity in the provision of such basic services as schooling, child care, trading standards and so on. We effectively already have, I say, a national service culture, so why—and this is the gist of my contribution to your deliberations this afternoon—do we not accept that in terms of the way government is organised and the public services constituted? Let me briefly take a pace backwards. My main criticism of the advice tendered to the Blair Government by the Civil Service is that it has been under-informed about the conditions of local service delivery. Too often, especially in programmes emanating from the Department of the Environment, Transport and the Regions, the Cabinet Office, the Treasury, the Department of Health and so on, a Civil Service mind can be seen at work using what I consider an antiquated model of public service. Let me briefly explain. Civil servants are generally ignorant of the conditions of local service delivery, especially inside local government. In those Departments with a local service delivery arm, such as the Departments of Social Security, Education and Employment, relations with local authorities are sometimes cold, sometimes rivalrous, sometimes even hostile. The scant progress made towards one-stop shopping for public services attests to that. The relative paucity of role swapping between the DETR, for example, and local authorities (and I am well aware of what Sir Richard Wilson said to you when you spoke to him in November about the great expansion in secondments and attachments) speaks for itself and certainly attests to the existence of a gulf. Briefly leaving aside the oxymoron of there being a national strategy for neighbourhood renewal, we are, in thinking about the Government's attention to local communities, agreed that there are fairly intellectual underpinnings for its policy for, for example, deprived communities. The latest DETR indices of deprivation is a formidable piece of work. The new strategy, says the Government, is about "ensuring someone takes responsibility" about joining up public services locally and "helping enable deprived communities have some leverage over local services". Taking those phrases, I am asking who do the Government or the Government's Civil Service advisers mean by "the agents of local service delivery" or "local change"? How does the centre reach down towards the settlements on Merseyside, for example, which are deemed to be deprived and so on? The trouble is that the horse, if you like, of elected local government bolted some time ago. It has been quite obvious for some considerable period of time that we are not going to go back. We can never go back to the original 1920s, 1930s model of municipal service delivery. What I am questioning is why there has not been a movement further forward in thinking at the centre about the modes and mechanisms of delivering services. I am not discounting Ministers' prejudices about elected local government. I am saying that it seems to me that one reason for the current huge complexity of programme delivery at local level is civil servants' inability to think imaginatively and sympathetically about local conditions; which is not a plea, I emphasise, for using councils more or returning powers to councillors. It is to observe that the gap is where the local authority is not trusted to deliver new money and new initiatives which then leads to the centre dreaming up a set of weird and wonderful (and certainly diverse) different mechanisms. I am saying, I suppose, that the Civil Service, all too conscious of status differences between Whitehall and local government and its own distance from local service delivery, has seemed ill-equipped to think through the consequences of the effort of breakdown in local government settlement. To be fair, some of this has been picked up by the Performance and Innovation Unit in the Cabinet Office which was going to study local leadership in the round, a generic issue, although I gather that report is not likely yet or in the near future to see the light of day. I suppose I am saying again that in education, prevention of crime, social services and so on there is a sort of black hole in the centre's thinking about the system of service delivery. To cut a long story short, it seems to me that we do need to rid the public service of its binary fixation: central and local on different sides. This might mean reconstituting the public service as a generic category differentiated by function, certainly, but no longer in anachronistic terms Whitehall/town hall. Common training, common ethos, might follow. I suppose I am also implying, not very originally, that radical change in the nature of public service at the centre of the state, where contributions to delivery might become the hallmark of success (and I do not think, despite what Sir Richard Wilson told you, that that is anywhere near the case yet), would have to be built into the notion rather than the development of amorphous criteria for Civil Service success which Whitehall currently adheres to. To summarise, I am not saying that all top civil servants should spend time running the Benefits Agency on the way up. What I am observing (not very originally) is how remarkable it is that you can get to the top of any public service system without intense familiarity with the local conditions of service delivery. I should say, having used that word "delivery" more than once, that one is not just talking about delivery of benefits or ensuring that the streets are swept. I think delivery, certainly under this Government, has come to mean a much wider sense of trying to ensure behaviourial change on the part of individuals and groups of individuals such that their lives can be better led. In conclusion, that too demands an attentiveness, a closeness, to the conditions in which people live their lives locally but, more pertinently for civil servants, close familiarity with the systems those people often rely on to deliver their public benefits.

739. That is immensely interesting and we shall want to talk to you about that in a moment. I wonder if I could ask Professor Dunleavy who, I should add, is a specialist adviser to the Committee, if he wants to say anything to start with.
(Professor Dunleavy) I have submitted a memorandum but I will perhaps recap orally on the key points in that. The first difficulty that one has in taking an optimistic view of the current operations of the Civil Service and central government particularly is that we do seem to have now quite a regular history of making large scale policy mistakes. I think people in Britain probably think of this as inevitable, as some sort of corollary of government behaviour generally, but actually we are very exceptional in Europe in the extent to which we make large scale mistakes and then we have to go back on them at considerable cost. I think that there are some constitutional origins of that. The United Kingdom has been a very large centralised unit and I agree completely with David's comments on the rather assertive Civil Service way of handling some national governments. England still remains one of the largest undifferentiated units of government administration in the western world outside of Japan and the British policy process is a policy process without many checks and balances. These are all contributory factors but I do think also that the contribution which the Civil Service makes in terms of offering excellent policy advice is a factor in large scale mistakes being made and being repeatedly made. I listed in my memorandum 17 different mistakes in the last ten years and in fact I have missed out a couple, one of which is the SERPS disaster which you have been investigating and possibly you might have pensions mis-selling as well. One reason for this, moving on to the second point in the memorandum, is that the Civil Service structure was defined at a period when the task of dealing with policy succession and leadership succession, a handover from a Government of a liberal or a left persuasion to a Government of a conservative persuasion, as the answer to the dominant problem. It is set up very well for dealing with that. It has always handled that problem very well. It is a machine which is politically attuned and which swings into action very readily behind whatever the Government's manifesto commitments are, perhaps a little too readily. The problem is that in the modern period we do not really see a set of policy issues which are defined fundamentally on left/right grounds. They are much more risk issues, issues to do with the commitment of resources or the regulation of society. These risk issues require a different model of expertise and it is a model of expertise which the current system in the Civil Service, which has endured at the senior levels and the centre essentially unchanged for a very long time, is very poorly adapted to meet. A third thing is that if you look at the Civil Service current reforms there are interesting and explicit commitments on changing the gender balance, or improving the representation of ethnic minorities, or the treatment of disabled people. There is no service-wide strategy, so far as one can tell, for improving the expertise and educational qualifications of the higher Civil Service. The problem here is that Britain now is very radically out of line with other major industrial countries. We have a very low proportion of people who have had anything more than undergraduate education and we have people who have very rarely had a vocationally relevant educational path. Half of the senior Civil Service in the USA has done postgraduate training in a vocationally relevant subject like an MBA or law degree or Master of Public Administration or something of that kind. Ninety eight per cent of them have done postgraduate training, 16 per cent of them have doctorates. We cannot see anything approaching that. Britain is untypical also in Europe now. There does not seem to be any commitment to improving the educational qualifications. You might wonder, for example, is it a good idea to recruit people directly from university who have only done undergraduate education? Should fast stream recruits be expected to either have already done or complete within five years of joining the Service a relevant postgraduate qualification? These sorts of issues do not seem to be being addressed anywhere in the current reform plans. The fourth point is that it is very unclear who is running the Civil Service as a whole. The Cabinet Office has the major responsibility but its internal structure is extremely complex and includes a large number of small units, all of whom seem to be pursuing individual issue agendas. It is not clear how they are co-ordinated. There are four Permanent Secretaries in the Cabinet Office now. I do not know for the life of me what the different roles of each of them are and I am sure that most journalists and most senior civil servants would not know who was supposed to be running what. Also the division between the Treasury and the Cabinet Office is still unclear. I will make one comment about joined-up governance which is that it seems to have progressed a little bit. If the current discussions of Whitehall reforms are correct we seem to be heading into a process of rather conventional departmental reorganisation on client lines and that seems to be a recognition that joined-up governance is very difficult to achieve under the current set of arrangements and is not likely to progress very far in the future.

740. Thank you very much indeed for that. Could I just start, provoked by David? I wonder if what you are advocating is not precisely what is happening because nobody believes that anyone is hooked on what you call this binary divide any more? One thing that we know is going on is nationalisation of public services. It is the attempt to run everything from the centre through a highly prescriptive series of performance targets and service agreements run out of the Treasury basically, that in all kinds of ways local authority has been bypassed by quangos and by zones and by particular programmes of all kinds. I do not actually recognise this dragon that has got to be slain. It seems to me it is well and truly dead.
(Mr Walker) The weight that you put on "highly prescriptive" suggests that it is something that might oppress you. What I would observe is that the kind of advice Ministers might receive when they think about moving forward from that old local authority model is under-informed because their officials will lack genuine grass roots experience of service receipt and delivery. If they do produce—and certainly the implication of what you said was that there is some kind of excess of appointed bodies—some mess in terms of local service, I would argue that that would be in part a result of civil servants' lack of familiarity with local conditions. There might be disagreement round this table about what role specifically elected local authorities would play. All I am saying is, leave that argument aside. Making sure the architecture works in terms of poor children, poor communities, for example, is vitiated to the extent that the centre does not know, does not have first line experience, does not keep itself fully informed of local delivery conditions.

741. Just so that I am clear, the heart of your proposal is that we have an integrated public service and we sweep away these distinctions which are getting in the way and therefore we make sure that people at every level, particularly those at the top, as you say, understand what front line delivery is all about?
(Mr Walker) It is probably unfair to name names, but I am going to give you an example. I will not attribute any particular view to this person. It is recently the case that the Chief Executive of the Metropolitan Borough of Solihull came to the end of a rather successful career as Chief Executive, including a spell at Wolverhampton (now the City of Wolverhampton). He should have been specifically the kind of animal the centre should have leapt upon and dragged back into itself to make use of many years—and he is still a relatively young man—of great experience in urban government. As it happens he has taken a public service job and we should be thankful for that. He has become Chief Executive of the Housing Corporation. My point would be (a) that there are far too few of his ilk, and incidentally this man happens to possess a PhD, and (b), the centre should have some capacity for ensuring that the kind of experience accumulated by individuals such as Norman Perry is made available. I would go one stage further and say exactly what you said, Chairman. I think now we have come to the point where a fundamental reconstitution of public service, yes, as a national public service, is necessary.

742. I agree with your analysis. We have all sorts of problems of delivery of local services. We have this highly prescriptive system coming from the centre without any real accountability by those who are notionally responsible, that is, those who are elected locally. Local democracy has broken down to some degree, as low turnout suggests. There is the difficulty that many MPs, I am sure, have in finding enough people to stand at district council elections in their areas. But what is your answer? The answer briefly for the Conservative Party in the mid to late 1980s in a heady moment of enthusiasm, which led to the poll tax, was, "Let us re-invigorate democracy at local level by delivering a shock to it by linking much more closely what is paid for at local level and who has been elected to allocate that money". That collapsed because the shock resulted in a revolt by voters. There was a shock but it had an undesired effect. Your solution seems to be centralisation really because you are saying that we should now control from the centre not only the policy but also the administrative system of delivery. Have I got that right?
(Mr Walker) I would put it in terms of honesty, that we need to honestly recognise the fact that across a wide array of services the centre calls the shots financially. The public demand uniform services. We should take those two facts and build them into a reformed system of public administration. I would observe in passing that the crisis or the failure of your bid to regenerate local democracy ten years ago did not lead at the centre to the kind of imaginative re-thinking of the connections between the centre and the periphery, Whitehall and town hall, that you might have thought. Ask yourself the question which department is responsible for central/local relations, and the formal answer is the Department of the Environment, Transport and the Regions, yet, as we know, central/local relations exist in considerable measure across a much wider swathe of departments, from MAFF through to the Department of Social Security. I would fault the central Civil Service for not over the years having invested time and intellectual energy in thinking about itself, its political system, in relationship to the locality. You might still believe that the regeneration of local democracy is possible. All I am saying this afternoon is that we have a problem. The problem is long in the tooth. It is not new to this Government. It existed under the Conservatives. One might have expected more profound thinking about either practical or intellectually impressive solutions to that.

743. You have come out with a profound thought and I am arguing that it has a profound problem, which is that it will end local democracy. You may say that local democracy is already dead. It has difficulties but I believe it is not dead and many of us round this table probably want to revive it rather than snuff it out. Do you agree that there is a problem and what are you suggesting should be done about it? If you have got a Civil Service that is responsible right across the board, the same uniform body responsible for everything, delivery at the lowest of local levels, what kind of accountability can there conceivably be by those local officials to the local elected councillors?
(Mr Walker) My first answer would be that it would be a very different animal from the Civil Service that you have been quizzing in this Committee, a Civil Service that had a genuine local rootedness, as it would have to have if it were to be a more effective deliverer of local services. It would look and feel like a different animal. There is a problem, you are right, in terms of traditionally defined accountability but I think as this new century wears on we have to be a lot more rounded in our thinking about accountability. If I could point you to a very interesting pamphlet produced today by someone on your side of the political fence, Graham Mather, about appointed bodies, it interestingly says that we should celebrate the way in which non-elected bodies can bring things to the political administrative party which perhaps elected politicians cannot: expertise, disinterestedness, knowledge and so on. The picture perhaps needs to be argued in a somewhat more rounded way.

744. I would like to see a lot more detail in your proposal before I became convinced by it. I would like to move on to ask Professor Dunleavy a few questions. Whereas I agree with Mr Walker's analysis but not his conclusions, I am afraid I disagree completely with Professor Dunleavy's analysis in his memorandum. Just taking this list of failures by the Civil Service, let us take the first one, the poll tax. In what respect did the Civil Service fail with respect to the poll tax?
(Professor Dunleavy) A traditional Civil Service role has always been to be a guardian of institutional memory, to provide a kind of collective repository of inherited wisdom. In the past when Ministers have contemplated restructuring local government finance in radical ways they have often been given advice that this would be quite difficult to do and have backed off from that. If you look at the studies that have been completed on the history of the poll tax, and particularly the book by David Butler and colleagues, it seems that the Department of the Environment Permanent Secretary refused to play that role throughout the poll tax period and in particular when the Government took an initial plan, which was for a phased introduction of the community charge, and then progressively telescoped that into a sort of big bang introduction, there was no Civil Service advice against that and Ministers seem not to have been briefed on quite technical and detailed aspects that should have been considered such as the sort of gearing factor that comes into play if people do not pay poll tax. The gearing factor comes into play such that the burden for everybody else who is still paying rises and then you get increased resistance and so on. None of this seemed to have been explained to Ministers at the stages when they made decisions to move from a phased to a big bang process. There does seem to have been a failure of Civil Service and departmental advice and that is certainly the conclusion of that major study of the episode which I do not think is a politically slanted study.

Mr Tyrie: My view of the study was that it was very interesting but completely wrong.

745. As papers come forward we will see those. As a matter of fact I was in the Department of the Environment when the local government finance studies that you refer to were being drawn up and I was in the Treasury when papers were prepared in enormous detail on the administrative problems that you are referring to, which were of course sent round to all the people on the Cabinet Committee, and the authors of that book knew that too because I told them. Likewise, the gearing problem to which you refer generated massive tables trying to extrapolate what the effect of the gearing would be on different sectors of society and indeed different regions within the country. I have never seen anything set out in more exhaustive detail nor more commitment by a set of officials to make sure that Ministers knew in the greatest possible detail what the consequences of the policy they were taking would be. The responsibility for the poll tax failure lies entirely with Ministers and nowhere else and that has been shown in a number of memoirs which have come out. Those participants who were fiercely against it internally have referred to some of this work that was done at the time. Rather than go through all this list of yours in immense detail—there is a whole host of things which all look completely up the spout. Just take an example, you suggest that the advice given on Trident was wrong. The key element on Trident was the fear of costs overrun. But Trident came in under budget. We can go through these one by one. It is true that we definitely had some poor advice on BSE but is this not, if I may use the word, an infection that seems to be going round other parts of the continent at the moment? Germany introduced and then had to withdraw a withholding tax, a most ignominious tax retreat, in the late 1980s, and there was some discussion before you came in of a huge blood transfusion scandal in France as well. Maybe you want to reply to that. Maybe I can briefly turn to another of your thoughts, which is that what we all need to do is to go off and do a PhD before we are allowed to get to work in the Civil Service. I have to say that, of the people I have come across in the Civil Service in my five years when I was there, there was no correlation between those who had higher academic qualifications to do the job and the quality of advice, but of course that is very subjective. There was a correlation, and this bears out another point that David was certainly making, between people who had experience of other walks of life and the ability to offer good advice, and rather than three years locked in a large cupboard writing 100,000 words I would have thought three years doing another job would be very valuable. Could you possibly tell me whether there is any evidence to suggest that academics or people who have full academic training, that is, a PhD and beyond, are better civil servants than those who have not?
(Professor Dunleavy) Can I just deal with one particular point you made earlier on? As I noted in my memo, any possible listing of policy disasters is bound to be controversial and people may pick on individual items and discuss them.

746. I did pick on the first and the last.
(Professor Dunleavy) Sure. If one just looked at the Trident programme, and it is a very substantial programme costing about £30 billion, one might think that there was a problem in committing to a programme of that kind ten years before you actually pay for it and then having to pay for it at a time when the threat for which you had originally devised the programme has more or less disappeared. In other ways, as you mentioned, it certainly came in under budget.

Mr Tyrie: But that was a policy decision. The decision to deliver it was a policy decision taken by the Ministers in the full knowledge of the implications, and indeed with private consultations between the Government and the Opposition.

747. Can I just say I suspect we are not going to do justice to these policy failures of our time, interesting though it is to have them ventilated, and perhaps we can move on to Andrew's further point.
(Professor Dunleavy) Far be it from me to underestimate the previous Government's mistakes. I think the argument in the memo is not that everybody should have a PhD and that people should not get into policy making ranks in the Civil Service until they have spent three or fours years in the study. The comment was that in terms of the subjects that British civil servants have studied, in terms of the level of training that they have had, they are very unusual. Only two per cent of senior US civil servants have humanities or history degrees. The rest have what we might think of as more relevant degrees. The point was also that in most areas of social life now postgraduate training has become quite important even in business. It is much more important in the private sector in Britain to have postgraduate training than it is in the Civil Service. Certainly there is a huge gap between, let us say, Civil Service departments and management consultant firms. There is a huge difference in the level of educational qualifications and professional qualifications. David mentioned the binary divide. One of the aspects of the binary divide between the centre and local government is that the people in local government at senior levels all have professional qualifications and very few of the people with whom they are interacting in the senior Civil service will have the same thing. Actually, if you have three years' undergraduate training and then you have sat in your office reading cardboard files for a very long period of time and responding to short term political emergencies and taking the odd, not very well run, Civil Service training course, you are professionally under-qualified to be making major decisions that stretch over long periods of time and involve large amounts of public money. That is the argument.

748. I just have to say that I think you are totally out of touch with what is going on in the Civil Service and the phrase that Civil Service training courses are academically uncertified is pretty insulting to some quite specific training that goes on now in the Civil Service today. The line that you have taken that everybody is sitting around reading cardboard files on short term issues is also completely at odds with my experience of certainly what was going on in the Treasury during my five years there. My question was whether there is any evidence that these countries who have got these high powered PhDs are doing any better. Do you think the US is better run? Are they good at running elections, for example?
(Professor Dunleavy) I think these are very interesting and different questions. I have not myself asserted, and I would not like to assert, that there is a direct connection between the level of educational and professional development of the staff and the performance of complete government systems because there are political variables, as I think your comments have already stressed to us. My impression of the US federal government is that it is very efficiently run administratively but it is hampered by very serious constitutional and political constraints and I would have thought the same was true in Britain too. I would not say that there is any overall case that could be made here. All I am saying is that the British system is now very unusual among advanced industrial societies. It is very unusual within Britain that we do lifelong career recruitment of people who have relatively little education and then we provide them with relatively little further development over the course of their careers. My experience, talking to senior civil servants, is that they will say to you that there is never a moment to breathe, there is never a moment to take time out, there is never a moment to stretch yourself intellectually, there is a constant rush of short run issues and departments are very reluctant to release staff or to support staff in their own time in enhancing their level of professional qualifications. I think the Civil Service has provided some support for a Masters in Public Administration programme and 150 people over six years have graduated through that, but that is the only commitment.

749. There is one bit which I do agree with in your paper but I have not got the answer; I have only got the question, so I'd like to see if you have got the answer. You are absolutely right that the Cabinet Office is a nightmare; it is Byzantine. We have been distributed the organisation chart of the Cabinet Office and I spent half an hour moving round it with my pencil following these arrows trying to work out what all this meant. As a matter of fact I have not met anybody who does know what it means. What I want to ask you is whether that actually tells us very much about whether the Civil Service is efficiently run or whether that tells us something about the way the Civil Service wants to present or is able to present the way it is run. In other words, do we think that those are the genuine lines of accountability with the formal thing in the centre, and do we think that things are really as bad as that?
(Professor Dunleavy) I think the Civil Service reform plan that Sir Richard Wilson has outlined tacitly admits that the so-called corporate centre in the Civil Service has been a neglected animal for the last ten or 15 years. Of course, the bulk of Civil Service activity is going to take place at departmental and agency level and that is where all the effort has been put. But it is important to ask questions about the Civil Service as a whole. It is important for political parties drawing up programmes and it is important for the taxpayer. The Civil Service costs us about £21 billion a year to run. Staff development inside that, for example, is probably about two billion pounds. The potential for saving money by progressing electronic governance literally runs into hundreds of millions of pounds. The question is, will departments and agencies do all that they should do when left to their own devices or should there be a stronger corporate centre that pushes overarching issues of great importance? I think the evidence is that the corporate centre is very weak and that the current structure in the Cabinet Office is almost incomprehensible to anybody outside the Cabinet Office.

751. We are agreed it is incomprehensible but my point is, is it also ineffective?
(Professor Dunleavy) What you have is a lot of units who are beavering away, who write quite interesting and well intentioned reports, some of them with quite radical criticisms of the current system, and then there is no follow through after that. Some units, like the Performance and Innovation Unit, will assemble a team, produce a report, split the team up. It is then very unclear who, if anybody, is progressing the ideas that were set out.

752. Shall we talk today about David Walker's model because it seemed to me that it ignored some of the more complex situations we have found ourselves in and you have ignored the whole aspect of European regulation, the issue of regional government, the issue of the devolved governance, and at a local level the realisation that was in a PIU report recently which talked about the role of quangos and its effect on localities and the whole question of public/private partnerships. Does that not make the situation far more complex in terms of this single public service model that you were talking about?
(Mr Walker) I am not sure it does. As you know, regional development agencies as they exist are non-Civil Service bodies. Yes, there are Government offices in the regions but they are pretty small and to my best knowledge pretty integrated in a cultural sense into their parent departments. In terms of United Kingdom participation in Europe and other international bodies there is not any real sense in which the personnel in Brussels, for example, are offshore in any cultural or administrative sense. Yes, devolution is already making a considerable difference, certainly to Scotland, in terms of Civil Service attitudes, in terms of the way we think about a United Kingdom-wide Civil Service. It is probably going to be the case that there will be further differentiation of perhaps pay, certainly administrative norms, between those who are responsible ultimately to the Scottish Executive and those who work for the Whitehall Civil Service with some question mark over the future of public service in Wales. I am not sure that that diversity tells against the problem that I am laying before you and it may be that the potential for a solution is by recognising how in so many ways there will have to be a local solution to national deficits in administration and in a sense vice versa.

753. Is not one of the issues that all the organisational change can go ahead but if you do not make the budgets into that organisational change it does not matter a row of beans?
(Mr Walker) Is that not precisely one of the problems with local government at the moment, that first of all budgetary responsibility is largely centrally set? It means local authorities are basically becoming administrators of a centrally set budget, or, adverting to your point about complexity, if one thinks, for example, of a programme such as Sure Start which is very important in terms of the life chance of poor children, tracing the lines of budgetary responsibility has become almost an exercise to parallel your investigation of the organisational chart of the Cabinet Office. It is very complicated. I suppose I am seeking ways in which we can actually make the system simpler and if that does in a sense recognise that local authorities are agents of the centre de facto, maybe moving that to a de jure position is something we have to accept in terms of the service. I am not, obviously, ruling out the maintenance of a local elected link. I am thinking about the way that local services are currently delivered in these conditions of high complexity.

754. Just taking you down this road further and the role of scrutiny and accountability, it seems to me that one of the interesting things about politics as we are at the moment is the rise of one-off pressure groups for different issues. There is a whole range of one-off pressure groups on any number of subjects and a distant connection with traditional political parties which have the all-encompassing point of view that linked into the kind of one-off solutions that seem to be an action zone on this or a team for that. Is there a way that you see those two issues of accountability and relationship to the political process being linked in any reforms of the Civil Service?
(Mr Walker) This is a difficult one because you will know that the empirical evidence suggests that people in their responses to questions about competence in government generally do dissociate their feelings about parties and politicians from their feelings about the public services that are delivered by the systems run by those self-same politicians, and that is particularly true about local government, that people's assessment of town halls is often negative but their appreciation of street services and so on is often highly positive. What that may suggest is that for most people the mechanism of service delivery is not terribly important. What does matter is the result, which leaves legislators such as yourselves with a problem, does it not, because one wants to reform the process of delivery to ensure greater accountability and effectiveness. That very process of reform is not of a great deal of interest to people out here who are concerned with services and a political trick obviously is to associate service improvement with changes in the machine. I suppose again that is where my contribution comes in because what I am desperately concerned about is ensuring that there is a better delivery system so that at the end of the day the public will register qualitative improvements in services perhaps as a result of some better alignment of centre and locality.

755. One final question to both of you is that the Civil Service has been traditionally good at constructing the legislation in a language which none of us can understand. The regulations are incomprehensible to anyone who tries to read them. They have not really looked at the role of implementation, the effect that that legislation or regulation, red tape, actually has on the ground. The regulation may be very good and the classic one, I think, is the working families tax credit which is a brilliant piece of policy. The Act was quite good but the regulations are incomprehensible to somebody who is trying to deliver them. Is that not part of the problem that we have got at the moment, that we are the most deregulated country in Europe but we are the ones that have the most complaints about our regulations?
(Mr Walker) You make a number of very good points. It is an odd problem, is it not, that, despite perhaps what Patrick was saying, there are ways in which even the most complicated piece of legislation, often involving a vast array of statutory instruments, have in fact been delivered by the system but the very delivery has led to increased dissension on the part of the public seeing the results of this complexity? If I may put this point to you as Members of the House of Commons, one way forward here might surely be, and I hope this does not sound too pious, even more pre-legislative scrutiny by yourselves, not just of primary legislation but also of the mass of secondary legislation which often passes through this place on the nod. I realise that can cause all sorts of problems in terms of your time and energy but that could be part of the solution as well.

756. Could I follow that up? It seems to me that one of the things you are saying is that Whitehall is, if you like, the person who pays and the town hall is the one who actually delivers and it is the problem that you have in that which is causing a lot of the difficulties there. One of the witnesses we had on the SERPS problem, Dame Ann Bowtell, indicated that one of the difficulties was that because the Benefits Agency was delivering it and it was the Policy Unit which produced the actual policy on that, there was a black hole in the delivery and the telling of people what the new policy was fell into that. It seems to me that that is the difficulty we are having between Whitehall as the policy maker and the town hall as the deliverer of services.
(Mr Walker) What has happened, has it not, is that you have had, to try and bridge that gap, the construction of a great array of new regulatory bodies of which, if I can say this in the presence of one of its former servants, the Audit Commission stands head and shoulders above the rest. It is a very important agency but in a sense it was felt to be needed to fill precisely the gap that you have identified. If the centre cannot trust local government to deliver, it then builds an apparatus of OFSTEDs and Audit Commissions and so on (and the legion has grown in recent years) to try and give itself more confidence in delivery. What I am trying to say is that we now need to think about ways in which, perhaps by bringing locality and centre closer together, we might actually make some important savings in the cost of the regulatory apparatus, but at the end of the day you see services better delivered as a result.

757. It seems to me that the vast majority of problems we have had have been created by central rather than local government. If you look at this, Professor Dunleavy comes down on it, and if you go back 20 years I would have added that one of the most ineffective policies that was forced on local government was the housing policy; not merely was it a disaster financially, it was a disaster for many, many families. That was not done by local government, that was done by central government. Should we not be saying to central government, "You are the ones that cannot deliver, you should be trusting local government because they are the ones that do deliver". Perhaps you should start to come together a little bit more and get rid of that black hole in the middle.
(Mr Walker) Perhaps we need to move beyond the cycle that was seen on both sides, during Conservative time and in the past three and three quarter years, to try and think of an administrative system which recognises many of your constituents, who I am sure will want the same kind of service delivered to them as their neighbours in west Lancashire. They will not want to see major differences, which seems to point in the direction of an administration system which does ensure that local areas can rely on broadly the same provision of finance for services. I think the logical step beyond that is to look at the kind of agent and public servant who is delivering and move away from what we have now, which is this broken-backed system. You are quite right, one side can often blame the other. I am not saying that one should do away with the local democratic element, that should remain in terms of the people who are responsible in an executive sense. It could and should be the same here, centrally, as locally.

758. That seems to be flying in the face of what you said earlier, maybe I was misinterpreting here. I got the impression you were saying that local government was moving into a position of being solely an agent of central government. If you take education, I think you are right, we would want a standard of education which is fairly national, but in many other respects it might be the provision of other services which would be very much a local decision, and that would not be covered by central government diktat, or want to be.
(Mr Walker) If you did list those services which were so generally local there would be no interest with them outside the local area—and nowadays it would be a very small list—I would cite in response to that street lighting, where it is the case, partly because we have the same kind of engineers and people in one area, people would not tolerate differential lumen power in their street lights. That has now escalated to a national sort of level. The other point to make is that large numbers of education services are being delivered outwith elected local government: vocational training, for example, which is a huge area now in the hands of the central quango. With special education, and so on and so forth, it is no longer the case that local authorities are the main provider of such traditional services.

759. I am not sure what Professor Dunleavy said, could I ask for a public response? Is the control of higher education moving away from local government and is that more effective than it was previously?
(Mr Walker) Your own Government are in the middle of reorganising vocational education, we ought to wait and see what the learning skills will deliver. Many people are quite critical of the text, partly because of their own business, not always because of an absence of councillors, although that may have been a factor in some areas. Again, I would not want to be drawn into saying whether councillors have a bright or not so bright future. All I am trying to say this afternoon is when we think about the people who are engaged in service delivery, the way we differentiate between the people who are qualified for top jobs in the DfEE, on the one hand, and those who become chief education officers, does not seem to be a rational response to the needs of the people to be educated or have their children educated.

760. Can I pick up on one thing Neil Turner asked you, you said as a throwaway remark, "We have to retain a local, democratic element", something like that, as though it was ready to dispense with them. Unless I am misunderstanding this completely, surely the point of what you are saying is that as these services are not going to be delivered by local authorities, as I understand it, and you are wanting to take them further away from that, if that model simply does not work it will further undermine any local, democratic element. You may have an election and you feel you cannot get rid of them. They will increasingly be bogus people who are asked to vote about things over which the authorities for which they are voting have no control. Your model is some super-efficient delivery organisation presided over or controlled from the centre, staffed by unified public servants who will wander through this system. The accountability question, if I am following this, comes back to the narrowest of needle eyes, which is a Minister standing up in the House of Commons, a system we know is mythical now.
(Mr Walker) That is precisely the point. The current system is dishonest to the extent it secures people who are not responsible. If you look around at your colleagues you would not pretend that Members of the House of Commons are engaged in delivering the service to their constituents, your role is at a considerable remove from the process, let alone the final point of delivery. That does not make you throw up your hands and go home and say, "I am going to throw in the towel." Likewise at local level, there is no connection between election and service provision. We already have the case in the election of tenant representatives on estate bodies, in housing. Elections can play a number of roles, they do not necessarily have to be about securing a class of person who is or who are themselves directly responsible for service. Elections can secure snapshots of the public will, they can secure a group of people who have general responsibility. If I may say so, you are working with a model which I think is largely out of date. What I am saying is, clearly, we are not going to dispense with the electoral element, there are lots of ways we can still use crude democracy, electing people without mythically attributing to democratic elected representatives the capacity themselves to deliver effective public services.

761. Where do policy priorities and choice of priorities come in in that kind of model that you have just given?
(Mr Walker) Again, perhaps, I have not made myself clear, what I am envisaging is if we were to have a more national mode of public service, people who are locally involved would have a much more significant role than they do at the moment when we split central and local. If Whitehall were more familiar with the conditions in which people lived and how people are delivering services locally then Whitehall's very culture would be different. Local would necessarily have much greater saliency in the model in the sketchy terms they are proposing than it does at the moment. I would have fewer misgivings than you about the way local perspective on policy would be fed up through the system.

762. I guess in theory, as somebody who is meant to believe in devolving things down to a lower level, as many celebrators of government, I should disagree with you. Last Friday night at midnight I was in the village hall of a village completely flooded, the Water Agency, the County Council, the Environment Agency, the Police, the Fire, the City Council Engineers, the Parish Council, the Army and also somebody representing the Health Authority were there. I think something like nine different agencies were there and it graphically demonstrated to me the system is not working. The members of the public there were tearing their hair out, not necessarily because their house had been flooded but the fact that nine different agencies spent the whole time passing the buck, as they saw it, from one to the other. The whole system of confidence in the way public services should be operated completely collapsed right in front of us in a very graphic way. I do not know what the solution to that is, but it ain't working at the moment. People felt there was no sense at all of any democratic accountability. The only person they associated with was muggins here who turns up and is known as somebody who is elected. That suggests to me that there should be a unique one-stop shop element rather than the way we provide services at the moment. I welcome your view on this. It may not matter a great deal if there are nine different organisations all working away, but it may be that a model can carry on at a tier above it. There needs to be a one-stop shop element, which is quite slick and small and which absorbs the issues and tells people who is going to deal with them and how they are going to be dealt with from within. With those nine different agencies the public outface is a very clear, simple organisation that does not tell people how it is being done. How it is being done certainly does not bother them, that it is this agency or that agency, the problem is with that model, the democratic deficit. Do you accept that that model could work? Give me a solution of how you would bring democracy into that element. The only one I can see is a strong elected mayor who is accountable, a public figure people recognise, who can be tough and set an agenda in the way the public can relate to.
(Mr Walker) The trouble with that is the local elected mayor would be only interested in whether it was a particular area, whereas the Environment Agency, especially in the case of excessive water flows, is concerned about a catchment area, a much wider area. I am not sure how you would do that. If I can make this point, I am by no means proposing any worked-out solution at all. I am saying de minimis if it were to be the case that people work for the Environment Agency and perhaps the police officers, perhaps the military officers and certainly local authority and people had gone through a common formation and belonged to a common service at some point and kept their work together in an emergency that would be greater. However, that would not address your point about democratic accountability, that is a much wider one. I think in terms of the effectiveness in which they were able to deal with the flooding problem they might have worked together better as a team if they actually had a common association with public service rather than with this great variety of different agencies, each of which is claiming to work in the public's interest.

763. Is it not precisely local government which historically has performed that integration, it is the fact that we have separated out all of the elements we have—the condition that Mark Oaten described—and now we are busy wondering how we can put it all back together again?
(Mr Walker) That sounds like going back to the past. The past is gone, for one very good reason, the public will not tolerate major or even small differentials of standards between different local authority areas, that is backed by every opinion survey that is done. We cannot go back to the position where local authority A does things differently from local authority B, we have to move forward.

764. Going back to that, I was going to bring up a statement you made earlier on, "We can go back to the municipal service delivery of the 20s and 30s". When I speak to some of the councillors in my area, who in the past have looked after the police authority and other services in small towns they would say that it was run much better, more accountable to the local community and they themselves enjoyed, probably, a far better service delivery than they do at this time. Did it not start because central government distrusted elected councils in the early 80s and the 90s, and there was a gradual taking away of powers from the local authorities and the creation of more quangos, they were unelected people who could be controlled centrally by government, whereas you could not have these loose cannon in the local authorities? What I am trying to say is, is there a future within regional government rather than the two tiers we have at the present time?
(Mr Walker) That is possible, although because of the difference in regional sentiment between different areas we are going to have let, in a sense, 13 flowers bloom and see how things go. Could I say this—I do not say this in any party political spirit—if you listened to your colleague for Norwich South and to the Minister from the Department of Health, and listened to them intently, as I am sure have you done over the last four years, you will have heard them say effective government demands a uniform approach to that service provision. Take child protection as a recent example of lifting a service out of local authorities, although individually they may be okay, in the generality they have not performed well. I have in mind the recent announcement by Paul Boateng. There has been severe criticism of local authorities who run children's homes. There are strong criticisms there and the logic that ministers themselves have taken to say, "We must devise a new structure for this service", often results in a new quango, an appointed body or some rather strange Committee. Maybe you are right, that in future this would be a lot better at regional level. We are nowhere near that yet.

765. Taking the regional government issues that would then resolve the problem about cross-boundary differences between service delivery, if you have one fire service controlled regionally rather than by county boundaries perhaps that too would be the best way forward. Even talking about local authorities district councils or county councils, if a street light goes out people have to know whether it is the county council or local authority. Most people in my area do not understand the separation between service delivery from different authorities, that seems to be the biggest problem. It is probably central government's responsibility to ensure that process takes place.
(Mr Walker) I am sure you are right. All I would observe is that in your instance of the fire service at the moment there is an extensive programme of training for fire officers dedicated to the fire service. What I wish for there is specialist training for the function which requires technical knowledge, there ought to be much more integration of training of specialist public services with fire officers, with other public servants, the police, civil servants and people who work the centre locally, and so on. There is a lot of other reasons why joining up does not take place. There could be a lot more joining up if we bite the bullet and we accept that certain local services are going to have to be trained for on a national basis.

766. My apologies for arriving late to this session. Having heard what you just said I am not certain I understood accurately something that you said a little earlier about the sort of popular perception of service delivery. Like this Tony Wright next to me, and possibly like the Tony Wright in the Chair as well, my feelings, certainly from what my constituents say to me, are that people believe the local council is responsible for every public service that they need to make use of, they do not differentiate, it is they who provide it and if they have a problem it is likely that their first port of call will be their local councillor or the town hall or the council office. It very often comes as a surprise to people to discover that it is some other agency, some other department, some other body entirely which needs to deal with the immediate problem, whatever it might be. Part of your argument seems to be that a certain mid 20th century perception of local government is no longer feasible because it no longer exists in the popular perception. I think you are wrong. Maybe that is not what you meant.
(Mr Walker) I think we would agree that a lot of people know very, very little about the practical circumstances in which they are governed. Polling data suggests many people believe they pay for local government through council tax, but that has, as we all know, not been the case in large measure for many, many years. People's capacity to keep up to date with the way they are governed is lacking. What I address myself to initially is what I thought you were most concerned about, which is effective government. At some point effectiveness will hinge upon the way government is perceived by the public, but I do not think there are a lot of issues to do with how little the public knows about how they are governed and I do not think the problems are just visible at local level.

767. In that case there may have been a misunderstanding on my part. I thought part of your argument was there was no longer public acceptance of the local council being responsible, once again, for the same range of services for which it was responsible perhaps in the 1930s, 1940s and 1950s.
(Mr Walker) If that meant that Brighton and Hove did things differently from East Sussex then the answer is, yes, people would not tolerate significant departures in service provision.

Chairman: I think you are right in saying that the Committee is interested in effective government, it is also interested in accountable government, and in the relationship between effective and accountable government, that is where some of the vexed issues come in. We asked you to come along to be stimulating and to provoke us, both of you, and you have done that. Patrick Dunleavy, as I understand it, wants to send all Civil Servants to the LSE and David Walker wants to abolish Whitehall and local government. We have had good value this afternoon. Thank you very much indeed for coming along.

768. Can I welcome our witnesses, on behalf of the Committee, all from the Centre for Management and Policy Studies: Professor Amann, Director General, Robert Green, Director, Corporate Development and Training, and Ewart Wooldridge, Director, Civil Service College Directorate. You are here, gentlemen, because of our inquiry into the Modernising Government programme, Civil Service reform issues, and we would like to explore aspects of your role in the scheme of things with you. We are very grateful for the very concise memorandum that you have let us have. Perhaps you and I ought to confess that we knew each other in a different life. Perhaps I ought to tell the Committee that you are also a Kremlinologist, are you not?

769. And maybe therefore ideally equipped to sort out Whitehall. Do you have an opening statement that you would like to give us?
(Professor Amann) Yes; thank you, Chairman. We are delighted to be here and tell you something about CMPS. If I may, I would just like to pick out a few points from the memorandum, perhaps to set the scene, as it were, for our discussion. CMPS is, as you will know, a new organisation, it has existed for just over 18 months; it is a complicated organisation, which has been created at the heart of Government, and, as you are aware, we have a number of key responsibilities within the Modernising Government White Paper, contributing to culture change through developing new approaches to policy-making, and developing the skills of the Civil Service so that they can meet these new challenges. CMPS incorporates the Civil Service College, which ceased to be an Agency on 1 April of last year and is now a Directorate of CMPS, within the Cabinet Office. During the last 18 months, to cut a long story short, we have moved from constructing a vision of the organisation, actually creating the organisation in all its various parts, it is now complete, and delivering the first range of products; some of them are original, and I think interesting. I will not go through all of them but there are just one or two that I would like to pick out. First of all, the development of the new programme for Ministers and for senior civil servants; as far as we are aware, there is no other country in the world that has yet developed a programme of this kind. We have developed a programme of peer reviews of the different departments, we have carried out five of those reviews already; and that really is the beginning of the Civil Service opening itself up more and becoming more of a learning organisation. We have reviewed all our corporate programmes, the corporate programmes include things like the Top Management Programme, and we have developed new programmes for the Senior Civil Service in areas like handling information technology and a version of our Top Management Programme which brings together civil servants from the UK and Europe, called Insight Europe, and that has been very well received throughout Europe. We have redesigned the entire training portfolio of the Civil Service College to bring it in line with the priorities of Modernising Government; in fact, I have brought with me—it is literally hot off the press, we have not even shown our staff this yet—the new CMPS Portfolio, which contains all our training. If I may, I will leave that with you. And, finally, we are developing new approaches to policy-making, based on the latest developments in knowledge management, and that is one of the most original things that we are doing to try to make policy more joined-up and evidence-based through the use of information technology. So I think it is reasonable to ask the hard question, "You had a Civil Service College before, so what is new about CMPS?" and I have been asked that question many times. And my answer to it is, firstly, that the span of CMPS is much wider than any pre-existing organisation, we cover the whole range of training, right up to the ministerial level. Secondly, we are directly intervening to create best practice in policy-making, not simply to collect it and disseminate it but actually to develop new approaches and create it. And, thirdly, and I hope I am not putting this too grandly, CMPS, in a sense, represents, or could represent, the final achievement of the original Fulton vision of using research and amassing intellectual capital and linking it into training, something which has never really happened in the history of the Civil Service College, and became more problematical during the period when the College was an Agency. So these are still very early days, but I hope that we have made some significant progress, and certainly we very much welcome the opportunity to come before the Committee and share some of our thoughts with you.

770. Thank you very much for that. If I could just kick off by asking two or three questions. In a nutshell, I know this is a very difficult thing to answer, but, in a nutshell, what was the problem to which CMPS was the solution?
(Professor Amann) I think the central problem, in a nutshell, was one of market failure. I think the Civil Service College, operating as an Agency, operating as a business, was trying to maximise its income stream by giving customers what they wanted, and, indeed, it was very successful in that, in its relationship with individual customers, it was successful financially, and people who had attended courses at the Civil Service College gave them high marks in evaluation. But what individual customers think at the moment when they leave a course is different from what the Civil Service as a whole needs in order to meet its corporate objectives, and the real problem was whether the Civil Service College, as an Agency, was set up in the right way to be able to respond to the new Modernising Government agenda. And, to get back to the point that I was making about Fulton, I think the central problem was that it had not really amassed the resources that would allow it to generate the sort of intellectual capital that could develop those programmes; and so a wedge of central funding and a stronger connection with the Cabinet Office was required in order to move things forward.

771. Thank you for that. And, if I am following this right, the pay-off from your existence will be that we shall get better and more informed policy-making?
(Professor Amann) Yes.

772. How shall we know that we are getting that?
(Professor Amann) Well, that is the sort of classic question to ask: "How do you know that you are going to be successful?" It is always difficult to answer. And in an area like policy-making it is extremely difficult to know the answer, because there are so many factors that would have a bearing on the quality of future policy-making, that the input of CMPS is merely one variable and it is difficult to isolate its impact. However, we do take seriously the question that you are asking, because we want to try to do new things in the area of evaluation too, we want to do things that other departments have not done yet. What we propose to do in policy-making is to conduct a survey of current Government practice, a systematic survey which looks at what best practice is in different departments, and we have just started that; at the present time, we have sent out a questionnaire, we are getting the replies in the next few weeks, and we want to establish some base-line data, so that, once we have established it, we can go back to departments in the future, periodically, and measure the kind of progress that we are making. We are going to do exactly the same thing, and it is slightly easier, with the training that we offer. At the moment, we measure our success in terms of the forms that participants fill in at the end of their course, and that is pretty good, but, of course, the warm feelings that you have as you leave a course are different from the more mature reflections that you might have a year down the track, when you begin to ask yourself how useful this training has really been in helping you to do your job better. Now, because we want to build up networks of students after the event, so that they can follow up their training and we can continue their learning, we want to get ourselves into a position where we can consult them in the future, so we can see what real difference it has made, or they think it has made, to their own competence in the job, and also to evaluate in terms of how departments think that training has impacted upon the performance of departments.

773. A simple soul might say, does this mean no more Dangerous Dogs Act, no more Child Support Act, no more rail privatisation, no more poll tax; is this going to so revolutionise policy-making that we do not have this trail of policy disasters any more?
(Professor Amann) I think it might cut down disasters by a significant margin, it will never eliminate them completely, and you will never get away from making political choices, perhaps sudden political choices, if the circumstances require it. But I think what evidence does is to discipline and constrain decision-making, so that at the margin you are better informed, you are taking a broad, comparative view, and you do come to better decisions. Personally, I think the term "evidence-based policy" is incorrect, I think the proper term is "evidence-informed policy", but, since we are using "evidence-based", that is the buzz-word, but it is more accurate to say "evidence-informed policy".

774. Just to explore another area, before I hand over, what I would put to you is that there is a problem here about when politics meets Civil Service policy-making, and you have referred to this, in talking about these innovative courses that you are doing with Ministers. These people inhabit different worlds and they have different requirements, and when the Cabinet Office did this nice report on `Professional Policy-Making for the 21st Century', it said: "One area of concern is that we found evidence of a lack of clarity about the prospective roles of Ministers and officials in communicating policy. In particular, Ministers want presentation that is `politically acute, not naïve,' while some policy-makers are uncomfortable with this, seeing it as at odds with their political neutrality." Well, is not that just a fact of life, that politicians operate in the short term, they want political pay-offs, they have to win elections, and they often do things which are daft? You come along and say to them, "That's daft, doing that;" they will do it, nevertheless. And, because this place works as it does, we shall all vote for it. Is not that the fact there?
(Professor Amann) I think both of those elements are always going to be present, and, just because there is always going to be a very powerful political element, it should not, in my view, be a counsel of despair about the use of the best evidence. We see it as our job, in CMPS, to develop new approaches to policy-making, to develop external networks where we can allow Government to access, in a much more effective and user-friendly way, the enormous intellectual capital that there is outside Government, and to make that available to policy-makers. That is really the job that we will do.

775. Let me give you an example, though, just to make it more concrete. If we summon up intellectual capital to the issue, there is no correlation between crime levels and funding of the police or numbers of policemen, this is a fact, established; and yet that does not stop politicians pretending otherwise and putting in place programmes that are built upon the opposite proposition. These are different worlds colliding, are they not?
(Professor Amann) Yes. They are different worlds, but, if you could take a different example from the same area, the research evidence shows that if you concentrate resources on major crime and repeat victimisation you use the evidence to actually focus police effort; you can have more of an impact than simply, in an indiscriminate way, putting a lot of policemen on the beat. But there is a popular perception—and who is to say that it is wrong—people feel more secure; so there is an argument between a political imperative and what the evidence suggests. But in many cases there will be police authorities who will actually use that evidence in deploying their forces. So I think those factors are always going to be present, there is always going to have to be a judgement made in the final analysis. I think it is our job to inform that judgement as best we can.

776. Is it not a fact that, you talked about policy, in answer to the Chair's question, the fact that you are the solution to the wrong question? And one of the problems, that the Civil Service has failed, over many, many years, is the whole question of implementation; that the Civil Service is very good at designing policy but implementation is tacked on the end? And your emphasis on policy is still missing the whole point of, unless we get implementation right then you can have as many policies, as many evidence-based things as you want but it is not actually going to change the reality on the street?
(Professor Amann) Yes. I think it is a very good question and I welcome it, because it gives me the opportunity to go into, in a little bit more detail, what I mean. Because when I suggest that we want to improve policy-making, I am not seeing that purely as the intellectual exercise of assembling evidence and analysing it. I am talking about the entire policy process, that includes implementation; and policy is something that you have to manage as well. We talk as if management and policy-making are somehow very different, but, in fact, policy-making is an aspect of management. Through the use of information technology, and what we call Knowledge Pools, which would be sites on the Government Intranet, around which policy development would take place, it gives the opportunity to draw into policy discussion a much broader group of individuals, in what would be a virtual policy team. An important aspect of that would be to draw in those who are responsible for implementation, because not only do you want research evidence but you also want the advice of those who will be responsible for implementing policy, whether they are teachers, or nurses, whatever the area of policy might be; that should be something which is integrated into policy development at the very beginning.

777. But it says, and Richard Wilson is talking about the Knowledge Network: "Direct access to the Knowledge Network is prohibited for any outside organisation or individuals." How are you going to get this wider group, when one of the most fundamental things about the way that the Civil Service is going to develop presentation of information to Ministers, the Knowledge Network, is going to be barred to people that you could be bringing in?
(Professor Amann) I think I would like to make a distinction, first of all, between the Knowledge Network and what I am talking about. The Knowledge Network is a very specific network and its main function at the moment is to provide, as I am sure you know, policy briefing and disaggregated data down to regional and constituency level. For a short time, the Knowledge Network was the responsibility of CMPS; that responsibility has now passed on to the e-envoy. The reason it was with CMPS was that we were wanting to broaden the remit of the Knowledge Network. It is to do with knowledge sharing, fundamentally, so that, in just the same way it could be used for policy briefing it could be used for policy-making more generally. But the Knowledge Pools that we in CMPS are developing—and we are doing so on a pilot basis, we are hoping to set up four Knowledge Pools in different areas of policy-making—would be a way of involving a broader stratum of people throughout the Civil Service, both professionals and policy-makers, and perhaps involving people from outside the Civil Service. So it is different from the Knowledge Network.

778. How much interaction will you have with the Information Commissioner, for example, in terms of freedom of information, and things like that, in terms of sharing that information, opening up the Civil Service to that? You were suggesting the sharing of information, it sounds like the right course, but, given the history of the Civil Service, given the statements that have been made, it seems to be in opposition to what potentially is going to happen. And, therefore, I am curious to see how you are actually going to get that sharing of information, get that outside influence, that you think is a good idea, and which I think everybody would accept was a good idea, when the pressures on the Civil Service are not to release information. We have had suggestions from Andrew Tyrie, earlier on, that he was getting blocked in answering Parliamentary Questions. How are you actually going to break down that cultural barrier to the sharing of information?
(Professor Amann) There is good practice at the moment issued by the Government Chief Scientist regarding the involvement of experts in policy-making and giving advice. I think the presumption would be that a lot of the information that we are talking about is actually in the public domain, and we would presume that as much of that information as possible could be made public. One thing I am very clear about, once you get into the area of evidence-based policy and developing networks and better relationships with researchers in universities and independent research institutes outside, that relationship is not going to be sustained in the long term if the door opens in only one direction; in other words, Government cannot just simply suck in information into different areas of policy development, there has to be some entry from those outside, they have to feel that they have made an input.

  779. The final question I have got is, we live in a much more complex world, we have got the European Commission, which has a different style of operating its Civil Service, we have got the devolved authorities in Scotland and Wales and Northern Ireland, and you have got embryonic regional government, through the Regional Development Agencies, and regional government in London now, with the Mayor, you have got local government as well; how are the different cultures going to interact, or are you looking, purely, only at the British Civil Service, how is the British Civil Service going to interact with those other Agencies?
  (Professor Amann) Most of this discussion about policy-making is really talking about what is happening in Whitehall, in central Government departments, but if you move on to the training area, which is the other aspect of culture change, we are working very hard to develop our relationships, particularly in Scotland, where the Civil Service College Directorate has an organisation, and I do not know whether Ewart Wooldridge would want to bring us up to date on what is happening there.
  (Mr Wooldridge) Just to add to that, which is really the point about the wider context of the public sector, is this just the Civil Service or is it the wider context, and it is very much the latter, not only is it a fact that we have re-opened an office in Edinburgh, and, in fact, we also have a relationship with the University of Strathclyde, in Glasgow, we have therefore invested in Scotland. We are investing also in partnership agreements, arrangements, with local government, particularly with the Improvement and Development Agency, and are developing our work in that area; and, indeed, in the wider public sector, we are working with the IDA and the NHS Executive and other institutions on research in public sector management. Very much the brief of CMPS as a whole, the Civil Service College Directorate, is for the wider public sector; and our customers, as it were, at the College, come from a wide cross-section of that sector.

780. The fact that you have reverted from an Agency into a Directorate, how has that affected the way you operate, and has it been for the benefit of you and what you are trying to do not being an Agency, and has that implications for the wider Civil Service?
(Mr Wooldridge) Just to give you a couple of examples of the benefit. I joined at the beginning of CMPS, so my responsibility was to take this through. Whilst we were an Agency, as a College, there was very much clear water between ourselves and other parts of the Civil Service and the Cabinet Office. By being integrated, in the autumn of 1999, when Civil Service reform was being developed and being launched, it meant that we could work much more closely with the Cabinet Office, with those who were developing that new strategy and rapidly turn that into forms of training; so there was this immediate opportunity to work more closely and to reflect that agenda in our work. And it has the double benefit of us being closer to the corporate agenda and actually making us more attractive to our customers, because we are still working on the basis of charging customers. And just another example of the advantage; by being much more integrated, as CMPS and within the Cabinet Office, we have been able to qualify for money from the Modernisation Fund, and we are spending, over the current two-year period, about £800,000 on research and development work into areas about making change happen, about diversity, about e-learning, and all those things would not have happened, or would not have happened as easily, if we had been a separate Agency. So it has had a directly beneficial effect on us.

781. And the implications for the other Agencies, the Benefits Agency and other Next Steps Agencies, the fact that you have been brought back into the mainstream Civil Service; does that follow that they should be, as well?
(Professor Amann) I think it is difficult for me to comment on that. I think all we can do is to explain what the reasons were for the Civil Service College coming within CMPS.

782. Evidence-informed policy, did I get that right, presumably, the purpose of trying to encourage this approach, or tell me whether it is, is that, by implication, the more evidence and information people have available the more likely they are to edge their way towards a consensus about what decision actually should be taken. Is that the core of the thinking that lies behind evidence-informed policy?
(Professor Amann) I think that is a possible by-product of it. I think the primary reason is just to get the policy right, in terms of the likely impact it will have on society, through the best social and economic analysis that you can come up with.

783. But there is not just one solution to a problem, is there?
(Professor Amann) No.

784. And there are political choices to be made in this connection?
(Professor Amann) There are political choices, and I speak really from the standpoint of my experience as a researcher, perhaps, rather than more recently as a civil servant. But in the academic world, too, in economic and social research, which is my area, there are always alternative explanations. But my experience has been that once you really do get into the primary evidence and that is shared between all those in the research team, although differences in interpretation are still there, it does tend to narrow the difference. So there is a by-product of moving perhaps more towards a consensus.

785. My experience of consensus-based policy-making is that it tends to be pretty disastrous—Dangerous Dogs, Firearms, keeping the hereditary Peerage, creating the Child Support Agency—there is a set of them; and that there is quite a risk with developing a notion in Whitehall that a technocratic set of solutions could become a substitute for political choices, and I just wonder whether you would like to comment on that?
(Professor Amann) I can comment on that, but I will do so very briefly, because I agree entirely with what you said. I think there is a misconception in evidence-based policy that you can amass evidence, it can be analysed very "objectively", and that somehow policy tumbles out automatically at the end without any political judgement having been applied. That simply will not happen. I think the political judgements will always have to be made, the political differences will always be there, but the decision will be made more sensibly, I think, if everyone concerned is aware of what the evidence is.

Mr Tyrie: Can I ask just one other set of questions; as you can tell, I remain somewhat sceptical about evidence-informed policy, that is not to suggest that I do not want the evidence, it suggests that I am just wondering, I very much agree with your—

Mr Tyrie: I very much agree with the opening remarks, I am doing my best, anyway, to agree with the Chairman.

786. A consensus; there is a consensus breaking out between me and my Chairman here, briefly, but I will do my best to crush it. But I would like to ask you about one other point you made, right at the beginning, where you said that the Agency structure was a revenue-maximising structure, that therefore they were treating themselves as a cost and revenue centre, going to other parts of the Civil Service and saying, "What do you want?" and the Civil Service were saying, "Well, we'd like this sort of training, please," or, "These sorts of programmes, please," I presume this is how it is operating, and the Agency say, "Okay, we'll lay it on," and then they got lots of ticks in the boxes for having produced the right stuff. You began a little to explain—now it is only a matter of time really, that you did not have time to explain, I am not suggesting you were trying to avoid it—what it was that departments were not asking for which they should have been asking for, which would lead them to higher-quality civil servants, and therefore fewer mistakes?
(Professor Amann) Yes. The relationship with the customer base was not quite as you have described it, because the relationship was not so much between the Civil Service College and departments, or the Civil Service College and the corporate Civil Service, it was with individual customers who came on courses. The view was taken that that really was not a satisfactory basis for driving forward the Modernising Government agenda, and I was one of those people who were present at the discussion, the early discussion, with the Permanent Secretaries in September 1999, when this agenda was really emerging. By that time, the College was just about to cease to be an Agency, to become a full part of CMPS, and for the first time the College was actually locked into the centre and was hearing at first hand what the major priorities were for better business planning, for the importance that was going to be given to increasing diversity throughout the Civil Service.

787. This is messages from the departments now, coming to you, telling you what they wanted?
(Professor Amann) Yes. We have got a much better relationship with individual departments, but also with the Civil Service Management Board, on which all the Permanent Secretaries sit.

788. I am terribly sorry, it is just sheer ignorance, but I think it is quite important, helping answer the questions that Brian White raised, about the benefits, moving from an Agency to a Directorate; why were you not picking up that information from individuals when they were coming, you were saying that the demand-led pressure in the Agency structure had come through individuals?
(Professor Amann) Because the individual preferences of members of staff, in thinking about their own career, do not necessarily aggregate to the way that the Civil Service as a whole wishes to develop in the future; and that only comes when the Service as a whole reflects on what its priorities are.

789. Why did you need to get rid of an Agency to do this, why did you not have departmental-based cost centres, cost and revenue centres? So that, for example, the Department of Health will come to you and say, "What we need is, we need other guys trained up in X, Y and Z; will you do us a course for that?"; and then, if you do it well, they pay you, and if not they find someone else to do it?
(Professor Amann) It was obviously before my time, but the major reason, as I understand it, is that the economics of the Civil Service College were such that it could not produce the surpluses which would generate the kind of intellectual capital for developing new programmes, developing programmes which in the short term may not be popular, which were costly in any case to develop.

790. Popular, at the individual level?
(Professor Amann) Popular, at the individual level.

Mr Tyrie: But, if you have gone over to a corporate-based revenue structure, what does that matter? You are getting your cheque from the Department of Health. I am sorry, but I am in a genuine fog, I do not understand why you had to smash up the Agency structure to deal with the market failure you raised at the beginning?

  792. Can anyone clear that fog?
  (Mr Wooldridge) I think perhaps one thing that clears the fog, Chairman, is that words like "smash up" imply nothing exists of what happened before. In many ways, we have built on it. There was a successful relationship, and, in fact, as I hinted in my earlier answer, we have not ceased to operate in a very business-like way, and we still benefit from the fact that my predecessors actually ran it as a successful business, responding to individual clients, as we have talked about, but also there was a relationship with departments. But the context of CMPS and being restored back into the Cabinet Office is that no-one has to work on an ever more coherent and consistent dialogue with those departmental clients than happened before. And it has also slightly, enough, sufficiently, taken the pressure off to allow us to do that kind of research and development work to develop the "unpopular" or less popular things. So it is not a step change, we have simply now got a context in which we can more coherently and systematically look at those priority areas and develop them, rather than just playing the market.
  (Professor Amann) I think, if we focus only on the College, Chairman, we may not be getting a complete picture here, because there is a whole other area of training. I wonder if Robert Green might have an opportunity to speak?
  (Mr Green) I think the main point I would make in this context is that, before I moved to CMPS, I was in the Personnel Department in DfEE. As a customer of the training on offer, I found it very confusing, because, at the senior level, which was what I was responsible for, and where my responsibilities now are, senior training provision was split between the Civil Service College, on the one hand, and the Cabinet Office, which used to run programmes like the Top Management Programme, as well. Many programmes had almost the same name, almost the same kind of market: very difficult to make sense of that. And I think one of the things we have clearly been able to do and that departments have said to us we have been able to do is to make sense of that; we have now got one organisation making provision for senior corporate training across the Civil Service. You could argue that that could have been done in different ways, but that is at least one benefit of the approach that has been taken.

793. I think this Committee is obviously sitting, trying to make Government work, it is a hell of a task, Mr Chairman, when we have a look around at ourselves. I have got two particular questions. One is, when should Ministers seek advice on risk assessment when it comes to a policy decision; and the other question is, is the Civil Service capable of providing such advice? And I ask these two questions for two or three reasons, personal reasons, which I have experienced within Government, within the Civil Service; the first one is the coal industry. Even in the last year the coal industry was going through a very bad patch, well, what is left of it, 7,000 miners. There were subsidies going into Europe, and the French were getting it, the Germans were getting it, the Spaniards were getting it, but we were not, and there were only two or three years to run of these subsidies, and we thought we would go along to the Minister and try to save what was left of this industry and get a subsidy and keep it afloat, always possible. The advice we got from the Minister and particularly the Civil Service, was that we could not get on this bandwagon, we could not get this money, so the industry would just have to die. A couple of MPs and a trade union leader went off to Europe, to see the powers that be in Europe, in energy, "No, problem, we'll pay out the money, if the Minister applies for it we'll give him it;" and, of course, a few months after that we get £100 million for the industry. But the civil servants had given the advice that we could not get it; mind, I think one of them got sacked, or pushed sideways, he was pushed away. That is one example of the bad decisions of the Civil Service. The other was BSE. I wonder what happened there. And, of course, the other one, the writing must be on the wall somewhere in the Passports, because we had an inquiry in this Committee, people were standing in queues, in Liverpool, Belfast and London, trying to get a passport, and not one civil servant had seen that coming. So the questions are, basically, is the Civil Service capable of seeing these risks, are they capable of telling the Minister to make Government work better, because that is what we are after, that is what we are trying to get, to make Government work better; are the civil servants too frightened to give the Ministers the answer they are looking for?
(Professor Amann) I think it is a very deep issue here, about accountability and risk. I think, because of the traditional values of the Civil Service and the very sharp feeling of accountability that senior civil servants feel they have, they are quite averse to taking risks, and this is not just an observation of mine, I think this is something which is well known and widely discussed at the present time. The question is how to move away from that without losing all the benefits of traditional values and a wish to be accountable; the obvious answer to it is much more professional risk management. I think there is a general view that this is an area of weakness in the Civil Service.

794. Is this why we have got more special advisers now, in Government, because the Civil Service has lost its grip?
(Professor Amann) No. I am not aware of the argument that deficiency in risk management is connected with political advisers. I think that risk management is connected with other areas in which it is widely appreciated its skills need to be improved, like project management, programme management. One of the real thrusts of the Modernising Government agenda is to move civil servants from being simply administrators of routine processes to being leaders who can actually manage significant projects and can be visible and give advice to Ministers on that basis.

795. So what you are saying to me is that the passport system, the BSE and the coal industry, they would not have happened, that is what you are saying to me. You are saying, "In my book, if I were opening my book, I would do away with that and there would not be a question of those things happening, because civil servants would see it, they would be better trained, they would observe it, they would say, `Hey, Minister, there's going to be a problem here, you're going to have queues and people fighting outside for passports'"? That is what we are trying to stop; we want to make Government better, not worse, and what we have seen, in the last few years, is worse.
(Professor Amann) It would certainly make it better. I could not guarantee that it would ever remove entirely some of the cases that you have mentioned. But if we take the Passport Agency as an example then professional risk management might have picked up the point that a very sophisticated IT system might not deliver on time. It might have considered the risks that insufficient staff were trained and not enough time was allocated in order to get the project in.

796. Do you know for a fact that Ministers were not told those things?
(Professor Amann) No, I do not know for a fact, I just know something about it and I am just hypothesising about what the factors might have been, and these would be elements in what would have been professional risk management. I think the case of BSE is slightly different, if I may say so, because I think one of the overriding issues there is the communication of risk to the public and the relationship of policy-makers in Government with the public.

797. Is it not true that if it had affected a middle-class person in the South East of England it would have been straight in to the Minister, but because it affected a few Northerners and working-class people in the North it does not matter?
(Mr Green) If I might just come in on this, not to suggest that this is the complete answer to the problem about professional risk management but just to show that this is very much an issue which CMPS has been trying to tackle. In fact, we have run a series of seminars for Ministers and civil servants and people from outside the Civil Service on the theme of risk, trying to get into this topic in increasing depth, and the very first seminar that we ran, in fact, took the Passport Agency events as a case study. That worked towards a series of seminars, one of which brought Ministers and civil servants together to look at the way we handle major IT projects. And, as I say, I do not pretend this is the complete answer, but I think creating an environment in which Ministers and civil servants can talk honestly with each other about their different perceptions and the issues that they confront is going to be helpful in the long run to developing that sort of understanding. And we have moved on to look at the issues involved in communicating with the public about risk. So it is very much a theme that we have taken forward. And, whilst I am speaking, if I might just return to a point that Mr White made earlier, we have put the results and the summaries of these seminars, which, as I say, involved people from outside the Civil Service, but they are on our website, on the Internet, so they are there for public discussion and debate, and that is very much the way that we want to operate.

798. One of the solutions to Ronnie's problems lies, clearly, in training, and training is only really going to be any good if you have good trainers, and it is encouraging to hear that you are using non-civil servant trainers in relation to risk management. But I just wondered, over the last two years or so, has there been quite a high turnover of the kind of people that you are using to train; in essence, had the people that you were using before left, are you using predominantly outsiders now to train, or are the trainers still individuals who were training before and are part of the Civil Service?
(Professor Amann) Let me make a start on that, and this is obviously a topic where I can bring in my two colleagues as well. In the corporate programmes, the training is largely provided by presenters who come from outside CMPS, from universities, from management consultancies, chief executives, for example, of major companies; so we look around quite rigorously to identify those individuals who are going to perform well, we assess them, and so forth.

  799. Is that a change from what it used to be?
  (Professor Amann) We are doing more of it now, so it is a change in that sense; but the Top Management Programme has always been run on those kinds of lines, we are constantly looking for very, very good people to present to a rather senior and critical audience. So far as the Civil Service College is concerned, we need to get into the composition of the teaching staff in the Civil Service College. There are, and Ewart will correct me in a moment, I think, something like 80 full-time staff in the Civil Service College, but there are 650 associates of the College, and much of the teaching is done by those associates, so there is a constant renewal of the teaching staff at the College. And novelty and innovation are secured not only by changing the staff but also by we ourselves going outside and trying to look at best practice elsewhere. So one of the things that we did early on in CMPS was to look at comparator organisations throughout the world and see what they were doing—the Kennedy School of Government at Harvard, we went to, New Zealand, Australia, Canada, and so forth—to see how it was done, what the best ideas are. But perhaps I should turn over first to Robert.
  (Mr Green) I think Ron has said most of it. The only point I would add is that, he is quite right, corporate programmes for senior people are taught almost entirely by people from outside, and really those people fall into two categories, they are the people from business schools and academics, and they are practitioners, they are chief executives, they are chief constables, they are people who are coming not particularly as teachers but as people with a great deal of experience in leadership and tackling the sorts of problems that civil servants and others are going to face. And perhaps I should just say that many of the senior corporate programmes, like the Top Management Programme, are actually not just for civil servants, civil servants are a minority on the Top Management Programme. It is one of the things that keeps us on our toes that we have to attract people from outside the Civil Service. The participants in those programmes often say, actually, they have learned as much from each other, from the mix of people from different sectors that we bring together.
  (Mr Wooldridge) Very briefly, Chairman, I have got nothing to add to the figures that Professor Amann mentioned, but just to make the point that it is not just teaching in a classroom in Sunningdale, or in London, or in Edinburgh; a substantial amount of our work in the Civil Service College Directorate is working inside departments, on a consultancy basis, and I am wanting to encourage that and increase that. So that in itself is a refreshing process, that we are actually dealing directly with individual departments and working with them on a client basis.

800. Just two quick points. Just on the programme of learning for Ministers, what is the take-up like, are Ministers taking part in that, or is it quite hard to get them to take part in it, are they good at taking it up?
(Mr Green) We think that, this financial year, there will be getting on for 250 ministerial participations in our events. Most of what we do is targeted at Ministers below Cabinet level and we have had something like 70 Ministers have taken part in our programmes: so very high take-up, and not only high take-up, the numbers suggest repeat business, in other words, Ministers are taking part in two, three, four events.

801. And are they volunteers, or conscripts?
(Mr Green) They are volunteers. Their departments pay for most of what we put on.

802. One other question then. I still was not quite clear, when the Chair asked you about how all this is evaluated, you said it was a very difficult question; it is, but it needs to be done as part of that. Who do you actually report to, who are you accountable to?
(Professor Amann) I report to a Board for CMPS, which is chaired by Sir Richard Wilson, as Cabinet Secretary, and that Board includes a number of outside members and also a number of Permanent Secretaries. So that is the immediate accountability. But, of course, I am a member of the Civil Service Management Board and of the Cabinet Office Management Board.

803. Could I just come back to a couple of areas, as we begin to end. You talked about, the phrase you used was, "We are directly intervening." I do not really know what "directly intervening" means, and I do not know how the work that you do connects with the work that is being done inside departments, where they have policy researchers, who are keeping their eye on all the literature and doing the kind of stuff that you are in the business of doing. When you come along with your direct interventions, I am not sure how this, as I say, interfaces with what departments are doing and how they feel about their policy expertise, nor how it connects with what other bits of the system are doing, like the Performance and Innovation Unit, who are also in the trade, are they not, of spreading all this exciting thinking around the place? How does it all come together?
(Professor Amann) Let us start from the great challenge for us of bringing about culture change in the Civil Service and in this area of policy-making. One approach, a traditional approach, would have been to write some guidance of best practice and disseminate that and hope that it would take root. What we decided to do was to pilot directly an alternative approach to policy-making, using information technology, and here we are doing no more than major companies and some large public organisations do throughout the world, so we have gone around looking at how large organisations manage knowledge in order to apply that to policy-making. Our direct intervention is not a unilateral intervention, we are actually working in partnership with departments in developing these pilots, so we are contributing some of our resources and expertise, and so are they, to develop policy Knowledge Pools, on which departments themselves will take the lead. So we have talked a lot about networking externally with the academic community and where the best research evidence comes from, that is only one side of our relationship. The other side of our relationship is networking internally with departments; we have set up a small Resource Centre, which is really a sort of large help desk, which links in with the whole Government Library Information Network to try to draw it together. So we are working very closely with departments in developing this approach. But we do want to actually validate an approach to policy-making rather than simply offering advice and hoping that it might be taken up.

804. I am fascinated, but we have not got time to just think how that might work in concrete instances. A Department is engaged upon a policy proposal, as I say, the Department itself regards itself as a reservoir of policy expertise in that area. I am just wondering: does it come to you, do you go to it, who goes to this pool, who drinks at it, is it only something that works when we are talking about cross-cutting policies and not narrowly departmental ones? I am just trying to get my mind around how this works in practice?
(Professor Amann) We have already developed a network of Knowledge Pool initiatives in departments. We are not doing something that is completely new, it is really an idea whose time has come, and there are all sorts of developments going on in different departments, and we are learning from each other, as it were. Some of these Knowledge Pools would be strictly departmental, but the most persuasive reason for making this kind of investment is to look at more complicated policy issues that cross departmental boundaries; because one of the beauties of information technology is that it allows you to do that in a more effective way.

805. So you are the `wicked issues' people, are you?
(Professor Amann) We are supporting some of the `wicked issues' people, because not only do we support departments but we work closely with PIU and the Social Exclusion Unit; it is likely that the Social Exclusion Unit would be one of the first pilot Knowledge Pools that we would develop, actually.

806. Can I just ask, finally, just how Parliament might fit into this? The reason for asking the question is, I think, straightforward. Here are you engaged upon providing cutting-edge, evidence-informed policy material, Ministers then have to decide what to do. It seems a deprivation for Parliament not to have access to some of this material that you are generating, some of these pools in which people are drinking, because, otherwise, how can Parliament test whether the policy choices that are made work in relation to the evidence-informed policy base that you have developed? So what I am saying to you is, is there not a legitimate way in which you can make some of your work available to Parliament and not simply see it as this single channel for Ministers and departments?
(Professor Amann) I think, not only Parliament but more generally. I think policy networks of academics and other specialists outside the Civil Service, the very people that we want to engage, whose intellectual capital we want to tap, in order to help us with policy-making, are those who should have access to that material. Now, we will have to develop the protocols very carefully for this, we are right at the beginning of the process of designing these Knowledge Pools, and one can imagine that there will be information in the Knowledge Pools which will be of a confidential character, which may involve advice to Ministers, maybe from academics who simply themselves want to give advice in confidence. But my hope would be that we would make as much of this information publicly available as possible, and, in just the same way that we have been very anxious to publish the learning points that have come out of the ministerial seminars, we have published most of the departmental peer reviews that we have been responsible for. We do see ourselves having a very open relationship not just with Parliament but also with the public.

807. I am grateful for that, and I am sure we will want to encourage you down that path. Thank you very much for coming along. If this Government has one credo, it is the one about what matters is what works, which is probably better than what matters is what does not work. But, insofar as you are the people who are engaged in the `what works' bit, you realise the buck is going to stop with you at some point, as well. But thank you very much for coming along and talking to us about your work and for leaving the material, too.
(Professor Amann) It has been a pleasure.

808. Thank you very much, Professor Hood, for coming along and giving evidence to us. I am sorry you have had to wait while we had the previous session. Thank you, too, for sending us papers on Risk Management, and then your memorandum on Risk and Regulation. Would you like to say anything, by way of introduction?

(Professor Hood) Only to say that my memorandum reflects what I have worked on over the last few years, I have mainly worked on regulatory issues; obviously, your remit as a Committee goes much wider than that, but that is the area in which I have mostly worked. I could tell you something about what I have observed about regulation of the public sector, I have done some research work on that, and I also included in my memorandum some remarks about risk management.

809. Let us take the two issues, if we may. Perhaps you would say something about what you think about the developing regulatory system within Government and where you think some system and order needs to be put into it; what are your main findings here?
(Professor Hood) I have found substantial growth in oversight of the public sector, under both the last Conservative Government and the current Labour Government. This has been a substantial growth point in public administration. I looked at a 20-year period, up to the late 1990s, and over that time I found that the population of the Civil Service generally had gone down by about 30 per cent, local government service by about 20 per cent, a bit more, but the population of overseers had risen by 90 per cent, in staff terms, so there seemed to be a kind of opposite process going on. No doubt, it is important for public services to be properly inspected, evaluated, overseen, etc., but it did seem to me that there has been a substantial growth. There does not seem to have been any general investigation of what principles should inform this kind of activity, and of what, indeed, accounts for the different approaches that different overseers and regulators take. If I could just give an example, if I may, to take three overseers of the public sector: the emerging Commission for Health Improvement, OFSTED and the Prisons Inspectorate. There, you see three overseers, inspecting and overseeing very important public services, but they work in very different ways. The Commission for Health Improvement is planning to base its inspections on a predictable cycle, and it will work, I think, largely on the basis of current Trust chief executives inspecting other current Trust chief executives. If you take the OFSTED system, you see a completely different principle for oversight, you also see regular, announced inspections, but in that case you do not see current school principals or headteachers inspecting other school headteachers, you see people who are not currently heads doing that. Now, why should we operate differently for health from education? If we look at prisons, we see a different kind of principle again; there, we see a mixture of insiders and outsiders doing the inspection, you have an ex-military person as the Chief Inspector, but below him you have people who are prison governors, and they operate not only by predictable inspections but also by a substantial basis of random inspection, they just turn up, without announcement. And when I talked to them they said that this was the only way that they could really get good information about their charges. Well, what I am saying is, if there is such a variety of practice, what accounts for it, can we identify principles that would apply throughout, or can we explain these variations by differences and the technical nature of what is being inspected?

810. Is your conclusion, therefore, that we need a new regulatory body to oversee the regulatory bodies?
(Professor Hood) In part, I think that was one of my conclusions. I argued that there were four kinds of deficits that could be observed in this field. One I thought was a mutuality deficit, if I can call it that; what I mean is that many of these regulators operated independently and they did not have much understanding of what was done in other areas. Well, that is very understandable, people are busy, they focus on their own field of interest and expertise, but it struck me that there was not very much in the way of learning across from other overseers. In fact, I did assemble some of them together, in a room at the top of the LSE, some years ago, and it was the first time that most of them had met one another, which partly makes my point. I thought that there was a deficit in that area; but I also thought that there was a deficit in terms of oversight of the regulators themselves. As I said, I observed substantial growth and diversity of practice but there did not seem to be a point in Government which had responsibility for thinking about this process and developing ideas about it. I think that is now starting to happen, with the Regulatory Impact Unit, which now has got a public sector component in it, but it is at a very early stage of its work, I think it is fair to say, but I believe that that work is important and I think it should go much further. I thought, as well, that, in some areas of this regulation, there was what you could call a randomness deficit, in the sense that I did not think that there were enough, as it were, surprise inspections going on. It seems to me that, with inspection and evaluation, there are two ways in which that process can work. One is by, shall we say, the terror effect of an announced inspection that is going to occur at some time in the future, and then even if, when the day comes, you cancel the inspection, a lot has happened between the time that the inspection is announced and the day; you know, the place gets painted up and the organisation looks at itself. And that is one thing that inspections do, they cause organisations to look at themselves and evaluate their own activity. But the other approach is, as I say, the random inspection, as with the prison case, where what you are trying to do is get information about how the organisation operates in normal mode, as it were, not when it is in inspection mode, and it seemed to me that that mode of inspection was remarkably little used across the public sector.

811. So, just so that we are clear, you are not one of these people who are saying the public sector is groaning under the weight of audit and inspection, you are saying the way in which it works is a mess, across the public sector, and needs sorting out?
(Professor Hood) Yes. I think that some people are certainly groaning about the weight of audit and inspection, some of the people I spoke to certainly said that they were; but I think some of the people who said that were people with private sector backgrounds who did not have experience of the kind of inspection and evaluation methods that apply in the public sector. I did not get anything that I could call good evidence that there was too much audit or too little audit, I would not find it easy to make a statement about that, but what I can say is that there is remarkably little evaluation of the effects of audit and remarkably little, at the time when I looked at the audit and evaluation and regulation oversight agencies, even of indicators of effectiveness, or otherwise, and such as there were were often very limitedly developed.

812. Have you looked, at all, at all the performance measures and targets that are part of the Modernising Government programme, and the extent to which they are being applied consistently and the extent to which they are being systematically monitored as well?
(Professor Hood) No, I cannot say that I have good information about that.

813. But they would come under your general argument?
(Professor Hood) Yes, they would. And I would say that the Modernising Government initiative has moved in some way towards developing some coherent ideas about public sector evaluation and oversight. There were at least some attempts to develop mutual exchanges across different kinds of public sector regulators and overseers, and there was some recognition, in the Modernising Government White paper, of the compliance costs of public sector audit—the first time, I think, that that issue had ever been recognised, but it was a very vague statement—since then, the Regulatory Impact Unit has started actually to try to find something out about these compliance costs.

814. Yes, I wanted finally just to ask you that, because I thought the paper that you gave us was very interesting on that. Basically, what you argued was, we have had these compliance cost assessments being done for the private sector, for a number of years now, but we have got these huge compliance costs in the public sector which do not have the same treatment and they ought to have; that was the essence of what you were saying?
(Professor Hood) Yes. I think compliance costs are difficult to measure, both in the private sector and in the public sector, and the way that I tried to measure them, in the study that I did a few years ago, was to look only at the costs of interacting with regulators or overseers, so I did not look at any of the costs that might be associated with changing your policies or changing your practices, but only what it cost you to set up the meetings, provide the papers, provide the information, etc., so just that very sense of compliance costs. And my figures, I will immediately say, were very rough, approximate estimates, but I believe that there are good reasons for assuming that compliance costs in that sense, just the interaction with the regulator, of public sector overseers, cannot run out at less than £1 billion a year, cannot do so.

815. And just as we produce these assessments, when we introduce legislation, for the impact upon business, would it not be a sensible idea to have similar things with every piece of legislation for its impact on the public sector, in terms of cost, too?
(Professor Hood) This is what I have argued for, and I think it would be in the spirit of transparency. And I believe that we are beginning to know more about these compliance costs, and I think we will know more as the Regulatory Impact Unit develops its work.

816. Just to follow on that point, is not the compliance costs, that we do, a very crude measure at the moment, it does not distinguish between a large company and a small business? And, in the public sector, the Conservative Government introduced regulations for parish audits, and I have got one parish which is about 60 people, which has a budget of £600 a year, of which £300 is the audit fee, to the Audit Commission. Is not that, we are getting the level of compliance costs, whether it be public or private sector, one of the issues that is crucial?
(Professor Hood) Very much so, and we also found that in the study that I did with my colleagues some years ago. I believe, in fact, that there is a very close similarity between the public and the private sector in that sense; the compliance costs do tend to be higher for the smaller organisations.

817. Did you look at the voluntary sector?
(Professor Hood) No. We only looked at the public sector.

818. Is not one of the cases that the role of the media, in terms of the generation of regulation, is one of the issues that tends to be forgotten, because what happens is the media whip up an issue, create a scapegoat, the Government's response is, "Well, we'd better create a regulatory unit, to make sure it never happens again," another regulatory body gets added, and when the issue has died down in the press this regulatory body is still there and the original reason for it is gone?
(Professor Hood) This is the so-called tombstone theory of regulatory creation, and I think that it does apply to some cases, though I do not think it can explain absolutely every kind of regulatory initiative. I think, actually, in many cases, it is a well-publicised minority. But if that really is an issue, one of the things that I suggested, in my earlier writing on this, is that if that is the case then should we not have some set testing of these regulators, that if they have to be created in response to some perceived crisis could we not put a fixed life on them after which point they have to be investigated? On the whole, we did not find, among the regulators that we looked at, that there was very widespread use of sunset, that is fixed terms of existence for these bodies.

819. One of the issues about the different regulators, and I will just quote an example in my own local authority, where they have combined education and children's social services into one department, they have just recently been inspected by both the SSI, the Social Services Inspectorate, and by OFSTED, and both OFSTED and SSI found it very hard actually to work out, because their own little tick in the box was not there, in one separate silo. The two had been joined together and they found it very hard to work out the interaction between the two. And you had two different sets of inspections, with two different inspectors coming to try to get to grips with the problem. And, as the Modernising Government argued for more joined-up government, is not that going to become more of a problem?
(Professor Hood) Indeed, we found that, with the regulators that we looked at, in many cases the demands that they made on the bodies that they were inspecting, or evaluating, were not co-ordinated, so that, indeed, you might find that you suddenly had a rash of inspections at a single time, which might be hard for an organisation to cope with, and might, indeed, ask for the same kind of information in different forms, and the like. And this goes to the point that I have been making earlier, that there is a case for looking at these practices across the piece. If there is a real case for diversity, and if there is a really good reason for one inspecting or evaluating body to work in a different way from another, well, that case can be made; but if it is simply an inertia process then there ought to be ways of coping with that.

820. We tend to be one of the most deregulated countries in Europe, yet we are the country that has most criticism of our regulation. Did you look at that issue, and is one of the issues the language in which the regulation is actually written that causes the problem?
(Professor Hood) I find it very hard to comment on that, because my study was not cross-nationally comparative, so I cannot speak with any authority about how regulation is seen elsewhere. I do have a colleague at LSE who looked at food regulation across 11 European countries and found that in every one public confidence was sharply dropping.

821. One of the things that we tend to be told is, "We want more entrepreneurs in the Civil Service," and "We want them to take the risks." Who do you think the risks should apply to, whose risk is it that they were looking at; when we talk of entrepreneurs, what should they be judging their entrepreneurial skills by?
(Professor Hood) I am not sure that I have fully understood that question. I do think that one of the key issues that I have observed, in public sector organisations dealing with the risk of blame, is the way that they devise ways of coping with that, through means that I am sure are very familiar to you in your activities, namely, rebuttal, denial, delay, reorganisation, service abandonment, and the like, these are ways that organisations deal with the handling of blame. It does not always—and this is the point that I have been trying to make in my piece on Risk Management—that kind of activity does not often contribute to good social risk management, if I can put it like that.

822. So the avoidance of risk is to the civil servant and Minister, not to the recipient of a service?
(Professor Hood) That is the traditional approach, I believe, well, a very common approach.

823. How do you reverse that so that the risk is protecting the public?
(Professor Hood) I do not think that there is a way, and I have said this in my paper, I do not think there is a panacea that will enable you to do that overnight, but if you can promote greater transparency, more reasoned consideration of risk, then I think you would be moving in the right direction. I do not say these problems will disappear.

824. Is the Public Service Agreement the right way forward?
(Professor Hood) I do not know, again, that I can really make a good judgement of that. I think it is a basis on which something can be built.

825. Just to take you back to one of your statements regarding the reduction in the civil servants and the increase in the overseers for the 20 years up to the nineties, there were some pretty major blunders in recent years: to quote a few, SERPS, BSE and, obviously, the passport system crisis that we had. Do you put the blame down to the number of civil servants cut in that particular area, or would there be another issue to look at, in those particular blunders?
(Professor Hood) I would have had to do a detailed study to look at the links. I think that it might be somewhat different issues in each case, but I am not sure. If I understand it, the Passport Agency collapse involved the management of a complex IT project, a traditional area of weakness within the public service and, indeed, many disasters in the private sector as well. The BSE case involved the identification of a disease for which the science did not exist, a disease which did not even have DNA, so you could not send it off to a laboratory to be analysed. It took a very long time for the science to establish even quite simple things that people wanted to know at the outset, like could the disease be transmitted from cow to calf, could it be transmitted among a herd by contagion, these kinds of simple things were not known and could not be known, even with all the resources that you could throw at them, for a number of years, just because of the reproduction cycle of the beasts. So there you have got a policy-making issue against a moving scientific frontier. So I am not sure that it is necessarily lack of key numbers in either of those cases, it is probably the wrong kinds of skills, and perhaps, in part, the intractable problems that were actually faced in those kinds of cases.

826. Would it not be a worthwhile research exercise, for you, or someone, to look at the great policy failures of our time and see what they might have in common and what differences they have and what lessons might be learned from them?
(Professor Hood) Some work has been done on this, in fact, not largely by myself but there has been work done on that, by the late Barry Turner and other people, of that kind. And some of the things that come through in those kinds of studies are that, if you want a really big kind of organisational policy failure, often you need a large organisation, or preferably several large organisations that do not quite fit together, you need time, because you need a lot of little things to go wrong, in unrecognised ways, over time, and you need some kind of clash of culture for misunderstandings to build up. The work of people like Barry Turner has identified those kinds of features as things that tend to be associated with major policy failures. So some of that work I think has been done; not by me, I should say.

827. You are modest; there is a tantalising footnote here, by you and others, `Assessing the Dangerous Dogs Act: When Does a Regulatory Law Fail?'. When does a regulatory law fail?
(Professor Hood) I used the example of the Dangerous Dogs Act to show the limitations of the better regulation principles, and the reason why I chose that example was that it was cited by the Better Regulation Task Force as an unambiguous example of regulatory failure, and it was condemned as a knee-jerk reaction. I took that example, that was their example, of bad regulatory policy-making, and in my paper what I tried to show was that, in designing this legislation, the principles of better regulation came into conflict, so that it would only have been possible to have met the test on one of them by failing on another; in other words, that they were not consistent in this particular case. And the example that I have put here, I think I referred to that in my paper, is that the more you go for targeting, if you go for a risk-based approach to dog regulation, of which the Dangerous Dogs Act was an example—it has gone much further now in other countries, like Germany and France—then that is going to come into conflict with some of the other principles of better regulation, and indeed did do so, such as transparency. Because, given that breeds of dog are not unambiguously identifiable, in the nature of the beast, there is no DNA test that will enable you to distinguish one breed of dog from another, given that intractable fact, then the more you try to target the more problems you are going to have with transparency. And the point that I was trying to make was that these principles are, in fact, in some cases, certainly in that case, trade-offs; and what I was arguing was that, if you are going to do really a serious test of good regulation, you have to look at how those trade-offs were arrived at, in designing any particular piece of regulation, and whether you could have made it better able to fit one principle of better regulation without violating another. That was my point.

828. Yes, I am interested in that, but surely what happened in practice was that you had a tabloid panic about dogs biting people, politicians have to respond to tabloid panics, they introduce lousy legislation that they know is not going to work, to be seen to be doing something, they do not grapple with "Are we getting consistent principles here?" they are behaving as politicians?
(Professor Hood) I think that may well be the case, but I think that the test then, perhaps, of good regulation is, given the timetable of regulatory development occurs in the way that you suggest, was the approach intelligently crafted, perhaps at the technical level. And what I am referring to here is the idea that, for many kinds of policy initiatives, you have to wait for a window, that is a common feature, I believe, in policy-making of many kinds, and that window perhaps arrives with a tragedy, as in the case that you refer to. But then the test of good regulation is not was it all done in a hurry but when the window opened were the regulators ready with intelligent proposals that were ready to go; and that also does not feature in the principles of good regulation, and I believe it should do, because I think that reflects the reality of how regulatory processes work. And, I think, if you are going to assess regulation intelligently, the test is not whether you had a hasty response to a crisis but whether, when the crisis arrived, when the window opened, there were well-prepared and well thought out proposals. That is my point.

829. I am not sure I am on the right line here, but Professor Hood has been very good, I think he is still going down this line, and it is another example, in fact. These Government inspectors, and particularly the new ones that have just been set up, particularly in local government, I get a bit worried. Because they came into my authority last month and had a look at all the books, and everything, to see how they were run, best value, and all this, and I get a bit worried; because my authority, as far as I am concerned, is well run, they do not waste money. I have seen authorities which have wasted money and built stupid things, but my authority has been well run for years. And yet these new Government inspectors are coming in, although they are Government, and saying to my authority, "You've got two leisure centres here, you've got one at one end of the town and one at the other;" well, they were built before the amalgamation of two local authorities, so they ended up with two. But they are both subsidised by the council tax, and these inspectors are saying, "Oh, we've got to give you a bad mark there, on that one, because you've got two and you're subsidising them." In other words, what they are saying to the local authority is, "You should get rid of one of them, by rights, sell it off," telling them to make a big political decision; and whichever one you close you are going to be wrong in that part of town, whichever administration is in power. And these inspectors are as good as telling these local authorities, where they have got money, where they are subsidising, "You've got to get rid of this;" and these are big political decisions. But they are not telling the people out there that they are telling them that, they are telling the council, and they are making the council take the decision. Do you think that is right?
(Professor Hood) I said at the outset that I believe that public services need to be overseen. I think that there is a question that you can ask about what the appropriate level of oversight actually is, and what the incremental advantage of extra investment in oversight and regulation is. I do not believe that any study has been done of that. I do not believe that we know what the efficiency advantages of increasing investment in regulation of the public sector are; that evidence, as far as I know, does not exist, I have not seen any. In the case of local government, we did find, in the study that we looked at, that, shall we say, the outer reaches of the public sector, and this perhaps is a London-centric view, and perhaps I should say that, but what I mean is this was Whitehall and the centre were the bits where the regulatory growth had tended to be concentrated, that is quangos and local authorities, schools as well. There may be good reasons for that. I am just saying that that was what we observed, that was where we saw the most growth. And, as I have also said earlier, there is a large number of different inspectors, overseers, evaluators, and I do think, as I have said in my earlier remarks and also in my published work, that the links between these bodies have not, shall we say, been very fully thought out, I think the system has evolved in a relatively unrationalised way.

830. They were put there to do a political job, do you think?
(Professor Hood) People have spoken of the politics of reassurance.

Mr Campbell: I have always had my doubts about the Audit Commission. I think that has been politically manhandled for years by parties, quite honestly, because they come in and tell local government what to do and what not to do, and I think sometimes they can get a bit political. And what I think is happening now, is, all these Government inspectorates and audits, I think the power is being taken away from politicians to make these decisions. I do not mind them coming in and saying, "Look," to the public, wherever they are, "here's a press release; we think you've got too many leisure centres here, that's our opinion, but it's up to the local authority to make the decision, not me, as an inspector." But they are not saying that, they are saying quietly to the chief executive of the council, "You've got to get rid of one of these," and they have got to make a big policy decision, that could nearly put whoever is in power out of power, taking a big decision like that. But they are not going to do that, they will whisper in your ear but they will not tell the public that "We've told the council to do it."

831. This rather reinforces your line about the need for some oversight of these things?
(Professor Hood) And a hard look. I am saying that there is a very good case for—

Mr Campbell: I think they are politically motivated; that is my opinion, honestly, straightforwardly.

832. I would like to ask one final question on risk. One of the fundamental obstacles to much more entrepreneurial activity in the Civil Service and other public services is the Treasury Rules on spending of money. Did you do any analysis of the negative effect of the Treasury Rules and particularly the 1920 and 1930 Acts that govern it?
(Professor Hood) No. I cannot honestly say that I have; but I do not think that that is the only factor that is affecting risk management in the public sector. I think also the move towards private insurance of public sector activities also has an impact on the way that public bodies manage risk, and may have real implications for the way that they handle issues of financial liability.

833. Could I say, as we end, because we are doing this broad-ranging inquiry into how Government works, and linking to the Modernising Government White Paper and Civil Service reform programme, you are a distinguished scholar of public administration, we are a humble Committee of Public Administration, is there anything that we have not asked you, that relates to any of that, that you might want to say to us, or is that just an impossible question?
(Professor Hood) I cannot think at the moment of a major additional point I would like to make. If one occurs to me when I am on the bus going home,—

Chairman: If I take up your offer, if points do occur to you, I think I would be very interested in your work, and it would be very good if you were just to drop us a note, we would appreciate that very much. And thank you very much for coming along and giving your time today.

834. Could I welcome our witnesses, on behalf of the Committee, and thank you very much for coming along and helping us with our general inquiry into making government work. I would particularly like to welcome Geoff Mulgan who is the Director of the Performance and Innovation Unit, and Ann Steward who is the Director of e-Government in the Office of the e-Envoy, and supporting cast. I understand that perhaps the two of you would like to say something by way of introduction. If so, by all means do.

(Mr Mulgan) Yes. First of all, I would like to thank you for the invitation. We are very grateful for the chance to take part in what has been a fascinating series of deliberations. I want to make a couple of points by way of introduction. First of all, I would like to say that I have only actually been in my current post for about four months, which is one of the reasons why I have brought along two colleagues—Jamie Rentoul and Stephen Aldridge—who have worked in PIU since its creation and therefore can answer some questions more authoritatively than I can. Secondly, as the paper which has been circulated to you I hope makes clear, we see our role very much as being about achieving practical change on the ground. We are not in the business just of producing reports, and the memorandum sets out some of the results that have already been achieved by PIU projects in the past. The focus on implementation and results is absolutely essential to where we are going as a unit. The final thing to say is that we are, in a sense, an innovation as a unit, and attempt to be self-critical, to be willing to learn, to recognise where we are not getting things right. I would very much welcome your feedback, your contribution to what is for us a continuing process of trying to improve our work.

835. Thank you very much for that. Ms Steward?
(Ms Steward) Thank you. Again, can I thank you very much for the opportunity to come and be part of the session here this afternoon. We have provided a short memorandum on my areas of activity and what I have responsibility for. I thought it might be useful to give you a flavour of the progress that has been made since we launched e-Government in April of last year. Perhaps I could focus on about three areas and introduce those. We went live with our Citizen Portal in December of last year. That is an important initiative that the Government has taken on board. That really is about our efforts to join up government information content on the Internet and so to make it easier for citizens to gain access to government information, and then, in support of that, to enable the citizens to have secure transactions. We are also working on what we call the Government Gateway, a piece of infrastructure to help bridge the back office and the front web-facing services to citizens. Finally, I think, on the progress that we are making overall in terms of our online services, our report that was released yesterday indicates that 40 per cent of those services we have identified as being able to be put online are actually online now. Thank you.

836. Thank you very much for that introduction. Perhaps I could kick off with some general questions. I think, Geoff Mulgan, you are a unique resource for this Committee, because you have been thinking about the public sector and how it works, and should work, for these many years in different roles. I would like, if we could, to tap into that, to help us with our thinking. I must say, I did stumble across a splendid article you wrote just ten years ago, in 1991, in that late-lamented journal Marxism Today, where you say this: "Public sector remains in the midst of a profound long-term crisis that will dominate the politics of the 1990s as much as the 1980s. The root causes of this crisis are economic, the interaction of a remorseless rise in the cost of providing services and steadily growing demands." Is that still your view on the central problem that the public sector faces?
(Mr Mulgan) I think public sectors around the world probably do still face precisely those tasks. The unit I now run is responsible for trying, in a small way, to address two parts of that. One is how to increase the performance of Government as a whole within limited resources. In addition, what was not emphasised in that quotation is that Government has to innovate, to become more enterprising, more imaginative in its use of its own resources, its people, its structures. It is a long time since I wrote that article.

837. No, it is a splendid article. It is unfair and horrible when people take you back to things you have written before, but in this case it seems to me to be entirely illuminating of where we are now. The reason I asked that question is obviously the approach that you bring to thinking about Government and about how it operates; it is obviously structured by what you think Government is, and what you think the central tasks are that it has to get hold of. If the central task is somehow to resolve that dilemma that you identified, then how you approach state services will be entirely different if you identify the task as being rather different, so it is rather important to know whether you still attach yourself to that broader view of what you think Government is all about.
(Mr Mulgan) I should say that in my current role I am commissioned with specific tasks by the Prime Minister, by Government as a whole, and we as a unit work according to briefs which we are given. Most of the PIU's work, as you will see from the document, is to do with fairly discrete policy issues like adoption, or renewable energy which we are working on at the moment, and some structural issues within Government like the organisation of regional offices. That is, broadly speaking, the main business of the PIU and will be for the foreseeable future, working very much on a project basis on specific issues where hopefully over relatively short periods of time—our projects tend to be completed within six to nine months—we can make significant breakthroughs in understanding of the issues and come up with very specific recommendations which can be fairly quickly put into effect. So to that extent, we are part of a rather pragmatic approach to policy-making; we are not particularly in the business of creating grand visions or grand analyses of the tasks facing Government. I think our value-added, and the test for us, is whether, on those practical projects, we really do achieve advances.

838. I understand that, but your argument was, it seems to me—I was convinced by it—that unless one had a grand vision, then pragmatic initiatives would come to nought, because they had to be consistent with this broader view of what the public sector wants. I can see I am not going to press you very much further on that. What I do want to know is, again as someone who is doing it now, but having thought about it for a long time, broadly speaking—and you are among friends, you can talk to us—what is your analysis of what is wrong with the way that we do Government now and in the past, for which initiatives like your own are designed to be a remedy?
(Mr Mulgan) My opinions have not greatly changed since being outside Government, and I think they are probably fairly widely shared. Much of the rationale behind the creation of units like the PIU, the SEU, and many of the reforms which have taken place in recent years, have been trying to address a series of problems, things which are seen to be failing in the system: insufficient capacity to innovate, to be entrepreneurial, to be able to link in to the best thinking in the rest of British society and indeed worldwide; capacity to reform; to be efficient, to use resources in ways that actually meet customers' needs rather than the needs of producers; a culture which to some extent was not sufficiently reflecting British society as it currently is in terms of diversity of employment and a whole series of other aspects. One of the big themes which again has been talked about for many years, one of the big critiques of Government in practice is that it is short-termist in its behaviour, as are politicians and ministers, and a high long-term price is paid for that. So in all of those respects I think there is a fairly widely shared analysis of some of the things which are wrong within Government and within the public sector as a whole, which a whole host of different reforms and institutions, including the PIU, are trying to address, as indeed is the e-Envoy Office. Only time will tell how successful they are, whether they are going far enough or, indeed, whether the analysis is absolutely spot on, but I think a lot of progress is being made, and that progress can only be made because there is a widely shared analysis of what is wrong.

839. The word is that you are the person who gave us the term "joined-up Government" for which you either deserve enormous credit or discredit. Could you tell us whether we had unjoined-up Government before, and also how we are to do it?
(Mr Mulgan) I think it is a rather ugly phrase "joined-up Government", and I am not certain that I did in fact coin it. Much of what Government has to do has to be organised in vertical structures, with clear lines of accountability, functionally divided structures, but it has very long been recognised, back to Haldane and indeed before, that many of the tasks which Government has to address in our current era—issues such as small firms competitiveness, social exclusion, the environment, the family—do not fit well into those functional, vertical hierarchies; that the needs of citizens are not easily sliced up into those functional silos, and that therefore in some fields, and in a variety of different ways, Government needs to operate more horizontally, more joined up, more holistically—you can use whatever language you like. That can sometimes be achieved through the ways in which budgets are structured; it can sometimes be achieved through the ways in which ministerial responsibilities are structured; it can sometimes be achieved through the ways in which particular things like technology are organised across departmental boundaries; and sometimes it can be addressed through creating units either in the centre of Government or within departments, but which have a cross-cutting remit covering fields beyond their traditionally set departmental boundary. All of those different tools are currently being used to try to make Government more joined up than it has been in the past. Inevitably those horizontal aspects have to co-exist with what is still primarily a set of vertical structures responsible for delivering services and achieving results in very clearly defined areas. This is not a specifically UK debate and discussion; other governments all around the world have been grappling with the same issues. Past British Governments have tried to be more joined up in different ways and with varying degrees of success, and I am sure that in ten or 15 years' time your equivalents and my equivalents will still be grappling with how to achieve it. It is clearly very difficult to achieve the right balance between the horizontal and the vertical.

MR GEOFF MULGAN, MR JAMIE RENTOUL MR STEPHEN ALDRIDGE, MS ANN STEWARD MR BOB EVANS AND MR STEFAN CZERNIAWKSI

840. Thank you for that. I have also seen you reported as identifying a particular gap between policy making and policy implementing as a real issue. Again perhaps I can move from Marxism Today to Public Finance more recently, where you say, "I have always been of the view that policy-makers underestimate the importance of practical implementation. I am not part of this very British Oxbridge disease that says policy is a high-level thing. I think one of the ways the public sector reforms of the 1980s went wrong was in believing you could separate out policy and implementation." I get the sense from the Government that it is very impatient with the way in which the system still seems to act as a brake on the kind of delivery that it wants. Is that because of this gap between policy implementation? If so, how on earth do we bridge it?
(Mr Mulgan) I think this Government is impatient with the speed of delivery. The last Government was as well. Much of the public is hoping to see results quickly and cannot quite understand why things are not achieved. As in the quote you read out, it is my view—and again I think this is pretty widely shared—that practical experience, practical implementation, has probably been undervalued in British Government in the past—perhaps in British society as a whole—relative to the formal tasks of writing elegant minutes and memoranda or legislation. One consequence of that has been that we have seen in too many fields policy failures, failures of implementation, failures of delivery. In terms of what should be done to rectify that, there are quite a lot of practical measures which can be taken, and indeed which are being taken, to move towards a culture right across Government which is more focused on delivery and implementation: in career terms rewarding front-line experience, direct involvement in implementation, more highly; ensuring that people are more likely to be promoted quickly if they have actually done some practical things rather than solely operated in policy roles in Whitehall. I think there is a great advantage in bringing more practitioners into the policy-making process much earlier on—this is happening in many departments, it has happened in the Social Exclusion Unit, it has happened in the PIU's work as well—so that we do not see a separation between, as it were, the pure policy specialists and then a different group of people who go off and implement, but rather we see the two as integral, and that the implementers are, right from the start, able to offer a reality check to say, "This policy isn't going to work, it will run into all sorts of problems. The IT issues haven't been grappled with, the human resources issues strategy is flawed" and so on. I think there is a great advantage in doing that. The final point I would say as to why the divide between policy and implementation can be problematic is that not many policies are implemented right first time. With most policies you implement, bits of them work, other things do not, and then you have to improve them, you have to learn quickly, in the light of experience and preferably fairly hard-edged evidence, about which bits are working and which are not. That requires constant feedback between the implementation and policy adjustment, rather than a one-off policy process which then gives a series of instructions to a different group of people who implement it.

841. I am trying to avoid grand visions now, but do you have in your mind a view of what a structurally reorganised British Government that would meet these criteria that you are defining would look like? Do you see your role as trying to move the system in that direction?
(Mr Mulgan) No, I do not have a blueprint for a grand structural vision. I think what Government is doing at the moment is right, which is to try to evolve a series of different approaches and methods some of which are set out in reports like the Wiring it Up report from the PIU, of the different ways in which you can achieve better joining-up, better implementation, and to allow these to evolve and to develop and prove themselves. I am actually quite suspicious of grand blueprints and structural redesigns. I think often in the past British Government has gone wrong by people believing that if you created a new architecture, somehow that would automatically solve the underlying problems.

842. I have had trouble in deciding whether or not you do have a grand vision. You say you do not, and I am sure that is right. Take something like the case you have cited of social exclusion. You have in fact got a new unit which more and more is, as you say, doing policy and implementation, it is more and more you doing the job of the traditional Civil Service Department, and eventually you will end up with a unit which has a Secretary of State responsible for it in a political sense and a Permanent Secretary responsible for it. You are, in a sense, recasting departments in order to concentrate on priorities, is that not right? I do appreciate the difficulties between vertical and horizontal.
(Mr Mulgan) I do not think it is. One of the priorities for central units like the PIU and the SEU is not to try to supplant the role of departments, and to be very clear that we only succeed to the extent that we achieve the support of departments, we convince them that the proposals coming from us are correct. In relation to the Social Exclusion Unit, I think you might be hearing evidence from Moira Wallace, and she can speak for them. Many of the things they have been looking at have now been passed out to the Department of Environment, Transport and the Regions, which is leading on neighbourhood renewal, setting up new units to implement that body of policy; the DfEE is leading on children and young people, again to set up a new structure with some cross-cutting roles, powers and budgets to take forward implementation.

843. Who takes responsibility? Who is responsible for seeing the targets, objectives, whatever it is, of the Social Exclusion Unit are met? Is it the Social Exclusion Unit?
(Mr Mulgan) In each case the task of implementation is clearly allotted to a particular department.

844. Who will chase them up?
(Mr Mulgan) They in turn are responsible for achieving the targets which are usually set out in published reports or, indeed, in spending reviews. So it is not the SEU which is responsible, it is the people within departments—permanent secretaries and other officials—who are responsible for achieving those.

845. Who will take them to task if that franchised-out work is not completed or is not done properly?
(Mr Mulgan) In a sense, it is part of the normal accountability processes of Government—the Prime Minister, the PSX process and so on. Indeed, so far as possible, the specific targets, if you are asking me about that, which we try wherever possible to put in the form of PSAs and SDAs, then are monitored and reviewed in the context of the PSX process.

846. Can I finish this mapping exercise, so that we get our minds around this system, before I hand over elsewhere. These are one or two fairly practical questions. When I look at reports of what the PIU has been doing, one question I ask myself is, could some of these have been done by task forces? What is the essential difference between having some of these topics farmed out to a task force or done in the PIU which operates rather similarly to a task force, does it not?
(Mr Mulgan) There are some similarities. Indeed, when any issue arises on the Government agenda, there is a choice of a whole variety of different tools you can use to look at it. The advantage of the PIU method over task forces is that we put together teams, usually about six or eight people, from mixed backgrounds—some civil servants from departments, some outsiders from business, the public sector, academia and so on, who work full time on the issue for quite a long period (say, six to nine months), doing rigorous analysis of the evidence so we know about what works, what does not work, hopefully thinking creatively about the different options, and then working through very practical proposals and policies. Task forces, which are usually made up of people sitting temporarily, but who have full-time jobs, for all sorts of reasons find it very hard to get into the fundamentals of an issue; they have all sorts of other advantages, but I think that for many of the sorts of topics which we are commissioned to do, that very intensive, full-time work by a team who are working day in and day out together, learning from each other, bringing together a range of different backgrounds from departments, from business and elsewhere, actually is uniquely able to achieve progress in practical policy making. That is not to say that task forces are not often a very useful thing, but I would say that on balance, with a tricky policy issue, the PIU model tends to be better.

847. Thank you for that. Last week we had in Professor Ron Amman from the Centre for Management and Policy Studies, who was telling us about his trade which was the cutting edge, evidence-based policy analysis. Are not you doing the same kind of thing?
(Mr Mulgan) We work very closely with the CMPS, and indeed we work in the same building, which helps. We have fairly distinctive tasks. We are given specific policy topics to work on and to come up with very specific recommendations. That is not a job the CMPS has. We often work with them on the early stage of a project, looking at what the evidence tells us. They can help, for example, to survey experience from around the world and from other governments, and feed them into our projects. There is a fairly clear division of labour between us, and we work very closely with them.

848. Thank you. I am almost done. What about the Strategic Futures Group? What is it, and what is your role, if any, in it?
(Mr Mulgan) I am glad you asked me that, because there has been somewhat misleading coverage of its role. It is actually an interesting but rather low-key and loose structure which was set up because a lot of departments have, over the last few years, set up strategy units and futures units. Indeed, most of the departments across Whitehall and devolved administrations have units of this kind. Many of them felt, and we felt too, that there could be an advantage in bringing them together in a single group who could share experience, share information and ideas. We, as the PIU, provide some support to that, and are doing some bits of research—for example, studying best practice around the world in futures and strategic work—which we will then feed in to that group. It has absolutely no power. We do not command anybody, co-ordinate anybody, tell anybody what they should do. Those individual units within departments can only be successful to the extent that they have the confidence and full support of their Permanent Secretaries and Ministers, so any centralised control over them would be completely counterproductive. I would emphasise this point. It is, in a sense, a voluntarist grouping of different units, and it will only work to the extent that they get something back out of it. My role is a role again without any authority. I just happen to chair their meetings. Certainly it is quite an interesting development, it is part of Government trying to be more long term, it is about trying to survey different possible futures, different trends, in order to improve the quality of decision-making within departments, but is in no way part of a centralisation of power in Whitehall, let alone any political control over these units.

849. Let me finally ask, who then decides what you look at?
(Mr Mulgan) We go through a fairly wide-ranging trawling process to define what projects we should be doing. We ask departments what they think we should be doing. We ask others around the centre of Government and, indeed, I hope in future we will cast the net even wider. Although I think it would be fair to say that in the very early days of the PIU there was some suspicion on the part of departments that we were, in a sense, coming as perhaps part of a sort of bossy centre, more and more departments have come to us proposing projects we should do. Of the last four or five projects we have announced in the last couple of months, one was proposed by DfID, one by DETR, one we are doing in close collaboration with the Treasury, one came from Number Ten, one we are doing with the DfEE. So we are now actually becoming a much more collective resource for Government. As I said, I hope that in future we can have an even more open process for identifying topics. I should say that out of that process we develop quite a long list of potential topics to look at. We then put together small teams to scope them, to work out whether there really is something we can add value on, whether there are practical results which can be achieved, whether the department is already doing the job perfectly well, and out of that try to focus on a much shorter list of recommendations to the Prime Minister of projects we actually do think should be fully-fledged PIU projects with sponsor Ministers and so on.

850. So you propose to the Prime Minister, and the Prime Minister decides?
(Mr Mulgan) That is right, but after an extremely open trawl and consultation across Whitehall.

851. Do you answer to the Prime Minister?
(Mr Mulgan) I report to the Prime Minister, through Sir Richard Wilson.

852. Have you seen, and do you look at all frequently at, the organisation chart for the Cabinet Office?
(Mr Mulgan) I do not look at any organisation charts very often, no.

853. Could you tell me why not?
(Mr Mulgan) You had an interesting discussion on organisation charts, I know, in this Committee, and there is nothing I can add to that.

854. I cannot remember that. Perhaps you could remind the Committee which bit you do not feel you are able to add to (I mean to the discussion we had)? Do you think the organisation chart tells us very much about what is going on in the Cabinet Office? Would you use it as a way of trying to find out what is going on in the Cabinet Office?
(Mr Mulgan) Probably not.

855. Does this imply—it may have no bearing at all—for example, that the Cabinet Office itself needs a bit of wiring up?
(Mr Mulgan) I think you are quite shortly going to be taking evidence from a number of people in the Cabinet Office who are much better able to answer that question than I am. All I would say is that we in the PIU see ourselves as part of the centre of Government as a whole, which includes the Cabinet Office, Treasury and Number Ten. We are only effective to the extent that we wire up very well with all of those bits of the machinery. I think that broadly speaking, with projects the PIU carries on, the follow through and so on, the centre operates as a pretty integrated whole, contrary to what you might imagine from some of the media reporting of the centre of Government. As I say, I really cannot answer for other bits of the Cabinet Office, but in terms of the policy topics we carry out, working relationships are very close right across the centre. If I were to draw an organisation chart, I would want it to include all the different parts of the centre, rather than separating out the Cabinet Office, because I think that leads to a slightly misleading view of how things are run.

856. Could we have one of those charts?
(Mr Mulgan) As I say, I am not the person to ask for one of those, and since I got a U in my Art `O'Level, I would probably come up with a much worse one.

857. You used to be, until very recently, a special adviser. I understand that you passed a message that you do not want to answer questions on special advisers and their role, and I will respect that. However, I would like to ask you, for a start, why you switched? You were an adviser until very recently, and now you are a civil servant. Why?
(Mr Mulgan) That is a personal question. I have been previously in my career a public servant in local government and in Europe long before I was a special adviser, so for me it was in no way a strange move to become a civil servant of national Government. The PIU I thought had done an extremely good job in its first two years, and I can say that because I take no credit for it whatsoever. When the job was advertised I had already spent some time as a special adviser, it was probably time to move on, and the PIU job was as attractive a job as I could imagine. I had always envisaged at some point moving into public service, though I had not decided whether that should be local or national Government, and I saw it as an opportunity which was too good to miss.

858. Will you work for an incoming Conservative administration?
(Mr Mulgan) Yes.

859. The only reason I ask is that there is only one precedent that I know of for the switch you have made, although you may know lots; I only know of one of any significance, and that is Terry Burns who came in as Chief Economic Adviser in 1979, became a permanent civil servant in about 1987—you may know the exact dates—and did not have a happy time when there was a change of Government, indeed I think it is common knowledge in the Whitehall village that he had a very unhappy time. The reason I asked the question is that there is in the public perception, I think, and, from what I can tell, rightly, quite a big difference between the character of people who are at present special advisers and the kinds of people who are civil servants. Would you agree with that?
(Mr Mulgan) As Sir Richard has said, special advisers vary greatly in the kinds of people they are, their kinds of backgrounds, their degree of expertise. I am not going to comment on that. In relation to Terry Burns, again it is not for me to comment on an individual case, although I would say that I think in many respects he did show that you could make that transition and he has since been appointed to an important role by this Government, whatever may or may not have transpired.

860. He was not sacked summarily, he was eased out after an interval.
(Mr Mulgan) He has been playing a rather powerful role in recent months in British public life, I believe. As I say, it is not for me to comment on that. I think it is possible to make that transition. It depends upon the particular individual. I in the past worked with all parties and in many non-political roles, which probably made it easier for me to make the change than it would be for many special advisers. Clearly, in the event of an election and a change of Government, I in my current role would need to review with our new masters the PIU work programme and so on. That is a natural thing in Government. I would not want to generalise in any way about the implications of what I have done, how far other people could or could not do it.

861. That is a shame. I thought that would be a very interesting question, because my next question was going to be, you are there as a unit to compensate for what must be seen as failings or weaknesses in existing civil service structure to some degree, otherwise you would not have been created. All Governments think there are things wrong with the Civil Service, and there probably are, and you are partly there to help rectify that. My next question was going to be, do you think that a lifetime career structure in the Civil Service as we have now at the top, with relatively little movement in and out—you are an exception, in a sense I was an exception, moving in and out—is the way forward, or do you think we need much better interchange between other walks of life, other careers and the Civil Service?
(Mr Mulgan) I have three comments. First of all, on the first bit of your question, I think it is right that Governments of all political persuasions have tried to do what, in a sense, the PIU is part of trying to do, which is to find a way to make Government more strategic, better at doing policy, better at being longer term. Probably the clearest antecedent of the PIU is the CPRS which was set up by Ted Heath nearly 30 years ago. I would tend to agree with the implication of the next bit of your question, which Sir Richard talked about as well, which is that the Civil Service would benefit from having more interchange, more openness, more key people getting different kinds of experience in their working lives, but with the caveat—and I think it is a very important one which I believe this Committee has addressed as well—that that must not be done at the expense of the very clear core values, principles and ethos which bind public service as a whole together and make it different from other kinds of service. With that caveat, I think not only Government benefits from getting different kinds of experience and expertise—and the PIU is part of that, half our membership at any one time is seconded from outside Government—but also there is a benefit to the rest of society if more people working in the wider public sector, local government, business, know how central Government works, that it is not an obscure field which most people do not comprehend.

862. I agree with everything you have said so far, and I particularly agree with that. How are we going to get it? You are the innovation unit. What is the innovative way to get this?
(Mr Mulgan) I can only talk about what we do in that respect, because I have no responsibility for personnel policies across the Civil Service.

863. Until you are appointed to do a study on how to get more people in and out.
(Mr Mulgan) When we do that I will be delighted to give you a full answer. As for the moment, all I can say is that we are doing all we can to pull in as many people as possible from different walks of life into the PIU. You may have seen that we have advertised in the last week for people from all fields to offer their services, to come and spend six to nine months in central Government. We are very keen not only to get people from across business, voluntary sector, public sector, but also from abroad. We already have a number of people working in the PIU seconded from governments elsewhere around the world. We find that extremely useful. I hope we can to some extent act as the role model or pilot, if you like, for other bits of Government to copy. In a sense, that is part of the broader ethos of working in a very open, wide and transparent way.

864. I have one last question which draws on something which the Chairman was talking about, which is the Strategic Futures Groups. Roughly how many people in each of the major departments are there in the Strategic Futures Groups? Could you tell us a bit more about them? I know very little. How many are there and how long have they been established? Who is setting their agendas—is it the Secretary of State, or are they generating their own? How does their role compare with what the CPRS has been doing for the whole Government, in this case at a departmental level? Tell me a bit more.
(Mr Mulgan) I cannot give a comprehensive answer. They are pretty different in kind. The Foreign Office, for example, has long had a policy planning staff. The DTI has a futures and innovation unit which operates with a particular style in a fairly open way. In other departments these units are much more closely tied into core strategy-making by the department and by the Permanent Secretary. So it is slightly hard, it is impossible in fact, to generalise. I do not know the numbers involved as a whole across Whitehall. What I would say is that more and more departments see it as useful to have a specialist function within them which is looking further ahead than immediate policy priorities, which is identifying the factors in their external environment which may help or hinder; and also, critical for our work, looking at more cross-cutting issues at how things which may appear at first glance to be another department's domain may in fact impinge on their work. Often the worst policy disasters arise from not noticing something which appears to be in a different neighbourhood but which actually affects you. So I am afraid I cannot give you an answer on individual units.

865. Has this group ever met, to your knowledge?
(Mr Mulgan) The Strategic Futures Group meets in a very low-key, very informal way. We bring in presentations, usually from outside.

867. I am trying to get a feel for how many people there are. I know something about the Policy Planning Unit of the Foreign Office which has been around for a long time, as I say, but I do not have any experience of the Strategic Futures Group, and I wondered if you could help.
(Mr Mulgan) There are one or two people from a range of departments at any one point. At one meeting there might be 20 or 30 people.

868. Would you be prepared to give us a note? I know you do not have any formal powers in this area, but would you be prepared to send us a note setting out how many people there are on these committees, and any other information you feel you ought to divulge?
(Mr Mulgan) I cannot see any problem in giving you a note about this particular group. It is a very loose, low-key committee, there is nothing particularly controversial about it. What I cannot do is give you a note on the individual units within departments, their work, who sets their programme and so on, mainly because I do not know.

869. All right, I will table some PQs. It is jolly hard work sometimes getting information, but are they all always called Strategic Futures Groups?
(Mr Mulgan) No.

870. Could you give us a list of what they are called in the case of each department? Would you be prepared to do that?
(Mr Mulgan) Can I just clarify that. The Strategic Futures Group is a committee, an informal committee made up of individual units across a wide range of departments in Whitehall and indeed beyond, which meets irregularly to share information, ideas, to have presentations from outside. I am absolutely delighted to share information about that group which we convene as the PIU. What I cannot do is tell you in detail about what its members do, what their work programmes are, exactly whom they report to and so on.

871. Fair enough. Will you send me a list at least of the named headings under which these groups operate in each department?
(Mr Mulgan) Yes.

872. If you could send us a note of the areas Andrew is asking about, that would be helpful.
(Mr Mulgan) Yes, I am happy to do that.

873. Do special advisers sit on these committees?
(Mr Mulgan) No, not as far as I am aware.

874. I have a couple of questions to Ann and one final question for Geoff before I move on to Ann. One of the great initiatives the Government set up was a complete review, with quite a number of pilots, but one of the issues that I see that needs to be tackled is how do you turn the pilots into full scale, right across the Government, particularly when departmental budgets are departmental and not allocated to joined-up initiatives? How do you actually tackle that?
(Mr Mulgan) I think this is one of the great issues involved in making Government more evidence based. On the one hand, in an ideal world, for every new policy we would have a series of pilots which would be fully evaluated and assessed, and then if they worked you would roll them out nationally. In practice, life is too short for that.

875. There is an election coming up.
(Mr Mulgan) We have a variety of pilots, pathfinders and so on, which by and large are fully evaluated four, five, six years down the line, but in addition departments try to identify the early lessons, the emerging conclusions, from their work and scale those up. In my view, British Government—and I think this is a common feature in many other governments too—has been relatively poor at quickly enough identifying what works, what are the promising innovations, and then analysing which of those are in fact replicable or not. Often they depend upon a particular individual who has been very creative, or a particular local circumstance which makes it possible to do something which simply is not possible elsewhere. We do not have good ways of identifying and analysing those, and then finally of quickly scaling them up across the country. Some departments are better at this than others, but as a whole our system is rather better at taking a national command and implementing it in a standardised way, than learning from pilots and, as I say, scaling up particular innovations. This is not an issue which is unique to the UK, it is one which, if you talk to many other governments, they are grappling with. It is an issue where we have quite a lot to learn from business, and bodies like the World Bank in the development field, which put a lot of time and effort into thinking about how you understand emerging successes, scale them up and replicate them. I think it would be a fair criticism that the UK Government is not doing this anything like as well as it should be.

876. Could I move to Ann. My understanding is that you have got the government element of the e-Envoy's Office and that the commercial element is elsewhere, is that right?
(Ms Steward) That is right, I have the responsibility for the e-Government Group, one of three within the e-Envoy's Group.

877. I was talking to Cable and Wireless at lunchtime. They gave me their brochure about the GSI project and e-Government. In the glossary at the back it has a whole series of terms such as Government Gateway, GSC, GSI, GSI Extranet, GTS, knowledge network, portals, etcetera, etcetera. Is not one of the problems that e-Government has got that nobody knows what it is, and the language is totally alien to most people?
(Ms Steward) Our work in the e-Government Group is really trying very hard to present information back to the citizens in a way that is meaningful for them, in a language that is easy to read and that can be understood and relate to their own individual life experiences as well. I think our Citizen Portal is exactly a reflection of that; to be able to present information around what we have termed "life episodes", so that they can actually have greater clarity on that. We continue to work with departments and agencies in terms of the content of the information and services that they have, to ensure that they are presenting it in a way that is meaningful and has greater clarity. Technology does bring with it some of the acronyms and special language that are quite unique to it, but we are trying to break down that difficulty in presenting information in clearer language.

878. One of the criticisms of the Government's Secure Intranet is that it is purely Government, and that there is a whole local government world out there who would be quite willing to share information with Government, but they can see that they have not got the budgets to set up the links. Government departments are quite willing to share the information with local government, but they are not prepared to pay for the link to get there. How are you tackling that interface between local government and central Government?
(Ms Steward) We work very closely with local government through their associations, the LGA and the IDeA, particularly our central Government organisation DETR who are the leading authority in that regard. We work closely with them, particularly the LGA, in supporting work which they would have for their own online initiatives. We support them in making available to them any of the work we do on our frameworks, our standards, our strategy documents, in fact any of the work that we do on areas like our Citizen Portal where we have close links with them as well. I think you would be aware that through the recent spending round there has been additional money made available to local government—£350 million—to assist them in getting online as well.

  879. One of the criticisms there has been is that the money that has been available for the investment in technology, in wiring up different departments, has come out of the Invest to Save Fund, and that the total of the money may be larger over time, but because it is split up into very small chunks of invest to save, the best has not been got out of it. Is that part of the criticism of the programme, or is that just somebody who is scaremongering? Do you recognise that picture?
  (Ms Steward) The Invest to Save Fund I think is a very useful and very valuable fund. It has clearly demonstrated the opportunities that various departments and agencies can gain through having access to the additional money to support new initiatives that they could not normally fund to go forward. It is supplemented also with the Capital Modernisation Fund which specifically targets capital investment to be able to go forward in that. I think my colleague might want to add a bit more information specifically on the Invest to Save Fund.
  (Mr Czerniawski) It is part of the intention of the Invest to Save budget that it is really one of these new initiatives, things that have not been done before, trying out ideas and being ready to recognise that some will succeed and some will be less successful. The scaling up of the new ideas is part of implementation. The larger implementation falls back into the standard spending review process. It puts us in the position to sponsor a wide range of activities from which we can learn from industry what works, encouraging a spread across the country.

880. When the Permanent Secretary of the DSS was here, when we were doing an investigation into SERPS, one of the things she admitted to was a massive problem in terms of communication in her department, the IT communication between different benefits agencies just was not there. Is it your responsibility to look at these departments and say, "You're not addressing that issue", or do you rely on the departments themselves to admit they have got problems in terms of delivering what they have to do right across Government?
(Ms Steward) The responsibility would rest with each individual department and agency and their senior management in that regard. We work very closely with them. We work with them through their information age government champion. We have a series of work groups that they would be invited to participate in, including areas, say, in connection with GSI and in work that they would do with any of our other major initiatives.

881. One of the most interesting innovations Government had was to introduce information age champions, as you have just mentioned. Has there been any review of how that process has worked?
(Ms Steward) I think the information age champion process is an ongoing review process in being able to identify the effectiveness of the way in which we can effectively communicate with them and have an inclusive role in work that we take forward. We internally, in the Office of the e-Envoy, also look to see just how effective we can be in supporting them as well, so collectively we will continue to review and see what changes may improve any of the operations.

882. I know the Government has signed interesting initiatives with Singapore and with other governments. Could you tell us what that is about, and what the benefits to the UK are?
(Ms Steward) These are memoranda of understanding that are established with other governments. It builds very much on what Geoff was talking about before, of being able to exchange information, experiences, work collaboratively with other governments, so that we can take advantage of their experiences to take added value as we try to translate any of our own initiatives, particularly in some of the areas like online services.

883. I want to ask you some questions about three difficult areas that may provide challenges to the Government's target for e-Government. The first is the data protection issues of human rights. There was a seminar yesterday where the police were saying that the Data Protection Act issues, and particularly the European Directive, were causing problems in terms of sharing information across different government departments. Is that a problem that you would see? If so, do we need to amend the data protection regulations we have got in this country?
(Ms Steward) Data protection is an important aspect of any of the work that we undertake across the Civil Service, and, particularly where we would use online services, departments and agencies must adhere to those regulations. I cannot speak on behalf of the Data Protection Commission, but again the PIU is actually taking forward a study currently on data protection, privacy and data sharing, and a much better understanding of what other opportunities there are available to us to be able to share data, for the end result of being able to provide improved services to our citizens.

884. One of the most frustrating things that I find is having to give my name and address time and time and time again, not only to Government but to businesses. Would it not be simpler just to have an ID card like they do in other continental countries, which can provide the information once and save all these hassles people have in their daily lives? I have thousands of cards which I use for different things, so why not have one card?
(Ms Steward) There are various ways in which we are looking at being able to make our services more readily available. We recently released a small pilot of a small system on change of address exactly for that, to make it easier for people to be able to notify information, either through commercial providers who are out there operating currently, or through the Post Office, so that information can be provided back into Government, and therefore for us actually to place that in our systems, so it reduces the amount of time that we need to come back and ask for the same information.

885. The last area where I think there is a problem is the skills that we have in this country. My background is a systems analyst. The project management skills that we have got in this country are very poor. It is true in other countries as well that project management skills are not very high. Are you addressing that through national training programmes? How are you addressing it within the Civil Service in order to achieve some of the Government's targets that they have set?
(Ms Steward) We are addressing that. We in fact identified the need to focus on those through the Government's review of successful IT projects through last year. There is work going through now with the Government's National Training Organisation, through other projects in the marketability of qualifications, through the Office of Government Commerce which is actually looking at that in depth as well. So there are particularly targeted areas, support from the centre for departments and agencies so that they can up-skill for their individual civil servants who are working in that area. I also note that it is, as you indicated, a problem even in industry. To that regard, the Government is working very closely with industry, through a senior IT forum, so that we can bring greater awareness and also skills sharing across the Government and private sector.

886. Your responsibility is to both the DTI through Patricia Hewitt and to the Cabinet Office through Ian McCartney. Does that actually cause your section a problem?
(Ms Steward) No, not at all. It is very clear for us. Patricia Hewitt is our e-Minister and takes leadership and direction at the political level for that. Ian McCartney is our Minister for e-Government which really focuses attention on what needs to be undertaken within Government in our departments and agencies. It works very effectively, and we have the Prime Minister at a very high level as well as our champion for this agenda.

887. Has the loss of Alex Allan been a blow to your office?
(Ms Steward) We of course were sorry to see Alex leaving, but we have Andrew Pinder as an interim e-envoy, and it is business as usual for us. We have got a large agenda, a lot of work, and we are moving forward.

888. We are impressed by the confidence of the answer. Is there a shred of doubt in your mind that the delivery targets for the delivery of government services electronically by set dates are going to be delivered?
(Ms Steward) No.

889. Not a shred?
(Ms Steward) I believe very firmly that the 40 per cent work to date is very good progress, and if you look at the United Kingdom's progress against other governments', we are standing very well. There is still a great deal of work that we need to undertake going forward and we continue to work very closely with the departments and agencies, and the Treasury in particular, to focus attention on that so the momentum is not lost, and we will be moving to transactions online, which is another major step forward, but 40 per cent is a very good rate of progress to date.

Chairman: Could I ask you a completely unreconstructed question. I will not have an Internet banking account, despite the attractive rates of interest, because I do not trust it. That is an entirely lamentable but entirely human feeling.

890. When the people's panel asked people about how they want services to be delivered to them, a large number of people said they wanted to talk to somebody, a lot of elderly people in particular said they wanted to be able to talk to somebody. I just had the sense that a world is being created out there where there may be a mismatch between what people who use services think they want in terms of how they connect with them and how people who know where the future is— is that an unfair question to ask you?
(Ms Steward) No, I know what you are saying. In particular, the Government is not saying every service will only be made available online. There will continue to be front office services, one-on-one services, services over the telephone. Even in the people's panel work we have been clear in hearing the message from our citizens that they still like to use the telephone for communications and interaction. We also know that there is a very large number of people who like to use the Internet, like to use it in their own homes, or at other facilities where it is convenient at a time that is convenient to them, not just during the hours when the office may be open. So choice is a very important issue for us and for our citizens and we are working to ensure that that occurs. Again through our Citizen Portal we have Citizen Space, which is an area where we are asking for feedback from our citizens to understand in as much clarity as we can have in developing our services going back to them.

891. If they need feedback and have said they would like to talk to a human being, that is something you will take account of?
(Ms Steward) That is correct and that information is information that individual departments and agencies take account of in the way in which they prepare and package their services back to citizens as well.

892. Could I pursue that a little further. Could you just explain for us how the Citizen Portal works?
(Ms Steward) I am happy to. It is an online portal and the purpose is to give a single point of entry, some point where it is easy to be able to make contact with government, with easy navigation to information that is wrapped around a life episode. We currently have four of those presented—having a baby, moving house, dealing with crime and going away. And again that reflects what we have heard from our citizens as the type of information they find meaningful.

893. Some people have all these altogether, joined-up.
(Ms Steward) Indeed they do. The individual can come online from an Internet access point and get information that is presented in a way that is without bureaucratic speak, so that it is relevant to them. It is United Kingdom wide—it is not just England, it is Scotland, Wales and Northern Ireland—and it is also localised so that if you are in Scotland you get information that is relevant to that particular area. Equally important, we have also translated the information into Welsh so we respect that particular language requirement.

894. You were saying in answering the Chairman just now that there is space there also for feedback for people to state their preferences about how they want to receive information, among other things?
(Ms Steward) That is correct. We have an area on the portal which is called "Citizen Space". We invite comment back in terms of how have they found their experience in dealing with government online through the Citizen Portal itself, and other views on what other services they may like as we go forward with this development.

  895. Being even more unreconstructed than the Chairman—I share his views about online banking, I have to say—but could you just tell us a bit more about what role you have, for instance, in monitoring exactly those issues about how people want to receive information because it seems to me there is something a bit circular about saying there is space within the Citizen Portal website to register that, in that the very people who will be giving their views are those who are already using the web anyway.
  (Ms Steward) That is correct in the sense that the people who are online are just one part of the community that are responding to it. Can I invite my colleague, Mr Bob Evans, who is the project manager for it, who will be able to give you a more detailed response.
  (Mr Evans) We recognise the point you make very much and we have been very concerned to make sure that we are getting feedback not just from those people using the site but those people not using the site and who want to get online. We have got three different channels for this. First, before we launched the portal we had a test programme by e-MORI with structured groups of typical users—pregnant women, regular travellers, people like that—to provide feedback on whether we got the content right, the look and the feel of the site right, and we got a reasonably positive response to that. We did some work offline, if you like, to see whether our design was right. As Ann has said, having gone live we have these channels for feedback, both comments on the site itself and also a discussion forum where people can make comments and suggestions about other things they would like to see. I have been quite pleased at the number of comments we have received through that channel and we are making use of that to re-design the site at the moment. Finally to get the offline feedback, again we have had e-MORI[1] running a series of structured group interviews with representative groups of citizens where they are given a demonstration of the site and they are asked their views on both the look and feel and the content of the site.

(Mr Czerniawski) Could I set that in a slightly wider context. To pick up the point you were making earlier, E-Government is not just about the presentation of services online by the UK online portal or any other means. For those people who, for whatever reason, choose not to access the Internet, who do not trust online banking, whatever it may be, e-Government initiatives will improve the internal efficiency of government. In some ways that is the biggest challenge and opportunity we have for improving services. Precisely as people make contact over the counter or make contact by telephone, the people they deal with will have much better information available and much better transactions to support. The advantages of e-Government go well beyond immediate users of online services and, reflecting that, we are very much tying in that wider e-Government agenda with the development of PSAs and SDAs so that what government departments do is what we are interested in making more widely available and improving internal efficiency. Departments within that wider PSA process are required to take account of research on broader citizens' interests and what services they want improved.

896. What is SDA?
(Mr Evans) Public Service Agreements and Service Delivery Agreements.

897. Can I go a little further on this question of people. I take the point you make about there being two parts to this process; the public receiving information, communicating online but also things happening in the back office, making the service more efficient, irrespective of how people are accessing that service. What proportion of the population at the moment have access to Internet?
(Ms Steward) The latest ONS figures have shown that 32 per cent of the United Kingdom population have access to the Internet, and I think it is growing steadily. That has increased from the mid-20s prior to December.

898. Is there any information about the proportions of people who access Internet in their own homes as opposed to some other outlet?
(Ms Steward) Yes. I would have to try and refresh my mind on this. I do not have the figures, but I am happy to provide them to you. It is a higher proportion than just several months ago, but I am happy to provide a note to you.[2]

899. I was just thinking of something like NHS Direct, for instance. I am not sure whether it is currently available in access points like post offices and whatever, but that is the intention, is it not?
(Mr Czerniawski) It is available wherever the Internet is available so public access points in libraries or for citizens' advice work.

900. What work is being done on publicising that?
(Mr Czerniawski) The Citizen Portal is part of a much broader initiative on UK online and there is another strand of it which is mainly the responsibility of another part of the Office of the E-envoy, which is about developing a network of what are called online centres, many of them based in public libraries and other public places, that provide not just the technical equipment to allow people who do not have access at home to get access to the Internet and start to use it but also an environment of training and encouragement, because we recognise that this is not just a question of making technology available; it is helping people to access it and developing confidence in it.

901. When Finland did exactly what you talked about they found that 16-year-old kids were monopolising the kiosks and public portals and therefore they moved to a system where they involved voluntary groups and went out and got access that way. They had those kind of problems three years ago. Have you resolved those problems in the UK or are you going to repeat the same process that they had?
(Mr Czerniawski) I am not close enough to the detail of that project to be able to give you an answer on that. I think perhaps if you are interested in the exact structure of the centres we could give you a note on it. There will be an awful lot of local variation. They will not just be in formal areas like libraries. There will be a range of other people who are interested—providers—in providing. Some particularly target at that younger age group.

902. Can I just say in terms of the Government's Internet services the bits I find useful I find incredibly useful, but it is finding them that is difficult. Anything with a government suffix strikes me in that way as well. It is still much too complicated. When I watch my children intuitively find their way around some mega company site, there is an element which so characterises Internet as being used to help people, but the Government's Internet site is very like the government, it is very hierarchical, very complex and there is a lot of secret information which only people who really know how to operate it can access. Reading your e-Government document I have to say it is not terribly informative. It is a very Civil Service not very modern Silicon Valley approach to life. It is structural rather than intuitive.
(Ms Steward) Again, I think in terms of the work that we are trying to take forward it is to look at the opportunities to be much more innovative and cross-cutting to bring information together in packages that are more relevant. However, it is a change programme that we are going through. It is not just from the centre, it is an overall change programme.

903. Thank you. Mr Mulgan, you got me going when you mentioned the CPRS. There are various similarities between you. It started in order to look forward, look outwards, not backwards, to make policy, to check up on things. It was located in the Cabinet Office, it reported to the Prime Minister and it turned into the Policy Unit. In a sense this is another attempt to do the same thing again. What is your relationship with the Policy Unit, Number Ten?
(Mr Mulgan) The CPRS, if I remember rightly, co-existed with the Policy Unit for eight years at least and had a rather different role. It was abolished by Margaret Thatcher because she did not think it was useful any more in 1982-83, I cannot remember exactly. We have within PIU an entirely different role from the Policy Unit. The Policy Unit operates within Number Ten, it operates in a particular set of roles for the Prime Minister. We by contrast have a pretty demarcated task which is in-depth policy analysis, strategic analysis of individual policy issues with quite significant time invested by teams looking at the issues. The political involvement in our projects comes through having sponsor ministers who are used as sounding boards and indeed through the departmental ministers responsible for implementation. There is a pretty clear division of labour. There are several lessons for us from the CPRS. One is about the importance of practical implementation. All units at the centre of government have an inherent problem in ensuring that what they do achieves change on the ground, in the real world and is not just about publishing reports that sit on a shelf. The CPRS was sometimes very effective but some of their reports did not have very much impact at all. Equally, any unit like ours has to retain the confidence of the Prime Minister and other ministers, and if that is gone then it is very hard for us to be useful. I think, equally, rather like the CPRS, it is important for a unit such as ours to retain the confidence of a much wider community and a big difference between us and them is we operate in a much more open way. The CPRS tended to publish, at most, one report a year. All of our work is published. You have been discussing in the last section issues around privacy and data-sharing. We are now well advanced on a project looking at precisely this issue of how to balance joining up data in government and assuring the citizen that they can be confident that data is not being abused. You can read the advisory group minutes of that project on the web. The report will be published. We engage in very extensive open consultations with a huge range of stakeholders in it, from lobby groups to businesses and so on. That is a big change in the style of how government works compared to the CPRS era. Personally I think it is essential for getting better informed policy making. It also helps at the implementation stage if everyone in the field has understood the process of thinking.

904. I understand that. I am interested in what the architecture tells us about the balance of power in government. The CPRS was certainly content in a pure Rothschild form to attempt to do a number of things that you do. It became the Policy Unit really, I suspect, as the Civil Service learnt how to deal with it. Your remit is to extend—this may be controversial—the role of the Prime Minister and Cabinet Office into departments. You would understand somebody saying that?
(Mr Mulgan) I would disagree. As I have been trying to say, we are only successful to the extent that we work with departments. Many of our projects are proposed by departments. We try, wherever possible, to get officials from departments onto our teams to work on a project and then go back to the department for the job of implementation. We have ministers attached to our projects to guide them through and then to take responsibility for implementation. To the extent that we are seen as the centre supplanting the role of departments, I suspect long run we are unlikely to be successful and departments will try and do what they can to see off our proposals and recommendations. I think that has been the problem with similar units in the centre in the past, that they have had too confrontational a relationship with departments. It is true we report directly to the Prime Minister. There are clear advantages in terms of our overall authority and credibility, but there is also a very practical advantage in that we are located within the Economic and Domestic Secretariat in the Cabinet Office which enables us to be much more plugged into the day-to-day workings of government with an overview of what is happening right across government, which would be harder if we were an entirely detached unit within the Cabinet Office. So for all of those reasons I hope that we have struck the right balance between being part of the centre, having a clear line of reporting accountability to the Prime Minister, but equally working in a pretty collegiate and consultative way with all departments, with officials and ministers. I would emphasise that government is in many ways a collaborative exercise and works best to the extent that there is wide understanding of the issues and a wide buy-in to the proposals that come out of the projects of the kind we do.

905. You mentioned that the standing and authority of your work is due to a certain extent to the direct link to the Prime Minister. How does that work? How often do you see him? How is your relationship with him structured?
(Mr Mulgan) I do not think the issue is particularly how much we see him. We report to him through Sir Richard Wilson. The projects which the PIU does are commissioned by the Prime Minister formally and are reported back to him, and he decides what then happens to them, if they are put into effect, and so forth. In practice, much of the work of a unit like ours is done in correspondence rather than by face-to-face meetings. I would also emphasise that all of our conclusions and the great majority of PIU projects end up in reports which are published as government policy, not as recommendations. Those go through a process of collective agreement. Again, all of the ways in which we work, the very collaborative and open way we work, is in part designed to ensure it is easier to secure collective agreement for what are often quite radical proposals.

906. But the process of collective agreement has changed over some years, and has increasingly changed in the last three or four, in that the Cabinet no longer meets for the length it used to do, and it no longer seems to have the same sort of function. The disagreements between the various ministers who are responsible in the end to Parliament appear to be exorcised in different ways, perhaps in rather less transparent ways than used to happen. That must cut across the whole Civil Service and make units like yours potentially much more powerful in confusing where responsibility lies—in a political sense, not in a Civil Service sense.
(Mr Mulgan) To the extent that all of our reports lead to very precise recommendations and tasks which are allocated to individual departments, those Ministers make absolutely sure that they have a say about what they are then going to be tasked to do.

907. Will they come and see you?
(Mr Mulgan) We will go and see them. One of the reasons we have a sponsor minister attached to every project we do is to ensure that they play a role in brokering agreement between ministers, ensuring that everyone is fully involved right from the start and that so far as possible there are not too many conflicts and bust-ups and as far as possible the Prime Minister does not need to be involved in acting as referee.

908. I think that is a change in that not so long ago people would have gone to see the ministers. I suspect in this the ministers have to work much harder to stop other units from doing things that they perhaps do not want to do or would cause problems with relationships with other departments, and therefore the feeling that the centre is becoming much stronger must be increased by the sort of work you do. It may be efficient but it may not be accountable.
(Mr Mulgan) I think accountability is absolutely clear. If what you are implying was the case it would be surprising if departments were proposing that we should take the lead responsibility on topics which were within their remit, which is happening to a considerable extent at the moment.

909. If the Prime Minister wants to do that through the extension of his operation of patronage, ministers will oblige him.
(Mr Mulgan) What I am saying is that they are making proposals, off their own bat, of topics which they would like the PIU to do which are often topics related to their department's responsibility. They think that taking a cross-cutting approach to it, and the PIU approach, would have a better prospect of achieving results than doing it in a traditional way within the department. I would emphasise that the first thing we do when we are starting any project is we go and talk to all the ministers with responsibility for that area. I do not think we could be successful long run unless we did that.

Mr Trend: It seems to me that under the camouflage of a horizontal exercise we are in fact getting a vertical exercise.

910. They do not say "get off our patch"?
(Mr Mulgan) When the PIU was established—and I think the same was true of the Social Exclusion Unit—there was not necessarily huge enthusiasm in departments about what appeared at first glance to be parts of the centre coming and taking over their responsibilities. One of the successes of these central units—and this is a success again which I can take no credit for because it happened when I was not responsible for them—is that they have established sufficient credibility and legitimacy that most departments, ministerially and officially, see that they are adding value. They are helping to solve problems which are not easily solvable within the traditional mechanisms and traditional vertical structures of departments. That is quite a surprising result. Two or three years ago I would not have expected there was the same support for these central units across Whitehall.

911. When your bit of the process ends, the project teams dissolve, it is handed over to a department to run with it; is that right? You do not have a role in pursuing what you have done through the system? Because we have heard from task forces that they sit around in a joined-up way having interesting cross-cutting thoughts, they deliver the products of these deliberations to the system and the system in a "systems way" manages to absorb it in a traditional departmental way. Why does that not happen to you—or does it?
(Mr Mulgan) No, for a number of reasons. First of all, because our reports are published as government policy not as recommendations. Most task force reports are published as recommendations to government. Ours are only published after collective agreement by the ministers who then have to put them into effect. Secondly, because the reports contain detailed recommendations, are clear who is responsible for carrying them out, are clear about the timescales within which they have to be carried out, so there is transparent public accountability. Thirdly, because they generally have identified a time period within which a named minister or more than one minister has to report back to the Prime Minister overall on how the recommendations have been implemented. Finally, because, wherever possible, we try and tie in the conclusions of reports into the definition of PSAs, SDAs and spending review processes, so that the PSX machinery can take over some of the role in following through implementation.

  912. The Wiring it Up report, which was extremely interesting, is due to be reflected in implementation about now. Is it being and how should we know it has been?
  (Mr Mulgan) I would like to ask Stephen Aldridge, who played a leading role in writing that report, to comment on that. We are due to have a report on progress early in 2001, as you will be aware. That report has already had a huge effect on how Whitehall works, how budgets are set and so on—again rather more than one might have anticipated at the time. Perhaps Stephen would like to comment.
  (Mr Aldridge) In terms of impacts and outcomes to date, the submission that we tabled gives some indication of the sorts of results that have been achieved to date. Just to summarise a few of them. The cross-cutting approaches were followed up in the Spending Review. We had some 15 cross-cutting reviews. The proposals for cross-cutting objectives and targets have been picked up in the various Public Service Agreements—30 of the 160 targets in the 2000 Spending Review are shared between departments. The Spending Review took into implementation the proposal for a cross-cutting budget to the Policy Innovation Fund of £50 million for 2001-02 to support cross-cutting initiatives, and many of the specific proposals in Wiring it Up have been taken forward as part of the Civil Service reform process. There was reference earlier to the need for interchange between the Civil Service and the non-Civil Service world—that proposal has been taken forward.

913. In a nutshell, whose responsibility is it for ensuring that those recommendations are implemented?
(Mr Aldridge) The responsibility for implementing recommendations is shared between the Cabinet Office, Treasury and the Civil Service Management Board. The Chief Secretary to the Treasury and the Minister for the Cabinet Office are due to report jointly on progress early this year and that progress report, to which I think you are referring, is currently in hand.

914. Could I try one last thing on you. It is partly picking up what Michael Trend was asking about. You have had experience of central government in Number Ten. You have now moved to this extremely important unit thinking strategically as a civil servant. Is it the case, as you see it and as you have experienced it, as is often said and said to us in evidence here, that the strategic centre of government in Britain is too weak and that is a weakness that has to be remedied? Some people suggest it should be remedied by an ostensible Prime Minister's Department. Some people think Michael's suggestions take you down that road, suggesting somehow Prime Ministerial tentacles were going out and making a Prime Minister's Department by other means. My question to you is does your analysis tell you there is a strategic weakness at the centre of British government and, if so, why do we not remedy it in a full frontal way rather than by assorted devices to get at the destination we want to arrive at?
(Mr Mulgan) It is probably not for me to give a comprehensive answer to that. I think one of the reasons why bodies like the PIU have been set up is a recognition that there is a strategic problem at the centre of British government. Whether "weakness" is quite the right word or not I do not know. Implied in the question is whether it has powers and authorities or whether it does not have enough powers and authorities. To some extent the issue is one of capacities. It has long been recognised that the centre of British government, particularly Number Ten and the Cabinet Office, has in many respects lacked sufficient capacities to be strategic, to innovate, to do the policy work we do, to keep track of what is happening in reality on the ground in a whole range of service areas and a huge variety of things which the government does, and that it lacks particular capacities, for example, in ensuring that the ways in which technologies are organised are professional and more strategic. There is a variety of other areas that one might mention. A lot of what is happening at the moment is trying to remedy that lack of capacities within the centre. Whether that is best done by naming departments in a different way or drawing the boundary lines between Number Ten, the Cabinet Office and the Treasury a different way is a slightly less interesting question than the question of what they actually do and what skills they have and how those are organised together across the centre of government as a whole, as I said earlier. A personal comment on some of the earlier very interesting discussions in this Committee is that I thought they were not quite posing the question in the right way, fascinating as it is to speculate about different kinds of Prime Ministerial Department.

Chairman: I think that is a note we should end on. I think with you telling us we are not posing the questions in quite the right way would be a appropriate place to end. It has been a very interesting session, a fascinating life episode. Thank you very much for coming along and talking to us and we wish you very well in your new post. Thank you very much indeed.

915. Let me welcome our witnesses this afternoon. It is very kind of you to come along to assist the Committee with its inquiry into Making Government Work. We have three former Ministers of different kinds with a huge amount of experience between them and we want to draw upon that experience if we can in the session that we have got this afternoon. I understand that you do not want to make any opening remarks in which case, if I may, I will kick off with a question or two. Could I, first of all, ask you this: when Government produced its Modernising Government White Paper one of the things it said is that its key commitment was to the idea of public service itself and it said, "We will value public service, not denigrate it", and I just wonder how that sits alongside the attempt to bring the ethos of the private sector ever more into the workings of government. Is there something called a "public service ethos" that sits there that needs protection from these marauders from the private sector or is it the other way round, that in fact the public sector is desperate for an infusion of the kind of skills that the private sector has? I wonder which of you would like to help us with that to start with.

(Dr Clark) Perhaps, Chairman, I can make a bit of a stab at it having attempted to write the Modernising Government White Paper 12 months before it appeared. I think there is a general feeling amongst those who are trying to manage the Civil Service, which was certainly one of the roles I had, as to how you actually persuade the Civil Service and how we enable it in a sense to use the skills and professionalism and dedication and integrity which they undoubtedly have to (a) match the needs of the general public and the aspirations of the general public and (b) to match the needs of industry in a very fast-changing society. I think certainly as a Labour Minister I felt that there had to be an attempt to increase productivity and, as I say, perhaps place the Civil Service in the context of the 21st Century that was changing very very quickly indeed, with e-commerce, the global economy and so on and so forth, plus the demands of our citizens who felt that they were standing in queues and filling in forms which they found incredibly annoying. It may have been necessary before we had IT but once we moved into the IT age we did not need to have those experiences of government. That is one of the things that drove me as part of a Labour Government to try and produce that Modernising Government White Paper.

916. I notice that when you spoke on the Queen's Speech Debate you mentioned the Civil Service and you said: "It consists of wonderful men and women, of the highest integrity and competence, who provide a wonderful service to the Government of the day ..." and so on. Then you say, "However, I wonder whether their modus operandi—the system under which they operate—is absolutely compatible with the new world of e-commerce, e-business and the global economy in this new century. I do not doubt their ability to give advice, but I wonder whether their accountability fits neatly with their philosophy." You are choosing your words carefully with us today but is your argument, David, that the Civil Service really is no longer fit for the tasks that are now being asked of it?
(Dr Clark) Perhaps I just would not use quite those words but I do feel that there have got to be fundamental changes in the Civil Service. I feel that probably they can only be imposed and the analysis has got to come from the outside. I have studied the reforms Sir Richard put forward but I think he almost gave the game away when he said his reforms were reforms for the Civil Service, by the Civil Service, led by the Civil Service, and I feel that if one looks back at it historically it is now 40-odd years since we had the last major report, the Fulton Report—and I very much welcome your inquiry—and Michael will remember as well that there was a Committee of the House of Commons that did the work that led up to Fulton. I think there is a case for us now to try to examine the Civil Service from the outside. I do not want to hog the issue but government's relationship with industry is changing as we move from the old industrial society. The days of intervention, if not gone, are very much weaker than they were 20, 30, 40 years ago. We are now finding governments and industry having to exist side by side under regulatory regimes. One of my criticisms of the Civil Service would be that they are not able to move swiftly enough. Perhaps I will give an example. Companies often complain to me, and I am sure to other Members, that they are trying to export and there is a government ethical foreign policy, but they still say that it often takes months, sometimes more than a year to get an export licence and we often lose business in that sort of situation. I am not blaming anyone but I think a system that cannot issue or refuse an export licence in a matter of six or seven months, there is something wrong there. That is the point I would make about the speed of change. With the ability of the culture and the method of working of the Civil Service, it is very difficult to force change through.

917. I wonder if I could ask Michael Heseltine something about this because in your splendid book Life in the Jungle you had some fairly robust things to say about your endeavours to change the system from within, and you trample on all kinds of conventions and you say, for example: "I totally rejected a convention that Ministers decide on policy and officials execute and administer..." which in a way drives a coach and horses through how we normally think about those matters. Would you like to say something about that?
(Mr Heseltine) The essence of management is to set objectives and then to secure the results. In order to do that you have to monitor and in some way measure the objectives that you have set to the best ability you can. In the private sector it is relatively easy because you have the disciplines of the balance sheet and the profit and loss account and the bottom line is common to the ethos of the capitalist system. In the public sector the objectives are obviously immensely diverse and often complicated and difficult to measure but much less difficult to measure than the conventional view would hold. I do not myself think that the responsibility for the relative inertia of bureaucracy is the fault of the bureaucracy. I think it is the fault of the politicians. If you work on the philosophy that I work on -"Don't show me the foot soldier who lost the war, show me the general"—the generals are the politicians and choosing a government is an extraordinarily narrow and confined opportunity in which a Prime Minister has to choose from people most of whom have never run anything of any size in their lives and never will again. So it is not surprising that a new government coming in is bemused. There is no induction training course for Ministers; you are thrown in at the deep end. The day you go and a new Minister comes, he usually does not talk to his predecessor, and often has (even within governments) objectives totally different to his predecessor, let alone a change of government. The civil servants over very very many years have got used to the fact that the tide comes in, the tide goes out and what they will be doing one day will be very different to what they are doing the next, even within governments, let alone between governments. My own experience is that they have therefore learnt the art of caution because they know full well that there is little credit for what goes right and there is huge opprobrium for what goes wrong, not least from select committees of this sort who expect every detail, every file, every dot, every cross to be available at relatively fast speed to account for the most trivial of incidents which took place ten years ago. The way to ruin your career is not to have records of that sort. This is not, if I may say so, compatible immediately with a fast-moving entrepreneurial system, but those are the disciplines they are taught by us as politicians to believe in. The real sanctions are when they fail to deliver that sort of detailed accountability. David is right, there will be occasions when it is difficult to get export licences but there will be areas—and I will not trespass on the politics of the ethical foreign policy—where perhaps it is not quite so clear in the basements of the Trade and Industry as to what that means as it is on the hustings from which the programme came, and so caution is the name of the game. My own experience of the Civil Service is therefore that I define it as a "Rolls Royce", the most brilliant engineering in the world, with no petrol, no driver, and it is the job of politicians to provide those two things, and if you can provide the petrol and you can drive we have one of the finest Civil Services in the world and my own experience of them is that they will do the most remarkable things if they are told precisely what you want, if they are set the clearest objectives, and if you have the good sense to have a timescale which you constantly keep them to, in other words if you are a professional manager. They are not used to professional management because that does not exist in the broad politics of this country. I cannot talk of any other system. There are no prizes for being a professional manager in politics, but I believe that the Civil Service would respond to professional management if there were any rewards in so doing.

  918. Could I bring Lord Simon in on this same point.
  (Lord Simon of Highbury) Could I respond to your first question because I think there are two interesting separate points that you raise. One is the value structure and the beliefs of the Civil Service which I do not think need changing in any sense. They have a very strong sense of values, a strong what the private sector would call "corporate" culture, and quite a developed pride in their capacity to deliver. Now the second part of the question is what can the private sector do to help that culture because I think Michael has just outlined that delivery or implementation is not the strength of that culture. It is analysis, policy formulation and risk management, as he explained it. So accountability, particularly of Ministers, can always be managed and that is the strength of the system. I think the issue for the Service is how to manage performance more appropriately so that customers, electors, voters get a more professional service. That is really what David was saying. I think you can separate out the two issues and one should be able, with the right advice, development, training selection (which I hope will continue in the Service) to get a service which combines the strength of its values and cultures but a much more effective sense of performance management. Where I would add a gloss to what Michael said is in the following: I think Ministers are like the board, if I could broadly use a private sector analogy. They should set the strategy and objectives very clearly but they do not manage the delivery. When they do it can be quite confusing for the civil servants. They should know where they want their department to go and they should see and measure whether they are achieving it. I think it gets difficult when they try to micro manage, just as in a company when the board start believing they are operating the system you often get difficulties.
  (Mr Heseltine) I do not agree with that view. I think that most boards have a significant proportion of executives on them and those executives are there to monitor and manage the system. To have essentially a non-executive board, which is what you have if you separate the Ministers from the officials in the classic 19th Century way, is where the problems start. One of the reasons they do start there is because in very limited parts of the national public sector is there sufficient detailed information for the board to know what is going on. One of the first things I always did in coming to a Ministry was to ask for a organogram, which never existed. You got that and the second stage is you said what is each department costing? They eventually told you that. What is the money going on? Eventually we got them to analyse down to £1,000 what everybody was spending on everything they were doing. It was unheard of as a process. Then one went through each one of these fields of activity and asked what the objectives were and who set the objectives and how long ago. There were great unanswered questions for most of those sort of questions so we set objectives. But what happened every time I left the Department, practically every time, was the system disappeared—not altogether, in the Department of Environment it has survived—so without Ministers that never would have happened.

919. Let me ask David Clark to adjudicate here. This is most interesting because you are offering us the hands-on ministerial model, Ministers as managers. I think Lord Simon you are saying no, not at all, the Civil Service is quite happy to do the managerial stuff as long as they have the strategic objectives clearly put. David, how do you respond?
(Dr Clark) Perhaps I could make the point I have been for quite a considerable number of years a non-executive director of a British company and now an international company so I think I understand the legal responsibilities of a non-executive directorship and I think Michael is right, that is where the strategy is carried out and the delivery is done by the executives. That is the model and I see that model working. But Lord Simon made a point—I think he made the point and I do not want to pick his words incorrectly—about delivery, and politicians cannot deliver. We cannot pay out the unemployment cheque to the constituent in Blyth; that has got to be carried out by the civil servant. I think we do get a case sometimes where we get a clash—I think this is something which could help—between policy objectives and the management of the Service and perhaps I could give a specific example to make my case. I remember one occasion when we had just published the Freedom of Information White Paper and my next major task was to launch the White Paper on Modernising Government. It will come as no surprise to members of this Committee that, of course, key to my thoughts was the use of IT and we had a very good head of IT in situ reporting to me. I remember my Permanent Secretary, a very good Permanent Secretary, Sir Robin Mountfield coming in to see me shortly after this stage and we were having this meeting and I was talking about what we thought we needed to do to produce this White Paper on Modernising Government. Almost as an after thought he said, "By the way the head of the IT Unit is leaving." I said, "That is not very sensible because we are just about to embark on this major White Paper where IT is central." We had this long discussion about the differing demands of delivering a policy and managing the Service and, quite rightly, Sir Robin said to me, "Managing the service is nothing to do with you. Your job is to set the policy. I will manage how it is brought about." I thought that was rather a classic case. We explored this at great length. I said, "I do not think this guy should leave, "and he said, "If he does not leave, he gets stuck in a rut and loses promotional opportunities. I said to him, "Can't we give him Brownie points for staying another six months?" and he said, "No, that is not possible, the system is simply too rigid." That may be an extreme example but it is an example which Members may be able to understand as to where we need greater flexibility within the system.

920. That is one kind of blockage which you identify. My impression of government now is that it is immensely frustrated by the gap between the setting of policy delivery targets and the delivery of those things on the ground and it feels somehow in its bones that there are blockages in there that are stopping this happening. Lord Simon, you were, as I understand it, brought in to "think the unthinkable" about all this. What is the unthinkable?
(Lord Simon of Highbury) I do not actually believe that this is a problem where you have got to continually think "outside the box" if that is what you mean by the unthinkable. Managing a system—and this is a very big system, 600,000 people, executive agencies and administrators, so it is a very, very big company to manage—you do have to think very clearly about leadership, the planning structure and the performance structure and you can separate those three things out relatively clearly. I think whilst it is interesting to listen to Michael Heseltine talking about the system he experienced, if you look at the system which I experienced, the public sector agreements (PSAs) are a very good planning basis for most departments. They separate out strategic objectives, medium-term objectives and short-term objectives and the dialogue between the ministerial team and Civil Service management can be very effective if it is handled professionally. The issue is the consistency of quality and the consistency of synergy between the ministerial team and the administrative team and the understanding of the system through those objectives and who is responsible for what. It is no different than most businesses. There are not miracles in businesses. There is just a lot of hard work, a lot of planning and a lot of consistency about performance management. I do not think you have to think the unthinkable. You just have to be very clear and very consistent about professional management in my experience, which we are not. For all the reasons that have been explained, in a dynamic system of politics there is very little consistency. So how you manage the system becomes much more professionally important in this structure than in other ones. There is a very good theoretical structure in place. The issue is to make it work better. I think that is professionalism not something outside the box or unthinkable.

921. So the idea you have some kind of radical plan in your back pocket is simply not true?
(Lord Simon of Highbury) No.

922. Could I ask you finally on this same area, you were involved in the Treasury's Public Service Productivity Panel which reported last August. I have not read the report but I read press reports of the report, and my reading of it is that your conclusion and that of your colleagues' was that it was a political failure to provide what you call "visible, committed leadership". There was a problem here, the problem of conflicting priorities and so on. Is it the case that you concluded that it was really a failure at political level rather than a failure at administrative level that you were identifying as a key factor here?
(Lord Simon of Highbury) I think it is a relative failure of both. As I say, if you look at the private sector you will see relative failure in many companies, either the failure of the board to have its strategy consistent and clear or the failure of the executive team to deliver appropriately. There is no perfect company in that sense. So what I think this report Meeting the Challenge of Productivity tries to point out is means by which both parties, the political leadership and the administrative leadership, can improve by professionalism of management. So, no, I do not think there is a total failure on the political side and I do not think there is a total achievement on the administrative side. What I do think is important is that if you have vertical structures (which government is) with departments of state whose accountability to the public at large through Parliament is always vertical, then the management of the horizontal issues, of which there are many in government, becomes professionally very difficult. If you did that in a company you would find it much more difficult to manage a company. So there are particular challenges in political management which are horizontal issues. Take an issue like Europe, how do you manage that across many departments when there is vertical accountability through the management structure? Quite difficult.

923. You have put your finger on precisely the dilemma but have you found the answer to this dilemma, the vertical and horizontal? Is it in a more muscular centre that can enforce its will throughout the entire system? Is that the direction that—
(Lord Simon of Highbury) I do not think there are any absolute answers to that question, Chairman. It depends on the issue and the dynamic of the market-place. That is not to make things difficult. The issues are dynamic and to say that for every issue we need to solve in government all we need to do is strengthen the centre is like a company saying they have not got enough people from head office who can walk around saying, "I am from head office. I am here to help you." We know that problem. It is not to load the centre all the time that is critical. It may well be that if you empower and allow people within the system to do more work themselves and to go up and down the organisation chain less, you will get more out of the system, particularly if it is a non-critical issue. If it is a critical issue, and that is about priorities and focus at the political level, you may want more centralisation. I do not think there is an absolute management answer to that. Each problem needs to be analysed and you have got to decide where you have got to apply the pressure to get improvement in delivery.

924. Before I ask any questions I saw Michael Heseltine writing furiously at one point and I just wondered if he had anything he wanted to add.
(Mr Heseltine) I was toying with the question you put to Lord Simon about thinking the unthinkable. I have had seven small thoughts.

925. Seven unthinkable thoughts?
(Mr Heseltine) The first is that you should recommend separating the Treasury, from its present overarching and dominating and, in my view, stultifying influence over the management of our economy, into two parts. One is essentially an accounting part, the second is what you might loosely call an office of the budget which takes strategic views and is "for" things as opposed to just being "against" things. The second is that you should give the Audit Commission the responsibility to audit national government as well as local government. The Audit Commission has saved massive sums of money in local government by production of comparative statistics in many different services proving you can measure the public sector perfectly effectively, but it is not applied to central government and it should be. The third thing is that one should ask oneself why do we need civil servants? We need civil servants to give the best policy advice to Ministers and appropriate bodies. The classic civil servant is very sophisticated, very clever, and very difficult to find. We have got 600,000 who do not conform to this rather refined definition because huge numbers of them are in delivery of services as opposed to giving advice to Ministers. I believe strongly that the evidence is overwhelming that service delivery should be the result of competitive tendering with private sector organisations delivering because they will inevitably deliver more effectively in terms of quality of service and price than a bureaucracy which lacks the discipline of the private sector. So that would mean that you could concentrate on recruiting the quality of civil servants that we associate with the concept and leave the delivery of objectives to people whose job depended upon delivery and who would lose contracts if they did not deliver. The next thing I would want to see is that there is proper management information of the sort of quality that you would get in any worthwhile private company about the detail and costs of departments set out in language and of a statistical form and numeracy that people can understand. Sixthly, I think that the targets set for agencies in the public sector should not be set by civil servant because they are too close to the agencies and often part and parcel of the same process of decision making. I think there should be an external discipline on the setting of targets. Time and again we found when targets were being set they were worse targets than the ones that had been achieved the preceding year and Ministers were too busy to be bothered with attention to all this stuff. So there should be a public/private sector scrutinising process on the targets that are set for agencies. And, seventhly, there should be much more cross-discipline recruitment between the public and private sectors. If I have got a few more minutes I will come up with some other ideas.

  926. I do not seem to need to do very much here. Perhaps I should just ask Lord Simon to explain the changes in his physiognomy as he listened to that list which varied a good deal as Michael spoke.
  (Mr Heseltine) In what way did it vary? I could not see.
  (Lord Simon of Highbury) The occasional smile of support! I think the area where I would feel most uncomfortable is on the issue of definitely deciding that services are always delivered better in the private sector. I am not convinced by that argument necessarily for either the health or school system for instance. I think a hybrid system works quite interestingly and whether it were government policy or not (and it appears to be) having both systems available and choice to the people seems to me to be a very good principle. I was smiling slightly at the thought that we had to have public tender for every service and progressively privatise all the system. I am not sure about that. I smiled with interest on the reorganisation of the Treasury, Michael. One might think about re-organising the Treasury but I would probably think about it in a different way and have it concentrating on macro economic management and the issue of money and its relationship with the Bank and to try perhaps to think of micro economic management and the role of the DTI relative to the Treasury in a slightly different light. Those would be issues. I think the days of the Treasury as a one-year cash accounting system saying no to everything have disappeared with the PSA structure and I think the PSA structure has been one of the great advances in the general management and professional management of the political system in the last four years, as I have observed it. So I certainly believe that the Treasury could be encouraged to take more risk and involve itself with greater flexibility in strategy and policy development, but I think it is moving in that direction and that would be my inclination.

927. Between the two of you, you have abolished the Treasury, have you not? Monetary policy has basically been given to the Bank of England anyway so when you say give them responsibility for looking after monetary affairs the lion's share of that has already gone. Michael wants to create an Office of Budget like the OMB in the United States, I presume, probably supervised by an equivalent organisation here to the Congressional Budget Office. There is not a great deal left if you also hand the micro supply-side responsibilities across to the DTI. Is this a fair description of your combined views, that it amounts to a dismemberment of the central department which is, if I may say so, a very radical proposal, the dismemberment of the first and most powerful department in Whitehall.
(Lord Simon of Highbury) It still has to handle such small issues as tax revenue and collection and balancing the budget for the nation.

928. Tax!
(Lord Simon of Highbury) My view of it, Andrew, is that—and I know you are tempting me to say more—the answer is it is a very small department already and the chances are that it will become smaller because of the focus of change in monetary management and budgetary management within the system. But abolish the Treasury? Good heavens above.

929. "Dismemberment" was the word I used. Michael?
(Mr Heseltine) I think, as Lord Simon said, there are essential jobs that come with the collection of revenues and the setting of the budgets and the monitoring of expenditure and I do not quarrel with any of that, but anyone who has seen the pervasion of influence of the Treasury understands that it is a very negative force. Everything is rejected as a matter of principle and then you have a huge battle. They are always trying to find ways of cutting the budgets of departments. There is never any strategic appraisal as to where the problems are in society over which they have such an influence. I understand their problems because of course the whole question is expenditure, but a classic example of this, which I suspect has certainly been the case in all governments up until the present one (and we cannot pass judgment on that one because it is in its early days) is the way in which capital expenditure has been slaughtered because people would not take the difficult revenue consequences on the revenue programmes, so in the end you always cut the capital and, without any doubt, over a long period of time this country has suffered in its infrastructure in the widest sense of the word precisely because of that failure to invest in the education system and the transport systems, for example. Water was slaughtered as a programme in the 1970s, I happen to remember. So you have to have a Treasury, a finance director, an accounts department, whatever it may be, but I think you need to have, as you rightly said, an Office of the Budget to try and take a strategic view as to what the requirements of the economy are.

930. Could I probe a little bit further what the task of the Implementation Unit is, which I think you head up—
(Lord Simon of Highbury) Nothing to do with me guv!

931. So this stuff we have had in the press about the Implementation Unit linked to your name is—
(Lord Simon of Highbury) No.

932. Could you tell us what you do?
(Lord Simon of Highbury) I offer advice if asked.

933. And how many days a week do you find yourself devoted to offering advice to the Government?
(Lord Simon of Highbury) Some weeks none, some weeks two or three. I have only been doing this job for 15 to 18 months so it is hard to see a pattern.

934. How many man days have you devoted to giving advice over the last 18 months?
(Lord Simon of Highbury) I have no idea because I do not charge for my services so I do not have to keep a record.

935. You do not know whether it is ten days or 50 days?
(Lord Simon of Highbury) It may be over the last 500 days 300 days of thinking time and 60 days of activity.

936. Do you have any position as an adviser? Do you have any formal position in any respect whatsoever?
(Lord Simon of Highbury) None. As an unpaid adviser I give advice if people ask for it.

937. Do you do that on the basis of government papers? Do you see government papers from time to time?
(Lord Simon of Highbury) I have seen government papers from time to time like the draft of the Public Services' Productivity paper which the Chairman was talking about from the Treasury. Since I was one of the panel I drafted some of it and you will see my name put to some of it. The same with Modernising Government and the reports on Civil Service reform. Those, as they have been drafted, I have seen in part as they have come through.

938. Do they come via the Cabinet Secretary?
(Lord Simon of Highbury) Via the Cabinet Secretary or one of the Departments. I am a member of the board of the Centre for Management and Policy Studies (CMPS).

939. Do you hold or have or attend meetings with the Cabinet Secretary at which Civil Service reform is discussed?
(Lord Simon of Highbury) Yes I have done. The board discusses that matter. It is mainly about the training and learning side, the development of programmes.

940. The reason I am asking these questions is to get a clear view of where the lines of accountability lie for an unusual person like yourself around Whitehall. There have not been very many of these over the last quarter of a century. You are accountable ultimately for what you do in Whitehall to whom? The Prime Minister? To whom do you answer? Suppose you get something wrong, suppose you collect one of these papers from the Cabinet Secretary and leave it in a restaurant and there is a row, who is responsible?
(Lord Simon of Highbury) I would be responsible if I left it in a restaurant, but I doubt very much whether it would be the end of the accountability because the person who had given it to me would no doubt be accountable, so if it had come to me through the Cabinet Secretary or it had come to me through one of the other Civil Service channels, no doubt they would be held accountable.

941. You have brought a good deal of business experience to bear on Whitehall and Michael has made a point about the need for more exchanges across disciplines. Do you think that a multiplication of Lord Simons across Whitehall is going to achieve much?
(Lord Simon of Highbury) It would not achieve much multiplying me because giving advice is not the same as doing the work and delivering. I think much more important is the target of 100 private sector experienced people coming into the management machine, the 3,000 civil servants who are what we call generally the management level. I think that cross-fertilisation is extremely useful and long may it continue. Having open tender for jobs within the system and fewer barriers to movements between departments is all to the strength of the system. I think that is what will improve the professional management.

942. Can I end by asking Michael Heseltine how he thinks that cross-fertilisation should be built up. What are the main impediments to it? Is it the lifetime career civil servant approach? In years gone by almost everyone who joined British Petroleum thought they might spend a whole career there. I joined British Petroleum in 1981 and a high proportion of people thought they were joining for a lifetime. Everybody knows now that is not true in large sections of industry but it is still true in a few professions, one of which is the Civil Service. People enter it in their early 20s and spend a lifetime in it. How are we to get this cross-fertilisation?
(Mr Heseltine) I do not have statistics but I think it is worth probing that assumption because, if I think of some of the most talented civil servants with whom I have worked, several of them have moved out into the private sector and I think this was not uncommon. I can think of some who came in from the private sector, but again I have no statistics for that. It is not too difficult if you are determined to do it for a Cabinet Minister to bring people into the department. I personally am very much committed to the view that special advisers—non-political special advisers—are an enormously valuable asset. I brought in people like Tom Baron from the house building world, Peter Levene from industry, Tom Burke from the environment world, and they worked within the departments as special advisers. What their politics are I have no idea. Certainly they were not all Conservatives. I brought a hundred export promoters into the DTI in order to act as a liaison between the national markets and the Department of Trade and Industry. There were already people there—innovation advisers they were called—in the DTI, so it can be done. So it should be.

943. Can I pick up one point from that exchange, and it is a Treasury point again? Lord Simon said that he thought the PSA system was the most important innovation for some years, and of course this is Treasury driven. Having abolished the Treasury as it were on the one side—
(Lord Simon of Highbury) Sorry, Chairman; I did not abolish it.

944. Having separated out various activities we have got the fact that now the Treasury is performing what you were describing, Lord Simon, as this most important innovation in government, driving from the centre, from the Treasury, these agreements right through the public sector in terms of performance targets and delivery. Should the Treasury be doing that? If the Treasury did not do it who would?
(Lord Simon of Highbury) Again, if you think of the private sector analogy, you would probably have a team involved at the first level setting the strategic plan for the company, and at the second level allocating resource in the appropriate direction. You would put together a group of people to perform those functions and that would be, referring back to your earlier conversation, the strong centre. It would probably have representatives from the financial function, representatives from the strategic planning function and representatives from the operating divisions and you would make, as you said yourself, Chairman, a strong centre. As it happens the way the system at the moment works it looks more like two separate functions: a financial strategy function, which is certainly now more effective than a revenue control function because it gets into strategy objectives, as you said, at a much wider level, but you also have at the centre in parallel a strategic planning function and a policy advisory function which is more Number Ten and the Cabinet Office running in parallel. Effectively you have a choice. You can either run it like that as a two-headed system or you can try and structure something which puts together all three parts at the centre. Companies run these things in different ways but, excuse me, I always think in a private sector model, a company model, because that is the administrative system I am used to.

945. Therefore you are predisposed towards thinking about a more collegiate, more board, view?
(Lord Simon of Highbury) Yes, I am more predisposed towards that model, particularly where you have very strong departmental walls for public accountability reasons. The horizontal management of the system has always seemed to me to be the greatest challenge and when you start to allocate resource across departments of state to achieve a strategy, how you manage that horizontally and play the tunes on it is the most difficult part of the professional management system.

946. So your enthusiasm for the PSAs goes alongside the belief that they would work even better if they were somehow collectively owned?
(Lord Simon of Highbury) Yes, that is fair to say.

947. Can I first of all apologise to the three witnesses? I have to go shortly. It is nothing personal, I assure you, and I look forward to reading the transcript of the rest of the meeting. I would like to take up with Michael Heseltine the government offices that he set up. You did set up those in the late 1990s. Can you tell us why?
(Mr Heseltine) Yes. I think they would come initially from the urban challenges that we faced where you had a range of government departments acting in their own interests, I do not mean selfishly but clearly they were in pursuit of their own objectives in these areas with their own officials and their own officers, and it seemed to me that the problem of the urban world actually required a much broader approach. The policies we had been pursuing from the 1980s onwards were all about trying to regenerate comprehensively and you cannot do that unless the education and crime and the roads and the environment and the housing all come together to try to raise the particular area you are preoccupied about. We talked about it internally and came to the view that it made sense to create integrated offices of government in the regions. I think it was the right decision. We managed to deal with the inevitable clash about who was going to take over whom by dividing the regional directors amongst the departments that were defending their sovereignty and providing they all got their share of the top jobs it worked extremely well and I think the regional directors have one of the most exciting jobs in government today. I think it has been a considerable success. That is why we did it.

948. You say it has been a considerable success. You think that they are still working there?
(Mr Heseltine) Certainly I had a lot to do with the regional directors; I saw them regularly. To my knowledge they thought the job was extremely attractive and it was much more effectively administered once it had been fused, and unless they were telling me what I wanted to hear (which I do not believe), undoubtedly it was a very sensible and overdue step.

949. I get the impression from my own regional office that one of the difficulties is the one Lord Simon was referring to in the horizontal management sense that, whilst what is now the DETR elements worked quite well, it was very difficult to get the education and those other departments to work quite as closely as they should.
(Mr Heseltine) I think I am right in saying that education was not involved.

950. Exactly. That is the point I am making, that you are saying it should have been.
(Mr Heseltine) Of course it should be. One of the things that is not as appreciated as it should be, and it is slightly outside what is relevant to what you are talking about, which we discovered in this whole initiative, was the way in which the local authorities were divided in battalions which saw their command structure going direct to their sponsoring department in Whitehall. That was very serious in that of course they were very much creatures of Whitehall. Much more serious was the fact that they were relatively indifferent to what was going on in the other parts of their local authority. In other words, the housing guy was looking to the DoE and was hoping at the end of the year to get a bit of extra money, but he was not particularly preoccupied by crime in the locality because that was the Home Office. You can repeat that pattern. One of the great benefits that came out of the concept of City Challenge is that these local authorities, incredibly, for the first time had to talk within themselves because they could not win the City Challenge process unless they had put forward corporate plans which were based upon the general interest of the community that was bidding for the City Challenge money, and of course they could not do it if they did not involve the private sector as well or the tenants or the Chief Constable or the headmistress or the teachers. For the first time in the process of putting money up for grabs we brought together the individual local authorities at a local level and the local community at the local level in a way that previous systems prised apart.

951. So why could you not do it at the central level as well?
(Mr Heseltine) We are of limited ambition. We did bring them together in a sense. There were Cabinet committees that brought them together and actually that Cabinet committee process accepted and drove forward City Challenge and, if we had been elected for another term, we were on the verge—and I believe this very strongly as an idea—of moving from the limited concept of a corporate plan for, say, a community of up to 30,000 people, to bid for the extra cash, to the point at which local authorities bid for the whole of their corporate plan. That would have been the next step and that is what needs to be done. If I had been one of the directly elected chief executives it would have been done immediately.

952. This is interesting in the sense that we are going to Newcastle to look at how the north east looks at that. Maybe Lord Simon can come in on this horizontal management aspect. Is it the politicians who are preventing this from happening in the way that most of us would envisage any regional government office working, and involving departments in that? Do you see that as a political problem or do you see it as an administrative problem?
(Lord Simon of Highbury) I do not really have the experience to answer that because in my brief ministerial career, particularly as it were coming straight from the business world, I tended to focus on two projects which I knew I needed to get done within a specific time and not worry essentially about the organisation of government through to the local government regional office. I worked with the regional offices because of the DTI policy, but not in looking at it as a co-ordinated structure. The issues of co-ordinating structure are the ones that one has had to face as a minister at the top of the system. No doubt the more problems you have in co-ordination and horizontal management at the top of the system the greater will be the difficulties at the bottom. They are usually magnified if you look at it in the private sector, so your question is extremely important but I do not think I know enough about the regional office and local authority management structure to comment.

953. Do you see it as part of a devolution process?
(Mr Heseltine) Yes, very much. We are desperately over-governed. People talk about the freedom of local government. I once got the forms that had to be completed in local government housing departments before they got authority for capital expenditure on houses. By the time you had dealt with the colour of the brick and the slope of the slate and the 80 questions that those local authorities had to fill in, the language of freedom for the local authority had no meaning whatsoever. I do not have the slightest doubt that the same thing went on in the Department of Education and all of that. If we had got to this stage I was trying to take my colleagues towards of a corporate plan and a competitive process for bidding between local authorities for the funds that were available, then one of the prizes that I saw in that was that central government could stand back and allow local authorities to be different. I happen to think that Newcastle is one of the more interesting examples of a coherent local government because—and heaven knows, the north east feels a bit beleaguered for very understandable economic reasons—they have co-operated much more effectively than the equivalent public/private sector or local authorities in other parts of the country. I do think that if we got this really powerful local figure, a working community, a devolved relationship through the government regional offices (I do not believe in regional assemblies, by the way; it is just another tier to get in the way) then I think Whitehall could have a bonfire of its controls. The unitary authorities are a very important part of this package. You have got them in the north east but they should have them in the shire counties as well. Then you could say, "These are big, mature people and they must be allowed to experiment and do things differently". That would then be a very substantial devolution of power from the centre.

954. What about accountability in a direct sense? You have the accountability of central government, you have the accountability of local government, you have got these government offices in the north west and north east and so on, working in there, you want them to have freedom and yet you do not seem to want them to have any direct accountability to the people they are bringing services to. You talked about the regional directors reporting directly to you rather than to the people whose services they are delivering.
(Mr Heseltine) First of all, there is a very real supra-authority relationship. The road programme is a national road programme, for example. The police forces operate very much on a national scale, so there are big central issues. There is a whole allocation of funds issue, there is a whole accountability to the use of the funds issue. The role of central government is unavoidable in such circumstances. That is what the regional offices are there for. One was trying to get them into a position where they took a positive view of their role. They were going to help as opposed to saying, "Fill in form 43 and we will let you know". That became an interesting and exciting job. The accountability seemed clear. The regional office is there to represent central government and be accountable for the decisions of central government. The local authorities are there to carry out their responsibilities, and the difficulty for the Member of Parliament of course is to try and recognise that he is not a local councillor. If you are in a marginal constituency the temptation is to be a district, county and goodness knows what councillor. That is very corruptive of the system.

955. I must admit it did sound very Roman. It is quite good if you are a Caesar but not very good if you are further down the scale.
(Mr Heseltine) I did not get very far with Latin myself.

956. You mentioned the fact that you were opposed to regional government. Do you not think that there are so many tiers of government at the moment that something needs to be done to put the balance back?
(Mr Heseltine) I have just indicated one area where we did. We got rid of the two tiers in Scotland and Wales with great success but that was largely because there were not any Conservative seats to lose so it was not a hugely controversial thing from my party's point of view. It was much more difficult when we tried to do the same thing in England. We set up the Local Government Commission for England and look where it got us. That was one way of getting rid of the tier. I am a unitary authority, county based man myself. That gets rid of a tier. It gets rid of the districts. Do you then recreate the regional tier? I say not. There are certain things; I can understand that there is a regional road programme for instance, but actually it is mainly a national road programme, so regionalising it probably creates a tension there between the central planning and the local one. From my knowledge and experience of most parts of this country there are not regional identities. People in Preston do not think of themselves as Liverpudlian, and certainly Mancunians do not think of themselves as Liverpudlians, and so trying to put the whole lot together just creates another forum for a great row. In the north east arguably it is different. I am not sure whether Northumberland thinks of itself as Newcastle, but certainly it is closer. I am making the right point, I see.

957. Newcastle thinks it is Northumberland.
(Mr Heseltine) That is right. So creating this regional tier is just another row and another tier. But you have to have the regional offices of government. That is not the same thing at all.

958. One of the things I found interesting as somebody who reformed the local authority I was on and backed your reforms in the early nineties and tried to think the unthinkable and create new structures within local government, was that one of the things that came out of that was that public services do not have the involvement of the community. They did not at that time and still for the vast majority of the public services, community involvement is minimal. Consultation is at best patchy (real consultation, that is) as opposed to, "We have decided what we are going to do here". How do you go about bringing the public into the mechanisms of government?
(Mr Heseltine) This was to me one of the most exciting things of City Challenge. There were those to whom it was anathema (not my party but there were parties who did not take so kindly to the idea of City Challenge) because they said, "You are going to penalise the unsuccessful." I said, "Yes, we are", and we did. If we had 30 local authorities bidding for the money that was available and it was five million pounds a year for seven years for these deprived areas, then only ten or 11 won, so 15 or 20, whatever it was, lost. I was prepared to take the flak of that, believing, hoping, that the effect would be that the 20 would not sit and sulk but would say, "Sod that, we are going to do it right next time", and that is what actually happened. The ten that won became the role models and the other 20 immediately rushed off to see how they had won and we managed to ensure the following year that a lot of the 20 won as well and so it worked out. One of the conditions of City Challenge was the community involvement. Ministers judged City Challenge. I personally with my ministers went round, listened to the 30 bids we had, made a decision. We were dealing broadly with Labour authorities. There were no party politics in it; there was an element of philosophy in that we wanted private sector involvement and that sort of thing, but by and large it was totally about trying to help build communities. One of the most distinguished authorities lost when the leader (we made the leaders do the presentation of their bids) was asked by me, because I was doing the judging in this case, what did the local teachers think of this. He said, "We will explain it to them". He lost at once because he had not consulted the teachers. We asked the same question about the Chief Constable. "You want this money to revive this inner city area. What does the Chief Constable think about your plans?" If anyone said, "He of course will keep the law", then finish. If you could not take the enthusiasm of the head teachers and the Chief Constable you were wasting your time trying to improve housing in these large areas. If it is still a crime rat run you have had it. That was the whole philosophy. The best example of it all, tear jerking as a matter of fact, was the Hulme Estate in Manchester. This was one of the worst slums in this country, and arguably in western Europe, deck access, rotten as hell. Everything was wrong. The fact is that we got the local authority with the benefit of AMEC, Sir Alan Cockshaw, in partnership to consult the local tenants and devise a strategy to save the Hulme Estate, and today the Hulme Estate is a highly attractive and desirable part of Manchester. Interestingly enough, it was that team concept that did the City Challenge with the Hulme Estate that, when the bomb went off in central Manchester, the Labour leader of Manchester was only too happy to take from to rebuild the centre of Manchester. We were accused of centralism because we insisted that they did their job of involving the community. I called it devolution.

  959. How do you get that involvement into central government services? That is where I find difficulty.
  (Lord Simon of Highbury) With great respect to City Challenge, and I am not trying to make a political point at all here, the problem of all intermediate organisation between central government, Westminster, and whatever level you want to call it: regional or county and so on, is that it falls apart in community and democratic terms if the assets it is controlling do not offer appropriate service to the consumers. The consumers are not interested in intermediate government and its shape. They are interested in the school or the hospital. It seems to me that what government is trying to do now and rethink now—and I do not want to presuppose the organisation because I am not a party to intermediate organisation—is to ensure that the quality of the delivery from the asset—from the hospital or the school—is more controlled by the local people so that it is either your schools council or your trust board. But there is intervention from the community and accountability to the community much more strongly felt at the level of the asset management. I think the big debate in government, as it will be in the private sector, is what layers of intermediate management are appropriate or do you even need when you have a fully effective asset management system where the local people are running their own asset? Of course they are going to be accountable. Is their accountability to the centre centre (Westminster) or to an intermediate centre? Many of the problems, if I may say so, of the last administration were that they may have thought a lot about the intermediate levels of government but they did not concentrate enough on the delivery at the asset level and the accountability to the local people.
  (Mr Heseltine) Well, I do not agree with that.
  (Lord Simon of Highbury) I was not trying to make a political point. It is an organisational point.
  (Mr Heseltine) Yes indeed, but the whole process of publishing results from schools and parent/teacher governors was precisely to do what you have just defined. Like so much of life, there is a perversity about it because the parent/teacher governors became very closely involved with the teachers and they were not prepared to recognise the failure of their schools even when the statistics glared in their face. The whole process of what you have described as asset management is that what we thought would be a grip by the local parents to get results actually became a sort of redoubt defending the indefensible. I do not think asset management hits the essence of the problem of either communities or deprived communities because there is so much inter-relationship between all the things that go to make the community that if you just concentrate on the school or the hospital and the other bits are wrong, those other bits will alienate the chances of restoring optimism and growth to the whole community. I think you do need intermediate systems and the ideal one to me is the directly elected chief executive of a local authority. That should be the person. It is preposterous that if you live in a British provincial city today the chief executive of the local authority will be paid more than practically any manager in the city whilst the leader will be grubbing round trying to eke out what is a pathetic expense allowance. It is utterly and absolutely incredible.
  (Dr Clark) Michael, I have been listening to what you have been saying and I certainly do not take much issue with the initiative you took in the eighties and nineties in pushing forward things like the Next Step agencies, performance targets, financial management initiatives. I go along with those. I would raise some questions. I do think we have ducked the issue because I then ask the question, "How does this affect our constituents who are wrestling with the problems of going from pillar to post and from one government department to another government department at a local level looking for housing benefit, unemployment benefit, social security benefit?" There is just no cohesion at all. They are in different buildings, they are staffed by different people, and there is no need for them to be so. We are back to the point that Lord Simon mentioned and we have ducked it, because the most difficult one is, how do we tackle horizontal management? Actually the reforms of the eighties and nineties, which certainly increased public service productivity and empowered a great many civil servants and managers, made the problem worse because they created the silence and they made horizontal management even more difficult. I believe that if we do not take a serious look at this problem we are going to have great difficulty in retaining the support of our citizens for government, whether it be local government or central government. I can see that they should operate in terms of powers but also in terms of the delivery of services. I was, when I was in the Cabinet Office, looking at ways in which we could possibly look at ways of delivering central government services through local government. Often they do very much better than central government. You might then have a bid in process but I just do not think that we have been radical enough in our thinking on this. Whilst I have got the floor can I just pick up one of Andrew's points about the interchange with industry? It is very welcome. Both parties have tried to encourage it but probably we want something much more radical than that. It is not good enough to have somebody going off for 18 months to work for ICI or BP and vice versa. We really ought to be thinking of something like the French system. God forbid, we would not want the elitism there but people do come in and perhaps spend ten years in the civil service there.

960. What is the obstacle?
(Dr Clark) There are obstacles. There are clearly understandable cultural difficulties. The people who have gone into the Civil Service traditionally expected a job for life. That is changing radically. There are problems about pay, problems about pensions. They are nitty-gritty issues. I believe we should be able to overcome them if we change our mind set in the way in which we look at this.

961. Is not the heart of the matter the final salary unfunded pension scheme? Once a civil servant has been in there ten years he is never going to want to push off; he is locked in. Similarly, to get people in from outside costs a huge amount for them to get any kind of attractive pension.
(Dr Clark) There are problems of course.

962. Is it not the case that the PSA's fundamental weakness, excellent initiative though it is, that Parliament still allocates its budget by department? Is that not one of the issues that we need to get away from, departmental budgets and the whole question of the Treasury rules that go back to the 1920s and beyond? Is that not a fundamental blockage now in trying to get an entrepreneurial spirit into the Civil Service?
(Dr Clark) Yes, I think it is. When one stops and thinks, there are two departments that go into every other department. There is the Treasury that goes in with big boots, one might say, and then there is the Cabinet Office which goes in with advice and information technology to try and advise departments how to make best use of their scarce resources. I feel that we really need to think very carefully—this will be a red hot issue, I guess—about changing the Cabinet Office to an office of the Prime Minister. I think that may be the only way you can drive through horizontal management. As a follow-on from there, you make a designated budget to make that a cross-departmental large department.

963. In Michael's book he calls the Cabinet Office "a bran tub".
(Mr Heseltine) The worst department that I ever served in.

964. "A glorious confusion of responsibilities".
(Mr Heseltine) Oh, it was just a dumping place. I have forgotten now what it was I got rid of. We had occupational health people and HMSO. HMSO was an absolute scandal. That went. We had a car pool. I was not prepared to take them on. They are still there; of course they are. I took one look at the thing and I said, "There is practically nothing here we need to be doing. Let us privatise the lot." It was a race against the election. I knew that the next government would not do it so I had to do it.

  965. So when you heard David Clark describe this new role for the Cabinet Office and you look at your memory of it, is this a vision that you can subscribe to?
  (Mr Heseltine) I am glad you think things have improved so much.
  (Dr Clark) I did not say that.

  966. I saw you nodding somewhere in that exchange, Lord Simon. Do you have a different view on the role of the Cabinet Office?
  (Lord Simon of Highbury) If you have great departments of state which are vertically organised, as the previous questioner was asking, how do you get better horizontal management of resource and application of strategy despite that vertical structure. The answer is that you have to have a strong centre. The question is, as we were saying earlier, how you organise it. Do you make the strong centre partially representative of the Treasury financial system and partially representative of what is the co-ordinating centre of government, the Cabinet Office, and partially strategic, which is presumably what the Prime Minister's office does, and all the young chaps think about strategy and formulation of the plan for the future. Somehow you have to pull all those three together. Having them operating separately is not getting a synergistic view of resource allocation coming through the single department budgetary system however good the Treasury is. This is because you are not marrying together the strategic political objectives with the flow of resource. Somewhere that has got to happen within the system. It either happens informally or formally. At the moment it is not formally structured in organisational terms.
  (Dr Clark) I used to think about it like this. We had the Strategic Policy Unit in Number Ten to try and think strategically. We had this strategic media unit, whatever they call it, to try and bring together the corporate message of government. The one thing we were always lacking was a strategic—and I use the word "strategic" here—management policy for government, not for the Civil Service but for government, to try and cope with this horizontal issue. That is the key issue we are facing, quite simply.
  (Mr Heseltine) I just want to make one important qualification. Of course the Cabinet Office consists of its own activities but also a very significant body of people seconded from other departments. I wish to distinguish absolutely between what I said about the Cabinet Office permanent activities and what you might call the secondees who are amongst the cream of the Whitehall officials. I personally do not go along with the idea of a Prime Minister's Office. I think it is quite incompatible with Parliament and the way things happen. It will simply involve the Prime Minister in everything that goes wrong.

967. Like the President.
(Mr Heseltine) Yes, it is a presidential system and we are not a presidential society. This Government has not yet seen the rough end of politics. The economy has been very benign for the last three years and so the idea of all this centralism and the Prime Minister can take all these political decisions has grown up. It is when the Prime Minister's back is against the wall and everything depends upon his or her determination that the rough end of politics bites. It is very important for, if you like, the Prime Minister to be able to get above the fray and to be able to dispose of Cabinet Ministers without them being able to say, "But you told me to do it, sir". I personally saw the process at work. I have never seen it successful. If you want a strategic view of government of some sort then you put one of your best ministers in charge of getting it. If you do not put the minister in charge you are not going to get officials to do it. If you put a lot of special advisers in to do it they are going to be resented and rejected by the officials anyway, and I happen to think that all these special advisers, the political ones, are going to be the Achilles heel about this Government's neck before long. I would get rid of all those. One of the worst things that has happened has been the politicisation—and we have played a part in it, nothing like the present Government but we did have the political advisers—of government. I would get them all out. Special advisers are quite different.

968. You are tempting us down a path that we do not want to go down just now.
(Mr Heseltine) It is not your field.

969. We are one of the most deregulated countries in terms of regulations but also one of the most complained about, mainly because of the language of regulation and parliamentary draftsmanship. We had a regulation yesterday at the Joint SI Committee which was 15 lines long, one sentence. Is that not part of the problem of the modernisation of government, that we are using language within government and mechanisms that are totally disconnected from the ordinary lives of people? Is that not an issue that if we are going to modernise government we need to tackle? Is that not one of the reasons why when a minister is coming in from a business environment the experience is not a very happy one?
(Mr Heseltine) I was responsible for the bonfires of controls and I never, if I now reveal the full truth, had that much faith in it as an initiative. It is quite interesting that today I saw that there is a survey that this country has come out top as one of the best places to do business, and one of the reasons why it is one of the best places in which to do business is the lack of regulatory climate that exists here. Anyway, all of us pay lip service to getting rid of waste in the public sector and cutting this, that and the other, and I really was not persuaded that there was that much mileage in it, so I put the gamekeepers in charge of the game and I brought John Sainsbury in, because he was extremely articulate on the subject of what we could deregulate, and he brought in a lot of other people. After John we had Francis Maude. I would not like to claim that we had actually done that much but I was totally persuaded by the end of the day that there was not that much more that one could do. There were one or two quite interesting things. There was a huge battle between the Treasury and the Department of Social Security over the fusion of the VAT collectors and the National Insurance people. They fought like tigers when we tried to bring these two things together. The fact is that in a civilised society you are going to have regulations and you are not going to starve people and you are not going to burn them and you are not going to allow the kids to be mucked around by paedophiles or whatever it may be, and any politician that thinks that you are going to get rid of the whole edifice of a modern, sophisticated society is just making populist statements. There is a limited amount that you can do. The other thing about this regulatory thing is that so much of the total numbers of regulations that are paraded in the more extreme newspapers are simply the regular updating of inflation rates or whatever it may be, the social security rates or the local government orders that Parliament has said will be updated every year, so there is a great raft of these things that has to go through every year almost automatically. They are not regulatory at all in the sense that they are bureaucratic intrusions. We did our best and we did do some good work with building societies and things like that, but there is not a great reservoir of controls out there that you can safely get rid of.

970. Michael has answered almost all my questions without my having to ask them. Perhaps I could ask David Clark something. When we were talking about making government work better at the centre and about the horizontal business and the apparent extension in prime ministerial power in a number of different ways, setting up task forces, and all the political and special advisers and so on, did it seem to you in your experience of government that the Cabinet system was increasingly under stress and that we were heading towards a presidential style of government?
(Dr Clark) Again I think there is a difference between the strategy, which is politics, and the delivery of policy advice, which clearly is the civil servants. I take slight issue with Michael. I accept that you can argue the case about whether there should be a Prime Minister's Department and we can make the point that we are not presidential, but Prime Ministers' Departments do operate in Australia and Canada quite effectively. In a sense you therefore have the collegiate nature of Cabinet ministers, which I think was Michael's point in a sense, that this Government has not yet felt the full ill winds of politics and therefore the Cabinet members and the collegiate nature of the Cabinet has not yet been put under stress. I think that is fair comment. In addition to that there is the issue of the strategic management of how you get departments to work together. It really is a nightmare. This is Andrew's problem about why do we not have more industrialists. These things are management but it does mean at a local level that you are probably going to take some very adventurous thing that Michael was trying to do and perhaps think about it. As I say, you can say to local government, "If you can put a decent bid in and you think you can do it better, why do you not run this service for us?", and bring things under this proper management structure straightaway. The problem is trying to get civil servants to work out how they are going to share their budgets. You need some strategic management.

Mr Trend: We have recently (referring to Mr Heseltine's advice before he even gave it to us) asked for an organogram for the Cabinet Office, and we got one and it was completely incomprehensible.

Mr Tyrie: Could you make it a task, Lord Simon, to produce us an organogram that is comprehensible?

971. What it is possible to see as time goes by is who has got the power and who has got the ear of the Prime Minister, how they are working through the system in a horizontal way, the different networks that are at work in government which seem to me anyway to undermine the idea of collegiate development.
(Dr Clark) The Cabinet Office has another disadvantage. Because it is an advantage to have the cre«me de la cre«me of civil servants seconded in, it does mean they are in for two or three years and then they go, so there is not often a collective memory in the Cabinet Office that you may have in another government department. That is a problem which again we have got to try and tackle and overcome if we are going to have a proper strategic management. I come back to my point that these are very radical reforms, possibly from the outside if we are going to tackle this.

972. I do not necessarily subscribe to the view which has been mentioned by one or two people that people who go into the Civil Service do not expect a job for life. I think certainly at the lower end of the scale, people in local government would probably expect a job for life, and indeed I have seen many people in that experience. What concerns me is one of the statements you made, Michael, that some left to go into the private sector at the top. Is that not one of the problems, that the people we need to keep within the Service itself do leave for the private sector, not necessarily because they have got problems with the service delivery but more specifically because of the attraction to the private sector because of the increase in their wages that they could probably get?
(Mr Heseltine) You are taking a very God-like view of your rights to control people's destinies. I think people are free to make decisions and they will go where the pastures appear greener for them, and so they should. The challenge should be for the Civil Service to create jobs and career structures and remuneration packages which can attract people back as people leave. That would be very good.

973. Are you satisfied that the career structure is actually in place because you also mentioned that people are brought in from outside from the private sector into the Civil Service and presumably on that basis they were headhunted?
(Mr Heseltine) Yes. I had no trouble with that. I can think of one or two people who said no but there were special circumstances then. I found it relatively easy to get the sort of people I wanted, on a short term basis I have to say, but two of them stayed actually. Peter Levene stayed. He came in 1984 and he was there at the end in 1997 in various roles. The public sector is the most wonderful place to work. It is a very exciting place providing the job definition is attractive and it can easily be. In a sense you may be back on the thought that I was trying to expand on, that when you get into the executive agencies you probably do get lots of people saying it will be a nice, safe place to be. If you recruit people whose attitude of mind is, "This is a nice, safe place to be", you will get nice, safe people and that is not quite compatible with what we have been talking about, which is a rather more adventurous and dynamic society. It is very easy for politicians to talk about adventurous civil servants. They do not want adventurous civil servants. They want civil servants who do as they are told because otherwise you have got someone doing things on your behalf that you are accountable for that you do not want done. It is very important to understand exactly what you want from civil servants. What I want from civil servants is the effective delivery of targets which are politically set.

974. How many civil servants would you say had left the service because of a dispute with yourself whilst you were a minister?
(Mr Heseltine) Dispute with me? It is not possible to have a dispute with me. I am the most reasonable man.

975. Andrew Tyrie raised a point about Civil Service pension arrangements as to whether that was an insuperable block to this free movement in and out. I thought I saw Lord Simon nodding vigorously in assent. Would that be a common view, that that is a real issue to be grappled with?
(Lord Simon of Highbury) I was nodding when Andrew was asking the question and listening to Michael Heseltine's answer. I thought the direction was going to be a conversation that we need more flexibility in the reward structures. Because we are coming out of a long term career structure into a much more flexible structure within the Civil Service which the private sector had to come to terms with earlier. I do not think for a second that the Service has come to terms with it yet. When I look at the report of the reforms that have been undertaken over the past year, the Report 2000, Richard Wilson's excellent document, I think it is very strong on leadership, very strong on the planning system and very strong on performance management. But if you read it, it is relatively weak on incentive and payment because it is very difficult to change the structure quickly. It needs quite a lot of courage at ministerial level and it needs quite a lot of inventiveness. I am not saying that you can pay the public sector like the private sector. You cannot. It would be too expensive and you would not find the grounds. But I think there has to be more flexibility and one of the flexibilities is the way that pensions are handled. That is why I was nodding. I think it needs a lot more work than that to think about how to make the system more adaptable to transfers.

976. I remember many years ago when I was a young lad in the Labour Party listening to ministers like Tony Benn who used to get up on the rostrum and say, "I have got civil servants who will not do this, will not do that". The question here is: can civil servants resist the political will of their political masters? Is that a fallacy or do civil servants try and buck the system when it comes to the political decisions?
(Lord Simon of Highbury) Can I answer from very limited experience as a minister? Just as in the private sector you will find occasions when your advisers are trying to tell you that what you want to do is probably not the best course, I found it usually the same as in the private sector: you listened to their advice and if you continued to disagree with them you told them what you wanted to happen and they would do it. I had absolutely no feeling or experience that what I wanted to do was being baulked by the Civil Service at all. What they do want to do is make sure that you have understood the risks of the decision that you are taking. They are very good at that. But if you have been trained in risk management, which most people in the private sector have, then it should not be a problem. But I would say that civil servants spend a lot of time on risk and they do not take very many. Risk management is the greatest difficulty within the system. Michael said earlier that they are cautious and they are cautious because they have never had a lot delegated to them and have never learned much to take risk and be responsible and accountable for it. The answer is that I never found them thwarting the political decision you wanted to take but sometimes cautious about its outcome.

977. Is that the reason why we are getting so many political advisers now in government?
(Lord Simon of Highbury) To try and move the system more quickly?

978. Yes.
(Lord Simon of Highbury) I have never had one so I would not know. I found it quite reasonable to move the system myself.

979. As a minister, Michael or David, would you rather have a civil servant advise you or one of these special advisers or a political adviser? What would be the best? Is the Civil Service being pushed to one side because it has been political in the past?
(Dr Clark) I think they give completely different advice. I found it reasonably easy to take a decision because I knew the buck stopped with me. You try to listen to the advice from your civil servants and also listen to the advice from your political advisers. I had two political advisers. One was young, very much Labour Party, and the other was a very respected former Professor of Politics, probably the leading expert on freedom of information in the United Kingdom. When he spoke he did it with such authority that even civil servants were pushed to challenge him. You have different forms of advice and certainly civil servants always accepted what you asked them to do at the end of the day. They made it quite plain on occasions, especially on appointments, that they did not agree. I found it was one issue where they would keep putting forward nam

	Income	Expenditure	Net Cost
CDT	1,973	3,410	1,437
CSC	20,000	19,800	-200
PSD	62	1,960	1,898
BRD	0	592	592
CMPS Total	22,035	25,762	3,727