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Home > Speeches > Public Accounts Committee debate, December 2010

The relationship between Ministers and Civil Servants

This speech was given in the chamber of the House of Commons as part of a debate on the work of the Public Accounts Committee on 16 December 2010

Mr Richard Bacon (South Norfolk) (Con): It is a great pleasure to follow the right hon. Member for Barking (Margaret Hodge), the new elected Chair of our Committee. I congratulate her on the way in which she has fulfilled and is fulfilling her office. It is a great pleasure to serve under her leadership.

Her predecessor was something of a stern headmaster, and although her style is slightly less stentorian-I looked up Stentor, and he was a Greek herald with a booming voice and it is hard to think of anyone in this House with a more booming voice than my hon. Friend the Member for Gainsborough (Mr Leigh)-she has already shown that she is no soft touch. She has shown her teeth on a number of occasions and she chairs the Committee with great aplomb. You might expect me to say that, Mr Deputy Speaker, but ask yourself which Conservative is likely to be able to resist serving under a strong woman whose first name is Margaret.

I want to say how much of a pleasure it is to have so much new blood on the Committee. It was a bit of a shock for me and the hon. Member for Great Grimsby (Austin Mitchell) to realise that we were the only members of the Committee who had served in the last Parliament and there is a great cast of new active keen members who are working very hard and contributing their new and varied experience.

Let me start by endorsing something that the Chair of the Committee just said. The problems will not go away because there has been a change in Administration. I have been looking at the problems that Government face through the lens of the Public Accounts Committee for the past nine years-I have been wrestling with these problems- and it staggers me that the problems are so generic and are repeated so much. In my relatively brief speech, I want to focus on a number of different reports and then on one issue in detail.

I shall look first at some reports that show structural improvements in the way that we are working with the National Audit Office and secondly at some that show welcome improvement in a particular area-financial management. I shall look thirdly at some reports that show the areas where there are still serious issues, one of which would be almost hilariously bad if it were not so serious because it involves public money, and fourthly at a couple of reports that are particularly important to how we might work in future. Finally, I shall look at one report in detail.

The first three reports I want to discuss signal something quite important. They are the 52nd report of 2008-09 on reducing health care associated infection and the 26th and 19th reports of 2009-10 on improving stroke care and improving dementia services respectively. The 52nd report was the third time since 2000 that the Committee looked at hospital-acquired infections and there has clearly been significant change in that time. The Committee considered it first in 2000 and again in 2004, when there had quite shockingly been a dramatic decline. The NAO published its report in 2004 and we took evidence on it later, and that catapulted hospital-acquired infection up the agenda.

Everyone will remember what a strong issue it became during the 2005 general election and it has been an important one ever since. It continues to be important for hospitals, but it will remain so only if they know that they are under scrutiny. That is why I was so pleased that we took evidence on it again in 2009. The report shows that there has been significant progress, particularly regarding the two infections that are the subject of national targets-MRSA and clostridium difficile-but that there have not been those measurable reductions in other avoidable infections that were not targeted. Clearly, progress is made in areas we scrutinise, but more needs to be done.

By returning briefly to an issue, as we did in our 26th report on stroke, we were able to demonstrate that there had been considerable improvement. Our report stated:

"We welcome the demonstrable improvements in stroke care which the Department of Health...has achieved since our first report",

but noted that there are still further steps to take. I firmly believe that the Committee should, as a matter of routine, return to issues much more regularly. We also did that with our interim report on dementia, which showed that although the then Government said that dementia would be a national priority, they did not walk their talk in the way that they did with cancer and coronary heart disease.

The financial management reports that caught my eye are the 46th report of 2008-09 on financial management in the Home Office and the third report of 2009-10 on financial management in the Foreign and Commonwealth Office. Let us remember that almost the first act of Sir David Normington on becoming the permanent secretary at the Home Office a few years ago was to sign an unaudited and unauditable set of accounts merely so that they could be presented to Parliament.

As we said at the time, that was a very unenviable position to be in and it certainly was not his fault. Our report shows that there has been considerable improvement in financial management at the Home Office and that it needs to sustain that momentum by incorporating strong financial management as standard across its business. We have identified areas in which further progress is needed, but we should stop to note the considerable improvement since the chaos of a few years ago.

Similarly, with the FCO, it was a delight to see the permanent secretary turn up with two chartered accountants and to be able to say in our report:

"The Committee is pleased to note that the Department has acted upon previous recommendations"

That is relevant to what the Chair of the Committee said a moment ago, and I wish that more Departments would do the same. In contrast, however, our 25th report of 2009-10 on the FCO's estate management showed that it has a lot further to go in that area. We commented that its

"new Estates Director currently does not have the information he needs to do his job."

The lack of correct information in Government Departments is a theme that we constantly come across and the NAO has rightly focused a suite of its work specifically on estate management because the Government are such a big property owner. There is still a great deal more to do in that area to improve the quality of management within Government.

It is not common to find qualified chartered surveyors and qualified chartered quantity surveyors in charge of a Department's estates in the way that we would expect, and are now getting, with financial managers in relation to financial management in Departments. That is something that the Government should focus on.

I turn to less successful areas, notably the private finance initiative project to deliver the multi-role tanker-the future strategic tanker aircraft-which should never have been set up in that form. Paragraph 1 of our report states.

"The use of PFI to deliver a vital military capability like FSTA was inappropriate."

It is rather depressing that after years of identifying projects where the use of PFI was inappropriate, and saying that certain types of project should never be subject to PFI-for example, the Libra project to supply computer systems for magistrates courts-it is still being used in situations in which it is wholly unsuitable. I was looking at the questions put by our Edinburgh colleague, the right hon. Member for Stirling (Mrs McGuire). At question 187, she asked the permanent secretary whether, notwithstanding the pressure he was under, there was any justification for the fact that when the Ministry of Defence

"went into a project, that they did not know what it looked like, would sound like, would turn out like, had no indication of the costs of the subcontractors."

The permanent secretary replied:

"I am certainly not arguing in favour of the approach that was taken...All I am trying to do is to offer a little bit of mitigation for that failure by reference to the operating conditions at the time."

I think what Sir Bill probably meant by "operating conditions at the time" was the previous Prime Minister, who when he was Chancellor of the Exchequer said that we would do it under PFI, or it would not happen. We need to be slightly more honest with ourselves about what is and is not appropriate, and to have more open debate about it. The project was scandalously managed and cost much more than it should. It has taken much longer than it should, and it was inappropriate in the first place.

The Chair referred to the aircraft carrier project, which is similar. We looked at that only this week with the new permanent secretary at the Ministry of Defence, as we did at the beginning of the year in our 2009 major projects report. What staggers me is that only seven months after signing the contract, the MOD took a decision that would increase the costs, not because of project management failure or management ineptitude-it was purely a decision to delay.

Decisions were taken that increased the cost by £908 million-or so they thought when we reported on the matter in our 23rd report, in the 2009-10 Session, HC 338. It turns out that the figure was not £908 million; it was £650 million more than that. It was £1.5 billion extra, on top of the original cost, purely because of the decision to delay.

I agree completely with our Chair.The permanent secretary at the time should have said, "Affordability is such an important component that if you want me to do it, you should require me to do it by issuing a direction." I am sorry that was not done.

Our report on the National Offender Management Service highlighted a significant issue relating to the management of the civil service and the way that civil servants are placed on projects. Our recommendation 5 notes that

"the Senior Responsible Owner did not have the right experience for the role."

Who put that person in that job, when she did not have right project management experience? If we set people up to fail, we cannot be surprised if that is exactly what happens.

I should like to refer to several other reports, but I shall concentrate on the report on the Rural Payments Agency, which illustrates some deep issues in the relationship between Ministers and civil servants that are as important for the future as they were in the past.

I shall remind the House of the facts in the RPA debacle. It involved the single payment system. Various methods were available, but the Government chose to implement the most complicated system on offer with the shortest available timetable.

That process was certain to increase both the total number of claimants and the total land area claimed, while the agency had not properly completed the essential digital mapping exercise-refusing to recognise that it was flawed-and was using a computer system that had not been fully tested, and which was anyway not up to the job.

It used an approach that split the work into separate tasks performed in different parts of the country, which made it impossible to track the progress of individual claims. It cancelled the parts of the system that would have provided management with information about what was going on and scrapped the contingency plan that would have at least enabled the agency to make part-payments.

Furthermore, the RPA sacked its most experienced staff and replaced them with unskilled temporary agency workers who were required to work unsocial hours on the minimum wage. One is tempted to ask, what could possibly have gone wrong? But the fact is that, as we all know, it did go wrong.

To say that the single payment scheme was convoluted was an understatement. Indeed, Dr James Jones of the Royal Agricultural College in Cirencester told our sister Committee, the Environment, Food and Rural Affairs Committee:

"This has been highly confusing conceptually even at the highest levels of those responsible for creating the scheme rules at EU, Member State and regional level. He said that most of the difficulties experienced in implementing the Single Payment Scheme stem back to internal contradictions that arise because
(a) entitlement is based on past occupation of specific parcels of agricultural land but is then not linked to that land; (b) payment is related to occupation of 'agricultural land' but does not require agricultural production; and (c) most of the cross-compliance and other conditions relate to production but the Single Payment was not a production-based subsidy."

And that was just for starters. One still had to decide which of the three possible years one would start the scheme in, whether to incorporate funding for the dairy sector into the scheme, and the crucial question of the method that would be used to calculate payments. That offered possibilities of quite byzantine complexity.

The main choice was whether to use as a reference point the payments that individual farmers had received in the past under the old common agricultural policy schemes-known as the historic approach-or whether to average out all payments among farmers in a state or region, which was known as the flat-rate approach. Member states could also apply a mixed model under which they were allowed to apply different calculations in different parts of their territory. It was this that enabled the Administrations in Scotland, Wales and Northern Ireland to use a different system from that used in England.

But there was a further twist within the mixed model. Even within one region of its territory, such as England, a member state could calculate single payments using a part-historic and part-flat rate approach. Under such a "hybrid" system, payments would be calculated partially by taking the available money within a region and splitting it among farmers on the basis of a flat-rate entitlement, and partially by taking account of the old subsidy that a farmer had received historically under the common agricultural policy schemes.

And that was not all. Member states could choose a hybrid scheme and leave it at that, which was known as a static hybrid, but if they wished, member states could choose a hybrid scheme and then vary it as time went on, so that over the years the proportion based on the historic subsidy payment declined and the proportion based on the flat rate increased. This was known as a dynamic hybrid.

The permanent secretary of the Department for Environment, Food and Rural Affairs, Dame Helen Ghosh, made it very clear that this was not the Schleswig-Holstein question. Members may recall that that was the question of which Lord Palmerston, a former Prime Minister, said that there were only three people who ever understood it: one of them died, one of them went mad and one of them forgot what the question was. But it was undoubtedly byzantine in its complexity. It prompts the question, what did DEFRA and the Rural Payments Agency actually think about all this? Well, funnily enough, it was very clear what they thought about it.

According to evidence from George Dunn, the chief executive of the Tenant Farmers Association, which he gave to the EFRA Committee, Bill Duncan, who was head of the central scheme management unit at the Rural Payments Agency, said that if the RPA were to choose something other than a simple historic or a simple regional average system it would be a "nightmare" to administer. That is what the senior Rural Payments Agency official thought. David Hunter, who was the director of European Union and international policy in DEFRA, said it would be "madness." That is what the senior DEFRA official thought.

Yet Dame Helen Ghosh, the permanent secretary of DEFRA, giving evidence to our Committee, in answer to a question from David Curry, then a Member of the House and a member of the PAC, and of course a former Agriculture Minister, told our Committee:

"Ministers were being told it was possible when it was not in fact possible."

The full quote is as follows, and I think it is quite illuminating:

"The capacity of the organisation to advise ministers-and I think we put them right-and indeed the connection between the policy and operations in the Department"-

I think she actually meant the lack of a proper connection between the policy and the operations-

"meant that ministers were being told it was possible when it was not in fact possible."

The quote continues:

"The point I am making is that had ministers at the time been told it was effectively impossible-and I think it is very difficult to discuss counter-factuals-they may have made a different decision, had they known the difficulty".

In other words, the senior official in the RPA with specific responsibility for the management of the scheme, Bill Duncan, thought the route that they were choosing would be a "nightmare" to administer.The senior DEFRA official with direct management responsibility for the oversight of the scheme, David Hunter, thought the route that they were choosing would be madness, but Ministers were being told that it was quite deliverable. As Dame Helen said,

"ministers were being told that it was possible when it was not in fact possible."

Why? It is the job of the neutral civil service to ensure that Ministers are in full possession of all relevant facts before making a decision, so we could blame the civil service for that debacle.

On the other hand, and in actuality, the Minister at the time was absolutely determined to go down a dynamic hybrid route come what may, so we could blame the Minister, and perhaps we should. The Minister should have been told, however, "It cannot be done." He should also have been told, "If you want me to do this, Minister, you are going to have to issue a direction to me to do it, because it cannot be done in a way that is economic, effective and efficient." Why did they do it? In the end, they did it because Ministers told them to, and they were not prepared to stand up to Ministers in the interest of taxpayers, as they should have.

What is the lesson? It is quite rightly true that civil servants respond to what they believe to be a Minister's priorities, but it is also essential for Ministers to be aware of the consequences of their decisions, and for civil servants to stand up to them and to make sure that they are aware of those consequences. I should like to think that the best civil servants do that, but I fear that it does not happen now as much as it did a generation ago. I am not making a party political point, however, because that was a criticism in the 1980s under the Thatcher Governments and subsequently; it has been a criticism of the previous Administration; and, for all I know, it will become a criticism of the current Administration.

It is absolutely essential, however, for Ministers and their advisers to understand the consequences of what they do and the impact of those decisions on large-scale-often world-scale-organisations.

The right hon. Member for Greenwich and Woolwich (Mr Raynsford), in evidence to the Public Administration Committee, made the point very clearly, stating that

"there has to be an understanding on the part of the politician about the impact of political decisions on the ability to manage organisations. I am critical of a failing of some of the leaders of this Government and previous governments who have believed that essentially political decisions could be taken without a proper appraisal of the impact on the running of a department."

16 December 2010

See also:
SPEECHES: Common causes of project failure

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