Q31 Austin Mitchell: In business you can enforce that. In Government all you can do is preach it.
Lord Browne: In business you can to an extent. The impression people have of business is that it is run by founder despots who have absolute autonomy and can do anything they want. It is simply not true. If you want to do business twice in a place you have got to watch out what you do. You have got to watch out what you do with the community, how you deal with it, you ought to worry about organised labour, you ought to worry about non-organised labour, and you ought to worry about your recruitment too. These are just a few things that it seems to me should at least cross the mind of a chief executive before they take big decisions to downsize a workforce.
Q32 Austin Mitchell: Yes, but the ERG are not in that situation. You had power and you could do things; now all you can do is preach.
Lord Browne: My observation of the ERG, in my limited experience of it, is that it takes a limited number of things and tries to deliver them in a very focused way, by consent and by activity in various areas.
Q33 Joseph Johnson: I want to go back to what Lord Browne was saying a few minutes ago about the quality of data that you had seen. You seem to be saying, if I understood correctly, that there was plenty of data. Indeed at one point I think you said there is, "Competent financial information, no question about that." Then you clarified it by saying, "The question is whether it is of the sort on which decisions can be made." I think that was roughly what you were saying. That surprised me to a certain extent because past National Audit Office reports seemed to suggest that the quality of data that the Treasury and other efficiency drives have encountered has not been at all good. Paragraph 1.13 of the report says that, "Available management information is often insufficiently robust." It uses that as one of the reasons why you are being suitably cautious about the savings that you are announcing. I just want to nail down whether you think it is good data or bad data.
Lord Browne: I think I was trying to define what I meant. What I have observed is the financial flow information, which is to say how much money has come in and how much money has gone out, is pretty good. Because people have to land their budget exactly. What is lacking is the much deeper understanding of how you can use numbers and information to understand where you really are. It is to do with efficiency. For example: how well are you doing against all the other Departments or commercial organisations? Where might you be on a project, beyond the Budget period? What are you doing in terms of using the right skills for a project? I am picking random examples. It depends what it is at the heart of your strategy. You should align strategic intent along with the numbers and information needed to work out whether you are on track to achieve what you want to do. Again, I have not observed all the boards, but it is uniform for all the independent members of boards saying, "We have to do more in this area." The ERG has done a limited amount, which is to produce these quarterly data reviews that I think are just about to start. We have to see how that goes, but it seems to me a good start.
Ian Watmore: One of the things that is clear is that whilst information in a given Department might be quite good, it does not compare very easily across Departments. People aggregate their information differently and then you look at them on one particular measure and you find that actually they are counting things in a different way. In total it works out for them, but just on an individual item it does not. The one that always comes up is cost of laptops. In some places, they count the laptop, the physical piece of hardware, and how much that costs. In other places they count the whole managed service, including the helpdesk, the security environment, and the software layer. Then two people put a number out for the cost of a laptop and people go, "One is five times the other, how scandalous", but actually it is completely different things that are being counted. It is that kind of thing that is really hard for us to do, which is why, as John says, the quarterly data survey which is a joint Treasury and ERG initiative, is trying to get at least a first cut of information out that you can cross-compare, and over time we will hopefully refine that.
Lord Browne: I do not think this is perfect in any organisation, commercial as well. That is why you have to limit the number of things that you look at. You have got to be very precise about what it is you want to know, otherwise people will inadvertently- sometimes purposefully-use two different versions of the same thing.
Q34 Joseph Johnson: Can I just clarify on the point Mr Watmore was making about the £3 billion to £4 billion savings that you believe are going to be attributable to the work of the ERG, out of the £6.2 billion targeted saving? I think you said those were being audited at the moment; is that an NAO audit?
Ian Watmore: We have got our internal auditors doing it, which is actually a service provided by the Home Office. It is another bit of Government that does cross-audit.
Q35 Mr Bacon: Did you say by the Home Office?
Ian Watmore: I think the internal audit function of Government is owned in one Department. It is just sat in one Department and it provides it to all Departments. We have invited those people in to come and crawl all over our figures.
Q36 Chair: If you look at what goes into that, you cannot call all of those efficiency savings, Ian. A freeze on recruitment is a good way-
Ian Watmore: Francis would say that-
Chair: What proportion are efficiencies?
Ian Watmore: Francis would say that the important thing that he was trying to achieve was real savings either in monies that otherwise would have caused cuts on the frontline-
Q37 Chair: Hang on. Even real savings, if you freeze recruitment, it is not a real saving.
Ian Watmore: Why not?
Chair: Because it is a deferring of expenditure.
Ian Watmore: If you are talking about recruitment, if you are at the same time making the system more efficient so you do not actually have to recruit that person.
Q38 Chair: Let's just take an example we had yesterday. We had DWP before us. There has been a freeze on IT. You have done a freeze on new contracts on IT.
Ian Watmore: I do not think we have done a freeze.I think we have always-
Austin Mitchell: Moratorium.
Ian Watmore: We have always said if they have expenditure on IT they bring it to us for approval.
Q39 Chair: Hang on a minute, I will tell you what they said to us yesterday. They said there was a moratorium on IT. One of their propositions for saving money over time is to get more people filling in their benefits online. They have been unable to do that because of an ERG moratorium-if you do not like the word "freeze"-on expenditure. The Permanent Secretary confirmed after a bit of persistence that that had created delay in the progress towards online applications. So you cannot call that a cut.
Ian Watmore: I would like to look at the specifics offline. I am not sure I recognise that example. I am happy to talk to Robert about it offline as well as I see him regularly. The point you asked was, "Is a recruitment freeze a real saving?" and I think it is, provided at the same time you are making the system more efficient so you are not then going to re-recruit those positions.
Q40 Joseph Johnson: The reason why I was asking about the auditing was because when the NAO has looked at past claimed savings it has found that internal audits have not been sufficiently robust. I think in its work on the 2007 savings, which were internally audited by Departments-I cannot remember the exact statistic-
Chair: 38%.
Joseph Johnson: Only something like 38% were green-lighted as bona fide, genuine savings. I just wondered what level of confidence you had that your £3 billion to £4 billion-
Ian Watmore: I am very happy if the NAO would like to come and look at it. I have no desire to do anything other than claim the right number.