1. Thank you for the opportunity to give evidence at your recent hearing on the emerging Efficiency landscape. Lord Browne and I enjoyed the discussion and we look forward to further, similar strategic debate across our other agendas in months and years to come.
2. In reviewing the transcript of the hearing, I am glad to provide a correction, a clarification, and the Government's responses to four points of detail that we were not able to answer on the day.
3. First, a correction on one minor piece of evidence. I told the hearing (in response to question 34) that I thought that internal audit services to government were provided to all government departments by a service located in the Home Office. In fact, there are several in-house providers of internal audit services within government departments, and provision to the Cabinet Office is arranged through a shared service agreement with BIS and C1G. My apologies for this oversight.
4. Secondly, I will be glad to provide a report before recess setting out our assessment of the cash savings that have been achieved in government departments as a result of Cabinet Office led delivery this year. I'd like to take this opportunity to clarify and reinforce comments I made at our hearing. These cash savings were generated by our early delivery work, which focussed on enacting the controls brought in by Francis Maude in May 2010 to help departments better control specific areas of expenditure, such as hiring management consultants. And, as my report next week will make clear, in each case we have seen a real cash releasing reduction in expenditure as targeted.
5. However, at our hearing the committee also questioned the extent to which these savings correspond with definitions of efficiency and value for money, as implemented by previous administrations. Committee members asked particularly about the sustainability of these measures.
6. I wanted to amplify that these early signs of the success of our strategies must be placed in the context of our broader programme of reform. For example, Major Projects cash savings arose from a review of government's portfolio of major projects. They will sustain over the lifetime of the individual project concerned, of course; but the more systemic reform that follows through from our initial review, and that will deliver sustained savings into the future, is our long term strategy to set up an effective Major Projects Authority, and all that this entails.
7. Thirdly, there were four specific questions that arose in the hearing:
(a) The committee asked whether the Department of Health's reductions in consulting expenditure had been offset by an increase in contracting expenditure. Our records show that the Department of Health reported a £98 million reduction in their expenditure on Consulting, a fall of 91% on 2009-10 levels. In the same period they reported a £16 million increase in spend on temporary staff and contractors, an increase of 37% on 2009-10 levels. 50 the increase in contractors offset only around a fifth of the decrease in consulting. The increase in DH spend on contractors has the effect of reducing the overall saving in government.
(b) The committee also asked us to revert with further detail on government policy in respect of reform to NH5 procurement. Here, whilst our overall policy framework is that NH5 reform falls within the "loose" category to which central controls do not apply, we are working with the Department of Health to identify which elements of our central programme of work can be applied within their own programme of efficiency and reform for the NH5; and where our central delivery can be made available directly to health service organisations, we will certainly ensure that they can benefit.
(c) Thirdly, the committee sought clarification of the MPA's role in respect of SROs of major projects. Part of the role of the MPA is to assure projects to identify that they have the necessary skills and resources to deliver to time, cost and quality and to intervene where there are gaps in capacity or capability. The Major Projects Academy aims to introduce a dedicated facility to undertake the education and development of high potential departmental officials to improve significantly the leadership of major projects. This work is still at an early stage of development and it is not possible to provide more detailed information on the size, scale or time frame of the academy at this time. However, David Pitchford has agreed to provide the PAC with a note on his role as PPM Head of Function in early autumn and this note will contain more information on the development of the Major Projects Academy, particularly in relation to building and managing SRO capability across government.
(d) Lastly, the committee asked at questions 60 and 61 about the definitions of professional services used within our control framework. I attach the definitions that have been used as an Annex to this letter.
July 2011