Q1 Chairman: Good afternoon, welcome to the Committee of Public Accounts where today we are considering the Comptroller and Auditor General's Report on HM Revenue & Customs' estate private finance deal eight years on. We welcome Lesley Strathie, Chief Executive of HM Revenue and Customs and Nick Friedlos, the Chief Executive of Mapeley. Ms Strathie, would you like to introduce your colleagues please?
Ms Strathie: On my left I have Dave Hartnett, Permanent Secretary for Tax and Simon Bowles, Chief Finance Officer to Revenue and Customs.
Q2 Chairman: Perhaps we could start by looking at the recommendations from the Comptroller and Auditor General. You will see that he says you have not achieved value for money so far because you have not obtained all the benefits of the deal and you do not have a strategy for using the property vacation provisions. Why do you disagree with the Comptroller and Auditor General in his conclusions?
Ms Strathie: First, I do not disagree with the fact that maximum value from this contract has not been taken and that the Department could have been more strategic in its approach. The part where we disagree is what I perceive as the NAO's narrow definition of value for money when I actually think this contract has enabled much broader value for money for HMRC. It enabled savings to be taken, it enabled vacations which have not been taken but within the totality of the change which the Department has absorbed and what it has done, that is where we disagree. We can agree on that.
Q3 Chairman: We can agree on this: you did not obtain all the benefits; you did not have a firmed up plan for property vacation. We can agree on that. Do you want to comment on that Comptroller and Auditor General?
Mr Morse: Ms Strathie and I are in broad agreement as to the fact that the benefits were not obtained and there was not a firmed up plan. I am quite content if we want to disagree on precisely how we are defining value for money.
Q4 Chairman: We can move on. We have cleared that disagreement up, or at least found out the nature of it. Can you look now at paragraph 2.21? We read there that the total savings now available have reduced from £1.1-£1.2 billion to about £900 million. Obviously you have got considerably less out of this, one third of a billion less than you wanted to out of this deal. How are you going to maximise savings over the next 12 years? What is your strategy now?
Ms Strathie: May I ask Mr Bowles, who has taken the lead on this contract, to answer that question?
Mr Bowles: I would like to look to your question on how we will maximise value from this contract over the remaining period, particularly having joined the Department last March. While I cannot change the past, I can certainly focus on the future. There are three strands here. The first one is around strengthening and improving the processes within the estates function in HMRC because that is a key element of getting value out of this contract and that includes the links to the business change. This contract has an important role in enabling the business to shape itself, to deploy people as efficiently as possible and that gives us options which we would want to optimise. The first piece is around the improvement of the ESS, the estates function. The second piece is around a number of commercial areas which we are working on in collaboration with Mapeley. Some of them are day-to-day issues which have arisen over the last four or five years, where we will be clarifying savings available under the contract and taking advantage of them. That needs to develop into the third strand which is developing a partnership. I absolutely accept the recommendations and points made by the National Audit Office that we can improve the elements of partnership between Mapeley and ourselves. That will require work not only on our side but also on Mapeley's.
Q5 Chairman: Let us look at how we can improve this partnership, in particular paragraph 3.10. You do not know what profits Mapeley have made. If you do not know what profits they are making, how can you know whether they are charging you a fair margin or not?
Ms Strathie: If we just step back and accept the time this contract was negotiated and signed and the terms that were signed and from 2001 fast forward to 2007, we are working with Mapeley to try to agree transparency, open book and best practice as defined in 2007. That is probably a question for Mapeley as to where we are on that particular journey. We now have greater sight and we have proposals from Mapeley on greater insight into that but it is beyond what we are required to do in the contract. If we are to work in the spirit of alliance and partnership going forward, I believe that is what we need.
Q6 Chairman: Let us now turn to Mapeley. Mr Friedlos can you assure this Committee that you are going to share with the Revenue this information that they need, that you are going to give them full information on what profits you are making so that we know, on behalf of the taxpayer, whether we are getting a fair margin or not? Can you assure the Committee that you can give them that information and that you will cooperate fully with them?
Mr Friedlos: I can assure the Committee of that. We have asked the Government to consider one or two safeguards around freedom of information and protecting the data.
Q7 Chairman: That is in recommendation "a". If you are going to do that in the future, why have you not done it in the past?
Mr Friedlos: We have always responded to requests that we have received.
Q8 Chairman: That is now a given. Are you happy with that Ms Strathie?
Ms Strathie: Very happy.
Q9 Chairman: We are here to help you.
Ms Strathie: Thank you.
Q10 Chairman: Mr Friedlos, paragraph 2.19. You raised concerns with HMRC in January 2009 about financial pressures arising from the vacations programme. Obviously the Revenue want to vacate properties from time to time. You said this was putting great pressures on you. Were you not just looking for concessions?
Mr Friedlos: We were not looking for concessions.