HC Deb 18 February 1988 vol 127 cc1149-56 3.30 pm
The Prime Minister (Mrs. Margaret Thatcher)

With permission, Mr. Speaker, I should like to make a statement on management in the Civil Service.

I asked the efficiency unit to report to me on the progress of management reforms in the Civil Service. It has produced a report, "Improving Management in Government: The Next Steps". The report finds that many Civil Service managers want to see further changes to give more room and flexibility for the exercise of personal responsibility. The report recommends, first, that to the greatest extent practicable the executive functions of Government, as distinct from policy advice, should be carried out by units clearly designated within Departments, referred to in the report as "agencies". Responsibility for the day-to-day operations of each agency should be delegated to a chief executive. He would be responsible for management within a framework of policy objectives and resources set by the responsible Minister, in consultation with the Treasury.

It recommends, secondly, that the Government should commit themselves to a progressive programme for attaining this objective; thirdly, that staff should be properly trained and prepared for management of the delivery of services whether within or outside central Government; and, fourthly, that a "project manager" at a senior level should ensure that the programme of change takes place.

The Government have accepted these four recommendations, which will set the direction for further development of management reform in the Civil Service. Each agency will be accountable to a Minister, who will in turn be accountable to Parliament for the agency's performance. These agencies will generally be within the Civil Service, and their staff will continue to be civil servants. The Government will develop a continuing programme for establishing agencies, applying progressively the lessons of the experience gained.

The Civil Service unions will be consulted about the setting up of particular agencies. They will also be consulted if any change in terms and conditions of civil servants is contemplated.

The centre of the Civil Service must be organised in a way which is helpful to bringing about change. A permanent secretary in the Office of the Minister for the Civil Service will be responsible, through the Head of the Home Civil Service, to me for managing the process of change needed to implement the recommendations.

I have placed copies of the efficiency unit's report, together with a list of executive functions that appear to be promising candidates as initial agencies, in the Library and copies are available in the Vote Office.

Mr. Roy Hattersley (Birmingham, Sparkbrook)

May I first assure the Prime Minister that the Opposition believe that a continuous review of the functions and performance of the Civil Service is necessary to improve its efficiency, its accountability and the service that it gives to the general public. In many respects, we have the best Civil Service in the world, but that does not mean it is beyond improvement. What the Prime Minister has announced today is, after all the press speculation, an anticlimax. It is no more than what Fulton recommended 20 years ago, although no doubt it creates the illusion of ministerial activity.

The important questions concern not what the Prime Minister has announced today but what she intends, and therefore I ask her three questions based on the guidance notes issued this morning to senior civil servants which contain the suggestion that they should be read alongside the Prime Minister's statement and the document put in the House of Commons Vote Office.

In paragraph C2 of the guidance notes, these words appear: In a few cases it may be appropriate to set up executive agencies outside the Civil Service, eg by setting up private limited companies. If the Government are contemplating turning part of the Civil Service into private limited companies, was it not the Prime Minister's duty to tell the House this afternoon?

Secondly, we are told in paragraph F3 that MPs are to be encouraged to approach agency management in the first instance. Since that is a clear erosion of parliamentary responsibility, was it not the Prime Minister's duty to tell that to the House of Commons this afternoon?

Thirdly, paragraph J3 says that reductions in Civil Service numbers have not reduced the services that the Civil Service provides. Has the Prime Minister never heard of the queues at DHSS offices, and is she not aware that there are now 200,000 unopened letters in Lunar house?

Finally, on the principle of what the Prime Minister says, since it is only of any real importance for what it presages for the future, about which there have been so many hints but so little action, let me ask her this. If there is to be a radical review of the Civil Service, can we be promised that changes will be preceded by discussions with all parties in the House? The Civil Service is not the property of any one Government and, to maintain the confidence in its impartiality and efficiency, changes in its organisation have to be made by consensus, not by confrontation.

The Prime Minister

I will take the right hon. Gentleman's points in order. First, I am not responsible for speculation in the newspapers. It gets wider of the mark every single day, as we all know.

Secondly, generally the executive agencies will be set up within the Civil Service, but on some occasions they will not. That is why I said "generally". There are occasions when it will be better to set them up outside the Civil Service. [Interruption.] I said "generally", not in each and every case. If the right hon. Gentleman looks, he will see that that is quite clear. So some of them will be set up outside and there will, of course, be consultations with the trade unions when they are set up.

Thirdly, on agency management, hon. Members quite frequently write to the manager of a local social security office or to an income tax inspector, because frequently they get a much quicker reply that way. There is nothing unusual about that and right hon. Gentlemen, when they were in power, would have advised hon. Members to write to managers when they possibly could because otherwise it takes very much longer. The right hon. Gentleman is fully aware of that.

Fourthly, the numbers in the Civil Service have indeed fallen. The figure is now some 588,000 — the lowest figure for the Civil Service since the war. But numbers in particular Departments, including parts of the DHSS, have of course been increased as the need has arisen.

I am very grateful to the right hon. Gentleman for what he said about the Civil Service. For our part, we pay tribute to the Civil Service, of which the nation has a right to be proud.

Several Hon. Members


Mr. Speaker

May I remind the House that following this statement we have business questions then a debate on the three prayers on the social fund and then a motion on which I am required to put the Question at 10 o'clock. I shall allow questions on this statement to go on until 4 o'clock and then, I am afraid, we must move on. I ask for brief questions, please.

Mr. Terence L. Higgins (Worthing)

In view of earlier reports of the Treasury and Civl Service Committee on the accountability of Ministers and civil servants, can my right hon. Friend confirm that it is not in her mind that there should be any change in the relationship between Ministers, civil servants and Select Committees?

The Prime Minister

There will be no change in the arrangements for accountability. Ministers will continue to account to Parliament for all the work of their Departments, including the work of the agencies. Departmental Select Committees will be able to examine departmental agencies' activities and agency staff in the same way as they examine Departments now. The new approach does not affect the work of the Parliamentary Commissioner for Administration. The establishment of departmental agencies will not affect the powers and responsibilities of the Public Accounts Committee. It is expected that when the permanent secretary, who is usually the accounting officer, goes to such a committee he will take with him the executive chairman of the agency and they will, therefore, both be available to answer questions.

Mr. Alan Beith (Berwick-upon-Tweed)

Does the Prime Minister accept that, whereas we would welcome any developments in organisation that allowed civil servants to exercise more personal responsibility, we would be strongly opposed to any attempt to prevent Members of the House from tabling questions on matters dealt with in the agencies that affected the fundamental rights of their constituents?

Does the right hon. Lady realise that both her reference to the performance of the agencies rather than to the matters with which they deal and suggestions in the yellow book carry the implication that the rights of Members on behalf of their constituents will be diminished? Is it not likely that, if that aspect of the matter is not corrected, we shall end up with Ministers continuing to exercise power but not being answerable to the House for what they are doing?

The Prime Minister

I do not think that the hon. Gentleman can have listened to the answer to the last question, which covered his point. I repeat: there will be no change in the arrangements for accountability. Ministers will continue to account to Parliament for all the work of their Departments, including the work of the agencies.

Sir William Clark (Croydon, South)

Is my right hon. Friend aware that most people agree that it is a good idea to split the functions of the Civil Service between the policy units and the agencies? Is she personally satisfied that the streamlining of the Civil Service will lead to better value for money?

The Prime Minister

That is its purpose, but, as my hon. Friend will see from the report presented to me, a considerable number of people in the Civil Service want an arrangement that will give them more responsibility. Many of them are well aware that, as my hon. Friend seems to suggest, there has been too much splitting between the duties of those concerned with making policy and those concerned with management. We feel strongly that those concerned with making policy should know from experience how that policy is implemented, and we hope that there will be very much more overlap in the duties of civil servants, with a part in management and a part in policy making, than in the past. The point, as my hon. Friend has said, is to obtain better value for money through personal responsibility.

Mr. Michael Foot (Blaenau Gwent)

Does not the Prime Minister appreciate that one of the reasons for the very low morale in the Civil Service is that she has appointed so many confirmed Thatcherites to some of the best jobs? Does she not think that it would be very damaging for the country if she were now to embark on an attack on the Civil Service comparable to the attack that she has already carried out on the universities, the National Health Service and local authorities?

The Prime Minister

I totally reject what the right hon. Gentleman has said. He will have had occasion to know as a Minister that the service received from civil servants is fundamental to the Civil Service, irrespective of any personal political views that civil servants hold. I am served every bit as well as the right hon. Gentleman has been served, and he does the House and the Civil Service a great disservice in some of his suggestions. This is a response to a report not by us, but to us, on improving management in government.

Mr. David Howell (Guildford)

Does my right hon. Friend accept that the proposals for a less centralised and less archaic system of financial control and management in Whitehall are thoroughly welcome and, indeed, long overdue? Does she recall that I urged the same course on Lord Wilson of Rievaulx 20 years ago in the House, when I put the proposition to him after the Fulton committee reported that such an approach should be adopted? My right hon. Friend will also recall, however, that we made little progress at the time. Will she now accept warm congratulations that the initiative has been seized in the introduction of a system that will increase accountability, job satisfaction in Whitehall and the efficiency of the public machine?

The Prime Minister

Yes, I remember my right hon. Friend's views at that time, and the views that he has strongly pressed on us since then. He will be the first to be aware that this is the latest advance in greatly improving management in the Civil Service. The savings from the efficiency scrutinies are rising to £325 million a year, and total £1.3 billion so far. There has been greatly improved value for money in purchasing, saving £290 million a year. My right hon. Friend the Minister of State put in a system of management in parts of the Civil Service called MINIS, which is also producing greatly improved efficiency. This is the latest of a number of steps that have already done a considerable amount to improve management efficiency in the Civil Service.

Mr. Roy Beggs (Antrim, East)

Will the proposed management reforms apply to Northern Ireland? Will the Prime Minister ensure that there will be adequate consultation with the Northern Ireland Civil Service before any final decisions are made? Further, will she assure the House that it is her intention, as far as possible, to avoid conflict between Northern Ireland Ministers and managers? Finally, has consultation taken place through the Anglo-Irish Conference on the implementation of the report's recommendations?

The Prime Minister

On the last point, no. On the earlier point, the reforms will apply to the Civil Service throughout the United Kingdom. I do not think that the initial list of 12 contains any agencies from that particular Department, but the reforms will apply throughout the entire Civil Service. The executive managers of the agencies will operate within the framework of objectives and resources laid down in consultation with the Minister and the Treasury.

Mr. Nigel Forman (Carshalton and Wallington)

I welcome my right hon. Friend's response to the report, but will it give the greatest scope in the Civil Service for performance-related pay and for some measure of decentralised pay bargaining — two important aspects that need to be encouraged?

The Prime Minister

It is intended that there should be more flexibility in pay in the agencies and also that there should be performance-related pay. As my hon. Friend is aware, we have already introduced a range of pay for a particular grade so that we can take into account people's performance. That range of pay for particular grades applies throughout the Civil Service. Yes, we believe in benefiting and rewarding excellent performance.

Mr. Michael Heseltine (Henley)

Will my right hon. Friend accept our strong support for what is a limited but further reform of the Civil Service and her commitment to its excellence? But in establishing executive agencies, will my right hon. Friend recognise that the logic of that is that there should be contracts for those in charge of the executive agencies so that there is full personal accountability? Will she consider a progressive extension of recruitment to the Civil Service by contract as opposed to permanent life tenure?

The Prime Minister

The majority of agencies will be established within the Civil Service, although, as I said previously, that will not be exclusively so. I shall consider what my right hon. Friend has said in relation to those that are not established in the Civil Service. If there were to be any fundamental changes in terms and conditions of pay in the Civil Service, they would have to be in conjunction with, and after consultation with, the Civil Service. As my right hon. Friend knows, we must recruit to the Civil Service under the established rules. There is provision for late entrants and we benefit greatly from those who have had experience outside the Civil Service who join us later.

Mr. Robert Sheldon (Ashton-under-Lyne)

Is the Prime Minister aware that, as the Fulton committee pointed out, policy changes are often the result of experience of implementation? How will she ensure that there is a proper interchange between the agencies and the Government Departments? Will she confirm that the National Audit Office will continue to be able to audit all the agencies and so present the Public Accounts Committee and the House of Commons with the inside information that is so essential? Finally, what legislation will be required?

The Prime Minister

In so far as the agencies are within the Civil Service, the National Audit Office arrangements will, of course, continue to apply. In so far as they are set up outside, that would not be the case, as far as I am aware. [HON. MEMBERS: "That is not what the right hon. Lady said."] It is what I said before. I said that, generally, the agencies would be set up within the Civil Service. That does not mean that they will be in all cases. In so far as they are within the Civil Service, the normal rules of accountability and audit continue to apply. [Interruption.] No, I am sorry. In so far as they are in the Civil Service, they will be accountable precisely as they are now. They will be set up in conjunction with Ministers within a framework and a resource allocation negotiated with Ministers and the Treasury.

I do not anticipate that legislation will be required for the proposals that I have announced.

Mrs. Margaret Ewing (Moray)

The Prime Minister talks about accountability to Ministers through the House. Has she given special consideration to the Scottish Office, in which we have a Solicitor-General who is a former but defeated Member of this House and a Minister for agriculture who is a non-elected Member of another place? Will this new system improve accountability to Scottish Members?

Will the right hon. Lady comment on how the chief excutives will be appointed? Will it be by patronage or will it involve other members of the Civil Service through a process of election?

The Prime Minister

The executive managers of the agencies will usually be appointed in the usual way. If we secure someone from outside as an executive manager, that will have to be through the usual competitive rules—the ordinary Civil Service rules. He could not be chosen without that.

The Secretary of State for Scotland answers all the hon. Lady's questions very well indeed.

Mr. Richard Alexander (Newark)

I welcome my right hon. Friend's statement. I assure her that the service that I get from civil servants in my constituency, especially at the Department of Health and Social Security offices, is first-class and often better than one can expect from Ministers. Nevertheless, will she bear in mind that it is important that hon. Members should have access at reasonable times to the Secretary of State in charge of a Department where it is not possible to get a proper answer from the Civil Service in one's own area?

The Prime Minister

Yes, of course. I am grateful to my hon. Friend. One knows full well from one's own experiences as a constituency Member that if one writes to the manager of the Department directly concerned one frequently gets a swifter reply than is possible by sending letters from one Department to another and down to the agency. There will continue to be access to Ministers. Indeed, if anything, the number of letters has continued to increase—not only to other Ministers but to this one, too.

Mr. Donald Anderson (Swansea, East)

My constituents at the Driver and Vehicle Licensing Centre in Swansea, which may become a public limited company, fear that they are likely to become involuntary guinea pigs in an ideological experiment. Will the Prime Minister assure us that the proposal is not a certain intended device to decouple local wage rates from national Civil Service rates and that even the hived-off operations will have the same safeguards for their staff as civil servants at the DVLC have now?

The Prime Minister

The hon. Gentleman is correct that the Swansea vehicle licensing office is one of the first of the 12 agencies proposed. It will be set up in consultation with the unions. On pay and recruitment and terms and conditions, we intend the agencies to be allowed some flexibility within the framework set by the responsible Minister, although there will need to be controls to safeguard public expenditure. The degree of flexibility can differ from agency to agency, depending on the requirements of the job to be done. Staff and unions will be consulted in the normal way if any changes in terms and conditions of service are contemplated. Quite apart from the proposals that I have announced, we have already made provision for a range of pay for any particular grade to enable us to take account of different circumstances and of merit.

Mr. Michael Shersby (Uxbridge)

Can my right hon. Friend suggest any areas in which she considers that an agency might be more effective outside Government? Has she received any advice that enables her to suggest to the House how that might proceed?

The Prime Minister

At present, no, but we are not excluding the possibility. We have put in the Vote Office a list of the 12 that we consider would be the first suitable executive agencies. From then on, it will be up to Ministers in their Departments—indeed, the 12 have come from Ministers — to identify functions and administrative services that are right for an agency, and to put forward those for future agencies.

Mr. John Garrett (Norwich, South)

Does the Prime Minister agree that the aim of the proposal is simply to cut the pay of civil servants outside London? Does she also agree that that will inevitably lead to a lessening of ministerial accountability to this House because our constituency cases will be the responsibility of the heads of quangos—some private—rather than the responsibility of Ministers? Does she realise that she has started something that her party may come to regret — the wholesale appointment of political appointees to the heads of executive agencies?

The Prime Minister

I have said that, where the agency remains within the Civil Service, appointments will continue to be made under all the present Civil Service rules.

There is now a range of pay for grades—deliberately to give extra pay for extra performance. I am astonished that that meets so much hostility from the Labour party.

Mr. James Couchman (Gillingham)

Is my right hon. Friend aware that her statement will be warmly welcomed by many hon. Members? In choosing those functions that might happily be turned into agencies, will she confirm that it will be presumed that agencies with partially or mainly commercial functions will be those that would properly be outside the Civil Service? Furthermore, will she consider the possibility of some of the existing agencies, such as the Property Services Agency, being candidates for being put outside the Civil Service?

The Prime Minister

As my hon. Friend is aware, the Property Services Agency is a Government Department with extensive responsibilities. We already enable Departments to choose to go to their own advisers rather than to use the Property Services Agency, if they think that they can get better value for money. Although it has not yet been proposed that the Property Services Agency be used in that way, we have a review of that agency and how best to reform its activities.

I am grateful to my hon. Friend for his comments. Insofar as there could be agencies outside the Civil Service, I accept that it would be best to deal in that way with I hose that are essentially commercial services.

Mr. Norman Hogg (Cumbernauld and Kilsyth)

Is the Prime Minister aware that Cumbernauld new town, in my constituency, contains a large Inland Revenue collection office? Is she further aware that my constituency suffers from high unemployment and low pay? Therefore, will she give an assurance that such areas will not be subject to change in the conditions of service and employment, that nationally agreed wages bargains will continue, and that the intention of this proposal is not to create conditions where the poor remain poorly paid, but rather that national pay negotiations will continue to determine what applies in the Civil Service nationally?

The Prime Minister

The hon. Gentleman said that the Inland Revenue had an office in his constituency. I think that he will find that the Inland Revenue Staff Federation has accepted the new arrangements for range pay. Perhaps he will kindly check that.

Mr. Tim Rathbone (Lewes)

In spite of the continued ministerial responsibility for policy, will my right hon. Friend confirm that sufficient ministerial responsibility and answerability for action will be devolved, as that seems to be the only way in which vast areas of service to people in this country can be entirely depoliticised?

The Prime Minister

The purpose of the change is to give more responsibility to the manager of the agency, but the manager will be accountable to his Minister and the permanent secretary will continue to be the accounting officer to the appropriate Select Committee. The whole purpose of this, in response to a report presented to us, is to reply to the desire of many people in the Civil Service to have more responsibility and the wish of the Government to have an organisational arrangement that will increase efficiency and the effective use of resources.

Mr. Hattersley

Will the Prime Minister clarify one doubt about one area of responsibility and accountability? Will areas that may become or—as the Prime Minister confessed — will become independent and private he accountable to Ministers and through Ministers, and will the Parliamentary Commissioner for Administration be responsible for any maladministration in those agencies?

The Prime Minister

In so far as they can become totally outside the Civil Service, they will not be accountable because they are totally outside the Civil Service. However, in general, they will be within the Civil Service and there will be no change in the arrangements for accountability.