UNCORRECTED TRANSCRIPT of ORAL EVIDENCE to Be Published As HC 521-I

UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 521-i

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

PUBLIC ADMINISTRATION COMMITTEE

THE WORK OF THE CABINET OFFICE

TUESDAY 9 JULY 2013

RICHARD HEATON CB

Evidence heard in Public Questions 1 - 141

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the Public Administration Committee

on Tuesday 9 July 2013

Members present:

Mr Bernard Jenkin (Chair) Charlie Elphicke Robert Halfon Kelvin Hopkins Greg Mulholland Lindsay Roy ______

Examination of Witness

Witness: Richard Heaton CB, Permanent Secretary, Cabinet Office, gave evidence.

Q1 Chair: Permanent Secretary, may I welcome you to your first evidence session in front of the Public Administration Select Committee? Please could you identify yourself for the record? Richard Heaton: Thank you, Mr Jenkin. I am Richard Heaton; I am First Parliamentary Counsel and Permanent Secretary to the Cabinet Office.

Q2 Chair: Thank you for joining us today. Your role is a somewhat complicated one because you are still in charge of the Office of Parliamentary Counsel; you are still in charge of all the drafting of legislation, which certainly has an overlap with the central role of policy co-ordination within the Cabinet Office. You also run a rather diverse group of activities in the Cabinet Office. You are therefore undertaking a dual part-time role. Do you think the Permanent Secretary of the Cabinet Office as a role lends itself to a part-time role? How are you finding it? Richard Heaton: I am lucky to have not just one, but two of the best jobs in Whitehall. I had four or five months as just First Parliamentary Counsel, which is brigaded as part of the Cabinet Office, so I was already part of the Cabinet Office collective leadership. There was already a certain degree of overlap. The two jobs complement each other pretty well. I do them roughly 50-50 in terms of my time. They are both about serving the whole of Government; they are both about making things work better; they are both about innovation; in terms of collective leadership, they are part of the same team. Cabinet Office getting by on half a Permanent Secretary seems to be pretty economical, but I hope it works okay.

Q3 Chair: How do you divide your time between the two roles? Richard Heaton: It is roughly 50-50. There was a period when I started as Permanent Secretary when it was much more on the Cabinet Office side. Then, when I launched Good Law in March/April this year, it was more on the Parliamentary Counsel side, so it evens out. Roughly speaking, I go through the diary at the beginning of each week and it works out as roughly 50-50. It ebbs and flows, but it is roughly half and half.

Q4 Chair: You were full-time First Parliamentary Counsel and all your predecessors were full-time Parliamentary Counsel. How is OPC operating now that you are part time? Richard Heaton: I have to make a confession: I am not a career law drafter and all my predecessors were. That is the key to it, as far as my time is concerned. My predecessors would spend a good half or two thirds of their time drafting, and I am not a career drafter, so I do not draft Bills. My role is as leader of the Office, helping to run the Office, providing direction and placing our work in the context of Good Law, but not drafting. That is why I found it possible to free up some of my time to do the Perm Sec job. That is the big difference between me and my predecessors.

Q5 Chair: The Institute for Government described part-time leadership as “the plat du jour in Whitehall”. What impact do you think these part-time roles are having at the senior levels of the Civil Service, given that the Head of the Civil Service is part time? Richard Heaton: When Gus O’Donnell was Cabinet Secretary, he was also Head of the Civil Service and he was Permanent Secretary of the Cabinet Office. Gus was a great leader of the Civil Service, but the Cabinet Office was not the big organisation it is now. It is justifiable that we have gone from being one-third of Gus’s time to half of my time. It is about time management and working out the things I can get stuck into to make a difference and add value. In those areas where I am present, either as Parliamentary Counsel or as Cabinet Secretary, I would hope that is a full-time presence; that I am properly briefed, know what I am talking about and that I can really make a difference and change things. If I were flitting in and out of 100 different meetings with my mind elsewhere, it would be pretty hopeless. I try to organise my life so it is not like that; I try and choose the areas where I can get stuck in as Perm Sec.

Q6 Chair: Whom do you report to? Richard Heaton: I report to Sir Jeremy Heywood. I have regular meetings with Sir Bob Kerslake and Sir Jeremy Heywood. Technically, as First Parliamentary Counsel, I report to Sir Jeremy; and technically, as Head of the Cabinet Office, I report to Bob. Effectively though, I report jointly to both the Head of the Civil Service and the Cabinet Secretary.

Q7 Chair: In practice you report to Jeremy Heywood. Richard Heaton: Yes, I did my end-of-year with him, so that must be the case.

Q8 Lindsay Roy: You say that part of your function is to make things better. What prompted the move of responsibility for cross-Government youth policy from Education to the Cabinet Office? Richard Heaton: First of all, it is not responsibility for youth employment and apprenticeships; it is quite a small co-ordination role looking after the sector. As to what prompted it, we were already involved in the National Citizen Service so we had a pretty close understanding of the youth sector and organisations that work with the youth sector, in the voluntary sector and local authorities, because they are both involved in NCS. We work really closely with the voluntary sector generally because we are the Government Department responsible. We thought we knew the area pretty well, and we thought we could make a difference, in what was quite a traditional policy area, using our innovative techniques; we could do things differently; we could build out from the NCS; we could do things economically, imaginatively and with a bit of energy. We were up for it and the transfer came our way.

Q9 Lindsay Roy: What are you doing differently? Richard Heaton: We start this week, so we have not got motoring yet. We hope to be doing it by building on our knowledge of the sector. We will not be employing dozens and dozens of people; we will not be doing great big, industrial-scale projects. We will be asking the sector what small, innovative, value-added things Government can do with the theme of innovation and creativity, and building out through the insight we have from NCS.

Q10 Lindsay Roy: NCS claims the programme will provide a chance to learn new skills. What are they and why can they not be delivered through schools? Richard Heaton: NCS is about some quite soft skills like leadership, self-confidence, teamwork, trusting peers, getting stuck in and helping. It is not classic curriculum stuff. The feel of NCS is really rather special. I have seen it on the ground a bit and it is quite special. It has this amazing social mix, with 16 and 17 year olds going away from home very often for the first time, spending two weeks on a residential activity, working in teams to do things, get things done, working in socially mixed teams. You get kids from all sorts of schools and backgrounds, geographically mixed. It is not classic school activity and the feedback you get from NCS kids at the end of a session is that they have learned to talk in public for the first time, to work in a team and to trust each other with a Jacob’s ladder. It is quite a breakthrough experience for the children who go on it. It is not school activity.

Q11 Lindsay Roy: So it is a different context, but you expect the same skills to be reinforced. Developing confidence, trust and teamwork, for example, are all delivered in schools as well. Richard Heaton: I very much hope they would be delivered in schools, but NCS appears to add something a bit different.

Q12 Lindsay Roy: What is the added value? Richard Heaton: The added value is spending a prolonged period of time away with your age group out of the school environment, taking initiative and being asked to take on responsibility for things in partnership with the kids you are in a group with. It is beyond the timetable; it is beyond the curriculum.

Q13 Lindsay Roy: It is a new curriculum. Richard Heaton: My knowledge is not of the education sector, so I do not know the extent to which these things are taught in schools. There certainly seems to be emerging evidence that children are getting something out of NCS they are not getting out of school.

Q14 Lindsay Roy: How does the Cabinet Office ensure local delivery? Richard Heaton: We have a supply chain. We contract with prime contractors who then sub-contract, so that the work is actually done on the ground by all sorts of people: local authorities, charities, established youth organisations. They are quite small as well as large, nationwide and local. We assure it; we work really hard with our prime contractors to make sure that quality is met, the take-up is good, standards are met, feedback is in place and evaluation is in place. As in any supplier organisation, we work hard with our supply chain.

Q15 Lindsay Roy: In the initial context, as far as I can see, there was quite a poor uptake of the programme, with a quarter of places not taken up and a quarter not carried through to completion. What lessons have you learned from that? Richard Heaton: Last year, the figures were better, and there was 87% uptake of the places that were commissioned. I cannot remember the percentage of those places that were

4 completed, but I think it was pretty high as well. This year, it looks like we are heading for a similar sort of figure. We learned a lesson about fees, for example. The current contract says that suppliers can charge up to £50. That is really by way of retention: people are more likely to stay on the course if they are paid a small amount of money up front, but it is capped at £50. We do not want to deter people by fees, but we want to incentivise people by them having a financial incentive to continue the course. The independent body that is now doing the marketing for NCS has learned a lot from the first wave and is marketing working better and more imaginatively than we had done in the first wave. There is quite a lot of learning.

Q16 Lindsay Roy: Finally, how can the ambition to fund growth of the NCS be accommodated with the limited settlement in the recent Spending Review? Richard Heaton: The recent Spending Review undertook that funding would be guaranteed for a continued growth in the programme of 60,000 and then 90,000 young people going on the course—that is from memory and I might have those figures wrong. Numbers are not attached to it, because we want to work hard on unit cost and bring the numbers down. In the spending round, a continued growth in NCS has been baked in to the settlement for the next two years.

Q17 Lindsay Roy: What criteria are you using to gauge value for money? Richard Heaton: Independent evaluation.

Q18 Lindsay Roy: What are the criteria in the independent evaluation? Richard Heaton: There are two levels of criteria. There is the easy stuff: the immediate feedback, asking, “Do you feel more confident?”. There is that sort of evaluation, which the National Centre for Social Research, whose report I sent you, has dwelt on. Then there is the softer stuff that is harder to evaluate, such as the effect of the programme in keeping young people away from crime and antisocial behaviour. That stuff is harder to quantify, but the immediate effect of the programme in terms of people’s perception of up-skilling is quite good evidence.

Q19 Lindsay Roy: Is this in-house evaluation or external evaluation? Richard Heaton: No, this is external. The National Centre for Social Research evaluated it.

Q20 Kelvin Hopkins: I have a question on resource. About 18 months ago, I took part in a debate opposing cuts in local authority funding for the youth service. The NCS budget is £104 million, which is about £45,000 per constituency. That is about one salary, plus on-costs if you are lucky. Is this not a pretty poor substitute for what local authorities should be doing? Should local authorities not be leading at local level? Richard Heaton: I hear what you are saying. This programme, we think, is a really good investment in young people. It is not a substitute; it is an additional investment funded by central Government but delivered partly through local authorities. Local authority youth services, delivery arms and partners such as charities are getting involved in this. It is not a substitute; it is an additional intervention at the particularly critical 16 to 17-year-old stage of a young person’s life. We think it is a really good investment. We do not see it as being a one- off or the one thing that will make a difference. We would like to see it—this partly responds to the earlier question—as part of a 10-year programme from 10 to 20, where young people ought to be encouraged to be involved in their community. Lots of that is going to be through local authorities, and it is going to be through the uniformed youth organisations, such as the Scouts, who are now actually supporters of this programme.

There are all sorts of ways in which NCS should just be one of the things that help to bind young people into their communities and get them into the spirit of helping each other and helping others. It is not a substitute for what local authorities are doing and the funding has not been taken away from local authorities. This is an additional intervention that Government is funding centrally.

Q21 Kelvin Hopkins: As I said, the amount is very small: £45,000 to £50,000. It is 24% of the Cabinet Office budget, but in terms of what local authorities would spend on the youth service, it is tiny. Richard Heaton: Quite. It is a good value programme. Remember, that is for a reasonably small number of young people. It is for 50,000 to 60,000. We hope to be able to scale it up, but then we will keep unit costs coming down. It will remain a good value programme and quite a sharp, intensive intervention for just this critical turning point or moment in a young person’s life that will help to engage them with their communities as they grow older.

Q22 Chair: The Education Select Committee has been pretty critical of this programme, not least because, at a time when youth services are being cut in local government, the Government seems to be centralising this particular activity. Only 79% of places were taken up in 2012, significantly increasing the unit cost, I calculate, to £400 per place. A lot of people drop out before the end of the programme. What is your reaction to these criticisms and the fact that the take-up is well under 100%? Richard Heaton: The unit cost is coming down, not going up, according to the figures I have in front of me. The unit cost rate in 2011, when it started, was £2,000, then went down to £1,400. There absolutely no question it will come down, partly as volume increases and partly as we do things better and centralise procurement. Unit cost will come down; it is a good value for money programme.

Q23 Chair: I beg your pardon; I miscalculated. Is it £1,400 per place? Richard Heaton: It was in 2012. It will be lower this year. As numbers go up, I am confident that it will be lower this year and it will continue to drop. The unit cost will come down. It is a reasonably low-cost intervention that the evidence suggests does make an impact.

Q24 Chair: What is the key benchmark of success of this programme? Richard Heaton: I cannot tell you the key benchmark with precision; I will have to write to you on the precision. It is about young people feeling more confident, better skilled and better able to work in a team, get a job, present themselves for an interview and work with others. That is the area.

Q25 Chair: How are you going to measure that? I hate to use the words “performance management” and “evaluation”, but how are you going to measure that? Richard Heaton: I sent you the evaluation from the National Centre for Social Research. This is not money that we want to chuck away just on a whim. This is a serious social programme that we think is a good investment. We are really keen that there is evidence to back it up because once we have evidence other people will want to join in, the take-up will increase and the word will grow. There is evidence here from the National Centre for Social Research from 2012. I would suggest it is probably a more detailed and more in- depth evaluation than any of the youth programmes going on run by local authorities, uniform associations or anyone else in the country. It benchmarks reasonably well in terms of cost

6 with similar programmes in the States. This is quite a rigorously analysed, benchmarked programme.

Q26 Chair: It seems to me that it is a programme where everyone has a popular idea of what they want it to achieve, but you actually have difficulty in expressing that in a key benchmark for success. Richard Heaton: I cannot give you a key benchmark, although it may be that I am not sufficiently briefed, in which case I apologise. I cannot give you a key benchmark. Chair: Help is at hand. Richard Heaton: Help is at hand. The easy one is a return on investment of £2 for every £1 invested. As a benchmark, nine out of 10 people would recommend it to a friend. Those are the two really easy ones. That first one does not capture the aspiration, which is that return on investment is more than £2 for every £1 because you turn people into good citizens, away from a life of crime and disorder and all the rest of it. The £2 for every £1 is the starting level benchmark. Nine out of 10 people would recommend it because of the experience it gives them and because of the skills it gives them. Those are the easy, obvious benchmarks, but the National Centre for Social Research goes into much more detail and looks at the impact of the programme on a more empirical basis.

Q27 Kelvin Hopkins: We send reports of this Committee for responses from Government. The recommendation from the Cabinet Office is that they should be responded to in general terms within two months of receipt of the report. We have just received the special advisers report, which was nine months late, and we are still waiting for the business appointment rules report, which was submitted one year ago. Why is that? Is it to do with resource or is it to do with resistance to the Government responding? Richard Heaton: First of all, I am sorry; there is no disrespect intended at all. I venture to suggest that it is because the Committee makes reports that touch on important, sensitive and difficult areas and are bang on target, if you see what I mean. It requires Government to think hard and to do lots of talking internally. That is probably why in the areas you mentioned you do not get an instant response of yes or no. It generates a lively debate. That is probably what is going on. It means that your aim is true.

Q28 Kelvin Hopkins: That is very encouraging as far as we are concerned, but even if it is sensitive, surely you have some clever scribes who can write some appropriate words within three or four months rather than waiting for one year. Richard Heaton: I am absolutely sure if it were just a question of drafting a response we would do better than that. I do not know exactly what happened on the special advisers one, and I am happy to look into that, but I am guessing that it was not simply a question that we did not have the person to draft the response. There would have been discussion within Government as to what the response ought to be. I am in your hands, but would it be better in those circumstances to give you an interim response to say, “We’re finding this difficult”? Would that be better than simply waiting until we have a prepared response?

Q29 Kelvin Hopkins: We actually have with us today the report on special advisers and the Government has pushed back in certain areas, as we might expect them to. It was not a long report; it surely should not have taken nine months to write. Richard Heaton: Some of these conversations are difficult in Government. They engage lots of different interests and people take different views. As I say, I do not know what the conversation was over that period. I was not party to that conversation. If we find

7 ourselves in those situations in the future, I am happy to put in interim reports if that would be helpful.

Q30 Kelvin Hopkins: Just a final question about the business appointment rules report: can we expect that very soon? Richard Heaton: I will either respond quickly or let you know where that has got to.

Q31 Chair: When this Committee produces a report that requires a response, can you confirm that it is in fact your responsibility to give Ministers the advice, i.e. the draft response to the report, as a starting point for their consideration? Is that what happens? Richard Heaton: Yes. Chair: You or somebody under you? Richard Heaton: Me, somebody under me or somebody alongside me would.

Q32 Chair: Can you confirm that in all cases that has happened within good time? Richard Heaton: I do not know what conversations happened on those two reports, so I cannot give a historical confirmation because that would be reckless. I am not sighted right now on what happened on those.

Q33 Chair: Given that it is a requirement in the guidelines that the Government should respond within two months of a report, is it not quite an important responsibility of yours to ensure that in good time Ministers get a draft of a response to each of our reports? Richard Heaton: Yes, it is. Whether the Civil Service would engage by offering up a draft or opening a conversation by saying, “Here’s a report; what’s your view on it” and having a conversation first, and then a draft would follow—

Q34 Chair: So why don’t you know about it? Richard Heaton: It is probably an oversight on my part. Chair: That is very noble. Richard Heaton: The response for that particular report would have come up through—I am just trying to think which part of the Cabinet Office. Chair: The SpAds report? Richard Heaton: I am thinking of the SpAds report.

Q35 Chair: Did that cross your desk before it went out? Richard Heaton: Yes, it would have done. Chair: You must have some idea of why it took so long. Richard Heaton: The conversations were protracted, but I cannot say more than that.

Q36 Chair: Would it be fair to say that the hold ups are political rather than administrative? Richard Heaton: Not always.

Q37 Chair: You are being very noble. I know it is what Permanent Secretaries do: they take the hits on behalf of their Ministers. Richard Heaton: I am not hiding from you a long, difficult e-mail chain. Sitting here, I do not know precisely what the nature of the conversations was. I am slightly speculating that it would have been a difficult, complicated series of conversations with different views.

Q38 Chair: That sounds political rather than administrative.

Richard Heaton: I am not sure who was involved in the conversations at the political level or on the Civil Service level. I do appreciate that I am not being very helpful. I am sorry.

Q39 Chair: We are very grateful for your frankness, but could you take back our unhappiness about this matter? Richard Heaton: Yes.

Q40 Chair: The next in the firing line for criticism will be Ministers and not officials, because you will be making sure that we get our responses on time from now on. Richard Heaton: Yes, certainly. This is going to sound trite, but I take the Department’s responsibilities to Parliament really seriously. The clue is in the adjective in my first job.

Q41 Chair: Can I put it to you that, if I ask you whether the hold up is political and not administrative and you know it to be political, you are under an obligation to tell us exactly what the problem is? Richard Heaton: Yes, I am not obfuscating. I just cannot put my finger on what the problem was.

Q42 Chair: Could you write to us about that? Richard Heaton: Yes.

Q43 Chair: If drafts were done in good time and then Ministers have failed to deal with them, would you tell us, please? If there has been an administrative failure and the Civil Service has failed to produce drafts in good time, please would you tell us that too? Richard Heaton: Yes. Chair: We are entitled to know what has gone wrong in this process. Richard Heaton: Indeed.

Q44 Charlie Elphicke: Mr Heaton, can I ask you about the spending round? The Cabinet Office has an important role in the spending round. It is meant to co-ordinate across Government. In 2012, the NAO wrote a report summarising its work on the Cabinet Office and it wrote that “the clarity of the Cabinet Office’s mandate across Government, and its relationship with HM Treasury” was a recurring theme. What do you make of that? Is the Cabinet Office doing what it is meant to do? Richard Heaton: Maybe you will accuse me of optimism, but I think the spending review we have just finished saw a better working relationship between the Treasury spending teams running the spending round and the Cabinet Office than before. For example, you saw that several of the bilateral discussions between the Treasury and Departments involved the Minister for the Cabinet Office. ERG and the spending teams were intensely engaged. We were able to give the Treasury benchmarks on key things across Government like money spent on property, headcount and IT. For the first time, I thought you got a real sense of granularity in the spending round’s observations on efficiency. You did not get that before, because we kind of knew it but did not have the data, and the Treasury and the Cabinet Office have at times not been as close as they should have been. For the first time, it felt quite a joint effort. On the MoD, for example, a big slug of the spending round is going to come from non- frontline efficiencies. The spending round’s insight into how the efficiencies can be gained was because we were working really closely with the Treasury.

Q45 Charlie Elphicke: So you say it was all a great success.

Richard Heaton: It was probably better than previous rounds.

Q46 Charlie Elphicke: What do you make of David Walker, who is the former Director of Public Reporting at the Audit Commission? He said the latest spending round was “painfully short term and unjoined up, as if the Government was a bunch of entirely separate Departments”. What do you make of that? Do you agree with that and do you think there is work to be done? Richard Heaton: So far as the efficiency theme is concerned, it did feel quite joined up. There is a running theme throughout all the settlements, for example, that the Treasury would expect Departments to provide through digital services for customers, which requires a strong central effort to get there. We will help to provide that. There was a strong sense that we need to procure things centrally through Government where that makes sense. It does not make sense in all cases, but it makes sense where there are common goods and services. That again requires central co-ordination. The spending round always looks, and the results feel, very binary: Treasury and Department, Treasury and Department. Those cross-cutting themes of efficiency, which are better spending, better procurement, better projects, better IT and better digital, suggest that there is a better horizontal element than previously. Therefore, I would reject part of that criticism.

Q47 Charlie Elphicke: Is it not true that the Cabinet Office is basically woefully underpowered? Once you take into account the £148 million to fund the 2015 General Election Review, £56 million for the NCS and all those sorts of things, basically out of a £300 million budget you have about £100 million left to try and co-ordinate the whole of Government, which is an enterprise of £700 billion. Do you not think it is all a bit like a Rolls-Royce with a Morris Minor engine in it? Richard Heaton: I think we give great value for money. You could say the same about the Treasury. The Treasury spending teams are small in head-count terms, but it is a question of where they get stuck in and what they do. For example, take one of our many co-ordination functions. In the secretariats close to the Prime Minister, what we do is done through a small team of very skilled people on secondment from Departments, who really know Whitehall and can bang heads together and sort out a really difficult policy question. That does not require huge troops. We need to up-skill ERG, the efficiency area, and there is a capability gap, but what they can do with 20 or 30 people who really know major projects, and by bringing in other people from Government to run reviews of major projects, goes way beyond their firepower. The thought of trying to co-ordinate better with 1,200 people as opposed to the numbers we currently use fills me with a slight bureaucratic dread. I would rather do it with smaller, better targeted, nimble, highly skilled resources. We are not as skilled as we should be; we need to be better and to have more people who are really brilliant at projects and procurement, but we are getting there. I do not think we are quite under-resourced.

Q48 Charlie Elphicke: Let me just ask this: is there not also a basic structural problem? The Cabinet Office serves the entire Cabinet, and when Ministers are warring you just have to co-ordinate and ask nicely: “Please, would you mind awfully?” If it was changed so it was actually a Prime Minister’s Department, surely you would not then have levers attached to elastic. You would actually have some real authority and give the Prime Minister much more authority in the spending round to push his vision through Government. Is it not time for this overdue reform to happen? Richard Heaton: We are collaborative, consultative and have thought leadership in many instances. We are quite directive in others. You will hear completely the opposite from

10 colleagues across Whitehall who sometimes complain that we are too directive, that we have too much control and that we exercise controls on spending. Famously, you cannot hire consultant spend and you cannot do IT spend without Cabinet Office central clearance.

Q49 Charlie Elphicke: Should there not be more of that, though? Richard Heaton: We always have to strike some sort of balance because Departments run their own business, have their own accounting officers and have to make investment decisions. We would say the things you need to bring into the centre are the things that are better done once than 25 times, and that free up Departments to do the things that are their core business to do. If you are sitting in a Department that looks after prisons you should be running prisons, doing criminal offender policy and you should not be wasting too much of your time buying paper and computers, for example. The things that should sensibly be done once ought to be done somewhere at the centre. At the moment that somewhere is the Cabinet Office. You could probably make the same observation about all sorts of big, complicated organisations in a time of austerity. You do not tend to find corporate functions being pushed out to subsidiaries, which is a word I use reluctantly, at a time of austerity. You tend to find those corporate functions being brought into the centre. That is the sort of trend that you are seeing at the moment. We strike a balance, though. We work with Departments, not against them.

Q50 Charlie Elphicke: Do you not need greater authority to actually enforce that, otherwise they will just do their own thing? It is like a bunch of cats that you are trying to herd. It is just an impossible task. Richard Heaton: We get authority from a Cabinet Committee and sometimes PEXER, which is the Cabinet Committee on Public Expenditure (Efficiency and Reform). That gives a mandate. It requires the Department to do things. That is the source of authority for controls. Treasury, under the spending round, gives us a degree of authority by saying, “We will make sure that this money is funded from Departments in certain circumstances”. We have a certain amount of authority, but as always in Government that is not going to be the complete picture. There is also going to be a degree of persuasion, collaboration and working with.

Q51 Charlie Elphicke: Where are you meant to do things and where is the Treasury meant to do things? How exactly does this relationship work or is it just as dysfunctional as the NAO seems to indicate? Richard Heaton: We all work very closely with the Treasury. My opposite numbers at the Treasury are the Permanent Secretary, the Second Permanent Secretary and the heads of the spending teams. Stephen Kelly, the Chief Operating Officer, has the same sort of relationships. It is pretty clear that they set the spending parameters and that we work really closely with them to help Departments deliver against them. I do not think dysfunctional is the right word; I hope I am not just being defensive. Our ideal would be for Whitehall to see the Treasury and the Cabinet Office as the effective centre of Government. After all, we are all in the same building now. We are happy to play the role as junior partner; we are happy to cede ultimate authority to the Treasury in terms of money. We would love the Treasury to be even better at the management finance function in Government, but we are absolutely happy to give them the resources, the thinking and the data that helps them do that. We think it is really important.

Q52 Chair: In what ways should the Treasury be even better at the management of public finance and the finance function?

Richard Heaton: I simply meant that Treasury is brilliant at the spending controls and spending numbers. I know that the Permanent Secretary has kicked off a bit of work to make this happen and we think there is even more that can be done in terms of micro-financial management within Government. It is a classic central Government function, and we are happy to share the burden with the Treasury. We can be even better at that between us.

Q53 Kelvin Hopkins: I just want to reinforce the point my colleague, Mr Elphicke, made about resources. One can look at the numbers, for example the programme of £56 million to encourage social action by third sector organisations. The third sector was a big part of the Government’s philosophy. It works out at £86,000 per constituency, which is really nothing compared to public services or a local authority budget. You are talking about tiny amounts of money, and bringing things into the centre that I would argue could be done better by local authorities, but also with a tiny resource. Richard Heaton: I think several members of the Committee heard presentations from this area when you visited our offices. In that area in particular, what we are doing is absolutely with small resource at the centre. If you had asked me what the threads were running through the Cabinet Office, one of them is this sense of innovation, doing things imaginatively and doing things differently in a time of austerity, because we do not have the money to do it huge or big-scale. We call it the Government Innovation Group and we have people who work with the voluntary sector in a completely different way, with a small seed funding capability that allows people to do social investments, for example the Social Outcomes Fund. These are different ways of energising and enabling the sector. We do not want to deliver services on the ground from central Government. That is just not where we are. We want to enable things to happen and we want people to do things with a bit of Government help.

Q54 Kelvin Hopkins: This third sector is suffering terribly because much of the funding comes from local government to these third sector organisations. This is certainly happening in my constituency town. They are constantly complaining and some are having to shut down because of lack of funding. Would Government not do better to think seriously about keeping some of that funding with local government to sustain these voluntary organisations that do such good work? Richard Heaton: All I would say to that is that, as you have observed, the small amount of money we spend in catalysing and encouraging people to do brilliant things in that sector, if you spread it throughout the country by way of direct grant, is not going to go anywhere. This is not a substitution fund. It is not like we are putting in huge budgets that would otherwise go to the third sector and spending them in the centre. We are not. We are spending a very small amount of money in the centre that enables delivery on the ground to happen more imaginatively. Social investment is a great example of that. It was pie in the sky five years ago, and now it is something where Britain leads the world. It was discussed at G8; the Americans are interested. This kind of came from nowhere and we are enabling it to happen. That small resource is the sort of thing that we in the Cabinet Office can help make happen.

Q55 Charlie Elphicke: You are spending more on social investment and all those sorts of things than you are on actually trying to make sure that Government works. After all, is that not your core function? Richard Heaton: The grant spending on social investment is a Social Outcomes Fund that enables people to find a single source of public money and cut through the difficulty of finding multiple funding streams. It is a one-off investment to get a market going that we

12 think will deliver huge dividends in years to come. It is comparing a bit of programme spend with admin spend, which is always dangerous.

Q56 Chair: It does seem interesting. The public spending round is an extraordinarily high-profile, adversarial, testosterone-charged political process. No corporate centre of a private corporation would waste so much effort getting so little reduction in overhead as Government spends. The figures we have are that, over the eight-year plan periods since the Coalition was elected, there is a smaller reduction in public spending than Denis Healey got in one year. Why do you think we have trapped ourselves into such a wasteful and ineffective way of controlling expenditure and increasing the efficiency of Government? Is it institutional or political? Richard Heaton: The architecture and timing of the spending round is just not one for me. I would observe that, in our contribution to delivering efficiency across Government, the numbers are beginning to speak for themselves.

Q57 Chair: We are coming to that right away, but basically you are saying, “Above my pay grade, m’lord”. Richard Heaton: Do you mean as to why there is a one-year spending round and why we do spending rounds? I think I would rather duck that one.

Q58 Chair: What observation would you have, as the Permanent Secretary of the Cabinet Office, about how we could make the centre of Government more efficient or more effective? Richard Heaton: Some of the answer is in the unified theme. If you have a large number of Government Departments, large and small but all constituted in much the same way and all responsible for two dozen spending lines, that seems an odd way of doing things. There is probably some way we can go on unifying; spending once rather than 20 times is a theme I have already touched on, but that seems to be quite important.

Q59 Chair: And one which the Minister himself has explored. Richard Heaton: Yes, absolutely. We are all in that territory.

Q60 Chair: Is there not a sense that the Treasury thinks it is the centre of Government, not the Cabinet Office, and you are just a functional partner? Richard Heaton: We are a junior partner. We are absolutely not in rivalry with the Treasury. We are a junior partner of the Treasury.

Q61 Greg Mulholland: Good morning, Richard. First of all, there was obviously a change between you and your predecessor, Ian Watmore, in that he headed up the clearly very important ERG and you do not. Is that a good thing or a bad thing? Richard Heaton: ERG was part-created by Ian with the Minister two or three years ago. When he left, I clearly would not have dreamed of volunteering to run the group. It would not have been my sort of thing and I do not think I would have done it very well. A full-time head of ERG was absolutely essential. That is what they now have in Stephen Kelly, who reports to me as part of the departmental framework, but is running ERG with vision and leadership. He is brilliant at the numbers and brilliant at delivery. That works well for me; it is a really important part of the Cabinet Office being run by a brilliant hire from outside. I would certainly rather that than me trying to do Ian’s job, which I would be spectacularly unfitted to do.

Q62 Greg Mulholland: Nevertheless, do you keep an overseeing role in your responsible position? Richard Heaton: Yes, I do. Stephen Kelly is one of those people who absolutely does not require micromanagement, and I would not dream of offering it to him, from me or anyone else as Permanent Secretary. I am absolutely there to support him; he works within the departmental framework. We work on key relationships together; we will discuss key appointments together. We work as a Permanent Secretary and a DG would ordinarily work in a big Department where the DG has complete command of their brief and knowledge of their brief. We don’t tread on each other’s toes. That would be crazy.

Q63 Greg Mulholland: Looking at the £10 billion savings for 2012-13 across Government, that is an impressive figure. How much do you think can actually be attributed to the work of the ERG? I will just quote from the NAO report from April this year that said “from the information available ERG cannot always distinguish between savings which have arisen solely because of its actions and those where it has had less direct effect”. How much is ERG actually delivering itself and how much would be delivered if it was not there? Richard Heaton: That was the NAO report you were quoting from. The numbers were £5.5 billion that year and then add £10 billion. The NAO just published its report yesterday for the £10 billion figure. You get a pretty good degree of assurance. The test you apply is whether this is likely to have happened without ERG’s intervention. That is never a complete 100% science. These are not savings that we have made and the Department has not made. They are all savings that the Departments have made and we are not claiming them as being our savings and not theirs. We are saying this is the index of savings where we have contributed towards their achievement. That is a key criterion. If they clearly would have been achieved without us, we would not dream of clocking them up as our savings, but if they are due at least in part to ERG’s intervention, effort or initiative, such as workforce reduction or pensions contribution reduction, commercial relationships or projects, or the controls, which are more clearly linked to an ERG intervention in the controls framework, then we will score them. I have not read the NAO report from yesterday in detail but they have given a reasonably good degree of assurance that our methodology is pretty good. There are always questions about how good the numbers are from Departments and so on, so you are never going to get 100% assurance and attribution in every case, but I think the degree of assurance the NAO have given for their figures yesterday are pretty good. I cannot quite remember how they phrased it, but the report only came out yesterday.

Q64 Greg Mulholland: Looking forward—and things get tougher when you are trying to make savings going forward having made some already—the NAO have also said that the objective to deliver cashable savings of £20 billion by 2015 is “ambitious”. That is their word, which is something I think we could all agree with. I would like to ask your views on whether that ambition is realistic, particularly because the NAO report from April also said that “ERG has yet to translate its ambition for saving £20 billion by 2014-15 into more detailed plans”. Can you also perhaps tell us when that is going to happen? Richard Heaton: A year or 18 months ago, if we had said we were aiming for £10 billion in 2012-13, that would have been described as ambitious. Of course they are ambitious, because we are an ambitious organisation. All I can say is that the feeling in ERG at the moment, which is beginning to be shared by the Treasury and other big Departments like the MoD, which is what makes it so interesting, is that we are all pretty confident that we have not seen the end of the road of really serious savings in Government. The reason the Secretary of State for Defence was able to sound so upbeat on the spending round was that

ERG is going to help MoD deliver savings that between us we are confident we can get out of procurement by the MoD, just to take one example. They are ambitious, yes, but we are pretty confident that those savings are still to be found, which is really good news because it means that this is not frontline saving. This remains back office savings on how Government does stuff, which is the area that above all we really ought to be bearing down on. They are ambitious, but we are pretty confident.

Q65 Greg Mulholland: So you are confident, but when will the detailed plans that the NAO has said are not there come forward? Richard Heaton: On the detailed plans for where we think the savings are going to come from in 2013-14, I cannot say when with precision. I can write to you to let you know exactly when, but at the moment unless someone is going to hand me a bit of paper I am not sure when we are going to be giving you that level of detail.

Q66 Greg Mulholland: That would certainly be helpful. The example you gave with the MoD was a particularly pertinent and topical one. Clearly, whilst this Committee and all Members of Parliament would welcome reasonable savings cutting out unnecessary bureaucracy and waste, as you have very clearly put in that example, that must not be at the expense of public services. Yet the NAO has also highlighted that ERG does not have a well- developed risk register, particularly in relation to the impact on public services. Do you feel that that is being properly taken into consideration as a key part of this process? If not, the fear is simply that this becomes an obsessive rush to save money as much as possible without actually thinking about the effect it may have on public services, which is what those Departments are there to deliver in the first place. Richard Heaton: It is a fair challenge. The key there is the role of the Department as well. It is not like we are stepping in, taking over spending, and taking over the risk of public service failure. We are doing all this in partnership with the people who are best able to assess and warn about the risks. We are never going to be in a position to understand as fully as the MoD the risks to frontline capability or to the provision of welfare services or health services. The role of the Department is really important. They are going to be making the savings, not us. We are going to be helping them buy things and helping them understand their spend, but they are going to be taking steps that will deliver the savings. We cannot take from them the responsibility to manage the risks of public service delivery. That is for Departments.

Q67 Greg Mulholland: I will add a question to that. This is something that often does not happen sufficiently in any public service reform. Are you fully taking into account, when coming up with these proposals and hopefully giving them some more detail, that some decisions to roll back Department capability could actually have the effect of increased public spending if those risks are not properly identified, planned for and mitigated, particularly in areas like welfare, health and social care? Richard Heaton: Yes. We would tread really cautiously if it came to anything that threatened the core activity of Departments. If Departments are saying, “We cannot deliver our key function if you do this centrally,” then absolutely of course we—

Q68 Greg Mulholland: What about the knock-on effects? For example, in health, if you change something in social care or you reduce social care, that might be a council issue, but nevertheless there could easily be a knock-on effect where suddenly the health spending goes up. Is that kind of knock-on, indirect consequence being taken as part of the thinking in identifying and mitigating these risks?

Richard Heaton: Yes, but I would say principally at departmental level. We do not want to be cavalier. We are helping Departments to make back office savings. Departments are responsible for delivering the context in which those savings are made, which includes keeping frontline services going. If there are unintended consequences, the people best able to spot them are Departments, and absolutely they should be alive to them. We are not in the business of imposing anything on anyone except where we can both agree safe savings can be made. That is how we are supposed to be working.

Q69 Greg Mulholland: As a very final question from me, can I just simply ask the question posed by the NAO of when ERG will explain how it will work with Departments to identify where the risks from cost reduction measures are crystallising and what mitigating actions will be necessary in each circumstance? I am not necessarily asking you for an answer to that today, but could you lay that out for us going forward and perhaps write to us? Richard Heaton: I will. It may be that ERG has already answered that particular question from the NAO, and if it has it has escaped my mind. Can I either write to you reminding you of the line or give you what the line is? I will explain that to you.

Q70 Chair: One of the themes that has come out of our evidence on procurement is how difficult it is to decide what is a common good or service that should be procured centrally and what should remain with Departments. This is not just a question of categorisation; it is a problem of the two rival power centres of Cabinet Office and Treasury. The mandate supported by PEX is in conflict with accepted practice throughout Whitehall that accounting officers are individually accountable to the Treasury and the Public Accounts Committee, and public expenditure is subject to a volume published by the Treasury called Managing Public Money. That makes Departments responsible for spending, not subject to a Cabinet Committee mandate. How is this going to be resolved? Richard Heaton: There is nothing in Managing Public Money to stop an accounting officer saying, “I can see that this spend is not the spend that delivers best VFM for my Department viewed as a whole, but it delivers wider VFM for the public purse”. That is a really important principle in Managing Public Money. It is the wrong starting point to say Managing Public Money always drives you towards a departmental solution. It always drives you to a VFM for the taxpayer solution.

Q71 Chair: It sounds like a matter of interpretation. Richard Heaton: No, I think it is really clear. I do not have the text with me, but Managing Public Money is really clear. I remember going on my introduction to Managing Public Money for accounting officers. It is really clear that I am obliged to take into account the costs to the taxpayer, the cost to the Government, not the cost to my Department. Once you get over the slight hang-up that Managing Public Money is often characterised as being all about the binary relationship between the Treasury and spending Departments, it enables the accounting officers to sign up to a broader value for money proposition across Government.

Q72 Chair: When ERG cannot get a Department to agree that something they are buying should be covered by the Cabinet Office mandate, what support do you get from the Treasury? Richard Heaton: We will roll out procurement reforms as an agreed Government policy with full support from the Treasury.

Q73 Chair: How interested is the Treasury in pursuing and supporting the Cabinet Office mandate? Richard Heaton: The relationship that we have put together over the last few months of the spending round means that we will get fulsome support from the Treasury. They want this to happen because there is this realisation that we all scoff about big Departments being told to save money on paper, but that is where savings come in aggregate. We all know that now.

Q74 Chair: Much of the impetus behind the Civil Service Reform Plan arises from your Minister’s frustration about how slow it is to get things done and how decisions seem to be obstructed by inertia in the system. This would seem to be a very good example of how the Cabinet Office mandate simply is not a mandate that runs throughout Whitehall. Richard Heaton: If you are asking me whether our procurement reforms will fail through resistance and inertia, I do not think they will. Departments want to be free to do the stuff that is core to them.

Q75 Chair: Why do you think the Minister is complaining about it then? Richard Heaton: I cannot speak for any particular complaint he might have made. Do you mean in the generality?

Q76 Chair: The generality that things are blocked, frustrated or delayed by inertia in the system. Why do you think he is saying this? What gives rise to this? I could ask what advice you are giving him about it, but that might be going too far. Richard Heaton: I am not going to try and enter the Minister’s mind, but sometimes you do get this inertia thing, which is that big Departments delivering a big project, doing things set up in a particular way as they always have been, are difficult, slow to shift. That is not because people have cutlasses in hand and are repelling borders. It is not like they are being actively resistant. They are just difficult to shift. If you have 60 people in one place all buying paper and you have 60 people in another place all buying paper, and you want to do things a bit differently, there is no active resistance. It is just that it can come as a distraction to a Department that is just getting on with its day job and does not want to be bothering with the 60 people buying paper.

Q77 Chair: In a business, if the head office said, “We’re all buying paper in a silly way. We are now going to buy it this way”, it would happen. Why is it so much harder in Whitehall? Richard Heaton: It unquestionably will happen. It has happened before.

Q78 Chair: I know, but why is it so much harder in Whitehall, given that there is a Cabinet Office mandate and you assure me that the Treasury is right behind these reforms? What is the resistance? Where is the political basis or the legitimacy for resistance to this proposal? Richard Heaton: I am not characterising it as resistance; I am characterising it as inertia.

Q79 Chair: Why does this inertia exist? Richard Heaton: Sometimes big Departments constitutionally feel autonomous and would not recognise the analogy between a company with subsidiary offices and a big, autonomous Department of State with an accounting officer, a Secretary of State and a relationship with the Treasury—they are fully fledged autonomous units. If that is the culture

17 of an organisation, then doing things centrally sometimes feels counter-cultural by definition, because joining up back office functions, joining up procurement functions and buying things together is not what great, independent ships of state would do. I do not think it is an active resistance.

Q80 Chair: So it is fundamentally about the landscape of Whitehall. It is constitutionally embedded that Departments have this autonomy. Richard Heaton: It is to some degree, but I do not want to understate the extent to which we are now changing. We are doing things more centrally. We are doing all sorts of things together.

Q81 Chair: I might ask the same question about management information. How much interest does the Treasury take in management information? It is a Cabinet Office initiative, but should be core to the finance function of the Government. Richard Heaton: How much interest does the Treasury take in it? You would have to ask the Treasury.

Q82 Chair: Since the Treasury is a much more powerful Department than the Cabinet Office, how can the Cabinet Office possibly deliver efficient management information across Whitehall if the Treasury is not really interested? Richard Heaton: I am not sure I would say the Treasury is not interested. It is true to say some Departments are responding to management information better than others. Some Departments are really using it and some Departments are still regarding it as an imposition. I am not quite sure where I would place the Treasury on that spectrum.

Q83 Chair: On Civil Service Reform generally, we said at the outset in our 2011 report Change in Government: The Agenda for Leadership that just wanting change to happen will not be effective. Without a plan, change will be defeated by inertia. Eventually, the Government produced a Civil Service Reform Plan, having never intended to do so. As Sir Jeremy Heywood has told us, some Ministers and some advisers continue to be frustrated with the Civil Service and with the progress of change. He says some more than others. In his Policy Exchange speech the Minister returned to the theme and said, “The record of successful implementation of the Civil Service Reform Plan is mixed. Too little of what we set out nearly 12 months ago has been fully executed.” He has expressed frustration about civil servants blocking agreed Government policy. What do you think about these assertions? Richard Heaton: There are two quite separate things. I will come back to civil servants blocking. The Government is about to do its one-year-on report on civil service reform, and that will happen imminently. You will get the full picture then. You will get a pretty honest assessment of how things have gone, and it will pick up some of the themes of what you have said. For example, there will be an acknowledgement that some things were slow to get going and the project as a whole was probably slow to mobilise, which incidentally is one of the major project issues that Lord Browne points to in his major projects report. Projects being slow to initialise is often a characteristic of a project that is not doing well. Having said that, I do not like Civil Service reform endlessly characterised by this story about “it’s not happening” or “there’s resistance”. I really think we are beginning to get somewhere. I know you went to the Be Exceptional event on the second day in Olympia, where all Permanent Secretaries were involved. There were themes of a digital Civil Service, a Civil Service that is up for change, the theme of unified, the theme of skilled, the theme of

18 people joining in and exchanging ideas—a Civil Service really interested in the future and not being defensive.

Q84 Chair: What do you think the overall theme is? What do you think the overall intent behind the Civil Service Reform Plan is? Richard Heaton: The overall theme is to re-galvanise the Civil Service and just make it smarter, more digital, smaller, less bureaucratic, less departmentally siloed, more unified and better able to serve the government of modern Britain. It is a really compelling agenda.

Q85 Chair: How much do you think your Department’s personnel buy into this, for example? Richard Heaton: It would be really interesting to see the engagement scores after Be Exceptional and this recent round. For example, we no longer get, “I don’t like talking about Civil Service Reform in my Department because we are doing Reform X or Change Programme Y and we would rather use that language.” You are now beginning to get Departments talking about and doing digital, being really interested in the conditions in which staff work, better workplaces and better IT.

Q86 Chair: In your Department last year the engagement scores were that only 29% agreed or strongly agreed that the Cabinet Office Board had a clear vision for the future. Only 28% felt that change was managed well in the Cabinet Office. Only 22% thought that when changes were made in the Cabinet Office they were usually for the better. In any private business these scores would be disastrous. Why do you think levels of engagement are up? It is the same question. They do not seem to buy into this overall theme that you are setting out. Richard Heaton: That engagement score was last September, and if I am honest it came at the end of a period in which there had been quite a lot of turmoil in the Cabinet Office and quite a lot of change in the senior leadership. I am not at all surprised that staff said they were disengaged from the organisation when there was so much change and turmoil at the top. It is never going to be as easy in the Cabinet Office to provide a really clear central, unified purpose as it is in a Department that has a really straightforward, three-point agenda, because as we talked about earlier, we are a disparate Department. I would be incredibly disappointed if our engagement scores were not quite a lot higher this September than last September. Chair: We will watch with interest. Richard Heaton: That is a risky thing for a Permanent Secretary to say. Chair: I hope you are right. Richard Heaton: At this moment in time, the momentum behind Civil Service reform is so good that I find it really depressing that when every time the papers pick up the story it always reverts. I hope this will not be the lead theme when the press picks up on the one-year- on report.

Q87 Chair: When the Minister himself says it is not going fast enough and it is dogged by inertia, can you blame the media for picking up this theme? Richard Heaton: No, and I am not going to contradict my Minister. I would not dream of doing that, but he always follows it by saying there are great things happening. We are beginning to really see the digital agenda taking off and the commercial skills agenda taking off.

Q88 Chair: Why did it take so long to assemble a team in the Cabinet Office to pursue the implementation of Civil Service Reform?

Richard Heaton: We should have done that before the plan was launched. We should have been absolutely clear the project teams needed to do this. Chair: Why did it take so long? Richard Heaton: This was last summer. We took too long over filling a key post for all sorts of various reasons. We were not smart and nimble enough to get the best people into that job. We lost some ground.

Q89 Chair: Is this a microcosm of the frustration that Ministers feel across the entire system—that things just take too long? Richard Heaton: It is certainly getting projects up and running.

Q90 Chair: Why do you think this problem afflicts the Civil Service far worse than, for example, most major corporations. They just simply would not live with this, would they? Richard Heaton: It is a fair observation.

Q91 Chair: Why do you think this happened in your Department on your watch? Richard Heaton: If I can be technical, the plan was not launched on my watch.

Q92 Chair: The formation of the team was one of the first tasks you must have been confronted with. I think you have been in office for a year now. Richard Heaton: For less than a year—nine months. Within weeks of my being in post, we managed to fill two really critical posts, which were the Head of Civil Service Reform and the Chief Operating Officer. I remember really clearly that my two really big, key objectives in the first few weeks were to fill those two major posts. It is regrettable that in each case there was a gap and there was no one filling those posts. There are all sorts of reasons why that happened in each individual case.

Q93 Chair: What are those all sorts of reasons? Why are these all sorts of reasons an excuse for the system to fail to be responsive and agile in the way that Ministers want and are entitled to expect? Richard Heaton: If you want to put your best person on to Project A and another key principal says, “I would rather the best person stayed where they are,” for example—and I am not saying that is what happened—that is the sort of thing that can happen. Government is doing lots of things and it is not always possible to move the best people into a particular area, but we now have a really good team that is motoring on Civil Service Reform and we are making progress.

Q94 Kelvin Hopkins: You were obviously involved in the Good Law initiative, and you tweeted a question, “Why is the law so hard to use?” and suggested that the answer should be volume, amendments and complex detail. When others were asked to respond, they said house style and the Office of the Parliamentary Counsel monopoly. They took a very different view from you. Which is right? Richard Heaton: My observation on Good Law is that I am really proud of our legal system and of laws, but I find it really dispiriting that law is complicated for the user, particularly the modern user who is not a professional. That is my starting point. There are four basic areas that contribute to the difficulty the user faces. The first of it is drafting language, and we are much better than we were. We use plain English; we use shorter sentences; we use more white space; we do not use the really compact intellectual devices they used 20 years ago. We are better at that, but by no means perfect, and we now talk to

20 users more than we used to. We have internet channels where real users are in touch with us and we can ask them what they are finding difficult. Language is part of it, but only part of it. Another part of it is the architecture of the statute book. If you look at a piece of legislation, it amends other bits, it has prospective amendments, some bits stand by themselves, for some bits you need to go into regulations. The user is constantly taken from left to right, right to left and up and down, and there is neither rhyme nor reason to the architecture of the statute book. The third reason is length and complexity. There are no simple answers there as to why we have such complicated laws. Why is it that we prescribe detail to such a large degree in UK legislation? It is partly because that is what we have always done; it is partly our common law tradition of trying to anticipate difficult cases in advance. That is a reverse common law tradition. There are all sorts of reasons. As to the OPC monopoly, we certainly do not have a monopoly of wisdom. The reason I started this conversation and the reason I am tweeting about it is, rather than sitting in a room for a year and a half to work out the answers and then telling the world, I am sharing this problem. I am saying to all sorts—I am saying to parliamentarians and users of the law— “We to make this stuff better. What do you think?” I am delighted that people are taking part. I do not agree that the OPC monopoly is particularly a cause, but I am delighted that people are joining in the conversation.

Q95 Kelvin Hopkins: In the recent past it has been said that Governments have legislated far too much and a lot of legislation on the statute book is never used. It is often badly drafted when it comes to the House and then there are lots of amendments, especially Government amendments, to put it right as it is going through its legislative process. Are Ministers and politicians to blame to an extent, or is it officials who make this problem? Richard Heaton: I do not particularly like the blame game, but I cannot sort out the legal system just by fiddling with the drafting. It is very rarely the drafting, technically, that is the problem. It is, as you say, the policy complexity. Let’s blame policy officials rather than Ministers, otherwise I am getting into difficult territory. The conversations we are having with the policy profession are about whether they have thought about a non-legislative means of doing things and whether they have factored in the effect on the user of complexities. If they have come to the ideal intellectual solution that meets all their stakeholders but is very complicated, have they fed that complexity back in to their thought process as a reason for doing something differently? These conversations are great. We were visible at the Open Policy bit of Civil Service Live, and so for the first time making law better is something that we are trying to get into policymakers’ consciousness: “You are going to be responsible for adding yet another bit of complexity to an already very complicated system. What can you do to avoid it?” It is a really important question for policymakers. I would absolutely make the challenge to Ministers of all stripes as well: “Is it always necessary to legislate? Is it always necessary to change the law? If it is, do you have to legislate in such detail? Can you leave more to chance?” The answer will not always be yes, but it is always worth asking the question. Complex legislation of itself carries a burden, confuses users and therefore gets in the way of the rule of law. It is a contributing factor to some very bad outcomes. Parliamentarians should be aware of it when they are passing legislation and Ministers should be aware of it. My profession advising Ministers should certainly be aware of it. If I serve up something that is immaculately drafted but very complicated, it might be the right answer or the best solution, but it might be completely the wrong one, because you are going to be visiting that complexity on some poor user of the law who is going to find it difficult. I really want this to be a conversation that engages all sorts of people because between us we are all responsible

21 for this legal system that has 100,000 words added each six months. It strikes me that there must be better ways of creating law than the one we have at the moment.

Q96 Kelvin Hopkins: I had an experience a dozen years ago or so. Names would never come from me, but a senior Minister said to me during some legislation going through the House, “You’re not going to vote for this rubbish are you?” and it was clearly a response by the Prime Minister and senior Government politicians: if there was a problem, through a Bill at it. It went on the statute book and never saw the light of day from thereon, but I was known as one of those MPs who might occasionally not agree with my own party and might even vote not the way the Whips would wish me to. It was a hint that maybe this was a lot of nonsense that I should not have anything to do with. Is it the case that some Ministers, or Prime Ministers even, when they have a problem, say, “Get me a Bill,” and the parliamentary drafters have to come up with something? Richard Heaton: If I were to caricature it like that, it would be unfair. I can think of some cases where that might happen, but generally speaking legislation is a worthy bureaucratic response to a political problem. Very often legislation is exactly the right thing to do, but there is just a question about how we go from there: how much detail we use and how we legislate in a way that enables the user to work out what is going on and navigate it, and I would add parliamentarians. Sometimes I sit watching a Public Bill Committee and watching Back-Bench members with pages and pages of amendments that amend other things, and I detect that even parliamentarians find it quite difficult to understand exactly what is going on because it is such a piecemeal process. One of the projects that we are doing under Good Law is to look at how we can do explanatory material for parliamentarians better, so that if you are being asked to legislate on complexity, at least you can see what you are doing and you are not frustrated by staring at a clause that inserts a schedule into an Act that was passed 20 years ago, which is what happens at the moment. This is quite a big agenda and I know some of the answers, but I do not know all of them. I was quite keen to start the conversation in a pretty open way using social media, rather than spending the next two years of my life sitting in my office trying to think up solutions and then having them shot down. I do not fancy that.

Q97 Kelvin Hopkins: I must say I find the Library notes on draft legislation more helpful than anything else. My one final question is on this point about the Parliamentary Counsel monopoly. I feel sorry for them having to draft some of the legislation they have to. Is it a problem that the Office of the Parliamentary Counsel has a monopoly in drafting legislation? Richard Heaton: I do not want to be defensive, but I do not think so. The Office of the Parliamentary Counsel was started 100 years ago because previously all Bills were drafted by different Barristers who had different drafting styles, and it was thought that uniformity or a house style would be useful. All I would observe is that we have tried before to use external lawyers to draft. You tend to get lawyers who are brilliant at tax law and are brilliant at drafting private legal instruments. If you have a look at the conveyance that you might have used to buy your house or a complicated contract with T&Cs in it, the private legal sector does not do clarity as well as the parliamentary drafters. I can honestly put my hand on my heart and say that I do not think standards would be improved if you suddenly went out to market. The market for clear legislative drafting does not really exist. Having said that, I am not remotely precious about who does the work, and I would be open to all sorts of different solutions. Sitting here, though, I do not really think that our monopoly is the problem. Kelvin Hopkins: My own prejudice is for Parliamentary Counsel to do the work— publicly accountable.

Q98 Chair: How much is there a conflict between clarity and brevity? If you want short legislation, it is going to be general in character, but if you want clear legislation, it is going to be long and complex. Is that correct? Richard Heaton: You get a paradox. Language is not very precise, so if you want to achieve precision—and there is a big question mark about whether we want to achieve precision or whether we are content with general statements—you have to add lots of words that do precise things. You get a long volume of legislation that is immaculately drafted but is very unclear for the reader because it goes on for 60 pages. You certainly get clarity at the expense of readability. The prior question is whether you need to write down legislation in such detail. If you do not do legislation in detail, and other countries do not, in our system you have to be prepared either for the answers to individual cases to be worked out on a case by case basis, by chance, by common sense or by the courts. That is the sort of trade-off you have to use. It is striking that in those areas of English law that are still governed by common law, there is no prior certainty and cases are decided on an individual basis. You get what Bentham describes as dog law, where you are punishing your dog for something the dog did not understand before you started punishing him. In the areas where common law happens, you still get the details being made up on a case-by-case basis. In the area where statute law governs, you have all the details set out in advance to anticipate all the hundreds of thousands of cases that are coming up. It is quite interesting to me that we have not really found a way of providing something in the middle. I am quite interested in exploring a middle ground of a statute-based system that has general themes.

Q99 Chair: Given that we have a court system that is very good at developing the common law and very good at interpreting precise statute, by writing general statements into legislation like “best value” or “public benefit” in the Charities Act 2006, are we not just creating a feast for lawyers? Richard Heaton: It is interesting. To wildly characterise, judges enjoy developing the law in a common law system. They do not much enjoy being asked to flesh out the detail in a generally worded statute. It is not something they feel comfortable with because they are straying into parliamentary territory. Parliament has expressed a view and they are trying to anticipate the will of Parliament. They say rhetorically, “I wish Parliament had given some guidance here.”

Q100 Chair: Then is this drive towards general statements in legislation, which is the modern fashion, actually misplaced? Richard Heaton: I am not sure there is a drive towards general statements. Chair: It happens more and more. Richard Heaton: We get complexity as well.

Q101 Chair: Can I just read you the Charities Act on the public benefit test? It says, “In determining whether the requirement is satisfied in relation to any such purpose, it is not to be presumed that a purpose of a particular description is for the public benefit.” Nowhere in this act are the words “public benefit” determined, described or defined. Richard Heaton: I am not a charities lawyer, but the concept of public benefit is the sort of concept that a court would feel comfortable deciding on a case-by-case basis. I imagine the drafter was trying to say they were pretty confident the courts could develop this as they have done that sort of development in the past, and so we can leave that area to them.

The alternative would have been for the drafter or for the policymaker, the Minister, to propose a rule-making power there.

Q102 Chair: Actually, that is exactly what happened. The Charity Commission was given the obligation to issue guidance on the interpretation of public benefit. What we finished up doing was passing either a judicial function or a legislative function to an executive agency. The result has been a mess. What do you think we learn from this? You will be addressing this in your response to our report on the Charity Commission. The clock is ticking. Richard Heaton: I do not want to anticipate what I might say. I would like to know what the policymaker thought would happen when they passed that bit of legislation. Chair: We are all left guessing. The courts are left guessing and the Charity Commission is left guessing because the legislation is so unspecific. Richard Heaton: I would not necessarily defend it in that case. I would defend in appropriate cases unspecific, principle-based legislation. It would be a shame to draw a general conclusion that we must never use principle-based legislation, because it is a technique that plenty of other countries use successfully.

Q103 Chair: How much do you think this represents the influence of different jurisdictions that now have such a strong influence on our own legal system, like the European Union and the European Convention on Human Rights? Richard Heaton: I do not know in that case. Sometimes the policymaker is trying to draw on the traditional strengths of the common law and sometimes they are trying to draw on the different practices of civil law jurisdictions. In that case, it could have been either, and I do not know, having not had a really good look at it. It could have been hoping that the courts would simply do case by case jurisprudence, in which case I do not know why that went wrong and why that did not happen. It could have been trying to draw on the more principle- based approach that you get in civil law countries, in which case, again, I am sorry, I do not know why that did not seem to work.

Q104 Chair: It looks as though very often the Government could not be bothered to work it out, so they are just going to shove the problem at the courts. Richard Heaton: It is not always shoving it to the courts, because courts do not interpret most legislation. You and I—users—interpret most legislation, so it is a fallacy to say that every bit of general stuff always ends up in the courts before it takes effect. English common laws tend to think that statute does not really exist until a court has interpreted it.

Q105 Chair: If you do not mind me saying so, I think that is an evasion. It finishes up being subject to interpretation, whether by the courts or others. Richard Heaton: If the alternative is in every case that every single instance has to be spelled out in regulations, then you are going to end up with a very much more complex legal system and a very much more complex statute book. You have a trade-off with the user, who might find that quite a useful piece of legislative prose.

Q106 Chair: Is the complexity now compounded by external jurisdictions having an influence on what we can put in our legislation? Richard Heaton: Yes, but I do not know if that was the case in the Charities Act. Chair: No, I do not think it was, but in general terms. Richard Heaton: Yes.

Q107 Chair: When a piece of legislation is being drafted, how often do you have to have regard to EU or ECHR rulings and legislation? Richard Heaton: Every public lawyer has the principles of ECHR in their mind always.

Q108 Chair: So we now cannot draft legislation in this country without having regard to those. Richard Heaton: I did not quite say that. Every lawyer certainly knows ECHR well and will know the areas where you need to be conscious of it. There are some areas that are going to be pretty free from ECHR and areas where you are going to be absolutely on your wits. The commercial relationship between big organisations with equality of bargaining power is not a massively ECHR area. If disputes arise, you have Article 6. An area that involves private life and the intervention of the state in families is going to be ECHR.

Q109 Chair: Do you think where this drives drafting towards more complexity, those are the areas where there is a tendency to just make a general statement and let people interpret it outside Parliament? Richard Heaton: I suppose it depends on the areas where Parliament feels strongly. Parliament has an interest in the legislation being effective. If Parliament has an interest in which way individual cases go, then that is the area Parliament ought, either by an Act or by rules, to legislate.

Q110 Chair: If Parliament does not know which way cases go because they are going to be determined by the ECJ or the ECHR, it is quite difficult for Parliament to create clear legislation. Richard Heaton: The Strasbourg Court is certainly guided by what you in this Parliament and the courts make of our obligations.

Q111 Chair: There is no doubt that we are hoist by our own petard, if that is what you mean. Richard Heaton: No, I mean it is not simply that they influence what we do. We influence what they do. Since the Human Rights Act, you have a whole pile of jurisprudence from this country that is read and listened to in Strasbourg, because we have a good, adversarial legal system that does proper legal analysis. If Parliament says, “We think this set of rules is within the ambit of what ECHR allows; we can take a chance here and push the boundaries,” that is the sort of legislative intervention that actually carries a bit of weight in Strasbourg. Strasbourg will think twice about the view that Parliament took or the British courts took.

Q112 Chair: In fact what you are saying is the more precise we are, the greater the margin of appreciation that we will be given by those foreign courts. Richard Heaton: If we take a considered view that a particular outcome is within our margin of appreciation, then it would take a brave Strasbourg Court to contradict us. Chair: So that would drive us towards precision. Richard Heaton: That would certainly drive us towards nailing down the limits of the ambit.

Q113 Robert Halfon: You may have seen our report on public engagement in relation to open-source policymaking. The Government talks about contestable policymaking, and the area it seemed to choose was Civil Service Reform, and then the contestable

25 policymaking that arose from it was from an establishment think-tank, the IPPR. I have no animosity against the IPPR whatsoever, but not only was it an establishment subject area that was chosen for contestable policymaking, you then chose a Westminster-insider body. Could you tell me what you understand contestable policymaking to be and what you are going to do to actually make it genuinely reach out to other parts outside the Westminster village? Richard Heaton: Yes. First of all, among the many virtues of open policymaking, it gives Ministers, quite rightly, a diversity of sources of advice, so they are not always having to ask civil servants for advice. On some areas of Civil Service reform, you do not want a monopoly of advice from the Civil Service. That was a particularly Westminster-villagey type subject, and you can see why Ministers wanted diversity of supply there. They went for IPPR because I guess they wanted a reasonably rapid response from someone who knew the landscape. I am absolutely taking your point that contestable policymaking goes beyond the usual suspects. It certainly goes beyond think-tanks, and I was going to say the next stage would be academics, but I would quite like it to be broader than that. It is partly discrete projects going outside, and in a sense we have always been able to do that. That is what the consultancy business is all about. People like IPPR have always been available to Government. If we crack it and do it well, it is about tapping into something much broader. It is about using collaboration with the public differently, taking the public’s views in a way other than a 12-week consultation; it is about using social media; it is about the sort of stuff that I am trying to do on Good Law. It is about genuinely putting questions out there and getting a really intelligent response that is something other than the usual suspects writing a response in 12 weeks.

Q114 Robert Halfon: The example we had when we were doing the Committee inquiry was the American Patent Office, which was looking for a form of crowd-sourcing its advice. It seems to me laughable, politely, that the contestable policymaking you did went to a Westminster think-thank that is full of insiders anyway, in essence. That is just doing the usual thing, but slightly outsourcing it. Richard Heaton: I agree that was not massively innovative. In a sense, it is a shame that that is the flagship for contestable policymaking, because it is a bit of straightforward consultancy. However, I would not want you to think that that is the limit of our ambition. On the calls on the Contestable Policy Fund, they are quite rightly policed by Ministers because it is not for the Civil Service to prescribe the circumstances in which advice from non-civil servants is offered. Quite rightly, Ministers control the tap on spending for the Contestable Policy Fund. One of the really exciting things about open policymaking at the moment—and it is part of Civil Service Reform; it is part of the spirit of innovation—is that we know that the traditional insular way of doing policy just does not really do the job anymore, or rather it does not tap into the really profound power that you get from crowd-sourcing, listening to people, using social media or just trying ideas out in beta phase, to use a digital analogy. There is something really powerful there that perhaps would have led to a different Charities Act. It avoids us being trapped by received wisdom and not being subject to external challenge.

Q115 Robert Halfon: Are you genuinely looking to innovate on ways for serious public engagement, whether it is social media or other means? Richard Heaton: I am not ducking this at all, but the head of the policy profession in Government is Chris Wormald, my Permanent Secretary colleague at the Department for Education. He would be able to tell you more on this. My personal view is that we genuinely

26 believe that Ministers and Government would be better served by having a fuller range of analysis available to them beyond civil servants. In addition, we want civil servants to have a broader world view. We want interchange with different sectors and all the rest of it. We cannot have difficult policy problems, like how to re-do charities law, being served up from a purely insular policy machine. That is just not going to work.

Q116 Robert Halfon: Can I just move on now to the Big Society? Why is it that the Cabinet Office is responsible for the Big Society and not the Department for Communities and Local Government or even possibly the Home Office? Richard Heaton: I am going to blow my trumpet. I do not claim personal credit for this, but the Cabinet Office is where you get really broad, innovative and mercurial, slightly disruptive thinking. The Big Society is such a profound idea that it requires something other than a delivery Department’s standard policy into operational response. It is about the NCS, which is a fairly extraordinary programme; it is about small bits of funding available for charities to do really different things. It is about a decade of social action, and it just feels it belongs at the moment in what is becoming the innovative heart of Government. I blow a trumpet for us as the Department for innovation in government, and the Big Society is about doing things differently and enabling things to happen differently. It is about the two examples I gave earlier, the NCS and social investments, and it is also about the transparency agenda. It is about broadening our thinking to engage people.

Q117 Robert Halfon: I am personally a very passionate supporter of the Big Society, but there are some people who suggest it has not been successful—in fact, our Committee published a report on this—because it is in the Cabinet Office, which is sometimes seen as the dustbin Department for issues that are too complicated to put in other Departments, but also because there is not a Big Society Minister at Minister of State or Cabinet level. What is your view of that? Richard Heaton: I do not want to comment on the bigness of ministerial personalities or portfolios. We have two Ministers, Francis Maude and Nick Hurd.

Q118 Robert Halfon: He is busy doing Civil Service Reform, procurement and so on, so he does not have huge amounts of time to spend on the Big Society. Richard Heaton: He is an energetic fellow, and Nick Hurd knows this sector probably better than anyone in Government. He goes at it with enormous energy.

Q119 Robert Halfon: He is seen as the Minister for Charities rather than the Minister for the Big Society as a whole. Richard Heaton: The NCS and social investment are not particularly charities; they are civil society. Civil society is a phrase we use and the Big Society is a phrase we use. It is certainly about not spending much money to enable innovative things to happen and to encourage volunteering: the decade of social action, encouraging volunteering and Olympic legacy are all part of the Government’s Big Society agenda.

Q120 Robert Halfon: What is the difference between civil society and the Big Society in your view? Richard Heaton: I do not know if there is a precise distinction. Civil society is a phrase that has been around for a while; Big Society has a particular political resonance, but I think they overlap. Civil society is probably more about a particular sector and structures, and Big Society aims at something attitudinal as well.

Q121 Robert Halfon: Can you define the Big Society for us in terms of how you see it in terms of Departments? Richard Heaton: I would define it as encouraging people, in a variety of different ways, to take part in their community, either through informal, formal, family or social structures. That sounds a lame description, but it is something like that.

Q122 Kelvin Hopkins: Surely civil society is a legitimate term that could be used by a political scientist. Big Society is a political slogan and it is a campaign by a particular Government. Surely there is a significant difference between those two. Richard Heaton: That is sort of what I was hinting at. Big Society has a particular political resonance.

Q123 Robert Halfon: One of the problems with the Big Society is that different people are given different definitions of it. This is no criticism of you, but has the fact that you had to think about it for 30 seconds and you see people on television describing it in different ways been the root of the problem? The Big Society has not been easy to define. Richard Heaton: We are focused on the portfolio of innovative, interesting things we are doing that politically you would brigade as a Big Society agenda. Whether or not you use that label, the programmes are delivering and doing really interesting things—the decade of social action is one—that politically meet the Big Society aspiration, but in a sense the label is not why we are doing it. That does not sound right, but the label is not everything.

Q124 Robert Halfon: You need to be able to define it for the public if you go out on the doorstep. I have developed my own definition for it, and as I said I am very much supportive of it. Richard Heaton: Can I ask you what yours is? Is that permissible?

Q125 Robert Halfon: I said it has three components. In essence it says that social capital is as important as economic capital and that social capital is the things that strengthen communities and families. Social entrepreneurs who run neighbourhood groups and charities are as important as economic entrepreneurs, so just as you remove red tape, cut taxes and make life easier for economic entrepreneurs, you have to do the same for social entrepreneurs. It also says that people power is as important as, if not more important than, state power, and this is where I am sure I would disagree with my good friend on the left. Kelvin Hopkins: In every sense. Robert Halfon: You empower people to have genuine decisions, whether it is planning or referendums on council tax or electing police commissioners and getting involved in policymaking. Those are the ways I have defined it, but it has taken me a long time to come to that definition. Chair: Mr Halfon, what is the question? Robert Halfon: He asked me the question, so I was answering. It is a new role for Select Committees, in fact. My question goes back to what I have been saying: part of the problem is that the Big Society is not seen as being taken seriously. There is not a senior Cabinet Minister or Minister of State focusing on it day and night. There are difficulties in definition, and it is not clear why it is in the Cabinet Office rather than in another Department. Richard Heaton: All I can say is that we are really energised by the portfolio of things that we brigade together in the Office for Civil Society, and they involve much of what you were saying in your definition, which was interesting. We take it seriously; we think we are making a difference and we hope we are trusted by the sector, although the sector slightly

28 underplays what we are talking about, because we are talking about people in communities, not just a sector. We think we are on to it and we hope we are doing a good job. Certainly, we get a lot of political energy from our Ministers and the subject is fascinating and engaging for civil servants, because it challenges them to do things other than by way of straightforward, industrial-scale delivery. If there are ideas on the ground, how do you enable that to happen with a slight nudge? I use that phrase in the non-technical sense. What minute intervention would encourage people to volunteer more, for example, take part in communities, spend more time helping others or get stuck into their parish? That is not a traditional task for civil servants, but it is one that really engages us because it is one of the ways we will respond to the challenge of building a better society with fewer Government resources. Without that sort of hope, the Civil Service could become rather a depressing place. You shrink in size, you are asked to do more and your tools remain the same. That is a depressing set of challenges. If the challenge is that you are going to be smaller in size, but there are different ways of doing things and empowering others, then suddenly we all come alive. We think, “Oh, we can do that.” Big Society as a collection of different tools for achieving social outcomes is really exciting for civil servants.

Q126 Robert Halfon: Can I move on to the Charity Commission, briefly? I realise the Charity Commission is an independent body, but what powers of oversight does the Cabinet Office have regarding the workings of the Charity Commission? Richard Heaton: I do not have chapter and verse. The Charity Commission is an independent body with a statutory remit. It is slightly special in its status compared with other NDPBs. We appoint the Chair and the Chair appoints the Chief Executive. I do not know chapter and verse from the Charities Act of what our suite of controls is on the Charity Commission.

Q127 Robert Halfon: If you believe the Charity Commission to be doing things that are against its remit or doing things that you find questionable, do you have power of oversight as the Cabinet Office? Richard Heaton: I am not going to waffle on about what the power of oversight is, because the lawyers might not like it. I cannot quite picture what the power is, whether it is a power to call for reports, a power to intervene or a power to set direction. I do have chapter and verse on it. I suspect the Chair has the Charities Act in front of him, and I do not.

Q128 Robert Halfon: You would be aware that there has been a huge controversy over the public benefit test, and that the Charity Commission is denying charitable status inexplicably to a Christian group called the Christian Brethren. You may be aware that this has raised a lot of hackles in Parliament and there have been a number of debates and a Private Member’s Bill on this issue. When something so controversial like that comes up regarding a body so linked to Government—as you say, the Cabinet Office chooses the Chairman and the Chief Executive—is there a kind of red alert system in the Cabinet Office that says we need to investigate this or we need to have a look at why the Charity Commission is behaving in this way? Richard Heaton: We certainly have a working relationship that covers red alert, and the head of our Office for Civil Society and the Minister have a good relationship with the Charity Commission. Issues are discussed. I am really sorry, I do not know off-hand what our formal powers of intervention are.

Q129 Robert Halfon: Given that there has been such controversy with the Charity Commission in recent times, particularly regarding the case that I just mentioned with the Christian Brethren, do you think that there is a case for a fundamental review of the Charity Commission, its role and remit, and how the public-benefit test is working? Richard Heaton: I absolutely cannot commit to a fundamental review because I am feeling unsighted right at the moment, and I am sorry about that. I can certainly take that away. Chair: We have made a number of recommendations in our inquiry report, having done the post-legislative review of the Charities Act. We look forward to the Department’s responses to that.

Q130 Robert Halfon: If the Chairman allows, are you able to supply the Committee with a response to the questions that I have asked: whether there is a red alert system and how the interaction between the Cabinet Office and Charity Commission works? Richard Heaton: I certainly can do that. I ought to have been able to do that for today. What I cannot commit to is our response. We will obviously respond to your report, but I cannot give an off-the-cuff response. I will write to the Committee on the perfectly reasonable questions you asked me about our formal powers.

Q131 Robert Halfon: In terms of the nudge unit, can I ask how much public money has gone into that since its inception? For the benefit of the Committee, can you explain what it does? Richard Heaton: I do not have the figures, but the nudge unit, the Behavioural Insight Team, has a staff of 12 or 15. It is a smallish unit of civil servants and the cost of it would be the cost of those salaries and not much else, I think. They are a group of people who understand the science of behavioural economics and behavioural insight. They give advice to Departments and the Cabinet Secretary on how behavioural insight can deliver a better outcome. I will give you an example. They have worked with HMRC on the design of standard letters that go to taxpayers asking for a tax return, or letters that go from DVLA to people asking them to license their cars. This is a really small example, but they worked on how the letters can be presented in a way that makes it more likely that the person will immediately pay their tax rather than binning the letters—a photograph of your car on the top of the page, or whatever it is. Those things do not require a big intervention or change of policy, but just a different way of triggering something, using the science of behavioural economics about inertia and affirmation bias, or whatever it is, causing people to do things that are good for the public purse. It is harnessing behavioural insight into public policymaking and delivery. It is a group of civil servants—just anticipating your next question—and we are in the process of seeking a partner to deliver, so one way or another the Behavioural Insight Team will be turned into a different delivery vehicle. It could be by way of a public sector mutual, or it could be by mutualisation in partnership with someone else with a degree of staff ownership or engagement. It is an outcome that is innovative and a bit different; it is what the staff of the unit have been pressing for. In fact it was their idea. It is finding a way of the Government capitalising on this area of expertise that we have developed over the last two or three years, and growing it with the help of a private sector partner. Sorry, you did not ask me that question, but I thought you might.

Q132 Robert Halfon: Given what you did with the IPPR, why does there need to be a nudge unit of civil servants? Why did you not just contract it out to a think-tank to do this work at the beginning? Why did you need to set up a special unit in Whitehall?

Richard Heaton: We set it up under a firector who was one of the key thinkers in the area. As I say, it was very, very small. It was one of those emerging disciplines, and I am not sure the IPPR were placed to do it. They would have had to go out to the market and hire someone who knew the stuff. There are now quite a few people who know it, but when we started there really were not very many people who were into this stuff, so we hired a guy who was into it.

Q133 Robert Halfon: You used the IPPR in terms of contestable policymaking to do Civil Service reform, and then you used the Civil Service to do something that is very much out of the box that you would imagine a think-tank could do. I am not against it, by the way, but I am just asking what the rhyme or reason to this is. Richard Heaton: We did not set up the unit to do a particular piece of work. I suppose, if you think back, nudge was happening, everyone was talking about it, and we wanted the Civil Service to use nudge techniques. We could have asked every Civil Service team to go out and contract with McKinsey’s or IPPR, but instead we said—and this is a classic Cabinet Office response—“Is there some way the centre can help Departments who are up for this understand what nudge can do?”

Q134 Robert Halfon: Would outsourcing it not have been a much better thing to do in terms of contestable policymaking? Richard Heaton: It was not a single policy response we were looking for. It was a capability. We were looking for a capability that would give an extra 10% to all the policy teams across Whitehall. Whitehall is essentially a policy machine looking for policy solutions, and we wanted all those policy solutions to be informed by nudge techniques. We did that by having a group in the Civil Service who knew nudge techniques, and who could go and talk to their colleagues across Whitehall. It has been very successful, but we are not keeping it as a classic Whitehall function, as I say. We are mutualising it.

Q135 Robert Halfon: How do you decide which units should be mutualised or have something different done with them? You have chosen this one, but how is that decided? Richard Heaton: It is a combination of things. There is a team within ERG that has gone around all Departments. Robert Halfon: What is ERG, sorry? Richard Heaton: Sorry. ERG is the Efficiency and Reform Group that we were talking about earlier, headed by Stephen Kelly. There is a team that goes around all Departments and asks them to find areas that could be candidates for this, and it is based on size and marketability. There is an economic set of principles. In this particular case, if I am right, I think the initiative came from the director and staff members themselves, who sensed that this was a thing happening in government and clambered to get on board. It is a small unit, but it is of interest to private sector partners, and that is where this one is going. Generally speaking, the round-up was by a team in ERG going around Departments and having conversations with pretty much all of them, saying, “What are the units that might just lend themselves to this sort of treatment?”

Q136 Robert Halfon: What other units do you have planned for this kind of operation? Richard Heaton: There are large and small. Some of them are big delivery organisations that may or may not go to the mutual territory, but will be spun off in some way, like the organisation under the Cabinet Office that provides shared back-office services for four or five big Departments. We are exploring with private-sector partners how that

31 might be done. There is a really interesting one in the Cabinet Office: if you do project management, you will know the bunch of techniques called PRINCE2 and the various things people learn if they want to do project management. Not many people know it, but that is some intellectual property developed within Government, and that function is being turned into a job partnership with an outsourced provider. I can write to you with further examples, but those are two that come to mind.

Q137 Robert Halfon: I am trying to find out whether there are any criteria that you are going to use to decide whether certain units in Whitehall should be mutualised or whatever. From what you are saying, it does not seem like there is. There is some thinking, “We might have a look here; we might have a look there,” but there are no criteria, and it goes back to the same thing of contestable policymaking. There are no criteria to it; it just seems to be done on a particular feeling at the time with a particular area of policy. Richard Heaton: I had a structured conversation with the team who came to see me as First Parliamentary Counsel. Taking your monopoly point, we asked ourselves whether OPC might be a candidate. It was a structured conversation; it was not completely random, so there were criteria. There were some things about size and proximity to the Government, whether there was a public-sector responsibility, and whether there was something that was at the core of government and needed to stay. It was not completely unstructured. It was a very good conversation with the fellow who heads the unit, but I cannot quite remember what criteria he used. It was not random. Again, I could write to you in more detail on that.

Q138 Robert Halfon: Finally, how will you assess the performance of the nudge unit? How do we know it has worked? Will you publish documentation? Will there be a statement in the House? Richard Heaton: Yes. The nudge unit set itself some pretty basic success criteria when it remained in Government: “Is it paying for itself 10 times over?” I think was one of them. “Is it mainstreamed into Whitehall?” was another of them, and “Has it done something really ground-changing in three Departments?” It was something pretty basic. Just with the two examples alone, DVLA and HMRC, it has far and away exceeded its 10 times investment criterion, because the gains are so huge: if you get 100,000 people paying their tax early, suddenly it is a massive, massive win.

Q139 Robert Halfon: Would it not be worth publishing an annual report or something on how this thing is working, given that impact? Richard Heaton: Yes, and we have gone further than that, because we are now inviting partners, so as part of the due diligence we will have been completely transparent about how it has performed. I am absolutely certain there will be stuff I can share with you, because no partner would come on board without having looked at the success measures.

Q140 Robert Halfon: Genuinely finally, do you think there should be criteria in which you set out, first, contestable policymaking, and secondly, how you will choose which areas of Government you want to turn into co-operatives or mutuals or whatever it may be, so that people can understand it from outside? Richard Heaton: We can probably do some more to explain our methodology. As I say, it is not completely random, and it is partly about letting people know the different ways of delivering services that are available and seeing what the takers are. There is certainly more method to it than that suggests. Sorry, the short answer is yes: there is probably more to do to explain how we run those two processes.

Q141 Chair: Well, you have given us some very full answers this morning, and I am very grateful to you. I hope you have not found it unenjoyable. Richard Heaton: I have found it very enjoyable. Thank you, Mr Jenkin. Chair: Thank you very much indeed for your evidence, and we will call it a day there. Thank you.