Transcript created by WordWave 22 February 2005 SIR JOHN BOURN KCB, Comptroller and Auditor General. Chairman 1. Welcome again, Sir John. We will get straight into the questioning because colleagues like yourselves have engagements. Can we start first of all with your total resource budget? Now, what is interesting, taking a longer view of it, is that over a five year period it shows an increase of 47.7%, and that is quite formidable. How can you live with Gershon with that sort of performance? (Sir John Bourn) Well, Chairman, we certainly can live with Gershon because if, in resource terms, you compare the increase in our budget with that of central government expenditure we are less than them. For example, in the forthcoming year central government expenditure in resource terms increases by 7.25%, whereas our increase in resource terms is 6%. In terms of the Gershon exercise, essentially what that is about is not of course reducing the total amount of central government expenditure, but realigning it and focusing more on frontline services. 2. Is there a necessary correlation of any sort between central government expenditure and yours? It is a matter of programmes, is it not? It may well be that they expand expenditure but the monitoring work does not expand, necessarily, in ratio with the financial expenditure, does it? 020 7404 1400 [email protected] www.wordwave.co.uk Smith Bernal WordWave, 190 Fleet Street, London EC4A 2AG (Sir John Bourn) No, it does not, and of course it is not, as I say. I think one particular feature of the present circumstances is of course that the accounts are more complicated under resource accounting than they were. A number of new organisations are being formed. I give an example: the Court Service, which brings together the administration of the Magistrates Courts with those courts and the Department of Constitutional Affairs. Well, the whole basis on which the assets were valued in the Magistrates Courts is different from the basis on which they were valued in the Crown Courts. So, bringing these together creates a complicated set of accounts and, of course, gives the auditor the requirement to put more attention on them— certainly in the early years. 3. Has the implementation of Sharman made a significant contribution to your extra costs or not? I have forgotten how far we are ahead with Sharman in relation to companies and executive agencies and so on. Is there much left to bring into the camp at the moment, or have we got nearly everything back? (Sir John Bourn) Yes, we have reached the point that the Special Health Authorities and all the executive non-departmental public bodies are now audited by us. And the target to put out to the firms of 25% of the financial audit will be achieved in 2005/2006. 4. So who is understanding? Is there anyone who is resisting coming into the fold? (Sir John Bourn) Certainly not as far as the executive non-departmental public bodies are concerned. The one area we have finally to reach a conclusion on is the right to audit PLCs. And you will recall, Chairman, the discussions that we had in relation to this. We got the European Commission to agree there was no problem about our doing it. We got the DTI to agree there was no problem about our doing it. We still have to get the agreement of the Institute of Chartered Accountants of England and Wales, who are the body who determine who has the licence to audit PLCs. Under their rules, to audit PLCs, the practice must be headed by a qualified accountant. Of course, the legislation setting up the National Audit www.wordwave.co.uk 2 Office does not restrict the appointment of a C&AG to someone who is a qualified accountant. So, we are currently engaged with the Institute of Chartered Accountants to find a way through that. 5. Well I think we should invite the Institute to appear before the Public Accounts Committee, to explain to us why they will not recognise the difference. I do not see why they should not recognise their need to make a change in their charter, if they are not to stand in the way of public and parliamentary accountability. I wonder if we can perhaps set this up— perhaps Edward and I can talk about it and we will consider getting them in within the next few months, assuming we are not otherwise occupied over the next few months. (Sir John Bourn) I would be grateful for that, Chairman. If you would like me to start off by telling the Institute of the meeting this afternoon, and of the points that you had raised and that you might wish to ask them to come in, I will do that. 6. And if you would let us have a background note? (Sir John Bourn) Yes, I will. 7. Okay, thank you very much. Now, back then to Gershon: we expect you, obviously, to be on the best financial diet in Whitehall, but does that mean you are not capable of further slimming down in the spirit of Gershon? (Sir John Bourn) Not only in the spirit of Gershon. I am proposing to slim down. When I appeared before you in July— 8. But Perkins says you are overeating. (Sir John Bourn) The fact of the matter is, as I say, that when I appeared before you in July I said I would reduce the administration costs of the Office by the 2.5%. I am in fact doing that. In 2005/2006 my administration costs will in fact go down by 3%. So, I am doing better than the Gershon requirement, and I will take that forward through the next two years. 9. But is not a part of that just an accounting technicality relating to pension funds? www.wordwave.co.uk 3 (Sir John Bourn) No, it is not. It is not to do with that. It is outside the pension contribution adjustment. How I am doing it is depicted in the table on page 1 of the memorandum I submitted to you. In the line entitled, “Infrastructure and Support” you will see that the expenditure in the current financial year of £14.4 million goes down to £13.5 million in 2005/2006. So, that is a reduction essentially in Gershon type economies through things like better procurement and simplification of back office arrangements. I am saving £450,000 by better procurement, more framework contracts and the simplification of procedures for handling human relations. So, these are real cases where, but for the changes we have made, we would have spent this money. So, it is not an accounting technicality. 10. We are not going to have departments turning around and sniping and saying, “Well Gershon is being applied to everyone else but not the NAO”? (Sir John Bourn) But I am glad to be able to say that I have not had any sniping from them. And we are doing more than Gershon has asked departments to do. 11. A reverse possibility put at yesterday’s meeting by one of our colleagues was that perhaps one could set an example in a different direction. We have all, as members of the Public Accounts Committee been proud to talk about the 8:1 ratio in savings, and we are proud of it, but one of our colleagues said, “Well, if you are not going to save more could you raise the ratio?” (Sir John Bourn) Well, of course, as I said yesterday, because we asked for 6% more resources next year, we shall in fact, on the 8:1 ratio, make more savings next year than we will have done under the ratio in this year. But if you would like me to consider, and I have been expecting this for some time, a 9:1 possibility, then I will consider it and, if I may, come back to you on it. 12. Yes. Well, I have led you into dangerous fields by saying because you are doing so well at eight I will give you more money for value for money studies. I still think that is www.wordwave.co.uk 4 logical at 8:1. And I would be in dereliction of my duty if I did not ask why do not you aspire to become even more than that? So, if you feel like putting a note in relation to that, if there is anything appropriate to add. (Sir John Bourn) Well, if there is, Chairman, I will. Thank you. 13. Okay, thank you very much. And then, coming back to the 8:1 and Gershon, your value for money reports are getting shorter. Is that how you are doing it? I used to look forward to 270 page documents to read on a Sunday, and I now find I have an hour to spare in the evening, you have cut a few pages out of each of them. What is happening there? Is this affecting quality at all? (Sir John Bourn) It is certainly not affecting quality, Chairman, and it is certainly not affecting the outcomes, which stay at the savings level. We are trying to write them well and clearly. And of course in a number of cases now some of the supporting material is on the website, rather than becoming part of the report itself. So, that is one of the reasons for the change. 14. The savings that were audited by Haines Watts for us, they applied to 2003.