THURSDAY 9 NOVEMBER 2000

SIR MICHAEL PARTRIDGE KCB

  460. It sounded from something else you said that there was not a great deal of political interest in any of this reform at all?
  (Sir Michael Partridge) Not until results started coming through. It was really quite a challenging thing to do. Who was to say that there were six functions, or that we got the six functions right. There was huge dissension in the Ministry. You can imagine, if you were to go out and abolish the regions with about 100 senior posts, and they thought they had been doing well for years and they were running HR and IT, what would happen if you devolved it to local office managers and gave them more freedom? The Treasury were very nervous. Secondly, there was huge dissension about how you split it up. The Benefits Agency did not want to lose charge of contributions because it all goes together. Frankly, they used the contributions staff to fill in gaps to pay benefits. That was why contributions were not collected, because staff were working on benefits when they were short of staff. I thought that the agency reforms clarified things but it was a big risk. When it all worked Ministers were extremely pleased. No, there was not a lot of political kudos. Even now nobody really goes around saying "This was a great management revolution in DSS and led to great improvements", except me.

  461. Just now there is this big focus on PSAs.
  (Sir Michael Partridge) Yes.

  462. Do you see them as a natural progression from where you had left it?
  (Sir Michael Partridge) Yes. I am very strongly in favour of all this. I think it has moved in that direction. We could not have done the agency reforms if we had not had 20 years of working on this and doing performance measurement, and improving management statistics. You cannot just plunge straight into agencies. A lot of agencies that were set up from scratch—I do not want to name names but, say, the Prisons Agency—did not work nearly so well because they were trying to catch up 20 years in two. You have got to have a base of working it through. I think the reform is now standing on our shoulders and going much further. At the end of my career I started to set myself objectives in about 1991 and by the time I retired I was on the Senior Appointments Committee. It was de rigueur for all Departments to have Permanent Secretaries with objectives, and your pay depended on it and it was assessed by independent businessmen from outside. I am very much in favour of that. I always used to show my targets to the Secretary of State and say "Do you think those were right for the Department?" He did not formally report on them. We did get reports later on from Ministers on them but I am afraid Ministers' reports were not nearly as critical as I would have been on some things. They all said "I think my Permanent Secretary is marvellous and should get a lot of money". I think that may have changed. I think you have got to go through that phase of getting it right but I am a stronger believer in this, personal accountability.

  463. Do you share the view that the original PSAs were over-elaborate?
  (Sir Michael Partridge) Yes. They have to be very few. I made a strong rule that my Heads of Agencies had no more than six objectives, you have just got to choose. I do the same with the university now, at Middlesex, with my Vice-Chancellor and senior people, I do performance appraisals for them and their pay depends on it. You have got to have some six targets and you have to argue it through with them as to what really are the priorities. Again, it is not set in concrete. If something crops up after six months which is of major importance you change one of your objectives and you drop another one out, or if one is clearly unattainable for reasons that, say, politicians have decided not to pursue that scheme, you drop it.

  464. If the Department fails on its measures, how do you penalise the Department?
  (Sir Michael Partridge) Permanent Secretaries get penalised on their pay to start with. Some did not get pay increases, to my knowledge. Some of my Chief Executives did not get pay increases. The same applies now in the university and some of industry. Industry is not so good at this, I have to say. I think most people in industry get some sort of bonus. Very rarely does somebody get a zero pay increase but that does happen in the Civil Service. I think that is the way to do it. Again, if somebody fails several times and they do not get pay increases they start to get the message and look for something else to do. It is not true that the Civil Service does not get rid of people. I had a big turnover in my 13 top posts, I think about five left, including one of the Deputy Secretaries at one point.

  465. The emphasis is on personal responsibility.
  (Sir Michael Partridge) Yes.

  466. Not, for example, chopping a budget because the Department did not meet its target?
  (Sir Michael Partridge) No. It should be on positive things. It can be. The main one is to live within your budget. I made a rule that if they did not do that, all the rest did not matter, that was a killer, they did not get a pay increase if they did not live within their budget, that was a key one. Then the other targets should be constructive ones like bringing in some schemes successfully. It depends what you mean by success. It is no good saying "Write a White Paper", anybody can write a White Paper even if you know nothing about it, you have got to have a target that says "Write a White Paper that is acceptable to Ministers and is well greeted when it is published". That is a target of success and you can say whether it is or not. You might argue about it. Some of them must be facts. Living within your budget is a fact, you either have or you have not, you cannot argue about it. Some of them must be quantifiable like that but there must also be some soft targets in those six. One of my targets was to measure people's contribution to the running of the Department as a whole on my board of management because there is a danger for agencies to split, as I have described, from what Departments in Whitehall are doing and pursuing their own ends and to hell with the rest of the Department. You cannot have that.

  467. What kinds of objectives and targets can we apply to the Treasury itself?
  (Sir Michael Partridge) Well, that is an interesting question. The Treasury itself, as I say, should not actually run many programmes itself. I think what you could ask them to do is to devise a few targets as to whether they are keeping public expenditure under control, which they are at the moment, and how the financial management is going. I think on the present measures they are doing extremely well on that. You could do that. I think one of the snags is public accountability, picking up a point that was made earlier. The Treasury does not have a lot of public accountability itself. It does not appear before many Select Committees, this one is an exception, and they do not really carry the can when policies go wrong that they have torpedoed. It was my Ministers and myself as Permanent Secretary in the dock over the Child Support scheme. Much of it was the Treasury's fault. I have been saying that since I retired but I could not say that when I was a Permanent Secretary. You end up in an awkward position on the Public Accounts Committee and other Committees defending decisions which are really the Treasury's. I think the Treasury ought to be hauled in and made jointly accountable on some of these decisions because they have a very powerful influence.

  468. I do not think we will disagree with this. You have expanded very well on the letter you wrote to us about how the Treasury is good at financial management and public expenditure but is hopeless at trying to interfere in policies. The account you have given us in terms of the Treasury "scuppering" policies, and you have mentioned Child Support, are there any notable ones?
  (Sir Michael Partridge) As I have said, they considerably damaged the programme of bringing in pension reforms over that 25 years. If they had not blocked the Crossman scheme, we would have had that scheme by 1968 or 1969 and there would not have been all the to-ing and fro-ing of the Joseph scheme and the Castle scheme and the Fowler reforms and all that. We would have had a stable situation. I think that was quite a damaging thing to have done. They did not damage the Joseph scheme, there was no time, or the Castle scheme. This is a political judgment, but I can say these sorts of things now I am retired. I think there is a great danger on Social Security that the Treasury's general bias against National Insurance and in favour of means-tested benefits is going far. I personally think that we will have only means-tested benefits within ten years if this goes on. You will have noticed in the Budget yesterday that the Chancellor, having abolished SERPS, has put up a contribution ceiling for no return, so you are raising earnings-related contributions and you are getting a flat-rate benefit and that benefit is dwindling rapidly in value. He is putting up means-tested benefits at the same time. This is the policy really. I do not believe it is a DSS policy, I think it is a Treasury driven policy and I think it will sow the seeds of its own destruction. I do not think people will stand for this eventually, that you have everything means-tested, and it depends on a sort of charity or back to the Poor Law in a way. I think that is an example of where they have taken over a policy area. They may be taking it further and I think the implications have not been seen and argued enough. This is where the public accountability comes in. The DSS cannot stand up and say "I think this is a rotten idea" because they are supposed to be one Government, and they are the Government. That is an example of where the Treasury have interfered with policy with, I think, very deleterious effects in 20 years' time.

  469. The way you divide up public expenditure and the development of policies with the Treasury on the one side and the Department itself on the other, you make it sound as though the Treasury's role is to say "no". Surely there are times when they are a positive benefit in developing the policy?
  (Sir Michael Partridge) Yes. I explained earlier that I tried to get a more collegiate approach in the 1990s, which I think is the right way to approach it. It should not all be about cuts and it should not be seen as successes and failures, it should be what is the best use of these vast resources in Social Security, and there is room for a lot of political argument on that. I think the Treasury and the DSS need to work together to identify what the options are and what the consequences are. It should not be Treasury driven, that should be a DSS policy. The Social Security Act states that the Secretary of State decides benefit increases, that is law. If a Chancellor ever gets up and says "I have decided to raise the pension", that is not law. I was always very strict when I was there that the Secretary of State signed a bit of paper saying he had reviewed the pension it and he had decided to put it up and we took strong exception if the Chancellor said he had done it. I think that has rather slipped. You have got to be careful of that. It should not be seen as antagonistic, it should be a joint approach because these things are too serious and money is too seriously involved to have two Departments squabbling about it.

  470. I very strongly agree with your idea that this is a partnership approach. but does that not mean it is a little bit unrealistic to talk about a division between driving public expenditure in the Treasury and developing policy in the Departments when clearly the two work together?
  (Sir Michael Partridge) The two must work together. I do not see that there is a clash in a business between the finance director and the policy director, as we would call them, the person, say, in charge of life and pensions in a big insurance company, they work together and it would be silly if they did not. I think we need more of that in Government and more of that across the whole of Whitehall instead of just individual Departments with the Treasury.

  471. Just to come back to your point about National Insurance contributions. It seems to be the case that the Treasury is taking over the Department of Social Security with National Insurance contributions gone, Family Credit gone, now the Working Families Tax Credit?
  (Sir Michael Partridge) It is all turning into tax credits and going to the Revenue and the Contributions Agency has gone to the Revenue. I think that is probably right but the policy is moving and I would not be surprised if the DSS was split up.

  472. To look forward, is not what we are aiming towards this combination of a golden mantra of putting together the tax system and the benefits system as a unified system?
  (Sir Michael Partridge) Yes, and we have tried to do that. Since I have been involved we first tried in the 1960s and we had a thing called the Minimum Income Guarantee in 1966, which has now come back again. Tax Credit was the genesis of child tax allowances coming into Child Benefit. That was done after great public debate. There were huge rows in the 1960s and 1970s about this publicly and in Cabinet and in Parliament. A lot of it is being done by stealth, it is going back to tax-based things and National Insurance is vanishing as such without any great public debate about it, and I think that is wrong.

  473. But the Treasury is perfectly capable of administering this system, is it not?
  (Sir Michael Partridge) Not the Treasury because the Treasury does not do that, the Inland Revenue does. It will be the Inland Revenue administering it, which is actually run by one of my former Deputy Secretaries who was in charge of Social Security policy, so I have got every confidence in him to do that. The Contributions Agency was run by Ann Chant, who was one of my Under-Secretaries, and she is now a Deputy Commissioner in the Inland Revenue, so I am very confident about the Inland Revenue's ability to do this.

  474. Can I ask two further questions about performance management which we had not intended to ask but they have come to our notice. One is that you said earlier you approved of the greater mechanistic approach to assessing performance within Departments, although you did not want to character assassinate—
  (Sir Michael Partridge) Yes, as long as it does not go into detail and is kept with some six targets and they are measurable.

  475. What about greater mechanistic approaches across departmental performance assessment? When you were running Government, PBB from the Americans was quite fashionable in those days.
  (Sir Michael Partridge) That is right.

  476. And the idea that you could assess things mechanically across the Department. Do you have any advice to give us on that now?
  (Sir Michael Partridge) Yes, I do. I saw that in operation and I also saw the joint approach to social policy—JASP as it was called—in the 1980s in DHSS and other Departments. The trouble with both those systems, and also with the Mini system when it was introduced, was they were far too mechanistic and far too elaborate. They produced masses and masses of paper with hundreds of targets and reports every three months on how you were getting on towards those targets and the whole system just drowned in paper. I am not a great believer in that. I am a great believer in defining very clearly from the start strategically what you want to achieve, not just saying "let us review the whole lot and see where we get to". Define one or two things you want to do and proceed incrementally and get on with those and make sure that you have got a person or a team that is responsible for doing that. If you make everybody responsible with a central secretariat then nobody is responsible and a central secretariat is not very good at doing it, except producing masses of reports. I think that the examples we have seen that have worked, like the Rothschild Think Tank, concentrated on just having a few people at the centre who took an area and took individual subjects and said "can we improve, for example, the way in which the unemployed are dealt with between the Department for Employment and the Department of Social Security?" and they produced a report on that, which was very interesting and very radical, and we adopted quite a lot of it—not all of it—and there were great arguments about it. That is the way to do it. I am a great believer in having clear strategic objectives, not too many, and picking them off incrementally one by one and putting a project team, or project leader, in charge. That is one thing the Government and the whole country lacks, good project leaders.

  477. The argument for PBB was that the Treasury had a pot of gold and it had to disburse that in some way or another.
  (Sir Michael Partridge) Yes.

  478. The benefit of the PBB approach was that you had some kind of opportunity cost approach to spending in some sort of detail. That was one way of trying to disburse money. You do not think there was any merit in that?
  (Sir Michael Partridge) Yes, I think it was very useful. It brought in a lot of features, as you say opportunity costing and marginal costing, which were very valuable adjuncts into it, but I think its problem was they tried to apply it to the whole lot in a global way and that meant there was far too much information collected, far too many reports, it was too big for people to assess. I would much rather say "let us a have a fairly brief review of where the shoe is really pinching, where are the big savings to be made, where is the need for more expenditure in broad terms" and focus on those and get on with those and do them. Peter Lilley and I gave a talk at the Civil Service College two nights ago, as we do to senior entrants, about how you make policy and how senior civil servants and MInisters should best relate to each other. He outlined his thesis, and I think he is absolutely right, that when he came in we discussed whether we should have a global review of Social Security, as had been done every five years, and he was very strongly against it and said "No, let us look at individual areas like Child Support, like Disability Benefits, and say are the resources in there being best used? Okay, we will get to pensions and Unemployment Benefit later and have a programme but do not try and do it all in one big review". It takes a long time, it gets unfocused. Pick your targets. This is quite difficult to do. To have a strategic view of what are the important things in programmes and management needs some very hard thought and sometimes you do not always get it right. You make much faster progress doing it incrementally like that.

  479. Your reservations are not to do with giving too much power to the Treasury?
  (Sir Michael Partridge) No, not at all. I am a great believer, we—as I said—got a Treasury Assistant Secretary in and we reviewed some areas of Social Security. He came up with recommendations that in some areas spending could certainly be cut with advantage because it was not being used properly and in others it should be increased. That was quite a surprise to the Treasury.