House of COMMONS







DCA Departmental Report 2005-2006



Tuesday 17 October 2006


Evidence heard in Public Questions 1 - 98





This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.



Any public use of, or reference to, the contents should make clear that neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.



Members who receive this for the purpose of correcting questions addressed by them to witnesses are asked to send corrections to the Committee Assistant.



Prospective witnesses may receive this in preparation for any written or oral evidence they may in due course give to the Committee.


Oral Evidence

Taken before the Constitutional Affairs Committee

on Tuesday 17 October 2006

Members present

Mr Alan Beith, in the Chair

Mrs San C James

Mr Piara S Khabra

Keith Vaz

Dr Alan Whitehead


Witnesses: Alex Allan, Permanent Secretary, Rod Clark, Director General Strategy, and Barbara Moorhouse, Director General Finance and Commercial, Department for Constitutional Affairs, gave evidence.


Chairman: Mr Allan, Ms Moorhouse, Mr Clark, welcome. I had better warn you that we are anticipating a vote fairly soon, which I hope might be the only one during the time that we have in front of us. But it is in the interests of democracy, in furtherance of which we declare any interests we might have that are relevant.

Keith Vaz: I am a practising barrister.

Q1 Chairman: In that case, can I start by referring to the fact that the annual report talks about the "reorganisation of the centre of the Department." What does that mean? Does it mean improved performance?

Alex Allan: That is certainly the intention. The main element in the reorganisation was avoiding the duplication of having a separate criminal justice unit within the Department and also a separate capability within what was then the court service, now Her Majesty's Court Service, so actually moving that category into HMCS so that both the policy and operational advice comes from the same source and at the same time setting up a quite small strategy function in the centre that looked at strategy across the Department, covering all the different elements which Rod Clark heads up. There were a number of changes like that, but that was the biggest change. We moved a few staff, a Legal Aid team, in the Department to the Legal Services Commission so that they could, again, combine policy and delivery in a way that we hope will improve performance.

Q2 Keith Vaz: You have now been in post for two years, Mr Allen. What do you see as the key changes undergone by the Department in that period?

Alex Allan: The key changes have actually been the structural changes that we have made, in particular the absorption of the Magistrates' Court service to create Her Majesty's Court Service in April 2005, which more or less doubled the size of the Department in terms of manpower. The other change that is more recent has been absorbing a number of quite large tribunals into the new Tribunal Service from April 2006. I think those have been much the biggest changes. The other change that I think is still ongoing but is very significant has been the struggle, which started well before I arrived, to get a new framework for Legal Aid to try and ensure that we have Legal Aid spending within the resources available to us, and that has proved much harder then we expected. Eventually, as you know, we set up the review chaired by Lord Carter of Coles, who reported in July, and we have just finished the consultation period and we will move to the consultation responses and take forward the implementation, but that going forward is going to be a very significant change, both to the Legal Services Commission and, of course, to the suppliers.

Q3 Keith Vaz: It is a profound change, is it not? It is quite a different Department to the one that your predecessor ran. Do you think that there is now a vision of what the Government want to achieve as far as the DCA is concerned?

Alex Allan: We have found that the vision which the Lord Chancellor set out under the theme of justice, rights and democracy is a very powerful one and one that has provided a clear unification for the vision for the Department, and indeed, our capability review, which started earlier in the year but was not published until July, identified that as one of the strengths, that we did have a clear vision across the Department. It also rightly identified some areas that - as you indicate, we have changed massively and that imposes quite big challenges for us in terms of actually delivering what we want to deliver. So we know where we want to go but we are still conscious that there is a lot still to be done.

Q4 Keith Vaz: You have no doubt visited all the various offices in Selborne House. Have you been to every one, and have you found anything surprising in any of these offices, things that you never thought should be there?

Alex Allan: The Department has a range of functions which, I must confess, I was not initially aware of, like keeping the roll of the baronetcy, but I do not think I have found anything otherwise. There are a lot of people in the Department who are very dedicated and work very hard. This was not just the centre; I have been and visited a very large number of courts and tribunals and other offices around the country and it is very impressive, the work that goes on in sometimes very difficult circumstances.

Q5 Keith Vaz: Let us just examine the annual review in terms of the catchphrase that you mentioned, "justice, rights and democracy". Is the Department there to provide more justice, more rights and wider democracy or are these to be contained? What is the point of that catchphrase?

Alex Allan: Clearly, we want to provide a justice system and enable access to justice as widely as possible. We want at the same time to ensure that people's rights are upheld and we have an overall responsibility for - I was going to say "most" but that may be an exaggeration - of the democratic policy towards the democratic system, dealing with things like electoral issues and constitutional reform in terms of devolution and so on. We do span all that and, as I say, one of the things that is very striking to me has been that actually our work... We are organised in a number of different units but they really do all work towards that end and have very important synergies. There are very important synergies between the criminal courts and the Legal Services Commission, for example, in terms of both how business is done and how much we spend. There are very important synergies, again, between the civil business and the family business and the Legal Services Commission. The tribunal business is quite closely linked into a wider concept of civil justice and the civil courts system. Issues like, for example, human rights, which is an important function carried out at the centre, and is something that obviously impinges on a lot of our business across the Department.

Q6 Keith Vaz: Do you think you are ready to become the Ministry for Justice now that the changes have taken place and the Home Office is in retreat because it is not fit or purpose and your boss is a key player in the Government? Are you ready to become the Ministry for Justice?

Alex Allan: So far as I am aware, that is not on the agenda. We have a big agenda...

Q7 Chairman: Nor was creating the Department in its present form.

Alex Allan: We play a key role. We perform a number of the functions which in other countries are brigaded in ministries of justice. One of the important things is that we do work very closely with the Home Office and with the Crown Prosecution Service and, as you know, the Office for Criminal Justice Reform is an organisation that reports to all three Ministers and in practice all three Permanent Secretaries, and acts on the criminal justice side as the element that takes forward common policies and actually operates through, for example, 42 local criminal justice boards, which have representatives of the police, the prosecution, the court service, the probation service and so on, and do act locally to try and identify the problems that are holding up progress in each local area, and the Office for Criminal Justice Reform sets, for example, targets for each local criminal justice board, so our first PSA target, which we share with the Home Office and the CPS, is the number of offences brought to justice and that is then cascaded out into 42 different sub-targets.

Chairman: We are going to return to those in due course.

Q8 Keith Vaz: One final question on this, and that is judicial appointments. Have you lost everybody to the new body or are there still civil servants in your Department who deal with any aspect of judicial appointments?

Alex Allan: Yes, there are still...

Q9 Keith Vaz: How many are left?

Alex Allan: I do not have the precise number. I can certainly let you have it. What they do is co-ordinate the requests, because the process is that the Lord Chancellor in consultation with the Lord Chief Justice or whoever else as appropriate, has to ask the Judicial Appointments Commission to run a competition to produce so many district judges or so many asylum and immigration judges, and in order to decide what the numbers needed are, that is dealt with through the remaining civil servants at the centre.

Q10 Keith Vaz: You do not know how many are left?

Alex Allan: I can certainly find out.

Q11 Keith Vaz: The vast majority have gone, have they?

Alex Allan: Yes.

Q12 Keith Vaz: There are just a few left passing on these requests?

Alex Allan: Yes.

Q13 Keith Vaz: But you can let me have the figures?

Alex Allan: I certainly can.

Q14 Chairman: You said a moment ago the integration of the court service had been a really central part of the changes that have taken place. That was accompanied by some chaos over the Oracle system. What were the practical consequences of the failure?

Alex Allan: Perhaps I could ask Barbara Moorhouse as our Director General of Finance to address this. It certainly was something that in the - I was going to say "short term" but for some months caused us considerable problems because of a lack of financial data and problems over paying some suppliers. Barbara and her team, and particularly the court service but also other bits of the Department, worked very hard to bring things back on track and I was very pleased that we were able to get signed clean audit accounts at the end of the year, though I am sorry that meant that we were not able to lay them as early as we had hoped. If I may, I will ask Barbara to expand on that.

Barbara Moorhouse: The problems with the Oracle system manifested themselves shortly after I came into the Department. The practical consequences of that were, firstly, that it caused quite a lot of disruption to the newly formed HMCS organisation in that they did not have management information, which for managers new in post was very disorientating. In very practical terms, the finance departments of both HMCS and indeed the DCA corporate finance departments could not produce information to guide the development of strategy within the Department in the way that we would otherwise have liked, and obviously just core management reporting, including budgetary control. It also meant that, instead of being able to introduce those new systems and improve the overall quality of management control and information in the Department, we went backwards for a period of time. What that meant was that we overall had a major exercise as well, which was not trivial either in terms of cost or management time, to recover the situation, which, as Alex has said, we successfully did in‑year. Where we are now is that we have a clean audit opinion, we have recovered those systems and we are trying to go back to the original plot, which was, of course, to recognise that those new systems were intended to give us a much better basis for the control and management of the Department both strategically and financially, and we have plans underway now to capitalise on that investment.

Q15 Chairman: Did everybody get paid on time?

Barbara Moorhouse: There were some very practical consequences. We had some difficulty in paying our own staff from time to time because payroll issues were also caught up in the Oracle implementation, and we had some very practical issues which caused us a great deal of difficulty, with some magistrates for example, and suppliers in turn were also not paid on time. So all of those obvious examples of a major systems failure did cause us difficulties and we remedied those by working very closely with our stakeholders and trying to make sure that we managed communications as effectively as possible while we brought the project back on line, but that was a substantial commitment of time to make that effective.

Q16 Mr Khabra: Coming to financial management, your finance team has been arranging training courses on financial management. How many of your staff have so far attended these courses and what has been the feedback from them?

Barbara Moorhouse: We have undertaken a number of different training initiatives within financial management to try and improve financial awareness. We started at the top with producing "Money for Ministers", a booklet that went to our ministerial team. Within that, we then supported through training for the senior civil service and something like approximately 50 per cent of our senior civil service grades have actually gone through that training programme so far. The courses are over-subscribed. We have also put people on them who are not technically senior civil service, because they have been incredibly popular. The feedback so far has been that this is information that people want to understand. I think there is a great deal of willingness to try and manage money more effectively within the Department, if we can give them the tools and the understanding as to how they should go about doing that. We have matched that investment with development of very specialist areas of financial training for particular areas, like lawyers for example, and court managers, and of course, we are investing quite heavily in improving the skills of my own finance team so that they can provide leadership to that growing financial and commercial awareness within the Department.

Q17 Mr Khabra: Have you yourself attended this course? If so, what did you find particularly helpful?

Barbara Moorhouse: I attended in the form of supporting in terms of introducing the course and trying to bring over to the participants some of the key issues within the Department. What I particularly valued from my perspective, because I obviously was not just a course attendee, was the opportunity to try and explain to a number of very committed managers the ways in which they could make a very practical difference in helping the Department to live within its budget, which was a challenge for us last year, a challenge that we met, and no doubt will be a challenge for us in the years to come.

Q18 Chairman: As well as the problems you had with Oracle, you also had problems which were highlighted by the Treasury financial management review with something rather curiously called Liberata, which I understand is an out-sourced provider of - what? Financial services? What was Liberata providing and what went wrong?

Barbara Moorhouse: Liberata are our out-sourced service provider. In simple terms, they take a number of the core processes within finance, for example, paying invoices and paying expenses, and those are done off-site at their centre, primarily down in South Wales. For some time the Department of Constitutional Affairs has had this out-sourced shared service arrangement whereby we do not employ directly a number of finance staff who carry out a number of those very basic transactions. They are employed by Liberata and we have a contract with them to provide those services to us. So when the Oracle system problem happened, it was partly Liberata's problem and partly ours. It was not their fault. It was a joint failure to implement that project effectively, and both parties picked up costs in response to that.

Q19 Chairman: So this is just the other side of the same coin, is it?

Barbara Moorhouse: Exactly so.

Q20 Chairman: You are satisfied that the problem has been resolved now?

Barbara Moorhouse: Yes. Essentially, we had to work, obviously, with our out-sourced supplier to provide the solutions, so both we and the supplier worked together. The benefit of that was that I think it has improved working relationships and understanding of how we can work better in the future and we have a major initiative now within finance to try and improve the way in which we carry out a wide variety of finance systems and processes which we believe will deliver efficiencies and, more importantly, give the Department a much better understanding and control of its costs and visibility and where it is actually spending its money; much better management information, in short.

Q21 Chairman: These do not involve taking this function back in-house, do they, or might they?

Barbara Moorhouse: Currently, we have just been going through a set of discussions with that supplier to look exactly at the interface, because there were some functions that we felt on the margin were better performed in-house and we have arranged to do that by a contract renegotiation, and there have been some small areas where we felt that they should take those into their portfolio of responsibilities. But it is at a very detailed level. There are a series of service level agreements that cover exactly what they do to us and what we do to them and the corresponding rights and responsibilities on both sides. We have carried out a comprehensive review of that settlement or that contractual base with them and we have made provisions that we know will save us money and we think will help to create that better platform for financial management.

Q22 Chairman: One of the reasons you gave for not getting your resource accounts in on time before the recess was that you had taken in the court service, but you have the Tribunals Agency. Are you not going to go through the same thing all over again?

Barbara Moorhouse: The Tribunal Service is smaller. It has therefore been easier to absorb, and the second issue was that it was the combination really of HMCS and the Oracle systems failure that caused us problems, and we are obviously anticipating that we will not suffer system failures in the same way again, and we have no reason to believe at this point that we will. The systems are now running smoothly, and we have planned very carefully to try and make sure that we are all set for being able to lay accounts before recess for the current financial year.

Q23 Chairman: This summer you have been involved in discussions about potential job cuts, and you told us that you met the trade union side in July and there was going to be another meeting in the autumn. Where are you up to on that?

Alex Allan: I have had another meeting a few weeks ago with the trade union side where we expanded on the plans we had, and explained how we were going about it, trying to put the financial background that is part of this and generally trying to be as open as we can about the plans going forward, to explain how we are looking to improve the efficiencies with which the courts run, and this is very much in line with our general strategy. We believe that there are things we can do through some targeted investment to improve the way the courts run. We have a whole programme of simpler, speedier summary justice, which is aimed at making sure that trials start more promptly, that they have fewer hearings before they actually come to trial. We believe there is quite a lot we can do to improve the efficiency and effectiveness of the way the courts operate and that is what we are trying to do.

Q24 Chairman: Is there a financial target for that programme, the speedy, simple summary justice?

Alex Allan: We are working on the financial targets. We have a number of pilots going at the moment and perhaps I could ask Rod Clark to expand on that in a moment.

Q25 Chairman: I was interested to know about the programme as a whole.

Alex Allan: We have very specific efficiency targets, for example, for head count as part of the Gershon review originally, and this is certainly one of the ways in which we are going to meet those targets. Yes, there is that. Yes, we also have an overall financial envelope for the Department. We are engaged in negotiations at the moment with the Treasury over the new Comprehensive Spending Review. Perhaps I could ask Rod Clark to expand about the scope of the simple, speedy summary justice programme.

Rod Clark: It was set out in the Lord Chancellor's document before the summer and has a number of elements. Key amongst them are the elements in particularly the magistrates' courts but also in the crown court, which are to do with getting the criminal justice agencies to work together more effectively and, in particular, to get advanced information on cases so that they can be disposed of more rapidly, particularly at the first hearing, where possible, without the large numbers of additional hearings that have often bedevilled the system. I was fairly recently down visiting the pilot that is running in Coventry Magistrates' Court, for example, and really very impressed at the results they are getting. By ensuring that advance information is provided early to the defence so that the defence can consult their client early on, there are a lot more cases coming to a first hearing with a plea, with a plea that can lead straight away to a sentence and so deal with that case very rapidly, and, where it does need to proceed to trial, that a date can be set very soon afterwards. The support of the magistracy in the area combined with the support from the police and the prosecution are essential in achieving that. That reduces Legal Aid expenditure as well as reducing the pressure on the staff and the courts themselves. This is a pilot at this stage. We are obviously looking to build on that sort of experience, but to find exactly what the financial implications are going to be, we need to do some more work.

Q26 Chairman: Just going back to jobs for a moment, can I clarify? You gave us some figures earlier on on the job losses that were expected in human relations and the Tribunals Service and various other parts of DCA. Do you have a current figure for people who have gone and posts not filled, just to give us a picture of what is happening?

Barbara Moorhouse: Up until the first quarter of this year of our Gershon target, our 1,100 job reductions, we had achieved 449. If I put it in context in terms of the overall Gershon programme, we had a baseline in April 2006 of 25,950 jobs and our target is to get down by 31 March 2008 to 24,473. That would give us a small margin. In other words, we now have plans that will enable us to exceed the Gershon target by about 200 jobs.

Q27 Chairman: And none of these involve simply transferring the equivalent work to the equivalent number of people in the private sector?

Barbara Moorhouse: No, these are attempts, as we have just been discussing, with the CJ SSS programme to achieve genuine efficiencies across the entirety of the Department in the way in which we work. Obviously, it is the case that most of those job reductions will take place in HMCS through better processes, primarily in the courts, and the change and modernisation programme that is now under way and that has received funding from the Treasury.

Q28 Keith Vaz: Mr Allan, did you see Question time today?

Alex Allan: Yes, I did.

Q29 Keith Vaz: So you heard my question to the Junior Minister about consultants.

Alex Allan: Yes.

Q30 Keith Vaz: So you know the answer to the question that I am going to ask you now.

Alex Allan: It depends which question you are going to ask me.

Q31 Keith Vaz: I only asked you one question, the question on consultants to Vera Baird. Did you see it?

Alex Allan: Yes, I did.

Q32 Keith Vaz: So you know what I am going to ask you, do you not?

Alex Allan: Perhaps you would like to ask me exactly what it is.

Q33 Keith Vaz: What did these consultants accomplish and why is it that on 4 May I was told by the Minister of State that she did not know?

Alex Allan: As I think the Parliamentary Secretary explained, we do have devolved budgets, we have devolved responsibilities for spending on consultancies as well as other areas, so some of it is approved locally, for the large ones there is a hierarchy of approvals, and major spending has to be approved by director generals, for example. So it is not straightforward at the moment to get the information. In a moment I will ask Barbara Moorhouse just to say a bit more about the work we have now got in hand to get better and quicker information. We have done some investigation following, partly, your question to make sure that we knew the full range of spending that was going on. In terms of the sort of various categories of spending, it covers a wide range of different types of consultancy, from support for change management, support for marketing and communications, support for the human resources programme, quite significant support for IT, some for the finance change programme, some for the strategy programme.

Q34 Chairman: You are spending a lot more money on on IT to pay for the problems which other programmes brought out?

Alex Allan: One of the reasons we do spend money on consultants in the IT area, for example, is because it does not make sense for us to employ directly very large numbers of very specialised IT skills for what would be a fixed length period. It is fairly normal that we do employ consultancies to provide that sort of support. Another one is that, for example, we are going through changing our pay and grading system across the whole Department, because we have inherited 42 different systems of pay and grading in local authorities, and we have been getting consultancy help to try and make sure that the system we devise for that is fit for purpose and in line with all the others.

Q35 Keith Vaz: Can I just stop you there? What surprises me and my colleagues, which prompted the question that I put down, was that you spent 11 million last year, you spent 700,000 in 1997, so we are talking about over the last ten years - and I do not have figures for each year but you will because you are the Permanent Secretary - I would think over 50 million has been spent on consultants, because it would have gone up from 700,000 to 10 million. It has not suddenly gone up from 700,000 to 10 million. There would have been a gradual increase over the years. We are talking millions and millions of pounds here, and you are telling me that until questions were put down you had no method of knowing who commissioned these consultants. We are talking about PricewaterhouseCoopers, 2,223,000; we are talking about KPMG, 1,061,000; and these are big names here, a lot of money, and until these questions were put down and you started to investigate what this was about, you, as the Permanent Secretary responsible to the Government and your Department, coming to us to give us your review, did not bother to know who commissioned this.

Alex Allan: I would know for the very large items that you mention. The issue, as I think was brought out in the Minister of State's written reply to you, was that there are very large sums ranging from 400 to one consultant, which I would not necessarily be expected to know about...

Q36 Keith Vaz: I know what he does because I found out this morning. The 413 we can deal with.

Alex Allan: Yes, but the large sums, yes, I would have known. PricewaterhouseCoopers' main work was in the areas of our consumer strategy, where following the creation of the new Department, and a focus much more on saying that our focus is on consumers rather than providers, we did quite substantial research looking at all sorts of areas across that to do with people's experience with the criminal justice system, some of the work that your Committee has looked at to do with small claims.

Q37 Keith Vaz: Let us look at the smallest amount, Mr Sutlieff. Mr Sutlieff was employed to fill a short-term skills gap. This is what he did: he devised a communication strategy and provided advertising and communication advice to the Judicial Appointments Commission implementation scheme. The strategy set out how to promote awareness across key stakeholders about how the creation of the Judicial Appointments Commission upon implementation of a constitutional format will affect judicial appointments and what these changes would mean for them. He was paid 413. I just cannot believe that in a Department the size of yours, with the budget you have, a quarter of all public expenditure in some areas, that you could not have found one civil servant to have done this work.

Alex Allan: Mr Sutlieff was, as you may know, previously a civil servant. He was director of communications at the Cabinet Office, I believe.

Q38 Keith Vaz: So he was an ex-civil servant who you have given this contract to?

Alex Allan: Yes.

Q39 Keith Vaz: But you could not find a single person in your Department to do this?

Alex Allan: It may well have been - I am speculating because I do not know the exact answer. As I say, a sum of that size would not require my involvement or approval but it is not unreasonable, where a team needs what is obviously a pretty small contract, that it may be more cost-effective to employ somebody like Mr Sutlieff to do that than it would be to ---

Q40 Keith Vaz: --- to ask one of your own civil servants?

Alex Allan: There might well be nobody in that ---

Q41 Keith Vaz: You have a press office, do you not?

Alex Allan: We have a press office. They may not have had the particular skills.

Q42 Keith Vaz: Nobody could have done what Mr Sutlieff could have done?

Alex Allan: I do not know the exact details but I am satisfied that ---

Q43 Keith Vaz: What about Vera Baird's answer to me this morning? What worries me is the principle of this. 11 million of taxpayers' money going on consultants when you pay your senior civil servants in your Department so much money, when we are talking about job cuts. All that is happening is that these contracts are going outside to very big firms like KPMG, PricewaterhouseCoopers, Ernst & Young, to do the work that really you all ought to be doing. The worst part is that nobody seems to have a grip on the commissioning of these consultants, and it takes a parliamentary question from a Member of Parliament and an inquiry by a Select Committee before you all think about trying to know how this is commissioned.

Alex Allan: As I say, the large sums for the big firms that you mentioned I did know about and they are areas, as I have outlined, for example, on the consumer strategy or in some of the other cases supporting our work on the IT side. For the major sums, yes, we do know and there is the visibility of that and they are employing people with the sorts of skills that we do not have in-house and where it would not necessarily be sensible to try and build up a level of skills for a relatively short term. In terms of the information and how we get it, I will ask Barbara Moorhouse to explain some of the work that has been done there.

Q44 Keith Vaz: Before Barbara comes in, why is it then that you allowed the Minister to sign - because I know that these questions would come to you as the Permanent Secretary - and she said that the information on what consultants employed by the DCA were used to accomplish was not held centrally and could only be obtained at disproportionate cost. Why did she not act in an accurate and full way to Parliament by telling me in that answer the consultants that she did know what they were doing, the big amounts of money? Why was a full and accurate answer not given to that question?

Alex Allan: I believe that answer is an accurate answer and, as I say...

Keith Vaz: But it is not correct, is it, because you do hold this information centrally? You have just told me you know about the big figures.

Q45 Chairman: There must be a trigger within the Department at which a particular part of the Department cannot spend a large sum of money on consultancy. It must be referred up at some point. What is the figure?

Alex Allan: There is a process which perhaps I will ask Barbara to outline, but we do indeed have a number of triggers. There is a basis that if there is a competition, i.e. if this is not let as a single tender up to 25,000, it would be dealt with by a head of branch; between 25,000 and 250,000 by a head of division or group; and over 250,000 by the appropriate board member and potentially by the board ministers, depending on the issues; and for a single tender under 50,000 by the head of division or group; and over 50,000 again, by the board member.

Chairman: If it is known at board level, it is known centrally.

Q46 Mrs James: We are talking about substantial sums, 1 million plus, 2 million in some cases. You must have a system of monitoring costs as they accrue. I would assume that you are billed by the hour by these large organisations. Would alarm bells be going off when bills were getting so high?

Alex Allan: Some of them may be by the hour, some of them may be fixed-price contracts. I think they would quite often be fixed-price contracts.

Q47 Mrs James: But you would know exactly what you were getting for your fixed-price contract.

Alex Allan: Absolutely. There would have been a process by which a contract was entered into which specified what it was that the firm or consultant was supplying and how much we were paying for what.

Mrs James: I do understand that, but some big people are making big money.

Q48 Chairman: We have established that if the contract is above 200,000 it would be considered at board level and therefore it is held centrally, if it is a tendered contract to a higher figure, if there is no tender involved, so quite a large proportion of the contracts we see in front of us here that Mr Vaz has weeded out would in fact be known about centrally.

Alex Allan: Yes, absolutely.

Q49 Chairman: So why was Parliament told that they were not?

Alex Allan: The question was what each of the consultants were used to accomplish and how much was paid in fees to each organisation.

Q50 Keith Vaz: But the Minister could reply, "Well, we don't keep figures below 200,000 but, by the way, chaps and chapesses, above 200,000, this is what we spent."

Alex Allan: But then she did give you a table which listed a large number of the fees paid to consultants by the court service.

Q51 Keith Vaz: No. She said it is not held centrally and could not be obtained, only at disproportionate cost, the favourite way in which government prevents backbenchers from finding out information. Can I just ask you: the head of branch who can authorise up to 25,000 without telling anybody basically - is that any amount of money? Can there be any contracts within that 25,000, and when will you get to hear about it?

Alex Allan: There are obvious rules. First of all, there will be a budget for the particular branch or division, however that is organised, so it is not that they have unlimited funds themselves. Secondly, there are rules operating through our procurement department on how they do it. They do not simply write the cheque.

The Committee suspended from 4.49 pm to 5.02 pm for a division in the House


Q52 Chairman: Order. I think Ms Moorhouse was about to give us some more detail.

Barbara Moorhouse: I would like to just try and set out the position factually as to how we approach the management of consultancy expenditure. If I take you back to my earlier remarks, I said that the failed Oracle implementation was an attempt to try and improve the management information in the Department. It has been recognised for some time that in the area of procurement systems, which is obviously about what we spend and how we procure things and the visibility that we have of services that we buy, the information that the old systems provided to us was not good enough. Clearly, we would have started to see some improvement in those information systems if the Oracle systems re-implementation had not failed, so we are now at a point where we are starting to look at the way in which we can get hold of information about a variety of expenditure within the Department, including that on consultancy. If I try and just quickly summarise where we stand today, we have a series of financial guidelines in place within the Department that require all managers at the various levels that we have described to follow certain policies and procedures before they engage consultants. Sometimes, as in any organisation, those will not be followed. We at the centre do not have visibility in our current systems to enable us to monitor areas where we are not supplied with the information centrally in the way that we would require and indeed have requested.

Q53 Chairman: Is that just the lower value ones?

Barbara Moorhouse: Yes, I think it would be fair to say that it was, largely because the bigger values tend to be ones where there is visibility because they are a critical part of what the Department is doing, and therefore there is a visibility just by the nature of people exercising their supervisory functions. What we plan to do within the area of consultancy spend is two things: we are looking to improve the way in which we monitor and shape the expenditure on consultancy in terms of refining the guidance, and using the improved information systems that we are now planning, to be able to monitor whether we are getting the compliance that we seek. It is also fair to say that there are some areas where, for example, approvals may take place in the context of a large project. We may, for example, on an IT project approve the overall expenditure and delegate, rightly, to that particular budget manager or project manager the right to go and engage consultants within predetermined limits. We would not necessarily review the precise use of consultants in those kinds of cases because they are part of an overall project management strategy. Finally, we are aware, of course, that approvals may not be quite as simple as the guidelines suggest, for example, where we take on a set of consultants to do a particular project and the project grows in size and scale from that originally envisaged, and that will happen from time to time, particularly on projects which are complex. I do not offer any of those as excuses; we fully understand the need to respond to and manage consultancy expenditure as effectively as possible. I am just trying to give a summary of the way in which we know that leakage currently happens. We are not happy with it and we have plans in place both to address the management information need so that we can keep a much better handle at the centre, and check up without endless amounts of manual monitoring what is happening within the Department, and secondly, to make sure that we are tougher around the systems and procedures, but that in turn depends on us having sufficient systems to give people good information to control their expenditure. Telling someone that they must work to a limit on consultancy expenditure and then giving them no financial information about spend puts them in a difficult position as well, and that was the situation that prevailed while we physically had no management information systems or financial reporting in the Department last year. So we are, I am afraid, slightly in catch-up. We know it is a catch-up we need to do and we are addressing that now.

Q54 Keith Vaz: Though, obviously, we are gratified that the system is going to improve, we are very concerned that up until now we seem to have a chaotic system, where nobody actually knows how much money was spent and for what purposes. Maybe the way to deal with this is to send an email or a memo to all senior staff who can commission consultants to tell them that they should not commission consultants unless they are absolutely satisfied that there is nobody in the Department that can do the job, and secondly, when they do commission, to just send you a memo, or somebody in the senior team, and say, "We have spent X amount of money on consultants and it has been spent for this purpose." It is not rocket science, is it?

Barbara Moorhouse: I entirely accept that and I think it might reassure you to know that the whole area of financial management and indeed consultancy and procurement management has been the subject of a number of reasonably stiff memos, and will continue to be so.

Q55 Keith Vaz: What would be helpful, I think, to the Committee is if we could have from Mr Allan a list of... We have the list of what you have spent the money on but, since you were able to tell us in such detail what Barry Sutlieff did, and I am not here as a kind of recruiting sergeant for Barry Sutlieff Enterprises, since you have the figures and you know what has been spent, and we have been assured by Ministers they have been spent properly, there is no reason why you could not tell us what each one of these consultants did.

Alex Allan: We will see and we will give you as much information as we can.

Chairman: Thank you very much.

Q56 Dr Whitehead: Could I ask some questions about Public Service Agreement targets. I note that the Department has responsibility to PSA-target only for two of its four objectives. How does one ensure that sufficient attention and monitoring is given to areas that are outside PSA targets, such as Legal Aid and various other things?

Alex Allan: Including the PSAs, but going more broadly than the PSAs, we have a whole range of systems and processes to monitor expenditure, to monitor what is being achieved and to monitor performance. We have, for example, monthly audit packs which list performance in all key areas. We get the monthly financial information and we have performance management sub-committees. For example, I chair one with both Rod Clark and Barbara Moorhouse looking at Legal Aid. Clearly, that is absolutely critical, and the fact that there is no PSA attached to it does not mean in any way that we pay less attention to it. We pay very substantial attention to it, and from a number of different perspectives. Clearly, one is the overall financial perspective. Another is what we are achieving. Indeed, Legal Aid does contribute to a number of our PSA targets. The criminal Legal Aid is not directly part of it but for example, target 5 on proportionate resolution of legal problems, the Legal Services Commission plays quite an important role in that target.

Q57 Dr Whitehead: Under those circumstances, what is the actual utility then of having PSA targets?

Alex Allan: They are useful, and I will come back to the individual targets, but they are also part more generally of a strategic number of key areas which form part of a Comprehensive Spending Review settlement whereby the Treasury looks to provide some reassurance to the taxpayer about what it is that is being achieved with the amounts of money they are allocated. So for us, clearly, they are shared ones, but very important targets for numbers of offences brought to justice, for confidence in the criminal justice system. Those are some of our key outcome measures. So they are both important to us and important more generally.

Q58 Dr Whitehead: Does that suggest then that areas that are outside PSA targets are dependent on those areas that are inside PSA targets for making sure the Department gets its money from the Treasury?

Alex Allan: In practice, it does not quite work like that, in that when we are putting forward our plans to the Treasury it covers activity... Clearly, as we talked about, it covers Legal Aid, which is roughly half of our spending, but it also covers other areas, for example, on human rights, freedom of information and so on, which is not the electoral reform, electoral administration, which is not covered by PSA targets. Those form a part of our plans as we put them forward to the Treasury. Not everything is covered by PSAs and I believe this is true of most Departments.

Q59 Dr Whitehead: You are, of course, dependent on the Home Office for the delivery of some of your PSA targets. Bearing in mind what has already been suggested about some of the issues relating to the Home Office, are you entirely happy that some of your financial future lies in the hands of a Department that may or may not deliver your targets to you?

Alex Allan: Of course, they are dependent on us, too, to some extent. I think it is right that we do have joint targets. As you say, in the criminal justice area, I do not think it would make much sense to have separate targets. Clearly, internally we have a lot of management information about the operation of the courts, but what ultimately matters is how many offenders are brought to justice, for example, and that does require working together between the police, the prosecutors and the court service, and indeed the probation service, the prison service, all sorts of other parts of the system. It is an issue where I do think setting up the Office for Criminal Justice Reform has made a difference. It has enabled us to get a much better feel for where the particular sticking points might be and, for example, I suppose it must have been about 18 months ago, I remember when the Office for Criminal Justice Reform was looking at future projections for offences brought to justice, and it looked then as if the bottleneck was not actually in the court service but was on the police service in terms of what is called sanction detection, basically how many people are caught and charged. So they put a big effort through the local criminal justice boards into increasing the number of sanction detections, and that succeeded quite markedly and helped make sure that... So it is a process that can look across and say the problem perhaps locally is under-resourced, or the Crown Prosecution Service and what can be done within the overall Crown Prosecution Service to push more resources in one particular area. There are other PSAs. Our asylum one is where our direct involvement is much smaller. Clearly, with something like bringing offences to justice we have a very big role. In the asylum PSA, which is about reducing the number of unfounded asylum claims, our role is quite small and secondary, in the sense that having an efficient appeal system, one that deals with them fairly and quickly and does not enable people to spin out appeals for ever and ever, will help reduce the number of people who feel that it is worth claiming asylum. We play a more indirect role there, but of course, we do work very closely with the Home Office on the asylum and immigration issues to try and make sure that the tribunal works effectively as part of the overall system.

Q60 Dr Whitehead: Do you think the Department, as far as PSA targets are concerned, also has a duty to defendants? One of your targets, of course, is to make sure that a certain number of cases are brought to justice. Does that include responsibility for defendants?

Alex Allan: We have a very obvious responsibility to defendants in terms of providing Legal Aid, which we do. Clearly, part of justice is to ensure that people do get a fair trial and that is a very key part of how we operate. Equally, at the same time, I think one of the changes that has been brought about more recently has been an increased focus on victims and some of the witnesses to particular crimes and trying to make sure that they get the full support and that they are not just treated as adjuncts to a process that is wholly between the state and the defendant. I think there has been a change of focus, but we still do spend very large sums on criminal Legal Aid in terms of supporting defendants to make sure they do get a fair trial.

Q61 Dr Whitehead: This is to do perhaps with the emphasis on customers. You were mentioning earlier the change in emphasis towards customers in the Department.

Alex Allan: The change in emphasis towards customers has been, as I say, much more focused on saying that we have not done enough to think about victims and witnesses, for example. Across the criminal justice system we are now doing a lot more to make sure that victims are given support from the moment the crime is committed, through all the charging process and then ultimately the court process, and we are trialling various things like victims' advocates to enable victims to have a voice in the court where they might not otherwise be able to do, in murder trials, for example, and similarly, we are looking very much within the civil justice system. For example - I know you have done an inquiry into this - how does it feel to people who are using our courts? I think it should be seen really as a shift away from the historic focus that the courts were there to basically support judges and magistrates and the legal profession to one that says we are part of a system that has much wider objectives.

Q62 Dr Whitehead: So are guilty defendants customers?

Rod Clark: Our PSA target 2 does explicitly talk about the need not to compromise fairness in the way that it delivers justice, and we deliver confidence in the justice system, and clearly, under the strap line, justice does require delivery of a just system.

Q63 Dr Whitehead: Do you think the Department might just about scrape into achieving its PSA target on bringing offenders to justice in 2007-08?

Rod Clark: We are pretty confident.

Alex Allan: We are ahead of it now. I think one of your questions was whether it is now too easy. We do not think it is yet, but if we can exceed it, we will.

Q64 Dr Whitehead: Except you might say that from a perception point of view, the challenge of making sure that you do not slip back from a target you have already exceeded this year as far as targets are concerned may not appear particularly stretching from the point of view of the public.

Alex Allan: From our perspective, as I think we explained in some of the details, a lot of the increase has actually been in cases that do not come before the courts, so there has been a lot of some of the fixed penalty notices, some of those sorts of disposals. Actually, for us, maintaining the volume of business in terms of number of cases through the magistrates' courts, through the crown courts, at the same level is quite a challenge and we are trying to do it with reducing resources and trying to operate more efficiently, so I do not think we feel we can relax now that we have exceeded the target. We feel we are being quite demanding of HMCS in terms of the objectives.

Q65 Dr Whitehead: Of course, if you look at it another way, and you look at the target in terms of offences recorded by police or even those that have occurred according to the British Crime Survey, the target that you are aiming for in 2007-08 represents only 22 per cent of offences reported to police and 11 per cent of offences recorded by the British Crime Survey, which appears to be a very low rate.

Alex Allan: That was one of the rationales behind the original programme, which I think was called "Narrowing the justice gap", which exactly reflected the point you have made, that the level of crimes that are brought before the courts relative to the total level of reported crimes is a small-ish percentage, and we want to get that percentage up, and I think we are getting that percentage up because the aggregate figures are falling, we are bringing more offences to justice, so we are narrowing the gap, though I fully accept that there is still a very big gap.

Q66 Dr Whitehead: Certainly you responded to some thoughts on this matter in your written evidence but do you not think that, perhaps in terms of a longer-term trajectory, expressing a PSA target as a percentage of those figures rather than a flat number would be a better way to proceed?

Alex Allan: Of course, if the aggregate crime figures continue to fall, that would tend to make it a softer target. I think we see some benefits in having a target expressed in numbers, for two reasons. One is that, as you yourself indicated, we have a long way to go to narrow the justice gap. If total crime falls and the percentage goes up, that is good news, I think. Secondly, it is operationally very much clearer to have a target that actually does numbers of cases to come before the courts, because you can actually say to a local criminal justice board "We expect that in your area 75,000 cases should be brought to justice this year" and if you say it is a certain percentage of the total number it is a much less clear target. So although there is some logic in saying it should vary with the amount of crime, I think actually this probably makes more sense.

Q67 Dr Whitehead: One area where one might question the progress is the question of PSA target 2 on ethnic minority confidence in the criminal justice system. Do you think, for example, the recent anti-terror operations in Forrest Gate and the large number of recent arrests concerning security threats has had an impact on that confidence and hence that target?

Alex Allan: I think it must be quite likely that is the case and it is something on which I think there is some survey evidence, which I will ask Rod Clark to comment on in a moment. Clearly, this is one of those targets where all sorts of things do influence people's conduct. One of the key things for us is not saying "It's a hopeless task. We can't influence what happens in the media therefore we don't try." We have a lot of programmes very specifically aimed at improving confidence, and they include the work we are doing on community justice programmes, what we are doing on, for example, dedicated drug courts, what we are doing on things like diversity in the judiciary and magistracy to try and make sure that people recognise a more diverse bench of magistrates, for example, looking at enforcement so that people do actually have more confidence that if fines are imposed, they are collected or community penalties are imposed that really mean that somebody has to do something, and equally the work we are doing, as I mentioned earlier, on victims and witnesses. While I do accept that at one level some of this may get swamped by the bigger trends, actually, I think we can do a lot, and it is really important that we do. Rod Clark will be able to say something about the survey evidence.

Rod Clark: Yes, the research evidence we have on the attitudes of members of minority ethnic groups is that if they do have a lack of confidence that they are going to be treated fairly by the criminal justice system, that is very largely influenced by the impressions they get from the media. Very little of the impact is ascribed to actual first-hand contact with the criminal justice systems themselves. Undoubtedly, the portrayal in the media is an important issue.

Q68 Dr Whitehead: On target 4, which is increasing the proportion of care cases completed within 40 weeks, your performance simply has deteriorated. What is the Department doing about that and why do you think it has deteriorated?

Rod Clark: I think there are a number of reasons. By far the biggest cause is simply the growth in the number of cases that are coming through. There is something like a 4.8 per cent increase in the numbers of applications to have guardians coming through from CAFCASS, which is suggestive of a continuing upward trend in the number of cases going through. There are also some changes, some legislative changes, which have arguably increased the time it takes to handle some cases. The fact that care and adoption proceedings now tend to run in parallel, so it is the slowest ship in the convoy that then concludes the case, has meant some slowdown. The key things that we are doing to tackle this were brought out in the childcare proceedings review that came out earlier in the year, with activity around the statutory framework, around a revised judicial protocol for next spring, concentrating on trying get the early activity on these cases brought forward so that in many cases fewer cases need to come through to the courts in the first place but also so that when they do come through they can be dealt with more expeditiously and more simply. There is a lot of work going on in HMCS on performance management and looking at performance variation. There are new courts coming on stream, particularly in London in the Gee Street courts where there are additional facilities being made available and more county court space also being provided. We are also looking at clarity in case management and other performance measures that we can take. However, I think this is an example where the court is, in a sense, the tip of the iceberg of a much bigger system to do with looking after children, and it is a bit like the criminal justice system; it is another area where we really do need to get partners on board working with us to find the most effective way of dealing with people in really very distressing and very difficult circumstances. Harriet Harman chairs a committee that brings together the DfES, the Welsh Assembly, CAFCASS, the judiciary, the various players, in working through the improvement programme that we have got, and that is backed up by family justice councils which also provide a forum a bit like (although not the same as) the local criminal justice boards, where some of these issues can be addressed and tackled. The increase in the numbers, some of which I suspect is due to an increased understanding of the sort of level of harm and risk for children in our communities, is one of the major factors that we are going to have to tackle in the years ahead.

Alex Allan: Of course, the Committee carried out a study in the family courts area and I think we are due to submit the Government's response before the end of the month on that.

Q69 Dr Whitehead: Two further brief thoughts, firstly the question of target 5 where at least on part of the target you simply do not have the information available to assess whether you have reached the target or not; why has that taken so long to correct?

Rod Clark: I think measure 1 under target 5 is a really good example of some of the problems to do with target setting. It is a target which tries to capture the outcome, as it were, for society that we are trying to achieve, which is in the world out there and the problems that people have, how many of those problems do we actually manage to address with effective advice. Because it is the outcome impact on the end customer, it is not something that can simply be read off our own operational systems. The fact that we have answered the phone however many times and given out advice does not necessarily translate to that being advice which addresses people's problems, so we are dependent on having a survey measure to measure it. That means that you are into samples collected over time and it takes time to build up a large enough sample to give you a statistically meaningful measure. We will have our first statistically worthwhile sighted shot on the numbers early in the new year, but even that of course is all around statistical error given the fact that it is a sample measure.

Q70 Dr Whitehead: Bearing in mind our earlier discussion on the role of the Treasury in looking at PSAs in terms of the effective financing of a department, would it not be a good idea at the next Comprehensive Spending Review to ensure that the Department, in taking on board PSAs, has got systems of measurement and baselines in place before the PSAs even come into being?

Alex Allan: Yes absolutely, and that is one of the things when we are negotiating --- there is then, as I think you know, a whole series of technical notes which do explain how they are going to be measured. This target does have a measure attached to it and then the National Audit Office does its periodic investigation and makes some comments on the individual PSAs and how they are organised. However, I agree completely, the more easily targets can be measured then the more meaningful they are.

Rod Clark: And the more we can underpin them by measures that sit underneath and are easier to quantify and to document.

Q71 Dr Whitehead: Just a minor thought on PSA target 3, you note in your written evidence that you are trying to increase opportunities for people who have got lower value disputes to settle earlier the problems that they have and I think you mentioned the in-house Small Claims Mediation Service which is being piloted in Manchester. Do you have any further information or thoughts about that service? Is there a timetable or are there proposals for rolling it out further across the country?

Alex Allan: Indeed. The service in Manchester has proved very successful. If anything, one of the problems has been that the number of claims that are put through to the mediator of public (?) has actually been relatively limited and his capacity is bigger than that, and so we are expanding the area that he will take cases from. The figures are extremely encouraging because during the pilot, 86% of the claims that were referred to it were settled on the day and with very high satisfaction levels. What is interesting also is that none of them required any subsequent follow-up enforcement action, whereas typically we have a number that even if they are settled still require action, so that was very encouraging. We are looking at rolling it out to another nine areas. We tried a number of different pilots, as you know. This was much the most successful and the one that we feel rolling it out will both provide a better service and indeed reduce demand on the county courts.

Q72 Dr Whitehead: Are the areas known?

Alex Allan: We are trying to have a geographical spread and we are trying to get as well as the wider Manchester one, two in the North East, two in the South East, one in London, two in the South West, one in the Midlands, and one more not yet identified.

Q73 Dr Whitehead: Central south of the country I would have thought would be very appropriate. I am sorry, that is an aside.

Alex Allan: I am not sure exactly but that is that is what I was told ---

Chairman: Two in the North East sounds promising! Mrs James?

Q74 Mrs James: I would like to take you back to the Comprehensive Spending Review; you have mentioned it once or twice. Can you tell us what point you are at in your negotiations with the Treasury as part of the continuing review?

Alex Allan: We are in the middle of negotiations and perhaps I could ask Barbara Moorhouse, who is in the thick of those negotiations, to explain a little bit about where we are in the process.

Barbara Moorhouse: It has a "back to the future" feel in terms of the CSR. Where we are at the moment is the Treasury obviously sets out precisely how they want departments to comply with their requirements for going into the Comprehensive Spending Review. They are requiring all departments to write to them at this current stage and there is a lot of preparatory work which I will not bore you with, essentially asking for information about our value for money reviews, our management strategy, in other words how we are looking after our estates, and what our proposals are around things like revenue and strategic objectives, so they are asking us to set out, as one would expect, a comprehensive view of where the Department wants to go and the amounts of money that it will cost to carry out our various core operations. We are just in the process of finalising our response to that timetable. There will be a meeting relatively soon over the next few weeks between the Chief Secretary of the Treasury and our Secretary of State to discuss the contents of that letter. Thereafter we expect to be continuing to work with the Treasury on the current timetable in order to refine work with officials within the Treasury for them to understand the detailed financial information that we have put together. Then all of that culminates in us putting a final proposition to the Treasury in January of next year.

Q75 Mrs James: So have you any other key priorities? You talked about the estates, the value for money; anything within your overall expansion or perhaps?

Barbara Moorhouse: From our point of view there are two absolutely overriding aspects. From a financial point of view clearly there are a number of strategic objectives and what is critical for us is that those can be appropriately funded. We all understand the context of public spending at the current time and we cannot be blind to that, however much we might wish to be so. The key issues for us are to make sure that we have taken a careful and thoughtful approach to the objectives that the Department has in terms of its ministerial and political agenda and the key priorities for us, the operational costs that we need to meet for running things like the courts. Legal aid is clearly a critical cost for us and the Carter proposals and the costing of those have been a key building block for our Comprehensive Spending Review. So drawing all of those priorities together, the key issues for us are to make sure that the Treasury understands the basis of those figures and the information and the money that we need to run the Department. Over on top of that if there is one absolutely central thing for the Department in the Comprehensive Spending Review, it is to ensure that we capitalise on work that has already been done so that we can get some modernisation funding into the Department. Clearly the Department has a certain legacy from the time that it was the Lord Chancellor's Department. We have carried out two very significant mergers of a number of organisations from the Courts Service, specifically the magistrates and then in the tribunals. What is critical to us now is that we can capitalise on a lot of the change work that is now going on and get the required investment in people, systems, pay and grading, the estates, and a number of other aspects of change in order for us to develop the efficient operation of the courts, the tribunals, and indeed every other part of our business to support the delivery of both our core constitutional and indeed our practical day-to-day support to customers.

Q76 Mrs James: Are you confident that you will get the level of support that you require?

Barbara Moorhouse: I do not think any Director General of Finance will be saying that they can be confident in their Treasury negotiations. We have put a great deal of thought and care into the proposition that we will put to the Treasury. We have tried to make sure that we are responding constructively to their request for us to demonstrate value for money, and to make sure that our spending plans are well-founded, and to ensure that we are being reasonably responsive to the realities of the public spending situation, whilst not short changing the important operational duties that we have in terms of running the courts and providing legal aid and supporting a number of vulnerable constituencies. We believe that we are broadly in the process of setting that picture right. We are working closely with the Treasury but, no, I think confidence might be taking it too far!

Alex Allan: A key plank was of course the Carter review of legal aid which sets out a programme going forward through the Comprehensive Spending Review years and does map out a process for considerable improvements in efficiency, in particular the efficiency with which the Legal Services Commission operates and providing the right sorts of processes that support what we are trying to do more generally, particularly in the criminal justice side.

Q77 Mrs James: You will soon be setting new PSA targets as part of the CSR. What changes do you want to see from your current PSAs?

Alex Allan: It is still fairly early in that process because, by and large, the way the Treasury operates - and Barbara will come in and correct me on this if I have got this wrong - is that the first discussion is all about what savings can you make and how can you improve your efficiency and then the processes of examining what the right PSA regime is continuing in parallel but perhaps not quite as advanced as that. We are running a number of workshops within the Department with the Treasury and with other stakeholders, looking at what the right sorts of targets might be and looking indeed at the areas that Dr Whitehead pointed out where we do not have PSA targets at the moment, as to whether there are PSA targets that we should be proposing and looking for in those areas as well. I do not know if Rod Clark wants to say something about that exercise?

Rod Clark: We have also been working with the Office for Criminal Justice Reform, which has been leading the work really to look at the joint PSAs around the criminal justice system. I think the impression that I am getting about where Treasury thinking is going is that they do not want to change the idea that this is a set of measures for the Government as a whole to set out some key priorities. They do not want to turn PSAs into individual performance measures department-by-department, although they will be very keen to understand exactly the underpinnings in terms of the performance measures that then set about delivering those PSAs. So what we need to do is to make sure that we understand the relationship between the money, the operational performance measures, and the delivery of the outcomes in areas which may be cross government (like the criminal justice targets) early enough to inform the setting of those targets.

Q78 Mrs James: I assume that you will be providing some sort of draft proposals for negotiations?

Alex Allan: It is a continuing, iterative process whereby ideas are put forward, then gradually refined, so I do not think there is a formal stage where we submit draft PSA targets in that sense but, yes, there is lots of debate.

Q79 Mrs James: Do you think you would allow the Committee to see those targets in draft form and allow us time to comment on them before they are finalised?

Alex Allan: As I say, I do not think there is necessarily a stage where we have a draft set of PSA targets, but I am very happy that we should both engage with the Committee and certainly get your views on what sorts of targets would be appropriate. I think that is entirely appropriate. That is part of the process.

Chairman: Maybe at a stage which seems to you to be appropriate you could drop us a note saying how things are developing and we might have some comments to make?

Q80 Mrs James: That would be excellent. Again, just following on reviews and performance, et cetera, your Department undertook one of the new Capability Reviews earlier in the year. What were the main messages arising from that review and did anything surprise you?

Alex Allan: I think the message that came out of our Capability Review, and indeed from talking to other departments who have been through the process came out of their reviews was there was not anything that was completely out of the blue, and indeed it would be slightly odd if there were. What it was was quite a lot of things which all departments, including us, knew we needed to do more of but had not quite got around to doing it with enough energy as we perhaps should have done, and it highlighted those. I think that is a fairly common theme. For us, as I think I said earlier, it was encouraging that it was actually quite complimentary about our overall strategy, but it identified a number of areas, for example, where we had a rather fragmented change management programme. We were going through lots of change but we had change management in a number of different bits of the Department and we needed to pull together a single change management programme, which we have done. It highlighted, again a point I made earlier, that we have got some quite big delivery challenges and if we are going to achieve what we want to do, that is a big challenge. We have set up more performance management and a whole lot more work to do that. Then it also highlighted areas over what I think they called our business model, which was basically how we worked together corporately to bring together the different bodies which make up the Department - the Courts Service, the Tribunals Service, the Legal Services Commission, the centre, how we operate with shared services.

Q81 Mrs James: They actually said that that was an urgent development area.

Alex Allan: Indeed. We have done quite a lot of work following that. I think we sent you a copy of our action plan.

Chairman: I think we would like to be kept up-to-date on the progress that you make. You mentioned Carter and I think Dr Whitehead had a comment about that.

Q82 Dr Whitehead: You have mentioned already that Lord Carter's review will result potentially in substantial savings, the suggestion was 100 million savings annually. Obviously we are conducting an inquiry generally into the Carter review, but in terms of the Department's budgeting and financing, what would be the consequences for the departmental budget if, for example, Lord Carter's recommendations were not implemented in full? Has the Department already banked, as it were, those savings in terms of its future budget?

Alex Allan: I am sure that as we move forward to draw up a plan with the Treasury the Treasury will want to hold us to implementing the Carter review proposals. More generally on legal aid, I think we may face problems over legal aid, either from not implementing all the Carter proposals (although we are very determined to do that) or from other fluctuations, and I think we are putting a lot of work into getting a much better focus on legal aid spending, exactly what drives it, and the sorts of pressures that it comes under. As you were I think implying, if we face an overspend on legal aid we have to find savings elsewhere and that is something that we will have to do. We believe that the Carter proposals actually work together with the rest of what we are doing and they produce a much long-term system of procurement of legal services through a table of fixed fees and so on that will actually help us to achieve some of our other objectives on speeding up the justice system. So it is a critical part of the work to make sure that this does get done. At all sorts of levels we work very closely with the Legal Services Commission, and the Parliamentary Secretary Vera Baird is taking a very strong interest and, as I think you may know, she spent a lot of August touring the country talking to solicitors to try to get their ---

Q83 Dr Whitehead: That is rather a kind way of expressing it!

Alex Allan: Clearly there are, as I think was made clear at Questions today, some areas on the family side where we are going to have to reconsider exactly how it is implemented but it is very, very important that we implement the thrust of the Carter reforms successfully.

Q84 Dr Whitehead: Do you not think that the Department is in perhaps something of a position of a hostage in as much as you the Department are, in a sense, relying on the fact that the Carter report figures are accurate and the savings are achievable and, secondly, you are going to Treasury with already published figures, as it were, for would-be savings from a review which was not a review by the Department, and will the Treasury therefore not say, "Well, that is a done deal; we will have those at the beginning of the discussion," and you will then be liable, as it were, for those savings when someone else has come up with them and not you?

Alex Allan: Well, we did work very closely with Lord Carter to try and provide a lot of support to his team, including paying consultants Frontier Economics to work with his team to make sure that the numbers were right. So we feel that these are numbers that are deliverable. The Legal Services Commission, the actual commission, the independently constituted body looked at the numbers and it believes that it will deliver the changes. They go with the grain of what the Legal Services Commission was doing in terms of trying to set up systems of preferred suppliers. So I do not think it is quite Lord Carter independently said this and then we are compete hostages. We did work closely with him. He did a lot of work with the Law Society and with the Bar Council on the precise schemes, particularly on the criminal side although, as I mentioned earlier, we do accept that some more work is needed on the family side. So I think that it does not feel like something that we have farmed off to an independent reviewer and then simply sat back and took what was coming to us.

Q85 Mr Khabra: I am going to ask you a question about your relationship with the Home Office. The Department shares responsibility with the Home Office and the Office of the Attorney General via the Office for Criminal Justice Reform. The Treasury's Financial Management Review in 2005 found that you were not sufficiently included in all consultations. Have you now increased your involvement? Would you say that you are a full partner with the other responsible departments?

Alex Allan: I would say yes we have improved our consultations and we do feel that we are full partners in the criminal justice system with the National Criminal Justice Board, the Office for Criminal Justice Reform, and the local criminal justice boards. Clearly, as I indicated earlier, it is very important that we do work closely with the Home Office on all these issues and we have got links in at lots of different levels. Picking up, sir, one of the points for example on legal aid, we do now have very clear arrangements in place that if another department makes a change that imposes unexpected costs on us, then there will be a public expenditure transfer to enable us to meet those costs, and our accounts show examples in money transferred from the Home Office for downstream costs associated with the 2003 Criminal Justice Act and also money transferred from the Department for Education and Skills for money associated with the Adoption and Children Act. So inevitably the Home Office is larger in scale in terms of its overall budget than us, but I think the Home Office recognises that there is a shared interest in trying to make sure that the whole system works well. To take an example, the Home Office at the moment has obvious pressures on prison places, and one of the areas is remand places, and so for them if they see that there are delays in the crown courts so that prisoners may be held on remand for longer then that clearly has very big impacts on them, so I think that there is increasing recognition that we are all in business with a common endeavour.

Q86 Mr Khabra: Has there ever been an occasion where there has been a conflict of interest or a conflict of responsibility?

Alex Allan: Inevitably at times there will be differences of political view about what is the best way forward, but I think the system is now robust enough that that can be resolved and, as I say, our working relationships are very good at all levels right from the top to the bottom.

Q87 Mr Khabra: The Home Office has already received its settlement from the Comprehensive Spending Review. What impact does this have on the scope for joint planning between the two departments?

Alex Allan: I accept that at one level it seems slightly odd that one part of the system has settled. We are still doing a lot of joint work, as Barbara Moorhouse said, and I will ask her to speak on this in a moment, and of course the Crown Prosecution Service has not yet made a settlement. I think we are conscious that although, as Barbara indicated, the Home Office settlement is at the upper end of the range, given the pressures, for example on the police forces, the pressures from the counter-terrorism strategy, the needs in the Prison Service it is actually a pretty tight settlement. I guess it would be a worry for us if they had an enormously generous settlement and lots and lots of defendants were heading our way and we got a very miserly settlement and we could not cope. It does not feel like that and, as I say, there is a lot more work going on to try and join it up, but Barbara may be able to expand a bit more.

Barbara Moorhouse: Yes, the Home Office did receive what at the time was seen to a relatively generous settlement but I think since then there have been a number of changes in expectations around the Home Office, and therefore what might have seemed like a generous settlement at that stage probably looks a great deal tighter if you are sitting in the Home Office today. I think the key issue going forward is that once we have agreed our settlement, whenever that may be, there are two ways that it can go in terms of talking about financial management. I think there is a strong pressure for all of the three agencies or departments to see those areas where by working together they can manage money better. We have had a number of examples where all three parties have recognised the value of working together on certain key projects. I think there are a number of good examples of that. However, I think there are also some challenges and as all three departments are likely to receive settlements less than they would have liked, obviously there is going to be a lot of challenge around us all being careful about how we manage money. The good side of that is that I think all three departments are now much, much sharper, I suppose, at focusing in on when new initiatives are going to cause them considerable cost and making sure that that thinking is built into the trilateral work before any particular policy or operational decision is made. That is extremely healthy and I think that will help to improve the overall quality of financial management across all three departments. However, it will also mean that there may be some short-term tensions around how some of those policy decisions pan out given that they impose different costs on one department where the investment might be made in another party. There will be some benefits of trilateral working in a tighter financial climate; there may also be some negatives. Overall, there is no doubt that effectively value for money across the criminal justice system really does need the three agents in these departments to work together.

Q88 Mr Khabra: Did you have consultation with the Home Office prior to the Comprehensive Spending Review with regard to your priorities?

Barbara Moorhouse: No, we have been in discussion with the Home Office and there have been some issues at policy and strategy level, but I do not think it would be true to say there was a full-scale discussion of our Comprehensive Spending Review or indeed theirs before they settled, but a number of the aspects of that are covered in various pieces of bilateral and trilateral work at official level.

Q89 Mr Khabra: On the question of your Department's estate management abilities, in the past there have been weaknesses. What improvements have you made and can you give some examples of the improvements?

Alex Allan: This is certainly an area we are focusing a lot on not just because of the financial pressures but also because we now have a very much bigger estate with the bringing of the magistrates' courts into Her Majesty's Courts Service, we now have responsibility for all the estate and that is something which we are looking at across the whole estate. Maybe there are areas where we have a county court, a magistrates' court and a crown court in very close proximity and we need to look at that. We have put a lot of effort into improving our general capability to do the planning and management of the estate's function. We have set up a capital investment board that Barbara chairs which I think is moving towards getting a very much clearer picture of not just the estates but looking at IT investment as well.

Q90 Mr Khabra: What mechanism is used to manage such a huge estate like the one you are responsible for?

Barbara Moorhouse: I think the main work that has been done since the Courts Service came together has been basically to establish the facts of what we own and the condition which it is in to get a thorough understanding of the asset base we have to manage. The tribunals have now got to go through that same process although their portfolio is much smaller and a lot of it is rented rather than being owned, so they have to go through a parallel process. It is also true to say that a lot of our thinking around estates has been very much governed by the level of capital investment or capital expenditure that we think we will be allowed in the Comprehensive Spending Review. It is true to say that when the courts produced their initial thinking about the amount of investment that they needed in the courts buildings, it included some very attractive and ambitious plans about rationalising buildings and, indeed, building new buildings which were, perhaps, geographically better for the current use of court business. It has become very clear as we have gone through the Comprehensive Spending Review that we were unlikely to receive that level of funding as we had originally hoped. Therefore, at the current time, we are going back now to revisit that initial thinking and to make sure we are prioritising the likely level of capital investment which we will have in the light of all of the work that we are doing around the use of courts and the change programme in HMCS so we are making best use of our existing estate, making disposals wherever we can so we have the opportunity to re-invest, and not being so reliant on the Treasury to produce significant extra funding in order for us to improve our estate. That is where our current thinking rests and we will be progressing that through the rest of the Comprehensive Spending Review discussions with the Treasury.

Q91 Mr Khabra: Could you tell us if you receive any income from the estates?

Barbara Moorhouse: I am sure there are bits and pieces of little rentals that we receive here and there.

Alex Allan: There are some innovative court managers who rent out their courts on Saturdays for weddings and things like this.

Rod Clark: Or do television shows and things like that.

Barbara Moorhouse: It certainly is small, we know that.

Q92 Chairman: The Committee has in the past taken an interest in the fact that you have a considerable historic state of listed buildings, some of which - it is argued by a lot of people - you ought to be using and sustaining and not simply pulling the rug from underneath them where they can be successfully used. I hope that is still forming part of your strategy.

Alex Allan: Indeed. Although it caused some controversy, if you take the case of Middlesex Guildhall, which will be converted into the new Supreme Court, we believe that the plans that were developed by Fielden, Mawson and Fosters really do justice to what is a historic building and take out quite a lot of the additions that have been made over the years to make it suitable as a crown court and take it into a much more open environment in a way that is sympathetic to its historic use. Of course, as you say, we have a number of historic buildings on the court estate. There will be some where we simply do not believe they should continue to form part of our estate. As you know, we sold Bow Street Magistrates Court together with the Metropolitan Police who sold the police station next door that had been closed for some time simply because there was no part of our estate planning to indicate that was a sensible asset to hold on to and so we are doing developments at Marylebone Road and Horseferry Road to absorb that capacity. There will be some buildings which we will dispose of; there will be some buildings that we will cherish.

Q93 Chairman: You have inherited some PFI contracts also. Are you going to manage these successfully and do you envisage more PFI contracts for future court projects?

Barbara Moorhouse: In short, we have nine PFI contracts and the costs of those are built into the base planning for the process. We do not envisage at this current time being able to use PFI as a procurement route in the future. I think it would be fair to say that a lot of PFI thinking was driven by the particular accounting rules that prevailed at one stage. Now that those no longer prevail, I think it is unlikely that we will use a new PFI procurement route.

Q94 Chairman: A couple of quick questions on a couple of other points. Why is it you have overshot on recovering court cost fees, 104%? Committees, in the past, have had anxieties that access to justice is in any case potentially limited and denied by full cost recovery.

Alex Allan: I do not believe in aggregate we have overshot.

Rod Clark: Not looking at civil and family together.

Alex Allan: Certainly, we do monitor the level of fees very carefully. As you say, we do have a target for full cost recovery, excluding the fees that are omitted, for example if somebody falls below income tests. It is full cost recovery allowing for that, so we do not try.

Q95 Chairman: You do not charge other users?

Alex Allan: We do not charge other users to cross-subsidise people who are exempt from fees, no.

Q96 Chairman: In your annual report, you do remind us that you are "conducting research into the experience of different electoral systems in the UK in line with the Government's manifesto commitment". When is this research likely to see the light of day?

Alex Allan: I think I would be rash to promise exactly when. There is indeed, as the report says, work going on within the Department. It is something which I am sure the Lord Chancellor will want to consider, although he will need to consult his ministerial colleagues, and we will publish in line with the manifesto commitment as soon as we are able to.

Q97 Chairman: Is it nearly finished and are ministers waiting to decide whether or not to publish it, or is there a lot more work that you have to do?

Alex Allan: I think most of the underlying factual information has been done. Exactly how it is pulled together and presented and what conclusions are drawn is something that is still going on.

Q98 Chairman: And you said it with a straight face! Thank you very much.

Alex Allan: Thank you.