RT HON ALISTAIR DARLING, SIR BRIAN BENDER, KCB AND MR MARK CLARKE

24 OCTOBER 2006

  Q60  Mr Bone: I wanted to add something to your report rather than subtract it. Would it be possible to do a variant analysis between what was estimated and what the outcome was so that you could see on the line why it has decreased or increased?

  Mr Darling: I do not see why it should not be possible to do that but I will reflect upon that and we will come back to you.

  Q61  Chairman: There are a lot of things that are not there. I have been looking for the union modernisation and what has been spent on that but I cannot find the figures, although it is referred to in the report. I would appreciate a note from Mr Clarke—you do not have to explain this here and now—on what is "non-cash expenditure".

  Mr Clarke: If you are looking at it not in a public sector context but in a private sector context, that would really refer to the parts of the profit and loss account that did not relate to cash. In other words, the depreciation provisions, amortisation, those kinds of things that do not have an immediate cash impact over the next few months. It is quite technical.

  Q62  Chairman: I would like a note on what non-cash expenditure is in a little more detail too, please.

  Mr Darling: It is a term that is not used in other departmental accounts. When I first looked at the DTI ones I asked what that was as well.

  Q63  Chairman: There are quite lumpy sums of non-cash expenditure in here.

  Mr Clarke: As you would expect. It is a basis of classification which we are obliged to use under the Treasury's remit, where we split between what is called near-cash, non-cash and capital. Those three things together form our expenditure.

  Sir Brian Bender: It is a categorisation that all departments have only recently been required to break down. Mark had to explain it to the rest of the department and he will be well versed in explaining it to the Committee.

  Q64  Chairman: Under "Knowledge Transfer Information" we have non-cash expenditure by the National Weights and Measures Authority of £214,000 and "other" at £52.5 million. That is quite a lot of "other" non-cash expenditure.

  Mr Darling: If the non-cash for example was depreciation of something, you would expect it to be rather smaller than the other figure. If you want chapter and verse on any of these things, that is fine, but it is something we ought to reflect on. Peter Bone has just asked for some additional information. You could split all these numbers down to every last penny, except that you would be consuming a rainforest every year to do so. On the other hand, you are quite right in saying that it is your job to ask departments what they spend their money on, so there must be a happy balance to be struck between the two.

  Q65  Chairman: I am not quite convinced we are getting it right at present.

  Mr Clarke: What we try to do in the tables in the report is to provide quite granular detail of that analysis. The totals are broken down into many lines, running into many pages.

  Q66  Mark Hunter: We are going to get a detailed breakdown of the £1.2 billion beyond just science and the RDAs?

  Mr Clarke: Yes.

  Q67  Mrs Curtis-Thomas: I wanted to ask a number of questions about construction because I have been speaking to a lot of your construction customers. There is a general concern that the whole activity of construction, since it has been moved from Defra to the DTI, has rather sunk without trace. I would like to know where the construction team within the DTI is in relation to retentions on contracts, where it is in relation to project bank accounts and where it is in relation to the Construction Act. When I referred to the construction industry earlier on, and the measures needed to make it more innovative and provide us with a better return, those three elements are extremely important. The industry has sought to pursue discussions with your department about those three matters. Unfortunately the response was good but in reality we have not seen any changes at all.

  Mr Darling: I am not aware of that approach. If the construction industry generally has approached the department—I think you said the answer was helpful?

  Q68  Mrs Curtis-Thomas: It was helpful in that it said, "We are going to sort this out in the next six months." That was 18 months ago and two years ago. The Construction Act is sitting on somebody's top shelf and I wonder if some of the project pool of people that you talk about might be allocated to this particular Act because review of the Construction Act is immensely important.

  Mr Darling: I will have a look at it and come back to the Committee. I cannot give you an answer now.

  Chairman: We are looking at doing something quite significant in the construction area.

  Q69  Mr Wright: Last year, we were told that there was going to be extensive reorganisation of the sectoral teams. We have been told that the department has now established a floating group of staff who can be deployed to priority areas at short notice. How is that pool being used and can you ensure that the expertise is not going to be lost if the pool people are constantly redeployed?

  Sir Brian Bender: We have a bit upwards of 150 staff in this project pool. The idea is they are allocated in the same way as, I guess, a managing partner in a consultancy would allocate across the business, so on a bidding process the department does periodically a couple of times a year, what are the new projects coming out? The purpose of this exercise is to enable us to move staff around more flexibly and, when a project is finished, they can then move on to something else. If you take an issue like the collapse of the Rover Group, what we put together was a team that consisted of our automotive unit that had the sectoral expertise and people from the project pool to boost the work on a short-ish term basis. They were doing it for 18 months or so. Some of the follow-up to the Energy Review will consist of people who are steeped in the issues in the detail from the Energy Group and people being brought in from the project pool. The idea is to identify what are priority activities over the next six or 12 months or so and then allocate staff to them alongside, quite often, the sectoral expertise that will exist in the department to boost that and then enable them to move on to something else. That is the nature of how it is supposed to work.

  Q70  Mr Wright: It does not actually work. Have there been failings within that particular pool so that there are shortcomings?

  Sir Brian Bender: I think it is a success, but we learn more about how we can prioritise, predict and allocate the resource to what are true departmental priorities. I think it is something we are learning as we go along but I regard it as one of the department's successes over the last couple of years in how we have it that up and how we are operating it. Indeed, the Secretary of State referred earlier to the Small Business Service. A lot of its work consists of short to medium term project work and the idea is that staff who are doing that will move into the project pool and, when those projects are finished, will move on to something else. I do not regard it as something that is failing; I regard it as part of the department's success story. The question is how to make it more successful.

  Mr Darling: The alternative is you maintain an awful lot of people just in case and I do not think we can justify that.

  Q71  Mr Wright: You say that there is a pool of 150. Is that a permanent structure of 150 or does that move from year to year?

  Sir Brian Bender: The department has built it up over the last couple of years to about 150. That is the stable size at the moment. They are then allocated to particular projects. That is the current size of it. It is likely to grow a bit more as a result of the changes in the Small Business Service and that will be a steady state, but it could increase or decrease depending on overall resource pressures on the department. The current plan is for it to be about 150 plus any project working coming in from the Small Business Service changes.

  Q72  Mr Wright: We talked about the 1,010 full time equivalent posts disappearing. Does it mean that the department's overall posts are going to increase over the years?

  Sir Brian Bender: No. All departments will be facing resource pressures. The departments whose spending review settlements were announced at the time of the Budget faced a real terms reduction in their administration budgets of 5% a year over the spending review period. That is what the rest of us need to regard as the going rate on total admin costs. Of the DTI admin budget, about half of that is pay or staff. The rest is things like IT, buildings and so on. The overall number will reduce in the years ahead. The 150 or a bit more will therefore be a relatively larger proportion of a slightly smaller department.

  Q73  Mr Wright: Over the years, you are saying that in the sectoral teams themselves there will be a reduction in staff and more use of pool resources to slip into there?

  Sir Brian Bender: Or in any other part of the department. The Companies Bill has included people who have great depth in company law and people who came in from the project pool. The size of standing teams will absolutely diminish, making sure as best we can that we have expertise where we need to have it, as the Secretary of State referred to earlier, in relation to business relations and sectors; and then the horizontal skills of the people in the project pool will come in and work on task and finish work.

  Q74  Mr Wright: You have no fear that the professionalism will be diminished over time and you will keep the skills within the department?

  Sir Brian Bender: This is something we have to keep a close eye on. The Secretary of State referred earlier to the automotive sector. Do we have enough understanding of what is going on in that sector, alongside our capability if something particular happens like MG Rover, so that we can bring in people to boost that work? Getting that balance right is clearly one of the issues we have to tackle both ministerially and at official level in the department.

  Q75  Mr Wright: In terms of the role of the Minister for Energy and the energy sector, it is more of a higher profile. Does that mean there will be more resources added to that particular sector, for instance?

  Sir Brian Bender: There are two aspects of what is going on in energy at the moment. What I might call business as usual, where I have asked that Director General to look as carefully and as rigorously as he can at how we can do stuff more efficiently. Then there is a peak of work as a result of the higher profile of energy issues and the review and follow-up to the review. That is largely project work. Overall, energy at least in the foreseeable future in a slightly smaller department will take a slightly higher proportion. To answer your question, there will be a slight shift of overall resource into energy from the rest.

  Mr Darling: The other thing that you ought to be aware of—you may be already—is that the Department of Trade and Industry increasingly does work with other departments. For example, along with Defra, who have established a climate change office, Civil Servants will be working on issues in relation to climate change which affect both the DTI and the energy review, as well as responsibilities that the Secretary of State for Defra has. Where we can use resources across government to complement our own we ought to do that. The main thing is it is essential that any government has available to it the right advice so that it can make the right decisions. On the other hand, we do have to make sure that we are becoming more efficient and that, if we do not need to be doing things, we do not do them. If we do not need to do them all the time, you equip yourself to deal with a particular problem but once that problem is sorted you can then use these people elsewhere. For a lot of civil servants—in my experience, the same thing happened in transport—they quite like the variety and change. You can attract and retain some very good people.

  Q76  Mr Weir: Over the last few years considerable responsibilities have been transferred from Whitehall to the Regional Development Agencies, with a consequential transfer of staff and funding. I understand the budget for the RDAs is planned to more than double between 2003 and 2008. Are the RDAs coping with such a large transfer of responsibilities and resources, particularly within a comparatively short timescale?

  Mr Darling: In general, yes. There is a variation between RDAs. The NAO has, I think I am right in saying, completed two reports on two RDAs, the north west of England and the east of England. One of the things that we are looking at as part of the spending review process is the relationship between RDAs, passenger transport authorities and some of the work that my colleague, David Miliband, started when he was at the Office of the Deputy Prime Minister, which Ruth Kelly is continuing in relation to the importance of what we call city regions, which are important. I am concerned that we do not transfer things that are not appropriate and that we enable RDAs to have a clear focus—if you give them too much, that can be difficult—and also to make sure that the areas in which they operate make sense in terms of the economics and social patterns we see in the country today. In general, yes, but it is something that we are looking at. It may be necessary to make some changes. RDAs are very MP and we were absolutely right to set them up but it makes sense in any organisation or group of organisations to ask whether or not we can do things better. There are some of the alignments that we need to look at as well as maybe some of the responsibilities.

  Q77  Mr Weir: One of the things that was transferred was responsibility for inward investment and you mentioned earlier staff reductions in UKTI. Do you see any tension between the role of the RDAs and UKTI?

  Mr Darling: This is a difficult point.

  Q78  Chairman: Your response to our India report has been received by the Committee and we agreed to publish it yesterday. I assure you it does deal with this issue.

  Mr Darling: I am happy to answer the question.

  Q79  Chairman: As you are writing to the Committee already, you have answered in part.

  Mr Darling: I will just refer the honourable gentleman to the answer I gave, which he will see. Part of the responsibility of RDAs is to attract inward investment. To that end, they undertake promotional activities in different parts of the world. Where there is a legitimate question to be asked is, if you are in India, you turn up at one of these things and find UKTI and three RDAs all telling you that they are all in the right place. The question is which one is right. I have to think long and hard before saying to an RDA, "No, you cannot promote yourself overseas" because they will say, "If we have jobs going in this area or we think we have an expertise, who is going to make a pitch for us?" We need to make some sense of this, and that is leaving aside the fact that you will undoubtedly find someone from Wales and Scotland at the same presentation. People will say, "How come, in a country of 60 million people, we need quite so many people there?" It is something we are going to sort out on a practical level. I want to avoid a situation where we have rather too many people increasing the current footprint across the world.