19 October 1994
THE FUNDAMENTAL EXPENDITURE REVIEW OF RUNNING COSTS
I am circulating with this note a summary of the report on the fundamental review of the Treasury's running costs (FER). The full report is available separately. Let me explain how it will be taken forward.
2. TMB and the FER Steering Group agree with the broad thrust of the report, but have made clear that decisions will not be taken until you have all had the opportunity to discuss the FER proposals and their implications.
3. Once you have had time to read and think about the report as a whole I hope you will all therefore take the opportunity to talk to me, to your line managers and to others involved about its recommendations.
4. The FER has, inevitably, put many people on the defensive. But we must not forget the unique strengths from which the Treasury starts. Following his work on the review Sir Colin Southgate said he was struck by "the dedication, intelligence and professionalism of the Treasury's staff" - an assessment which I and my TMB colleagues wholeheartedly repeat.
5. Every single one of us wants the Treasury to be an organisation in which we can give of our best. But every organisation, no matter how good its staff, must be able to respond to a changing world - and the Treasury is no exception.
6. I believe the FER recommendations can help us do this by:
* defining clear objectives and tasks for the Treasury, so we can take a more strategic and longer-term perspective and concentrate on core tasks which we can do well;
* creating a new structure in which directorates have clearer responsibilities for each of the Treasury's objectives;
* streamlining management levels, to give more responsibility and job satisfaction to junior staff, and free up senior staff to carry out a more strategic and managerial role;
* seeking to provide the best possible services to support us in our work, including up-to-date office facilities, IT and the right personnel systems.
The Chancellor's Views
7. The Chancellor has seen the report and given his initial reactions. He strongly endorses Sir Colin Southgate's view of the Treasury strengths and the arrangements for handling the report. He has commented that he regards the development of a strategic approach to public expenditure control work, and a proactive approach to the Treasury's Economic Ministry and supply side advocacy role, as the most important outcome of the review. He has also made 3 specific points on the report's recommendations:
(i) he wants there to be a clear timetable for transferring work on transport and industry issues from the proposed finance, regulation and industry directorate to the proposed expenditure and policy analysis directorate (see para 12.36 of the full report).
(ii) he welcomes the quality of the Treasury's economic forecasting performance, but wants regular updates of the analysis of forecasting quality and would like the forecasting work to be market-tested in 2 years time (see Chapter 7 of the full report).
(iii) he believes that co-location of the Treasury's legal advisers, rather than full transfer into the Treasury, would be sufficient at this stage (see Chapter 13).
Managing Change
8. I believe the recommendations will help us do the right job well, make the Treasury a better place to work in, and help us handle the rest of the world better than in the past. But I won't pretend it will be easy or painless. The proposals have major implications for us all, including for some the possibility of a transfer to another Government Department and for others the uncertainty about whether they will still have a job here.
9. You will all want clear and timely information on what is happening to jobs and how you are affected personally. I can't give you all the answers at the moment. What I can do is tell you how things will be handled from now on.
10. As you will see, the report makes specific recommendations only for posts from Heads of Division upwards, involving overall reduction in staff numbers at these levels of about a quarter. They are proposals, not decisions; decisions about these posts will be taken in about a month after the parallel process of discussion with staff and consultation with the trade unions. Our aim will be for the new senior structure of the Department to be in place by 1 April 1995.
11. There are no detailed proposals at present for changes in the number of posts for other grades. The position here will depend on the staffing needs of the new directorates. This includes secretaries, most of whose jobs are currently linked to posts at Head of Division level and above, but for whom different working patterns and opportunities might be available in future. More generally, the position may also be affected over time by other changes - for example in our methods of working, as proposed by the Efficient Office Project Team, or the way in which the work of expenditure divisions evolves.
12. So I do not expect there to be specific proposals for numbers of jobs in these other grades for some months yet. I know that this continuing uncertainty for most of you will be extremely unwelcome. But I have been clear throughout that the FER must not become an arbitrary cuts exercise. It is vital that we work through all the implications carefully with the managers concerned in each area. Nor is there any reason to expect that the proportionate effect on jobs will then be the same at all levels.
13. When we do have proposals for future staffing numbers at other levels, we will put them forward at the earliest opportunity. Then we will follow the same procedures as I have described for the senior grades - consultation, followed by decisions on numbers of posts.
14. At all levels decisions about who will fill the posts will be a separate process from decisions about the future of the posts themselves. In any case where there are significant reductions in posts we will try to manage the position through voluntary redundancies. Volunteers will receive the same financial terms as would apply under compulsory redundancy.
15. Knowing the answer to "what happens to my job?" may take longer than many of you have been expecting. But it is only natural that some of you may want to start thinking now about the implications of the possible changes for you personally. So we have arranged that our outplacement consultants, FOCUS, are available to give all staff independent and confidential advice. We will be issuing a booklet to everyone next week which will give information about these services and also about the terms available on redundancy.
Investing in People
16. Clearly we shall have a difficult and stressful period ahead, and one in which we will all need to show sensitivity and understanding for those facing the greatest uncertainties. But for the great majority of staff who will continue to work in the Treasury I firmly believe the FER now offers us the opportunity to build a better organisation. This cannot be achieved without increased investment in people. I am totally committed to that. And we now have a major and focused programme of work in hand which will deliver:
* new induction training arrangements from next month for all entrants to the Treasury;
* the early introduction of an improved advertising posts system to put individuals in the best position to match their skills and experience to jobs;
* the introduction of pre-posting training so that staff have the necessary knowledge when they start a new job;
* delegation of central training budgets so staff can choose to buy whatever courses suit them best, whether internally or externally run. At the same time, new courses will continue to be developed to help implement the changes proposed in the FER;
* the development of a new skills framework and a system of management feedback to help staff choose the right training and to underpin team-working.
* the Treasury's own pay and grading and related personnel systems from April 1996. These will help take forward the changes in working practices envisaged by the FER Working Groups and will bring new ways of motivating, rewarding and appraising staff.
Conclusion
17. You will need time to absorb these proposals and to feed in your views. I do not underestimate the difficulties we now face or the scale of investment in people required. But I believe that the follow up to the FER gives us the opportunity to create the stronger and better organisation we all seek.
TERRY BURNS