Source · Select Committees · Public Accounts Committee
Recommendation 11
11
Accepted
High civil service turnover undermines corporate knowledge and institutional memory on distress.
Recommendation
The government’s corporate knowledge about the health of key sectors and companies may be vulnerable because of the high turnover of civil servants in this field, who may have 17 Correspondence from HM Treasury to Committee, 30 January 2024 18 C&AG’s Report, para 1.8 19 Q23 20 C&AG’s Report, para 2.15 21 National Audit Office (NAO) Report, Good practice guide: Monitoring and responding to companies in distress, October 2023, page 10 22 C&AG’s Report, para 2.17 23 Qq13,27; C&AG’s Report, para 6 24 Q12–13 25 Q23 26 Qq 41–43 12 Monitoring and responding to companies in distress built trusted relationships with the private sector and be skilled at handling information “sensitively and carefully”.27 The Cabinet Office told us that the last time it had a company it needed to look at, the Chief Operating Officer for the Civil Service wrote to all departments to nominate a single point of responsibility in their operations team. It told us that “it is important to have someone in departments so we can have a Government-wide call.”28 Despite this, it explained that next time there is a similar case, this will need to be updated because “doubtless people will have moved on.” The Treasury also explained to us how its spending teams are formally alerted when a department is seeking to make any sort of financial contribution to a company.29 We have previously raised concerns about the high staff turnover in the Treasury and a lack of operational experience at more junior levels of the Treasury spending teams.30 Analysis of the latest civil service statistics shows that the Treasury has the highest turnover rate of all departments.31 The Treasury told us that it had launched a corporate finance network as one way of maintaining institutional memory, and that there is a regular permanent secretaries’ group focused on growth where it shares its guidance and principles on company distress situations, to be cascaded to teams across the civil service.32
Government Response Summary
The government agrees with the recommendation, stating it is implemented through ongoing actions such as making supplier risk a standing item for engagement, fostering two-way intelligence sharing to retain corporate memory, and requiring departments to escalate risk indicators via their governance frameworks and the Orange Book. It also highlights the Cabinet Office's commercial team support and DBT's Critical Imports and Supply Chains Strategy.
Government Response
Accepted
HM Government
Accepted
2.1 The government agrees with the Committee’s recommendation. Recommendation implemented 2.2 Supplier and supply chain risk is a standing item for commercial engagement between the Cabinet Office and departments. 2.3 The sharing of intelligence on supplier and sector risk indicators between Cabinet Office and departments is a ‘two-way’ process, which allows the Cabinet Office and departments to support each other in retaining corporate memory. 2.4 Departments should escalate identified risk indicators within their own governance frameworks such that a record is maintained of decisions made in respect of each risk identified. Guidance on risk management is provided by the Orange Book. 2.5 Commercial teams in the Cabinet Office support supplier monitoring activity by developing regulation and guidance, benchmarking performance, developing and supporting the implementation of playbooks, developing and attracting commercial talent, and monitoring strategic suppliers. Each of these functions supports departments in maintaining a continuous level of knowledge and improving their capability to identify and mitigate risk. 2.6 DBT recently published the Critical Imports and Supply Chains Strategy which sets out actions for government to take with business and international partners to monitor, mitigate, plan, and respond to supply chain shocks. It describes how DBT uses trade data to identify where the UK is over reliant on a country for imports of a good. This data is available for departments to consider diversification options through DBT’s diversification dashboards. Where a potential shock is identified, or when an unanticipated event leads to supply chain disruption, a response model has been developed to cover emergency planning, response, recovery and risk assessment.