BIS permanent secretary Martin Donnelly seeks ministerial direction over Redcar apprentice plan

Top official at the business department says plan to subsidise apprenticeship wages could set an "unhelpful precedent" – and seeks the fourth ministerial direction of the parliament

By matt.foster

29 Oct 2015

Business secretary Sajid Javid has ordered his most senior official to proceed with a plan to use public money to pay the wages of redundant apprentices at the closed Redcar steelworks, after the department's permanent secretary raised concerns over the cost to taxpayers.

Martin Donnelly, the perm sec at the Department for Business, Innovation and Skills, sought a rare ministerial direction from Javid over the proposal to provide a £1.7million public subsidy to firms taking on apprentices at the shuttered SSI steel and ironworks site.

As accounting officers for their departments, perm secs have a responsibility to ensure that spending decisions meet four tests – "value for money", "regularity", "propriety", and "feasibility". If they believe a decision may go against one of those aims, they are required to write to ministers seeking a formal "direction to proceed", allowing them to note their concerns ahead of being instructed to continue.

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In a letter to Javid – published on the GOV.UK website on Wednesday – Donnelly acknowledged that the closure of the steelworks had been a "major shock to the economy of the Tees Valley".

But he said the level of support – with the government promising to fully subsidise the wages of Redcar apprentices to ensure they find new jobs – could set an "unhelpful precedent".

The perm sec wrote: "In accordance with our obligations to secure value for money for the taxpayer, we have considered the proposal against the criteria as set out by HMT [HM Treasury] in "Managing Public Money".

"The required appraisal process concludes that this would not offer value for money even after taking into account the very real economic challenges facing apprentices in the Tees Valley at this time.

"It is the case that apprenticeship training offers a value for money investment and that there is economic value in supporting the apprentices to complete their training. The value for money issue stems from the level of subsidy that the Taskforce have requested in this case.

"I am also concerned that spending at this level would be repercussive, and might create an unhelpful precedent."

Donnelly adds, however, that the decision may have "broader implications" which could override the value for money concerns including "maintaining confidence in the Tees Valley economy".

"If you wish to accept the request of the taskforce, then I will proceed accordingly but I require your written instruction to do so," Donnelly writes.

"I will then ensure the necessary steps are taken to carry forward your instruction without delay."

Responding, Javid acknowledges the department's concern that the wage subsidy could be "repercussive" and accepts that the plan "offers poor value for money when measured conventionally".

He adds: "However, as secretary of state I have to weigh that assessment against the broader objectives of government; including our commitments to localism, and our aim to build confidence in apprenticeships.

"Furthermore, the apprentices of Teesside face a very extreme situation and one which, in my judgement, requires an exceptional and urgent public sector response that is equivalent to the scale of the challenge."

Donnelly's request for a ministerial direction is his second of the parliament, with the perm sec having previously flagged up value for money concerns over proposals to gift Royal Mail shares to staff.

It is the fourth ministerial direction sought by a senior official in this parliament. As well as Donnelly's two interventions, then-Cabinet Office perm sec Richard Heaton recently noted his concerns over the funding of the Kids Company charity, while Bronwyn Hill at the Department for Environment, Food and Rural Affairs questioned the value for money implications of Defra's flood reinsurance scheme.

According to research published by the Institute for Government, it took almost five years for the first ministerial direction to be sought in the last parliament.

A report published by the think tank last year found that the use of ministerial directions was rare, with 50 sought between 1990 and 2013.

The exchange of letters between Donnelly and Javid will now be forwarded on to the National Audit Office spending watchdog as well as MPs on the public accounts committee for further scrutiny.

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