Written evidence from the Department of Transport (NED012)

Public Administration and Constitutional Affairs Committee

The Role of Non-Executive Directors in Government inquiry

The Department has a team of six Non-Executives (NEDs) led by a Lead NED. Their external challenge, support, scrutiny, experience and expertise is highly valued by the Department and they are integrated into all aspects of our Corporate Governance Framework from the DfT Board and its sub-committees, to specific review Boards and policy areas, as well as being allocated oversight of specific DfT Strategic Priorities aligned to their area of expertise.

All of our NEDs are active and visible across the Department and across Government, working closely with Permanent Secretaries, the Executive Team and policy officials to help deliver effective governance and ensuring that the Department’s decision making benefits from the specific skills and expertise that each NED brings. NED’s impartiality and independent challenge is at the forefront of their responsibilities, and their roles are clearly set out in their Terms of Appointment. This ensures that both parties have a clear understanding of how the relationship will work.

The Department’s NEDs contributed to the recent Cabinet Office skills audit, which asked NEDs to identify their skills and areas of expertise. From the responses provided, the DfT NEDs as a team, possessed a strong balance of skills and experience which meet the current requirements of the Department.

Based on the Department’s Strategic Priorities[1], the current skill set DfT requires from its NEDs, includes the traditional NED skills as well as department specific expertise including for example; project management, major infrastructure projects, environmental impacts, user experience, regional perspective, digital innovations and finance including audit. More broadly than specific skills and experience, an understanding of the machinery of Government and a pragmatic approach to problem solving all aid in delivering an effective Government Non-Executive.

The Secretary of State chairs the Departmental Board (comprising of ministers, the Department’s most Senior Civil Servants and NEDs) which has oversight of five main areas: performance, strategy, resources, capability and risk. It delegates several of its responsibilities to sub-committees within DfT’s Corporate Governance Framework.

The sub-committees are comprised of:

• Group Audit and Risk Assurance Committee (GARAC): DfT NED Richard Keys chairs the Committee which is currently meeting up to eight times per year and NED Ranjit Baxi is also a member. GARAC provides oversight of the DfT programme of assurance activity and reviews the Internal Audit strategy and the performance of Government Internal Audit Agency. It also assures that there are effective systems for internal controls; financial reporting; governance; assurance; and risk management.
• Investment, Portfolio and Delivery Committee (IPDC): DfT Lead NED Ian King and NED Tony Poulter attend this fortnightly committee, providing their expert advice and scrutiny of the high-profile projects and investment decisions for the Department. IPDC considers advice to Ministers on economic, financial and commercial decisions across the Tier 1 Portfolio of programmes and projects, at all stages of the project lifecycle.
• Nominations Committee (NomCom): DfT Lead NED Ian King chairs the Committee which meets quarterly and NED Tracy Westall is also a member. NomCom has an advisory role focussing primarily on ensuring the Department has the capability to deliver and plan the current and future needs for talented people in both the Department and its Arms-Length Bodies. It provides scrutiny of both DfT Executive appointments, as well as, DfT and Arms-Length Bodies Non-Executive appointments by ensuring appropriate succession planning is in place to meet the needs of the Department and Ministers.
• Executive and Non-Executives Meeting (ENEM): All of the NEDs attend this quarterly meeting. ENEM provides a supportive and challenging working environment for the Executive and Non-Executive Members. It monitors and oversees the Department’s delivery and financial performance; organisational capability and resourcing; and policy development. The only other key sub-committee is the Executive Committee, which has no NED membership:
• Executive Committee (ExCo): maintains a strategic oversight of and provides scrutiny to the Department’s policies and delivery commitments and takes key management decisions across the Department.

The DfT NEDs are also actively engaged in a number cross Whitehall steering groups and individual one-off reviews which used their existing knowledge and expertise. This included efficiency reviews as well as providing support to another government department by conducting an Effectiveness Review of their Audit and the Executive Risk Committee. 

Given the far-reaching influence and impact of NEDs on the Department’s work, it is important to assess their performance. The Lead NED completes appraisals of his Non-Executive team to ensure they are meeting key performance objectives and delivering scrutiny in the appropriate areas.

The Department as part of its corporate obligations also recently undertook an independent Board Effectiveness Evaluation, commissioned by the Lead NED, to identify how well the Board and its sub-committees were performing and to identify any areas for improvement. The feedback from the independent evaluation was largely positive, with the Department’s committee structure particularly noted as being robust and effective. The Department’s NEDs were universally praised and recognised for the positive contributions they played in delivering effective governance to the Department, with IPDC, GARAC and NomCom highlighted as being highly valuable.

Many of our NEDs are leading figures in their respective fields, so to have access to their level of experience gained from both the private and public sector, is a massive benefit for the Department. The NEDs provide objective advice in a pragmatic way, blending best practice from the private sector with a clear understanding of the machinery of Government and context which Civil Servants operate in. For the most part the positive impact that NEDs have within Departments goes unrecognised, greater transparency on their impact could also be provided via the use of Department’s Annual Report and Accounts, which could include more information on their roles and specific key pieces of work.

Despite the mutually positive experience and relationships that the Department has with its NEDs, the Department is aware of the everchanging landscape that Government Departments need to operate in, and the flexibility that this requires. For example, in the current operating environment expertise in new ways of working, change management and digital innovation are likely to be in demand.  Furthermore, while the importance of NED diversity in general and specifically race and gender is well established, diversity in terms of region, disability and age for example, is less mature and should be improved. The diversity of thought and insight people from these groups could bring to Boards should help to engineer efficiencies, innovation and change in the future in line with Government priorities.

To help facilitate the diversity of NEDs going forward, the Department continues to appoint its NEDs via open and fair competition, adhering to the Corporate Governance Code for Central Government Departments, and following the spirit of the related Governance Code for Public Appointments. Participants in the Board Effectiveness Evaluation were enthused by the recent strengthening of the NED team, and its consequential effect on diversity of background, skills and experience.

Having such access to senior industry figures who provide advice, share experience and expertise and provide challenge in such an unfettered way is a huge positive for the Department. Our NEDs undertake many additional activities both for the Department and in cross Whitehall forums, and certainly go over and above the time commitment in their Terms of Appointment providing great value for money.

July 2022