I beg to move,
That this House takes note of the 4th, the 7th to the 9th, the 12th to the 34th and the 36th to the 42nd Reports, and the Second Special Report from the Committee of Public Accounts of Session 2005-06, and of the Treasury Minutes and the Northern Ireland Department of Finance and Personnel Memoranda on these Reports, Cm 6699, 6728, 6743, 6766, 6775, 6789, 6843, 6863 and 6884.
It is a pleasure to welcome Members to the Public Accounts Committee debate, albeit a bit late. In view of the late hour, we should perhaps question whether our procedure in years gone by, when we had an annual debate, was not a better way of generating interest, but we can no doubt pursue that later through the usual channels. I am sure that the debate will be interesting. We will potentially be here until a quarter to midnight—and why not? This is a very important subject.
The last such debate, which took place in January, was considered worth while by Members in all parts of the House. We examined the Committee’s work in driving value for money in public services, and the encouraging assurance was received from the Financial Secretary to the Treasury that the Committee would make an important contribution to the 2007 comprehensive spending review. Given its continuing preference for objectivity over partisanship—not something for which this Chamber is generally noted—the incisiveness of our investigations and the quality of our reports, thanks to the help of the National Audit Office, I hope that today’s debate will act as a powerful engine for both discussion and change within Whitehall.
The Financial Secretary described as a tour de force the paper on delivering efficiency savings that we published before the last debate, and I understand that it is now widely used in Whitehall. I will quote widely from a report that we published only today, entitled “Delivering High Quality Public Services for all”. I hope that it, like the last generic report, will be widely used in Whitehall.
I am of course proud to be the Chairman of the Public Accounts Committee, which is the oldest Committee in Parliament. Until recently, we thought that it was set up by Gladstone in the 1860s, but I have done some research and I found that a Public Accounts Committee met as long ago as the 17th century. For instance, in 1690 the Public Accounts Committee, which, I am afraid to say, was not friendly to the regime of James II—I regret that, as a Jacobite—reported that:
“The ships built, rebuilt and repaired by these commissioners were fully and well performed, and the buildings and other works by them erected and made during the continuation of the same commission were done with great exactness, sufficiency and frugality of expense in the managery and conduct thereof.”
I have searched for a Treasury minute in reply to that excellent report, but I have not found one. I am sure that that incompetence is entirely due to the current Treasury team—three and a half centuries later and we are still waiting for a reply to the PAC report of 1690.
I rise because the hon. Gentleman mentioned 1690. Is he aware that many of my constituents demonstrate regularly to celebrate an event that took place in that year—indeed, many demonstrate against events that took place in that year—but that none of them demonstrates to celebrate the anniversary of the PAC?
Well, we have obviously failed to make our mark. But of course, we live nowadays in times when venality is not an issue in public life, is it? The Committee to which I referred earlier looked at the affairs of Pepys’s friend Richard Cooling, the Lord Chamberlain’s secretary, no less, who
“told us his horse was a bribe, and his boots a bribe; and told us he was made up of bribes…and that he makes every sort of tradesman to bribe him; and invited me home to his house to taste of his bribe-wine.”
That is one of the problems that that Committee dealt with.
Given that the hon. Member for Glasgow, South-West (Mr. Davidson) takes an interest in the Royal family, I shall point out another such debate that I found. The Committee took place on the Floor of the Whole House and, according to the journal of the House of Commons,
“Some expressions were frequently used which seemed to glance at the licence and disorders and extravagant expense of that place”—
“not without some reflections which, aimed at the lady”—
I do not know who she is—
“and the exorbitant power exercised by her and this imperious way of proceeding, confirmed those in their wariness who had no mind to oppose or contradict the party that they would and meant should prevail.”
So we think that the Public Accounts Committee has been holding the court and the Government to account for the best part of three or four centuries, and we continue to do so.
For instance, only this year we published 31 reports—at least twice as many as any other Committee—on a range of vital issues since the last debate. We found, to take one example, that as of September 2005, one third of our armed forces were not as ready as they should have been, and we called on the Ministry of Defence to clarify its plans for bringing the armed forces back up to required readiness. A plainly ridiculous situation was also uncovered whereby massive overpayments were an inherent part of the tax credit system. In short, whoever designed the scheme—perhaps it was the Treasury, although I do not know—knew that it would lead to overpayments before they even introduced it. This created a worrying situation for hundreds of thousands of vulnerable families who had to find money to finance repayments.
It has to be said that many people have been helped by tax credits, and I acknowledge that. However, many families have been made sick with worry about the need to pay back money that they do not have money that they have been given and have now spent. With more than £1 billion lost through claimant error and fraud in 2003-04 alone, money is leaking from the tax credit system faster than the water from London’s antiquated pipes.
We have also concluded that consular service staff have shown tremendous dedication and determination in helping British nationals in distress, and we pay tribute to them. That is particularly in relation to the nine major overseas emergencies of 2005. In the same report we recognise also the steps that have been taken by the Foreign and Commonwealth Office to improve its emergency plans, especially in the light of its experience during the tsunami, when its call-handling system was overwhelmed.
We are also, I am afraid to say, the Public Accounts Committee for Northern Ireland while Stormont is suspended. We took evidence from the Department of the Environment on the problems that had been developing in implementing a waste management strategy for Northern Ireland. In particular, we took the Department to task for failing to show strong leadership under the greening Government initiative. It responded by agreeing to establish waste reduction and recycling targets equivalent to its Westminster counterparts.
We found again and again that the quality of governance in Northern Ireland has been below par compared to the rest of the United Kingdom. It is a hugely over-governed part of the United Kingdom and perhaps too much emphasis, understandably, has been placed on peace and security, and not enough on good governance. I was talking to a Minister in the Northern Ireland Office this evening, who assures me that that is now changing and that the Department is trying to achieve the same sort of value-for-money targets in Northern Ireland that have been the norm in the rest of the United Kingdom. That is to be welcomed. I hope that the Treasury will keep a close eye on what is happening there.
A number of our findings have reached the very top of the news agenda. Even today, I think that we might be making the news. April was the Committee’s highest-profile month given the number of articles published. This was largely the result of revelations regarding foreign national criminals. According to The Daily Telegraph,
“this tale of incompetence has come to light only because of the assiduity”—
those are the words that are written above the door of the Committee’s Chairman, apparently put there by Gladstone—
“of the Commons Public Accounts Committee, one of the few agents of public accountability we have left in our neutered democracy.”
My hon. Friend the Member for South Norfolk (Mr. Bacon)—I pay tribute to him—was rightly afforded special praise for his persistent pressing on this issue, not least by Ministers, who congratulated him. The former Home Secretary, the right hon. Member for Norwich, South (Mr. Clarke), was a big enough man to acknowledge the role played by my hon. Friend. When people say that the only route that is worth while in this place is to be either a Minister or a shadow spokesman, they should bear in mind my hon. Friend, who has devoted his parliamentary years to serving on a Select Committee. That shows what can be achieved on Select Committees. We are grateful to him.
Other reports that we have published have received a large amount of publicity. One such report is the cancer plan. Our reports on health are always of great interest. We have produced reports on our railway stations, the Diana fountain and many other matters. How instructive it is in our celebrity-obsessed society that we can waste billions on fraud and error in the Department for Work and Pensions, but if we are lucky our report will reach page 15 of the Financial Times. If we talk about a paltry £1 million or £2 million wasted on a concrete memorial in Hyde park, we have wall-to-wall coverage in all the newspapers. That is something that we have to live with.
I have been especially encouraged by the Government’s acceptance of the Committee’s recommendations. The Department of Health accepted the need to provide all cancer patients with a formal assessment of the support that they need to manage the pain, stress, and anxiety caused by their cancer. The Department for Education and Skills agreed to review the curriculum after we recommended that school lessons be made more relevant to pupils who were reluctant to attend school.
In all, 94 per cent. of the Committee’s recommendations were accepted by the Government. I am delighted to pay tribute to the Treasury and the Treasury minutes in ensuring such a high strike rate. But we have to ensure that our recommendations are not just accepted but implemented, and we want to do more work with the NAO on that.
We would not be influential were it not for the quality and dedication of the Committee’s members and staff. I pay tribute to Mr. Nick Wright and his colleagues for all the work that they do. I thank those who have left the Committee since the last debate—the hon. Members for Bristol, West (Stephen Williams), for Hemsworth (Jon Trickett) and for Orkney and Shetland (Mr. Carmichael). I also welcome those who have since joined—the hon. Members for Islwyn (Mr. Touhig), for Mid-Dorset and North Poole (Annette Brooke) and for Southport (Dr. Pugh). All the other existing members continue to work hard, to hold the Government to account and they all deserve congratulation, and I give it.
I also pass on the Committee’s regards to all its staff and their continuing commitment to the Committee’s work, and of course, and not least, to the NAO, whose professionalism and impartiality make our work possible. One of my ambitions in the time left to me serving on the Liaison Committee and chairing this Committee is to see other Select Committees make more use of the NAO. In the past, there has been a tendency for the PAC to be too possessive about the NAO, and we should use it more as a resource to help other Committees hold Government to account, particularly on the estimates and expenditure account side.
The trouble is that the scope of the Committee’s work is so wide-ranging that I could just go around a series of disjointed issues, but one issue in particular stands out. As the Government look forward to the 2007 comprehensive spending review, so the debate on the effectiveness of increased spending on public services in recent years gathers pace. This is now central to our democracy, particularly as apparently the two parties are growing closer in ideology and there is more and more emphasis on how to deliver more efficient public services, given the increased resources that are devoted to that.
To contribute to that debate, I want to discuss the extent to which increased investment in public services is meeting what should be the most important test of its effectiveness: its impact on the end user—such an obvious remark, but something that may not always be at the forefront of our minds in political debate. I want to highlight six key ingredients of user satisfaction with public services. They are all very topical and they are all contained in the 63rd report that we published only this morning. Those six key ingredients indicate where public money has been spent well, and where there is still some way to go. They feed, I hope—and I hope that the Minister will respond to this—the Government’s fundamental review of public spending priorities.
I start by quoting paragraph 18 of the report. It is a significant paragraph and I hope that the Government take note of it. Bear in mind that this is an all-party report, agreed by 15 Members of the House of Commons. It states:
“Public bodies also need to consider how the structure of organisations can affect the planning and delivery of services. The public sector becomes more complex as it grows in size, as the commissioning of new projects and services leads to overlap between departments. For example, if a new agency is created to tackle childhood obesity, headed by a government-appointed ‘tsar’ and equipped with a small office staff, its powers and field of responsibility will overlap with those of other departments, such as the Department of Health, local education and strategic health authorities. As the agency becomes embedded within the overall government framework, its interaction with these other departments will evolve to ‘iron out’ overlapping provision, but there will nevertheless be a time period in which less-efficient practices occur. The more rapidly the government decides to expand the public sector the more likely this is to occur. Political pressure to establish or expand the public provision of a service as quickly as possible will increase the likelihood of such projects being ill-defined and poorly planned, wasting public money in the process and possibly slowing down improvements.”
I particularly recommend that paragraph to the Minister.
Let me quickly go over the tests. First, the most basic requirement of a public service is that it should be accessible, but too often that is not the case. The Committee uncovered a wide geographical variation in the use of National Institute for Health and Clinical Excellence-approved cancer drugs, including those for breast cancer, across the country—again, there was a lot of publicity and public interest. We found that people in some less affluent parts of the country—typically the north—may lose out when it comes to cancer care, because cancer networks in some deprived areas lack comprehensive service plans.
Access to public services can also be affected by complexity in how services are delivered. For example, complicated processes can deter people from claiming benefits. Language is another potential barrier preventing people from accessing public services, but it is an area in which the Government are making progress, which the Committee has acknowledged. Our report on adult literacy and numeracy highlighted progress in reaching those with language needs, thanks in part to the increased Skills for Life budget. There has been progress, but more can be done.
Secondly, once demanded, public services should be delivered as promptly as possible. Failure to do so can cause inconvenience, hardship and disruption, and, at its most serious, put lives at risk. Over the years, the Committee has repeatedly highlighted the importance of getting it right first time in benefit decision making, which means making decisions quickly and accurately to guard against clogging up the system with appeals and revised benefit assessments.
Thirdly, public services should respond to the needs of users, which is obvious but is not always done. Failure to take into account what people want can result in unsuitable services that cause inconvenience, dissatisfaction and, sometimes, hardship for users. To design services around the needs of users, providers must first have a thorough understanding of what users want. Incidentally, all these points are illustrated by practical examples in the report, but there is no time to go through them now.
Fourthly, public services will ultimately fall short of expectations if users and providers fail to communicate effectively with each other. Call centres are one increasingly common way for people to communicate with public bodies, but they are also an increasingly common cause of frustration and dissatisfaction with public services. Our investigation of tax assessment found that some staff on telephone helplines lack the detailed knowledge to respond consistently and accurately to inquiries.
Fifthly, public services need to set and meet high standards. One way to improve the quality of public services is to introduce appropriate incentives and targets. For example, the Committee recommended the greater use of financial penalties to drive up the standard of facilities in Britain’s railway stations. I was so appalled by the disgusting state of Market Rasen station in my constituency that I brought my own incriminating photographs to the hearing, where a panoply of highly paid members of the railway establishment were in front of the Committee. My photos of waiting room graffiti captured the squalor pretty well and, although I do not have the photographic genius of Robert Capa or the hon. Member for Great Grimsby (Mr. Mitchell), they made a difference and things have changed. Standards in public services can also be improved by involving public service providers that are capable of meeting the diverse needs of different groups in society.
Finally, even if standards are world class, people will not be happy if services cost what they consider to be too much. As a consequence, providers must publish, publicise and contain costs. And users of services need to know about the costs that they will incur. People must be told how much they will pay when, for example, they contact a public service by telephone. It is also important that money is not wasted. Some money never makes it to a programme’s front line, because it is swallowed up in management costs. For example, about one third of Learn direct funding went on overheads in 2004-05, and the Committee urged UFI—the University for Industry—to channel that money towards learners instead.
By outlining the Committee’s recent findings on users’ experiences of public services—some positive, some negative and some highlighting areas for improvement—I hope that we have contributed to the debate on the effectiveness of increased spending on public services, which is helping to inform the Financial Secretary’s work on the comprehensive spending review.
In my final few minutes, I want to move on to explore some important developments in other aspects of the stewardship of public money. In January, the Comptroller and Auditor General issued a disclaimer on the Home Office accounts, which were not only riddled with errors but delivered too late for his staff to audit in time. Such a disclaimer is virtually unprecedented in relation to a great Department of State. It is extraordinary, not to mention deeply concerning, that such an organisation should fail so spectacularly to render its accounts to Parliament.
The Home Office invited yet more accusations of incompetence following the Committee’s inquiry into returning failed asylum applicants. The sheer perseverance of the Committee, particularly my hon. Friend the Member for South Norfolk, brought this to light. We not only highlighted a serious immediate threat to the well-being of the public but pointed to what the former Home Secretary was compelled to describe as “a serious systemic failure” in his Department’s ability to understand what was happening with foreign national criminals. The Government aim to address the clear need to improve the performance of Departments for their departmental capability reviews. I look forward to assessing those reviews and their implementation in the coming weeks and months.
We welcome the other developments that will give the Comptroller and Auditor General more opportunities to ensure the wise spending of the nation’s money. It is encouraging that HM Treasury has asked the National Audit Office to review the economy, efficiency, and effectiveness with which the Financial Services Authority has used its resources when discharging its statutory functions.
We note the progress of the Company Law Reform Bill, which will give the Comptroller and Auditor General the right to audit non-departmental public bodies that are companies. We are pleased to see the continuing progress of the National Lottery Bill, which will finally give the CAG access to the information that the National Lottery Commission holds for the purpose of vetting people involved in running the national lottery.
We always return to the BBC in these debates—and why not? The Committee would like assurances regarding the CAG’s access to the BBC and to central Government money channelled through local government. It is with great interest that I note the discussions between the Department for Culture, Media and Sport and the NAO regarding the establishment of a baseline against which to judge the BBC’s future efficiency programme. I welcome the Government’s recognition that the NAO should have an expanded role in assessing the BBC’s value for money, but I urge them to do more to enhance parliamentary scrutiny of the BBC. It is ludicrous that the CAG should not have freedom to select the topics that he wishes to examine. We cannot have a situation whereby what is in effect a public body is spending £3 billion-worth of public money, and the main external auditor on the behalf of the taxpayer—the CAG—has to go cap in hand to the BBC to agree a programme of investigation. He should have the right to go where he wants. As the Government introduce different funding mechanisms for local government through local area agreements, it is imperative that proper parliamentary accountability of these funds remains.
Following the Committee’s recent visit to Washington DC, where Congressmen have far more power over appropriation than we do, it is clear that there is scope to improve parliamentary scrutiny of Government spending plans. We wrote as a Committee to the Chairman of the Liaison Committee, the Father of the House, who is also a member of our Committee—I pay tribute to his work on it—proposing that departmental Select Committees devote more time to the scrutiny of expenditure plans. We also drew his attention to the willingness of the NAO to provide support for that. We discussed this in the Liaison Committee last week—I hope that I am not giving anything away—and interest was expressed. The Hansard Society has published a report on the subject, and we have our own PAC report on it. I agree that we will never—or not rapidly—move to a situation whereby we are like Congress, where the President proposes but ultimately Congress disposes, with line- by-line control of the budget.
Nevertheless, there must be some progress towards returning to Parliament’s traditional role. I cited the 17th century, when this sort of debate produced a civil war. Nowadays there is virtually no line-by-line scrutiny of the estimates. That is a worrying shortfall in what Parliament’s work should be about. If we can provide other Select Committees with more help from the NAO, we will not magically persuade the Government suddenly to give Select Committees line-by-line procurement powers. However, if they can at least set up the processes and have the knowledge, it might be possible for the Government, or a future Government, to start creating more interest in the appropriation procedure and business. Parliament is fundamentally about that and was set up to perform that function.
I have given a brief outline of the Committee’s valuable and challenging work in the past six months. I expect our work in the next six months to be just as challenging and, I hope, valuable, with investigations into a wide range of topical issues, including NHS financial management.
The hon. Gentleman has led the Public Accounts Committee with distinction, and some of the reports satisfied Parliament about the economy, efficiency and effectiveness of public expenditure in five sixths of the United Kingdom—the country of England. Does he believe that he has adequate powers to focus on the public expenditure that is funded by the generous Barnett formula in Scotland, Wales and Northern Ireland?
The Public Accounts Committee in Scotland is good. When the Conservative party was in power, it introduced the internal market into the Scottish health service. It surprises me that Public Accounts Committee reports do not mention the public sector’s purchasing power. There were 32 different prices for cornflakes, and the Conservative Government extended that to beds, bandages and breakages. The internal market in the health service gave the private sector a licence to print money. Does the hon. Gentleman agree that the public sector should standardise its purchasing policies, whether in local government or the health service, for chairs, beds, pens, tables and so on?
Of course I agree. I give the Government credit for setting up the Office of Government Commerce. There has not been time to deal with that vital issue in my few remarks but we all agree with the hon. Gentleman that what he outlines is an extraordinarily important part of saving public money, and that a great deal of progress remains to be made.
In the next six months, we shall consider NHS financial management, the Rural Payments Agency, including the single payment scheme, which had all sorts of problems, and the Child Support Agency. Our distinguished Committee has been a force in ensuring that taxpayers’ money is spent wisely and effectively. I commend its work to the House.
One of the frustrating aspects of the Committee’s work is the time lag between our hearing, the subsequent reports and the Treasury’s response. In January, when Public Accounts Committee reports were previously debated on the Floor of the House, I found myself, as a new member of the Committee, in an interesting position because I had not participated in any of the hearings on the reports that we were discussing.
Today, however, I have seen the process through with many of the reports, from the initial National Audit Office report, through the PAC evidence sessions, to the publication of the report and the Treasury response. It helps when we see the whole picture. However, it requires an efficient filing system because it is impossible to retain in one’s head the burning issues that we discuss at hearings. If one does not keep a good record in notes, the issues can get lost in the mists of time, because we meet twice a week to consider a most diverse range of subjects—unlike other Select Committees, which, as the hon. Member for Gainsborough (Mr. Leigh) said, home in on a specific aspect of a particular Department and spend several weeks delving into minute detail.
We, on the other hand, fly at 30,000 ft, twice a week diving down and swooping back up to move to the next Department and the next subject. Although that approach means that we cover much ground, it sometimes feels a bit superficial. I am pleased that, in the past year, we have spent some deliberative time outside hearings, trying to pull together some common themes. I should like us to do more of that.
Our most recent session, when we reviewed the work programme of the National Audit Office for the next couple of years with Sir John Bourn, was most valuable. Our work is a partnership with the NAO. I particularly welcome the new appendix to that report, which looked at the risk factors involved in the various areas that the NAO was considering.
It is easy for us to get on our hobby horses when deciding what issues we shall hold hearings on. We all have our pet projects and our pet Departments. However, our time is limited, and we should prioritise our hearings to cover the areas of highest risk. Time and again, we criticise Departments for not taking a risk-based approach, so it is only right that we too should take such an approach to our work.
While reviewing our work over the past six months, I should like to pay tribute to the Chair of our Committee, the hon. Member for Gainsborough, who has, as ever, been assiduous, courteous and charming in his chairmanship. I would also like to thank Nick Wright for his invaluable help as our Committee Clerk, and all the staff at the NAO.
We have a wealth of reports before us today demonstrating the sheer scope of our work, which reaches into every Department, enabling us to fulfil our function of ensuring that the taxpayer is getting value for money, exposing weaknesses and recommending improvements in the process—but of course not the policy—of government. As a member of the party that is in government, I see my role as that of a critical friend. I of course believe that the policy is right; I therefore have a vested interest in making sure that it is delivered effectively. Because of that, I want to focus on two reports today. The first is the 17th report, “Achieving value for money in the delivery of public services”, from which I want to pick up on the theme of complexity, and move on to the 36th report, entitled “Tackling the complexity of the benefits system”.
Before I home in on those reports, however, I want to say a few words about the Committee’s visit to Washington and Boston earlier this year. Once again, I must thank the Committee staff, particularly Nick Wright and Christine Randall, who accompanied us and made sure that we were all in the right place at the right time, even the hon. Member for South Norfolk (Mr. Bacon), who usually managed to be last. It was interesting to see the different approach taken to financial oversight there. In many ways, that reflected the different structure of a separately elected President and his Executive, who can be in conflict with the separately elected Congress. That is all very different from our parliamentary system, in which the Executive derive their power from their majority in Parliament.
It would not be easy to replicate the financial scrutiny and overview of the American system, but like the hon. Member for Gainsborough, I certainly came away thinking that there could be improvements in the way in which Parliament undertakes financial scrutiny of future expenditure plans. I am looking forward to the responses from the Liaison Committee, the Modernisation Committee and the Public Accounts Commission to the proposals put forward by our Chair for departmental Select Committees to devote more time to the scrutiny of expenditure plans.
I shall move on to the two reports on which I want to focus today. The 17th report, “Achieving value for money in the delivery of public services”, is fundamental to our work in the Public Accounts Committee. Incidentally, I believe that the report that was published today is also fundamental, but I understand that it is outside the scope of the motion, so I shall not refer to it. The 17th report is an example of how we have consciously stepped outside our role of diving in from 30,000 ft and tried to draw together wider themes over a 10-year period. We deliberately chose a 10-year period so that the report would straddle different Governments and phases of government.
One of the encouraging things to come out of the report is that the great majority of the Committee’s recommendations over the years have been acted on. Despite that, however, it is disappointing to note that lessons do not seem to have been learned across other Departments, as the same themes come through in different reports. Seven factors have been identified as needing greater progress, but I shall concentrate on just three: the lack of adequate project management; the fact that there are not enough pilot schemes prior to implementation; and the need to reduce complexity and bureaucracy.
In our last debate in January, I drew attention to the importance of project management, particularly in regard to Ministry of Defence major projects. That is reinforced in this report, which highlights the MOD support vehicle projects, in which the Department decided to proceed without a formal assessment phase, resulting in a slippage of 19 months. This was not because the Department lacked a proper procedure. The smart acquisition procedures were in place; they were simply not acted on.
There is an example in the report from my own constituency. The Home Office had allocated funding to the Portsmouth Partnership for a CCTV and automatic number plate recognition system in December 2002, but required the funds to be spent by the year’s end. The subsequent rushed procurement and lack of testing meant that the new systems were not operational until August 2003. There needs to be recognition at departmental level of the practicalities involved in implementing recommendations on the ground.
When we look at pilot projects we see in many reports that either they have not been used or, if they have been used, lessons have not been learned from them. Pilot schemes are crucial for picking up practical issues that may not be apparent in the design stage, but they are of no use if the results are ignored.
I quite agree that there are instances of pilot projects working well. There is an example in one of our reports of good practice in the Treasury building project, demonstrating how advance planning can reduce risk. I am saying that there have been instances where pilot projects have not worked very well or where lessons have not been learned. If we look at the potential schemes for individual learning accounts in the Department for Education and Skills, we see that during the pilot stage none of the schemes worked, so a completely different scheme was implemented which had no testing at all and was rushed through, resulting in a system prone to fraud which cost the taxpayer about £67 million.
Moving on to reducing complexity and bureaucracy, we come up against an inevitable tension between the Government policy of targeting public money at those most in need and the inevitable complexity that that brings. Sometimes the complexity and bureaucracy go beyond that tension, and our report highlights the South East England Development Agency in my region, where there were more than 40 different funding streams, each with separate monitoring and evaluation criteria. That led to SEEDA having to set up a brand new initiative just to help applicants wade through the process.
Our 36th report focused on complexity in the benefits system. As I said, complexity is inevitable when one targets benefits as well as preventing fraud and abuse and making sure that public money goes where it is most needed. The immediate response is, “We must simplify things,” but as our report points out, simplification is not an easy option, and it means a trade-off with affordability, fairness and targeting. That is not to say that there is not much more that can be done.
Let us consider the letters sent out by the DWP. Our report highlighted the difficulties that people have had with written communications, as well as the fact that nothing has improved much over the past six years. I am sure that I am not alone in having constituents at my advice centre who have struggled through the complexity of applying for the benefits to which they are entitled, only, when they get those benefits, to receive letters that they simply do not understand.
Was my hon. Friend surprised by the evidence that we received that potential recipients of benefits which other Departments were implementing would not receive that advice because it was a DWP project, rather than taking a holistic approach, with people attending advice sessions at which they could receive advice from different Departments, which seems the obvious thing to do?
I agree with the hon. Lady that the complexity of the benefits system is to a certain extent inevitable if there is targeting, but one of the consequences is that organisations such as Citizens Advice have a great increase in their work load. Does she agree that it would be reasonable, in introducing changes to the benefits system, to give some resource to the Citizens Advice to enable it to cope with the inevitable increase in its work load?
I know from when I was a councillor that citizens advice bureaux get considerable resources through service level agreements with local authorities. They do a tremendous amount of work. We should take note when Citizens Advice tells us of the problems that it has. In 2003-04, citizens advice bureaux dealt with 1.3 million cases relating to benefits and tax credits. Citizens Advice acknowledges that some progress has been made, but says that it is still seeing too many people who are missing out on the money to which they are entitled.
Similarly, the Child Poverty Action Group acknowledges the inherent complexity in targeting benefits, but points out that it is made worse by poor delivery, which the Department can do something about. In our report we highlight the importance of highly skilled, trained staff, and at our hearing I asked the permanent secretary why a human being could not review the computer-generated letters that went out and, if necessary, write an explanation on the bottom in plain English. If a letter lists all the benefits to which one could be entitled, but it actually means that one is not going to get any money, it would be a lot easier to understand if that were written on the bottom.
Of course, the use of IT, telephone and other communication technologies will aid simplification. We must be aware, however, that some people will always need face-to-face advice, and we must make sure that our staff have adequate training to do that.
Given the importance of preserving that human face, does the hon. Lady share my concern that the savings proposed from front-line staff at the Benefits Agency should not go too far too quickly? We should not throw people on the mercy of a complex computer system without a sufficient number of staff to guide them through that complexity.
It is important that we make sure that the IT systems are in place first, but I would be the last to say that we should not make savings and process benefits more efficiently. We must, however, put the user at the forefront. Efficiency savings and simplification must be delivered for the benefit of the user, and not necessarily for the benefit of the Department. The user must come first. Claimants and applicants must get the benefits of the simplification.
The most important outcome of the inquiry into the complexity of benefits is the setting up of the simplification team, which will develop the simplification strategy and then be able to challenge all new policy proposals on the grounds of complexity. At our hearing, I was encouraged when the permanent secretary said that he hoped to come back in one year and show a demonstrable difference in the level of complexity. I was dubious, however, about how that would be possible, when a clear set of performance indicators had not yet been devised. I was not quite sure how that improvement would be demonstrated. Sadly that was borne out in the Treasury response:
“Because of the difficulties with developing such a measure, the Department cannot commit at this stage to producing one by 2007”.
However, I am pleased that the Department nevertheless undertakes to keep the Committee informed of progress.
Measurement of progress brings me back to our visit to the USA. For me, one of the highlights of the trip was our visit to Harvard Business School and our opportunity to debate with four of its professors. It was a huge privilege to listen to them. I was especially interested in the concept of the value chain in delivering public services and how, all too often, we are focused just on inputs, activities and outputs, and we forget the next two items in the value chain—outcomes and impacts. I have no problem with targets. I come from an industry background where total quality management was the norm, and one of the first lessons in any quality system, whether Six Sigma, TQM or whatever is fashionable at the time, is that one must be able to measure.
One must have a mechanism to show whether one is meeting one’s defined standards. Delivering public services, however, is not the same as manufacturing widgets, and our standard must be more than just the measuring of inputs, activities and outputs. We must also have a means of assessing outcomes and impacts. The difficulty arises because those are often long-term outcomes and impacts, and the Government are under pressure to find ways in which to demonstrate progress quickly.
Yesterday, I visited my out-of-hours GP service, which had failed on a measurement criterion to get overnight reports to the relevant GP by 8 am the next day. One might say that that was fair enough, but the fact that it had extended its service until 8 am and could not get reports to GPs by 8 am because patients were still being treated at that time had not been taken into account. Yes, it had failed on the raw output target, but it was delivering a better outcome.
That brings me back to those Harvard professors. One concluded with a quote from Nietzsche:
“The most common form of human stupidity is forgetting what we are trying to accomplish”.
As members of the PAC, we should keep in mind what we are trying to accomplish. I hope that we will consider outcomes and impacts as well as inputs, activities and outputs when we scrutinise the cost-effectiveness of Government policy.
It is a great pleasure to take part in the debate and to follow the hon. Member for Portsmouth, North (Sarah McCarthy-Fry). I, too, greatly enjoyed the visit to Harvard Business School and would commend it to anyone. I hope that before long the Government also go there and listen to the professors.
My hon. Friend the Member for Gainsborough (Mr. Leigh) referred to my role in the exposure of the foreign national prisoners scandal. I do not propose to say anything about that in this debate, but merely to make one comment about the former Home Secretary, the right hon. Member for Norwich, South (Mr. Clarke). I consciously and deliberately did not call for his resignation over that matter, and I was sorry to see him go. Some may say that his departure became inevitable, but I continue to have a high regard for him and I think that what has happened in the Home Office since then demonstrates that the problems go much deeper than the issue of one Cabinet Minister. I pay tribute to the right hon. Gentleman for the work that he did during his time at the Home Office. “Oops, sorry, I did not mean to destroy your Cabinet career,” is not necessarily the most welcome thing to hear from a parliamentary opponent, and that was not my intention. I can only repeat that I have a high regard for the right hon. Gentleman, and I hope that he will continue to make a contribution in this place.
Nevertheless, as was pointed out by my hon. Friend the Member for Gainsborough, there is a serious problem with the Home Office that goes well beyond one issue connected with the immigration and nationality directorate. My hon. Friend said that the Home Office had been unable to present a set of audited accounts to Parliament. There have been the most serious problems possible with the Home Office accounts. They were flagged up in a memorandum from the National Audit Office to the audit committee of the Home Office, entitled “Home Office Resource Accounts 2004-05 Audit Update from the National Audit Office”.
I pay tribute to Mr. Darren Box, financial audit director at the National Audit Office, whose persistence caused the seriousness of the problems to come to light. His memorandum to the audit committee states
“At this stage we are contemplating a disclaimer opinion on the accounts on the grounds that fundamental control failures mean that we are unable to form an opinion on whether the accounts are true and fair and whether expenditure recorded in them is regular.”
The memo continues:
“The accounts display a very limited understanding of how different figures within financial statements relate to one another indicating skills and experience deficits within Accounts Branch.
The accounts showed little evidence of meaningful management review at any level.
With the notable exception of IND, there is no evidence of the accounts production process being subject to any proper project management disciplines.
Issues raised in our previous management letters have not been actioned and appear not to have been disseminated to relevant staff”.
Later, under the heading “Control Weaknesses”, the memo states:
“In addition to late and poor quality financial statements, serious control weaknesses have also been identified during the audit. The weaknesses include:
IT Controls: There is a lack of security within key IT applications through the absence of unique identification for system administrators, no audit trails, weaknesses in control over standing data”
and so forth.
The memo adds:
“Bank reconciliations are the most fundamental of all accounting controls as they enable payment, receipts and cash balances to be validated to an external source and provide assurance about debtor and creditor balances. Due to difficulties in implementing the Adelphi accounting system, the Home Office has been unable to reconcile its cash at bank position”.
That bears repetition—the Home Office has been unable to reconcile its cash at bank position.
Bank reconciliations are fundamental. They are an essential control over cash to ensure that income and payments recorded in any organisation’s bank account match its accounting records. Matching also provides assurance about debtor and creditor balances—in other words, amounts owed to and by a Department—and can help to prevent and detect fraud and error. What was worse was that the Home Office had not even realised that failure to reconcile cash fully could ultimately undermine its ability to provide Parliament with fully audited accounts.
The memo goes into further detail about the Adelphi accounting system, stating:
“A further cause for concern has arisen from our review of Adelphi transaction data. It took six months for the Home Office to supply us with transaction data that we were able to reconcile successfully to the Adelphi general ledger. However, when the gross transaction value of debits and credits within this data was totalled, they each amounted to some £26,527,108,436,994, almost 2,000 times higher than the Home Office’s gross expenditure for 2004-05 and approximately one and a half times higher than the estimated GDP of the entire planet. This suggests that something has gone seriously awry…We have yet to receive an explanation for what has happened... Collectively, these control weaknesses expose the Home Office to a high risk of fraud, irregularity, poor value for money and waste in its financial operations.”
Given that the Home Office is feeling its way through this incoherent and inaccurate maze of figures that underpin its performance and direction, can the hon. Gentleman suggest why it is so certain that savings that are available under contestability and outsourcing are sufficient to apply those two techniques on a grand scale to the National Offender Management Service?
I do not think that I can. Many of the so-called savings to be found under various aspects of Government efficiency programmes—had we been in office, they would probably have been found under the James committee savings—are very questionable. A different example, with which the Financial Secretary will be only too familiar, is that Her Majesty’s Revenue and Customs is busy sacking fraud staff, who were bringing in many hundreds of times their own salary in some cases, in order to meet rather spurious targets. However, I will not dwell on that.
The result of all that activity was that the Comptroller and Auditor General, Sir John Bourn, was unable to reach an opinion on the truth and fairness of the Home Office accounts for 2004-05, so he disclaimed an audit opinion. It is worth explaining what disclaiming means. A disclaimer is not the same as a qualified opinion. We are familiar with the idea of qualified opinions—for example, because of concerns about fraud and error, there has been a qualified opinion on the Department for Work and Pensions’ accounts since 1988, which specifies the particular aspects, such as housing benefit fraud, income support fraud or whatever, that are the subject of concern. The same happens with the European Court of Auditors in respect of EU accounts. However, that is not what I am talking about. This is Sir John Bourn, an Officer of the House, telling Parliament that he has no information at all with which to form a view. The accounts were presented to Parliament unaudited.
Irrespective of whether we are talking about a public or a private sector organisation, that is an almost unbelievable state of affairs. It is hard to imagine any private sector organisation—whether it be a golf club or a multinational corporation—for which that would fail to lead to enormous consequences. The Home Office cannot say with any certainty how much it spent during the year, what debts it was owed and what it owed to others or what assets it owns. There is no assurance that all expenditure incurred during the year was in line with what Parliament authorised and financial information provided by the Home Office is unreliable. Those are the most basic failures of financial stewardship and control by the accounting officer who is legally responsible to Parliament to account for how moneys are spent.
In that case, the accounting officer failed in his duty to Parliament and one might have thought that the person responsible would have been hauled over the coals, exposed and brought to the Bar of the House to explain himself. What actually happened, however, was that he was promoted to become Deputy Governor of the Bank of England in charge of financial stability in the banking system, which, if nothing else, at least shows that the people who run the country still have a sense of humour.
What I would like to know is where the Treasury is in all that. The NAO memo goes on to state that
“late qualified accounts are extremely damaging to the Home Office’s reputation, particularly with the Treasury who are likely to exercise closer scrutiny over the unaudited resource budget outturn submitted to them each summer.”
What assurances can the Financial Secretary give us about the Home Office’s use of public money? Is the Treasury now keeping a close eye on what happens? What supervision regime is now in place? Is there now a Treasury hit squad inside the Home Office helping to sort things out? How often does the Home Office have to report in and tell the Treasury what it is doing? It has been a disgraceful episode and I hope that it is soon sorted out.
I come to the national programme for information technology in the health service. I do so with some trepidation because I see that the hon. Member for Glasgow, South-West (Mr. Davidson) is in his place. The last time I made a speech on this subject—it was some years ago, I can reassure him—he said that he was glad that there were anoraks in this place who were prepared to devote so much attention to such areas and that he was very glad that he was not one of them. I have to say that the problems have not gone away; if anything, they have become worse. The scale of the national programme is simply huge. As the NAO described it:
“The scope, vision, scale and complexity of the Programme is wider and more extensive than any ongoing or planned healthcare IT development programme in the world.”
It started with the beguiling idea that information technology offered enormous potential benefits for the NHS. Above all, patient records could follow the patient smoothly and quickly around the system, bookings could be made online, and doctors could consult records easily in their surgeries and during their rounds. Managers and clinicians could track and report on the work of hospitals and trusts, on the prevalence of clinical conditions and on the success of the health service in treating them. IT in the NHS seemed to offer nothing short of a revolution. However, the problem was that the revolution appeared to be outside the Government’s control. System standards were being set at the centre, as they should be, but system procurement was happening at a local and trust level.
The hon. Lady may recall that Sir Peter Gershon, when he was at the Office of Government Commerce, negotiated a deal with Microsoft that saved the taxpayer £120 million. As the hon. Member for Livingston (Mr. Devine) said earlier, there have been serious problems with the public sector failing to exercise the procurement power that it has, and I welcome any steps towards improving procurement and using the purchasing power that is available.
In relation to the national programme—in which Microsoft is not involved, by the way—the system standards have been set at the centre, but procurement has happened locally. The whole process must have seemed terribly slow to those who wanted to make things happen more quickly. That was why, some years ago, the Prime Minister called to a seminar the heads of some of the world’s largest IT companies. They told him that there was no problem and that they could design, deliver and install national systems across the entire NHS that would do everything that the most optimistic advocate of health IT could want. Of course, they said it would not be cheap and they quoted a figure of £2.3 billion, but, as the Prime Minister said, up to 600 million pieces of paper would be saved a year.
Thus the national programme for IT in the health service was born and with it a new bureaucracy, Connecting for Health. Promises were made, headlines garnered and giant regional contracts were duly let. However, five years on, where are we? For one thing, the cost of the whole programme has inflated enormously. By 2003-04, £6.2 billion worth of contracts had been placed and, in evidence to the PAC, the director general of IT in the health service, Mr. Richard Granger, told us that the figure is now £12.4 billion. The Minister of State for Health has said that the figure is closer to £20 billion, although there is some dispute about what he is including in that. In any event, those are huge numbers.
Even taking the mean of those projected figures, it suggests an overspend of £12.5 billion, which would fund in total the trust deficits that the NHS is experiencing for more than 20 years, which would take us moderately close to the next Conservative Government.
The hon. Gentleman ends on a very optimistic note, and I join him in that. The fact is that the numbers, as well as being very large, have been very varied. We have heard £2.3 billion; £6.2 billion; £6.8 billion; £1.9 billion of central costs, making a total of £8.7 billion; £3.4 billion of central costs making £12.4 billion; £20 billion; and three to five times central contract costs, which could push the figure to more than £30 billion. The fact that the figures are so vague and varied is part of the problem. The potential opportunity cost is also enormous, as the hon. Gentleman points out.
The National Audit Office put a figure of £3.4 billion on it, although how much that takes into account the full costs is a moot point. One has only to read the board papers of trusts around the country to see IT directors saying that they are incurring costs that they cannot recover, in many cases including costs that they incurred through the old information for health programme that was stopped when the national programme for IT in the health service was started and costs incurred on legacy systems. No matter exactly what the sum is, it is definitely big. One could say that cost overruns are nothing new; they are regrettable and to be avoided, but they happen. However, surely in return for that vast forecast expenditure we would now expect to be on the way towards a world-beating IT system.
As the hon. Lady will know, we have looked at the national programme for IT in the health service a number of times during the last few years and I dare say that there will be future reports. In fact, the National Audit Office has said there will be other reports on it further down the line. It is a matter of enormous importance to taxpayers and, I am sure, to all members of the Committee.
One of the suggestions that has been made by Connecting for Health is that 750,000 prescriptions have been issued by using the electronic prescribing service. One of the slightly alarming facts is that only 1.5 per cent. of those were received electronically by pharmacies and hence dispensed. The rest of them—some 740,000—simply vanished into the ether, never to be seen or heard of again. The thought of thousands of NHS staff typing pointlessly away is a combination of industry and futility that I find rather depressing to contemplate. The reason for that state of affairs is that, where systems were put in place in GP surgeries, the corresponding systems were not put in place in pharmacies, and sometimes vice versa. That is a relatively small example of some of the problems. There are many others.
Perhaps the most important and difficult component of the national programme is the delivery of patient administration and clinical systems into acute hospital trusts. We should by now have 110 acute hospitals with patient administration and clinical systems in place. The actual number is just 12. Of those 12, how many are clinical systems? The answer is none. Not a single hospital-wide clinical system has been delivered under the national programme.
The choose and book system should allow patients to book appointments with doctors electronically. Almost half of all GP referrals—some 8.5 million a year—are supposed to be made under that system by September 2007, but so far we have only 300,000 bookings. The number of bookings can be found on the Connecting for Health website. What is not on the website, but is true, is that by the Department of Health’s own estimate, only about one quarter of the bookings that have been achieved were made truly electronically; the remaining three quarters were made by telephone.
One redeeming feature in this rather grim scene is that most of the forecast cost of the national programme has yet to be spent. So far, total expenditure is about £1.5 billion. That figure of actual expenditure so far was confirmed to the Committee by the director general of IT in the health service. Although £1.5 billion is admittedly rather more than the £654 million referred to in the National Audit Office report, it leaves us wondering what sort of organisation can run up almost £850 million of central administration costs before it has even achieved its main aims. However, it remains true that many billions of pounds have yet to be spent, so it may not be too late to turn back from the road that we are currently on.
That is a crucial point. It is easy to think of NHS IT as a complex and enormously expensive abstraction—as a subject for techies and computer journalists, but not for politicians or the national media. In fact, good IT systems offer enormous benefits to patients and bad ones cause them direct harm. The national programme is therefore an issue of great importance. The US firm Cerner, and its partner Fujitsu, have the regional contracts covering the south of England under the programme. It has recently been reported that Cerner is also to enter into a contract with BT to deliver systems in London after problems with another US software supplier, IDX. The Nuffield orthopaedic centre in Oxford is the only trust under the national programme now using the patient administration system offered by Cerner. I have been shown a board paper from the trust, which shows that the trust failed to meet its waiting list targets because IT system problems meant that it could not identify which patients were waiting for what treatment. The paper, by the director of nursing and operations for the trust, states:
“the scale of the difficulties and the duration of time that the problems persisted meant that operationally it was impossible to maintain assurance that all patients could be identified to be treated within appropriate timescales.”
In fact, the standard of the patient information produced by the software system was so low that all the information had to be checked and corrected manually. In other words, the trust and its patients would have been better off with no electronic system at all.
In Birmingham children’s hospital, the patient administration system was provided by the troubled UK firm iSOFT. A series of problems in Birmingham culminated in the trust losing 800 children’s records in a fortnight. Some of those children turned up for appointments entirely unexpectedly because their records could not be found, while others were presumably not summoned for appointments that they required. To give one more example, the child health system deployed by BT in London lost so many children’s records that the number of vaccinations given to children in the primary care trusts that were even in a position to report any statistics went down by 18 per cent.
Volume 16, No. 25 of “CDR Weekly”, the Health Protection Agency’s journal, stated:
“This is the third quarterly report in which national trends could not be reported due to problems with new child health systems being implemented in London. Comparing the year 2005/6 to 2004/5, the number of children in London who are missing from the COVER programme is nearly 18,000 for children turning 12 months, over 14,500 for children turning 24 months and nearly 19,000 for children turning 5 years of age.”
The number of children getting vital vaccinations for measles, mumps, rubella, polio and so on fell by a fifth. The Health Protection Agency commented:
“If new child systems fail to deliver ... then children risk missing out on vaccination. Thus, they remain unprotected and eventually will catch measles, mumps, and rubella infections.”
The HPA report continued:
“Falls in coverage of this magnitude not only indicate that individual children may be at risk, but also represent a potential major public health threat to the control of the diseases in the community.”
Those are chilling words. It is extraordinary that no clinical systems have been deployed under the national programme. However, on reflection, given the damage that patient administration systems now seem to be doing, perhaps that is just as well. The implications of similar failures in clinical systems hardly bear thinking about.
Finally, I want to deal briefly with the consequences of the crisis in the national programme for IT contractors. Mr. Granger, the programme’s director general, is fond of using blood-curdling metaphors when speaking about IT contractors. He intends, he says, to treat them like huskies—when one goes lame, it is shot, cut up and fed to the rest—apparently, that keeps them keen. However, managing a massive IT programme is not like running a dog sled. I believe that that brand of macho management threatens to bring yet more chaos to an already tottering system.
By the end of March this year, the four major contractors—BT, Accenture, Fujitsu and CSC— had received only £250 million in payments on £5 billion-worth of contracts.
However, their spending in what I believe to be a doomed effort to make the fundamentally flawed system work has been massive. Accenture has wisely already set aside £260 million as provision against losses on the contract, but the remaining three companies have remained strangely silent. By the end of March this year—two and a half years in—BT had received just £1.3 million on its contract of £996 million. My best advice indicates that BT has spent more than £200 million trying to get systems up and running. That amount does not yet figure in its annual accounts. I understand that BT intends to replace its existing software supplier with Cerner, fresh from that company’s poor performance at Nuffield. However, that means that most, or perhaps all, of BT’s work in progress on the existing contract will need to be written off. We have already seen what happened to the software supplier iSOFT, when shareholders—
Order. I am most impressed by the hon. Gentleman’s expertise on this subject, but it does not relate to the matter before us. Although there will be other occasions on which he will be able to raise the problems of the NHS, he must get back to the matter in hand.
Thank you for that guidance, Mr. Speaker. I will rapidly draw my remarks to a conclusion and allow other hon. Members to speak.
The national programme for IT in the health service has been covered by the National Audit Office on several occasions, as I am sure it will be in the future. It is the largest civilian IT programme in the world and a matter of great importance. I hope that it is also of great importance to the Treasury and that the Financial Secretary will find time in his winding-up speech to refer to the interest that the Treasury has in the matter, because the amounts involved are so enormous that they could have huge consequences for the Exchequer, fiscal policy and, indeed, the rest of the country.
It is a pleasure to take part in this debate and, indeed, to serve on the PAC under the benign and good-humoured chairmanship of the hon. Member for Gainsborough (Mr. Leigh). Like him and my hon. Friend the Member for Portsmouth, North (Sarah McCarthy-Fry), I have looked at the 17th report, “Achieving value for money in the delivery of public services”, because every member of the PAC wants the Committee to be effective. We want its work to be used and useful; we want to be sure that lessons are learned and are taken into account in decision making.
The 17th report identified seven key aspects of public service delivery that Departments must target to achieve better value for money: planning carefully prior to implementation; strengthening project management; reducing complexity and bureaucracy; raising public service productivity; being more commercially astute; tackling fraud; and better and more timely implementation of policies and programmes. An example of good planning is the benefit payment card, which is successful as 97 per cent. of benefits are paid directly into people’s accounts and claimants are pleased with it. Another good example is the turnaround at the passport agency.
Turning to project management, there have been many complex IT schemes. Like the hon. Member for South Norfolk (Mr. Bacon), I am generally not a fan of IT schemes, but we have become better at running them. As for the need to reduce complexity and bureaucracy, the Committee has returned to the benefits system as we need to reduce tiers of bureaucracy and the number of institutions delivering public services. Public service productivity improvements include a better use of accommodation in the NHS and the higher education sector. The role of the Office of Government Commerce is vital if we are to achieve the goal of being more commercially astute, and after the reports were produced we looked at the issue again. There is a great deal to be done to tackle fraud in tax payments, and in its examination of policies that need to be implemented better and in a more timely manner, the 17th report looked at the Eurofighter and the Apache helicopter.
In considering whether the reports are used and are useful, I looked at the document that the Treasury published last Thursday entitled, “Releasing the resources to meet the challenges ahead: value for money in the 2007 Comprehensive Spending Review”. I wished to make a judgment about whether the proposal to save 2.5 per cent. and achieve better administration is credible, because last week there was a great deal of scepticism about that objective and many aspersions were cast on it. The Gershon efficiency programme identified five measures to improve efficiency. Inevitably, they are not the same as the measures identified by the NAO, although there is considerable overlap. For example, the NAO and the PAC said that it was important to be more commercially astute, but the Treasury document looked at procurement practices in general. The NAO discussed productivity, but the Treasury document looked at the importance of increasing the ratio of productive time to total time in the public services. The NAO discussed the need to reduce complexity and bureaucracy, but the Treasury document looked at transactional services policy, funding and regulation. In addition, it urged the importance of reducing spending in corporate services. It reported that in recent years, there have been £8 billion-worth of savings as a result of those five measures. However, I am sure that everybody would be more interested in looking forward, so I wanted to see whether examples of the type given in the document issued last week are likely to produce the sort of savings that would result in a 2.5 per cent. saving year on year overall.
On procurement, the examples given are pulling together procurement for several Government Departments and public bodies. For example, the Foreign and Commonwealth Office and the Department for International Development are to collocate many offices. The Department for Transport will promote collaboration between highways authorities on new build and maintenance. The Department for Education and Skills is piloting e-procurement for schools. Lord Carter’s review of legal aid will provide a market-based approach which should produce savings of 20 per cent. over the next four years. In addition to these value-for-money considerations, procurement will need to take account of the decisions set out in the energy review and the need for procurement to be compliant with our climate change objectives in the future.
Turning to productive time, the sort of possibilities spelled out are the major changes in the Department for Constitutional Affairs with regard to the running of the court system, and in the Ministry of Defence the merging of the Defence Logistics Organisation with the Defence Procurement Agency. The Lyons review made recommendations on the use of assets, from which should flow significant asset disposals projected to be £30 billion in the period up to 2010. The Department for Communities and Local Government and the Treasury are to improve the release of land for house building. So there are a large number of chunky examples.
The PAC also considered the reduction of complexity and bureaucracy. It is important to see how that is to be carried forward. Examples include reducing the number of funding streams for improving the social housing stock, and rationalising the number of contact centres and local offices in order to share provision across the public sector and reduce duplication through better data sharing.
The PAC concentrated a great deal on the need to reduce fraud. Improvements are being made to the operation of the Driver and Vehicle Licensing Agency to cut evasion of vehicle excise duty. That is projected to save £140 million a year. The court system is changing the administration of fixed penalty notices, which will reduce the scope for defrauding the public purse.
On implementation, which is another of the overlapping themes, the Department of Health is reviewing systemic delivery issues to improve treatment pathways. That will cut the length of patients’ hospital stays, which should benefit not just the public purse, but patients.
On the two other factors identified by the PAC in its 17th report, improving planning and improving project management, there is no explicit read-across to the plans for the comprehensive spending review. However, the NAO commented on the importance of strengthening Government Departments’ capabilities. That means upskilling staff to raise their capacity to plan and manage complex projects. That is being done partly by upskilling within Departments and partly by strengthening central support and collaboration. For example, the work of the Office of Government Commerce and the introduction of the gateway system, which we have discussed, will no doubt turn out to be important. It could also be said that the process of cross-cutting reviews and zero-based budgeting is part of improving planning and management.
To summarise, when the 17th report by the PAC was published, the Chairman said:
“Given the scale of Government spending just a 2 per cent. improvement in the use of resources could generate savings of £8 billion a year.”
In the forthcoming comprehensive spending review, the Government have gone further, identifying scope for saving 2.5 per cent. a year. Looking at the range of measures and policies, that appears to be completely credible. We have come a long way from the Gladstonian approach—or even the 17th century, candle-ends approach. To achieve that saving, it will be necessary to re-engineer processes and utilise the procurement scope of the £125 billion that the Government already spend. But I am sure that that will turn out to be possible, and that as the PAC goes on to do further work we will find further possibilities that the Government will be able to make use of.
May I start by returning to a point that the hon. Member for Gainsborough (Mr. Leigh) made in introducing the debate? This is no time of the evening for a debate of such importance on matters that are so crucial to the efficient governance of the country. The Public Accounts Committee does a very important job. It produces reports that are of enormous value, and they ought to be given proper and timely scrutiny by the House. That is not achieved by a debate such as this in which, with very few exceptions, the participants are Committee members. I notice that Members present include the hon. Members for South Norfolk (Mr. Bacon), for Tunbridge Wells (Greg Clark), for Glasgow, South-West (Mr. Davidson), for Bishop Auckland (Helen Goodman), for Tooting (Mr. Khan), for Portsmouth, North (Sarah McCarthy-Fry) and for Burnley (Kitty Ussher), and my hon. Friend the Member for Southport (Dr. Pugh), as well as the Financial Secretary, who is nominally a member of the Committee, and its Chairman, the hon. Member for Gainsborough. If this debate is only to be an expanded Committee meeting, it fails its primary purpose. I hope that the Government’s business managers take note of that and ensure that in future we have a more appropriate setting for the debate.
I completely agree with what the hon. Gentleman has just said. If we have to grind on late into the night, I suppose that it is in the best interests of taxpayers that we do so. But has the hon. Gentleman noticed that the Government’s business managers—the Whips—are also Treasury Ministers, and if Ministers on the Treasury Bench are required to stay late this evening, it can only be because of actions of the Treasury itself, and they might think of that in future, before timing a debate in this way?
Let us hope so, but I am not entirely sure that the usual channels work in that way.
Let me pay tribute again to the work of the PAC. Its Chairman used the word “assiduity” in terms of his office. Assiduity is one of those words that nowadays have almost solely a parliamentary usage: no one other than parliamentarians talks of being assiduous, just as no one else talks about being churlish. But it is a relevant word: this Committee is assiduous in its approach to its work, for which we are grateful.
I have never had the pleasure of serving on the PAC, but I did serve on what is perhaps an analogous body before I entered the House. I was an audit commissioner, and I know about the important work that was done by the Audit Commission—the sister body of the National Audit Office—and the importance of our reports in improving the effectiveness and efficiency of local government and the national health service.
The other important point to make is that the PAC’s reports are not all about disasters; they are not all about things going wrong. We need to put it on the record that they often point to good practice, and sometimes even excellence, in public services. If we do not recognise that, we give a false perspective of the Committee’s work.
Having said that, it is inevitable that we concentrate on those areas where the Government are performing less well. We have heard mention of areas that I do not intend to pursue. The hon. Member for Portsmouth, North mentioned Ministry of Defence procurement; that has been a long-term concern of mine and I still do not think that we get it right. However hard the MOD tries to improve its procurement, it does not get it right, and too often there are some absurdities in procurement procedures, which we can ill afford. Not only do they cost money, they reduce our armed forces’ effectiveness and sometimes subjects them to risks that they should not face, simply because of the lack of correctness in procurement procedure.
Nor am I going to go into national health service IT procurement. I assume that the hon. Member for South Norfolk was discussing earlier the 17th report’s reference to NHS IT, and that that was why his entire speech was in order. I want to echo some of the concerns that he expressed by pointing out that when I met my local medical committee of general practitioners in Somerset last week, top of their agenda was their concern about the NHS IT contract’s effect on their practices. We in this House should be aware of that issue.
I do want to mention the Home Office, and I share many of the concerns that have already been expressed. The 34th report, on returning failed asylum applicants, was the first crack that caused the entire edifice to collapse, and not before time. The Home Office has been underperforming in management, service delivery and, as we have already heard, accountancy procedures for far too long. The hon. Member for Portsmouth, North mentioned how often pilot schemes were progressed without assessing the results. No Department is more guilty of that than the Home Office, which is forever starting pilot schemes and rolling out the relevant programmes across the country—sometimes with disastrous results—before the schemes have even run their course, let alone before the evidence has been assessed. We see that in legislation, as well; sometimes, legislation is amended before it has even come into force. That is not the right way to run a Department of such importance to the country, and I do hope that the new Home Secretary is getting to grips with it, but I fear that the early signs are not good. We must wait to see what happens in the days and months to come.
I turn to a perhaps less obvious report—the 40th, on efficiency in water resource management in the Environment Agency. I have a particular and personal interest in water resource management, as I live in a village where we have been given notice of discontinuation of our water supply by the Duke of Somerset. I want to stress the huge strains that are being put on the Environment Agency, a body for which I have a great deal of time, and which does absolutely essential work. My contention is that the increasing costs of flood management are preventing it from doing a lot of the other work in mitigation of environmental damage that it ought to be doing. In particular, it is unable to provide the level of resources for environmental protection that it should. I hope that the Committee will return to that issue and the question of the distribution of resources. It made the point in the 40th report that there was a blurring of the resources applied to water resource management and to flood defence. In fact, that is a wider problem within the Environment Agency, and, because I want it to do the best possible job, and because I know the demands being put on its limited resources, it is worth exploring further.
I turn to one other use of the Environment Agency’s resources that came to my notice a few days ago. A couple of websites belonging to the agency—or, more accurately, to the “Asiantaeth yr Amgylchedd Cymru”, which is the Environment Agency Wales—have devoted an entire page to the
“Nentydd Mells, Whatney a Nunney”,
“Somerset Frome yn Whitam Friary a Frome.”
Being translated, that is the Mells stream in Whatley and Nunney and the River Frome in Witham Friary, my home village, in my constituency. In none of those three villages do we have a monoglot Welsh speaker, and I am not entirely sure that it is a proper use of resources to use translating facilities to provide individual websites for flood defence and flood protection information in Welsh for my Somerset villages.
I know that we are quite near to Wales. I suppose that we are a Marcher county. I strongly support the view that there should be Welsh information for Welsh people in Wales. However, I do not believe that it is a sensible use of resources to provide information in Welsh about flood levels in villages in Somerset, because we find it difficult to assimilate that information. The Committee might like to consider that. Perhaps the issue should have been incorporated in the report “Lost in translation?” which was actually on an entirely different subject.
Lastly, I will deal with tax credit fraud. It is an inevitable area of concern. Exactly a year ago today, when the Committee issued its fourth report, it was slightly optimistic about fraud. It reported:
“The Department has made good progress in reducing losses from fraud and error”.
Unfortunately, the Department in question was the Department for Work and Pensions; the tax credit system is operated by the Treasury through Her Majesty’s Revenue and Customs. We have the 37th report, on the Inland Revenue, and I see within it a great deal of concern expressed.
We had the original estimate of £460 million of fraud in the tax credit system. We know that that has now increased to about £1.28 billion in the first year. We know also that the signs are that in the second year of operation the figure will be as high again. Further, we know that £131 million of taxpayers’ money has been lost to organised fraud—to gangs working in collaboration, it would appear, with civil servants, although that is yet to be established, to defraud the Exchequer. In addition, we know that in the third year of operation the overpayment of tax credits—a point made by the Chairman of the Committee—is likely to be about £1.8 billion. So many unhappy people have been given money which they unwittingly received, not knowing that they were not entitled to it, and have suffered the consequences of having that clawed back. Sometimes that has caused great hardship to families, because the money was inevitably spent on children’s clothes, Christmas presents or whatever was required in the household.
In the first three years of tax credits, £5.8 billion has been overspent and £2.4 billion has been lost in fraud. There is at least a strong suspicion that this was known to the Department back in 2004, and yet the ePortal, which is thought to be the main occasion for fraud, was not closed until December 2005.
There is still a sense of denial on the part of the Treasury about these facts. There is concern that it has not come to grips with its underperformance in dealing with the matter. Yet £1 in every £10 in this system is lost through error and fraud. That being so, I think that we are entitled to ask why better and more stringent action was not taken at any early stage. When the Comptroller and Auditor General has to qualify the accounts of Her Majesty’s Revenue and Customs year after year, of all the Departments in the panoply of the state, there are serious questions to be asked.
I close by taking up a point that the Chairman of the Committee may have raised slightly out of order, in that it was referred to in a report that was published only today and is not part of our consideration. I will follow the hon. Gentleman’s lead by at least mentioning what he said. He used the phrase, “Getting it right the first time”. That is a key part of delivering good public services. Time and again in our constituencies we as individual Members see examples of the inability of public services to get it right first time, occasioning people to come to our advice surgeries or write us letters that require us to write letters on House of Commons notepaper, and miraculously what was not right the first time is then sorted, because a Member of Parliament has written to the chief executive of the agency concerned and that then descends through the bureaucracy like a brick until it hits some poor unfortunate who then has to recalculate the figures and get it right. It should not be like that. People should have the expectation and right that Government Departments will make the calculation to get it right first time. Until we have systems that make sure that that is the case, we are failing our citizens.
Yet again I congratulate the Public Accounts Committee on all its work in highlighting cases where the Government Departments do not get it right, in the hope and expectation that improvement will come. I hope that I am as optimistic as the hon. Member for Bishop Auckland (Helen Goodman). I am not sure that I am. She sees a bright new future for Government as a result of the reports. I hope that that is the case because it is in all our interests that it is the case. I express a little cynicism and a little pessimism, but let us hope that there is at least some incremental improvement, and that the PAC has helped that process.
I begin as other colleagues have ended, by paying tribute to Nick Wright, Chris Randall, Emma Sawyer and Ronnie Jefferson, who run the Committee’s office so efficiently, and also to the Comptroller and Auditor General, Sir John Bourn, and his team at the NAO, who really are top drawer. I note the time, so I will focus primarily on two particular reports in the motion, the 22nd and the 37th reports, that may not otherwise receive the attention that I believe they deserve.
Last time we discussed a PAC report, in January 2006, the Financial Secretary described our work as a tour de force. However, it is not just the Financial Secretary or the Treasury who take an interest in our reports. It is not even the “Today” programme— which cherry-picks and selects the most outrageously critical comments of the Chairman against the Government— which has an interest in the work that we do. What is remarkable is how non-governmental organisations, pressure groups, constituents and other Departments take an interest in our work, and the work that we do provides an opening or a springboard for things that they can do.
The 22nd report was one such report. The Chairman of the PAC talked about the impact on the end user, and the 22nd report is a good example. That report was on the subject of maintaining and improving Britain’s railway stations. As all constituents in Tooting will know, I have been campaigning for improvements in Earlsfield station in my constituency for some time now. At the beginning of this month, a help point was installed, which enables disabled passengers to utilise a free taxi service that willtake them to an accessible station. This followed confirmation that I received at the Committee meeting on 12 October that the Association of Train Operating Companies would be investing £600,000 to improve such facilities across the network, and train operating companies such as South West Trains have followed that lead.
However, in its report the Committee highlighted the fact that more than half of the country’s stations are not fully accessible to the disabled. That led me to table early-day motion 911, which 141 colleagues have signed, although one or two Committee members still have not done so, and I highly recommend them to do so. The situation highlighted by our Committee and by the early-day motion is clearly unacceptable. Therefore, as I said earlier, I welcome the Department for Transport’s commitment to invest £370 million over the next decade to address the deficiencies that we raised, which are in breach of the Disability Discrimination Act 1995.
I was disappointed that Earlsfield was not included in the 47 stations initially chosen for the study, but I am pleased about the objectives outlined in the railways for all strategy. Once again, I would like the Committee to take some of the credit for the conclusions that that strategy reached. It called for improvements to be made in a shorter time frame, and our report highlighted the fact that insufficient attention had been paid to the quality of stations. Now that the Department for Transport is responsible for stations strategy, I hope that it will respond accordingly to that recommendation.
Station security is another important area that the Committee investigated, and I note that my hon. Friend the Member for Brent, South (Ms Butler) will hand in a petition tomorrow highlighting concerns that we first raised in our Committee. Balham station in my constituency particularly concerned me, and I raised the matter in Committee, because there appeared to be complacency about passenger security. Our Committee highlighted the point that few train operating companies had joined national schemes to improve security and reduce crime.
The report cited the three most reassuring facilities for passengers—the presence of staff, effective lighting and closed circuit television. I acknowledge that the Treasury has contended that improvements to personal safety will increase train usage only by approximately 2 per cent., as opposed to the 11 per cent. figure quoted in the report, but that does not reduce the significance of safer stations, and I am sure that I speak for hon. Members on both sides of the House when I say that the safety and security of our constituents is of paramount importance.
The report also confirmed that the original franchise agreements failed to place suitable emphasis on the improvement of facilities. I therefore welcome the Government’s increased expectations regarding station security within future franchise agreements. Investment in British Transport police increased by 24 per cent. in the past year, as the issue began to receive the necessary recognition.
The Committee also highlighted the complicated and inflexible procedures employed by Network Rail, which many see as an obstacle in the path of improvement to station services. The majority of our stations around the country are more than 100 years old, and approximately 15 per cent. of them are listed buildings. Moreover, as I learned at first hand, too many organisations are responsible for station maintenance. I understand that work is under way on a new stations code to establish more effective contractual arrangements, and I believe that that is essential if stations are to make progress on maintenance, security and facilities.
The hon. Member for Somerton and Frome (Mr. Heath) has mentioned the Committee’s 37th report, “Inland Revenue Standard Report: New Tax Credits”, and my hon. Friend the Member for Portsmouth, North (Sarah McCarthy-Fry) has mentioned the 36th report, which is connected to it. When we questioned the chairman of HM Revenue and Customs on 14 December in Committee, I established that tax credits had the highest take-up of any benefit delivered through a credit system. Tax credits benefit at least 3,600 families in my constituency and a total of 6.1 million families nationwide, which include 10 million children. I understand from the evidence that we heard and from the excellent questions that I asked—
Another hon. Friend has also complimented me.
I understand that the take-up rate is particularly high among low-income families, at 93 per cent. compared with only 47 per cent. for the old working families tax credit. I welcome the commitment by the Government, the Treasury and HMRC to improve the efficiency of tax credit administration. The problems associated with overpayments highlighted in the report have prevented that laudable scheme from receiving the praise that it certainly deserves. Overpayments are inherent in the system, because of the provisional nature of the awards. I have been assured that HMRC is confident that the changes implemented by the Government, which are outlined in the report, will ensure that overpayments are significantly reduced. The disregard for income increases has been raised from £2,500 to £25,000, and claimants must advise HMRC of changes in their circumstances within one month.
The report also raised concerns about error and fraud. The hon. Member for Somerton and Frome has touched on those concerns, and I will not rehearse his points.
I sincerely hope that HMRC is coming to terms with improving the system to prevent fraud. However, some constituents have told it several times about changes of circumstance, but nothing has happened—it is as though the letters have disappeared into the ether—which means that they are still overpaid, despite having done everything that they can to notify it. Is that not a cause for some concern?
Absolutely. The permanent secretary who gave evidence to our Committee took that on the chin and said that the Department will not seek to recover whatever payments are made through no fault of the claimant. That is some comfort to the distressed constituents mentioned by the hon. Gentleman.
As we heard in our evidence, increased attempts at tax credit fraud resulted in the website being closed down. I welcome the Government’s decision to double the number of pre-payment checks before issuing a tax credit award. The Committee was reassured that the majority of attempts to commit identity fraud through the tax credit system were prevented. Nevertheless, I am pleased that HMRC will now be more proactive in contacting certain claimants. The Financial Secretary has taken this issue very seriously, as has his Department. Nevertheless, it is important to maintain the right balance between keeping the system user-friendly, thereby maintaining a high take-up and helping the most vulnerable in our communities, and preventing fraud and overpayments.
May I say that the excellence of my hon. Friend’s questions is matched only by the magnificence of his speeches? Does he agree that the PAC offers the only forum where it is possible to have a non-partisan discussion about a scheme such as tax credits, which provides an enormous amount of benefits to a large number of people yet has some clear difficulties and problems? In the Chamber, we often end up with yah-boo politics that generate a great deal of heat but very little light as regards clarifying the difficulties.
I am grateful to my hon. Friend, and would recommend three sources that confirm what he says. First, the report prepared by the NAO was based on facts and figures rather than dogma. Secondly, the transcript of our evidence, including the questions asked by the Chairman and other hon. Members on both sides of the House, concerned the process and implementation of the scheme rather than the party politics. Thirdly, the PAC report was very balanced and dealt with the facts, problems and challenges while recognising the benefits in a non-party political way. It is a shame that the day after our report was published, the “Today” programme decided to cherry-pick the criticisms, not the excellent and balanced parts that were of a non-party political nature.
I should like to end with a couple of words of caution. First, an issue raised in January this year has still not been dealt with—namely, that very good reports are being produced but they are produced too long after the initial NAO reports. When our Chairman wound up the previous debate, he said that he would look into that. I think that a huge amount of progress still needs to be made.
Secondly, the purpose of the PAC is to provide parliamentary scrutiny of the Executive, but that does not mean that it always needs to be critical. The hon. Member for Somerton and Frome—I think that I have quoted him three times in my speech, which must be a record, and always with a generous interpretation of his words—talked about our Committee and our reports highlighting good practice, best practice and excellent practice, but that aspect appears to have been lost. I am concerned that in providing parliamentary scrutiny of the Executive, the PAC may be seen merely to be critical, when it will sometimes be complimentary. That may lead to our Committee being perceived in a way that is unhelpful to those who give evidence, and those of us who are members may become cynical in that regard. Witnesses, who often want to come and be open and get to the root of the problems, may become wary of doing so because of our reputation.
I hope that the experience of the past 300 years will continue in terms of the spirit of our Committee in providing scrutiny, some good and some not so good.
At this stage of the debate, everything that ought to be said has been said, but not everybody has said it. I shall therefore follow suit and praise the chairmanship of my hon. Friend the Member for Gainsborough (Mr. Leigh). He is an indulgent Chairman to Committee members but a fearsome Chairman in the eyes of witnesses. I remember, with a mixture of horror and admiration, his intervening on one witness, whose answer was full of circumlocution, to tell him that he was speaking drivel and that if he did not do better in the next half hour, he should not go further. It will take me many years to reach that admirable level of intolerance of waffle. I have greatly enjoyed serving under my hon. Friend’s chairmanship.
I pay tribute to the National Audit Office under Sir John Bourn. It, too, chooses its words carefully and I often marvel at the understatement with which it delivers withering judgments. Using the word “disclaim”, which my hon. Friend the Member for South Norfolk (Mr. Bacon) mentioned, is a modest way in which to pronounce a devastating verdict on a set of accounts. Perhaps that serves as a totem for Sir John’s approach. We all know what he means, but he expresses it diplomatically.
May I also put on record my appreciation of the work of the Committee staff and the Treasury representatives, who respond to questions that are often naive, at least on my part, with enthusiasm and helpfulness, which often goes beyond the call of duty? I am grateful for that.
I intended to praise the speech of the hon. Member for Tooting (Mr. Khan), but in the light of his comments, perhaps I should give way so that he can praise his own contribution. However, he always makes a lively contribution in the Committee and he has done that again tonight.
Given the lateness of the hour, I want to comment on only three subjects that we have considered: the BBC; our report on competition, which was directed at the Office of Fair Trading; and the report, which several hon. Members mentioned, on tax credits.
The Chairman referred to our perennial plea to be given oversight of the BBC, or least to allow the National Audit Office access. I want to reinforce that. I should perhaps declare an interest because I worked for the BBC in a previous existence. One of my duties was being the point man who haggled with the NAO about what went into its report on the World Service, which is the one part of the BBC to which the NAO has unfettered access. I know from that experience that there is no question that the NAO’s scrutiny of that part of the BBC compromised its editorial or political integrity. It was entirely proper that the use of public money be scrutinised in that way. The contention that NAO involvement exposes the BBC to excessive political interference is frankly nonsense.
It is disappointing that the Green Paper, which became a White Paper and is shortly to become a BBC charter, has given way in almost every respect to the BBC’s demands but not to those of Parliament. I do not know what insight that provides into the Government’s thinking, but it is regrettable.
Our report on the BBC had a worthy subject—the expansion of White City—but it is not one of the more central subjects. I hope that, if the NAO has unfettered access, we might consider issues such as the BBC’s investment in digital and online services and its commercial services in our debate next year or the subsequent year. Such matters go to the heart of the appetite for proper public scrutiny of the BBC.
Let me give an example of things going well. The hon. Members for Tooting and for Somerton and Frome (Mr. Heath) said that we should praise and encourage. Our robust hearing on the important subject of the Office of Fair Trading has already had a remarkably salutary effect. Under the Competition Act 1998, the Office of Fair Trading acquired far-reaching new powers, including the power to compel witnesses to give evidence and to fine up to 10 per cent. of turnover. It has also had a huge increase in its staff and budget levels.
When representatives of the OFT appeared before the Committee, however, we found that it had failed to make use of those powers in almost every respect. Inquiries that were meant to take between six months and a year were taking three years to complete. Not one of the standards that the OFT had set itself, as outlined on its website, had been met. Not once had the power to compel witnesses to give evidence been used. The situation was unravelling to such an extent that it gave the impression of being what I described as a meek organisation.
The chief executive of the OFT, John Fingleton, was only six weeks into his term of office when he appeared before the Committee. To his credit, however, he did not do what he might reasonably have been expected to do, and claim that he had not been there at the time. That would perhaps have been understandable, but instead he took our criticisms on the chin and, since that hearing, there has been a remarkable flurry of activity at the OFT. It has launched inquiries into supermarkets, school uniform suppliers and credit services, and there has been a real increase in the pace and relevance of its inquiries. It is too early to say whether all that will be matched by a sustained focus on quality, although I obviously hope that it will be. I commend the OFT’s positive reaction to the NAO report and to the rather robust exchanges with all hon. Members on the Committee.
The third subject that I want to talk about is tax credits. Many hon. Members have mentioned this already. Like the hon. Member for Glasgow, South-West (Mr. Davidson), I believe that this is an extremely important area of public policy. I believe that to be the case for two reasons. First, as the hon. Member for Somerton and Frome mentioned, the tax credits policy has caused the report and accounts of the Inland Revenue to be qualified four times in a row. Given that that is the flagship financial Department of the Government, responsible directly to Treasury Ministers, this is a matter of profound concern that should rightly be the concern of the Committee.
Secondly, the new tax credits system cost £16 billion, which is a huge sum that requires proper scrutiny. As the hon. Member for Glasgow, South-West said, the Committee is the only forum in which this amount of Government spending can be scrutinised—dare I say professionally?—without the partisan knockabout that we get here. I should like to place on record my disappointment in the degree of scrutiny of the tax credit system that we have been able to exercise. In the pre-Budget report, the Government changed an important part of the tax credit policy—rightly, so far as one can tell on paper. They increased the disregard for people’s changes in income from £2,500 a year to £25,000 a year. That is a huge increase that will have huge financial consequences. It is therefore important that the Committee should be able properly to interrogate the reasons for that decision, to test whether the change in policy offers value for money, and that is what we tried to do.
Committee members from both sides of the House asked some very relevant questions. Perhaps I should follow the example of the hon. Member for Tooting and praise my own questions, as he did. I asked the questions that were on everyone’s mind. I asked the deputy chairman of Her Majesty’s Revenue and Customs the following question:
“Part of the assessment”—
in the pre-Budget report—
“must have been to have an idea of what the pure fiscal effect was of increasing the disregard. That work must have been done; you will confirm that?”
Mr. Gray replied:
“I believe it has been done.”
“Since that information is available, will you write to me through the Committee giving what the assessment is of the pure component of increasing the disregard?”
Mr. Gray said:
“Certainly, in liaison with our Treasury colleagues. We will write to the Committee.”
I said, “Providing that information?” and Mr. Gray said, “Yes.”
That information has not been provided. In the Committee’s report, the evidence that HMRC submitted said, in complete contrast to what was told to us in the hearing:
“It is not possible to produce reliable estimates of the cost of the individual elements on their own”.
When we discussed our draft report as a Committee, we noticed that the information had not been provided, and we said that if it had been overlooked, we ought to draw attention to it. I know that Labour Members participated in that discussion. We therefore placed in the report recommendation 3, which said:
“Before the Pre-Budget Report the Department estimated the cost of this element of the package. The Department should provide details of the estimate it made”.
In the Treasury minute responding to the Committee’s recommendations, as Treasury minutes are required to do, we have yet again an answer that is waffle to the point of being gobbledegook. It says:
“The figure refers to a change in what claimants would be entitled to. This does not translate into a cost to the Exchequer”.
That flies in the face of the reasonable evidence that HMRC gave to the Committee.
Just to emphasise the point that this information exists and is not being provided to the Committee, I can tell the House that the Institute for Fiscal Studies, which no one can accuse of being politically partisan, put in a freedom of information request to obtain that information. In a letter refusing to disclose it, HMRC wrote to Mike Brewer of the IFS:
“You have requested information that HMRC holds about the likely cost in 2006/7, 2007/8 and 2008/9 of increasing the earnings disregard in tax credits from £2,500 to £25,000…In this case we have concluded that the public interest in withholding the information outweighs the public interest in disclosing it”.
I am very willing to give way to the Financial Secretary if he can give us the Treasury’s calculation of the effect of the increase in the disregard or explain just what is the public interest in withholding from the Public Accounts Committee this crucial piece of evidence that witnesses before the Committee said existed, that they promised to provide to the Committee and that they have admitted to the IFS exists, but have not provided.
We work quite hard as a Committee, meeting twice a week. We take our responsibilities seriously. As the hon. Member for Glasgow, South-West mentioned, for the most part we do not have party politics before our eyes when we are scrutinising Government value for money. We all seriously want to get to grips with the question of tax credits. My view, like that of many Labour Members, is that tax credits have many virtues and it is important to get them right and solve some of the overpayments that cause such distress to many of our constituents. We can judge whether that is the right reform only if the Government provide us with the information to make that assessment.
I hope that the Financial Secretary will reflect on the contributions that have been made and, perhaps, trust the Committee and Parliament a little more to do our job in helping to scrutinise these measures. Even if it proves a little embarrassing for Ministers, the function of the Public Accounts Committee, going back into the mists of time, as the Chairman reported, is sometimes to ask difficult questions. It does not give confidence, and it is not an impressive performance by the Government, if information is withheld, impeding us in our duty.
I begin my remarks with a tribute to the Chairman of the Committee. I am often asked by my colleagues and, indeed, by Opposition Members what it is like serving under the hon. Member for Gainsborough (Mr. Leigh). They ask with some trepidation, as though they expect him to behave in a somewhat wild manner. I indicate that indeed he is the very essence of a good Chairman. Despite his views, which when expressed in this Chamber I regard as extreme in the extreme, he has chaired the Committee with impartiality and fairness on all sides. Indeed, he has defended the position of the Committee against assaults from outside. For example, Nicholas Soames, the Member for Prince Charles, has on several occasions berated him for allowing the Committee—
May I refer to the hon. Gentleman to whom I referred earlier as representing a constituency somewhere in England? I am afraid that I am not aware of his constituency. He gives the impression of seeking to represent a particular individual who, I understand, is not a voter. He regards any inquisition or discussion by the Public Accounts Committee of the financial circumstances of that individual as almost a personal affront. While I anticipate that the Chairman might have some sympathy with that point of view, he has nevertheless defended the Committee’s right to conduct those investigations over a long period, for which we are grateful. Given his encouragement, we will continue to do so.
That is a mark of the political impartiality of the Committee, which has been and continues to be one of our strengths. We meet as a group of partisan politicians in an environment that is almost entirely removed from the cockpit of partisan conflict. There are the occasional Whips’ narks from one side or the other who wish to intrude in our debates in the manner for which they have been wound up. However, the vast majority of members of the Committee spot that right away, and more sensible voices prevail.
I look forward to reading Hansard tomorrow to check exactly how long the hon. Gentleman was speaking for. It may have been for less than four hours, although I did find myself losing the will to live after two and a half.
May I turn to the way in which our debates are conducted? Ever the assiduous member of the Committee, I think that I am the only one who has brought the complete box of reports to the Chamber. Following the hon. Member for Tunbridge Wells (Greg Clark), I am tempted to read the edited highlights of my contributions to the Committee, but I shall refrain from doing so.
One of the values of the Committee is the way in which we are, in many ways, about the only genuine counterbalance to the permanent Government. Often, when issues such as tax credits become the subject of partisan debate, there is a knockabout involving a group of Government or Opposition Members who feel obliged to defend what is being done, even though it is indefensible. Only in a relatively impartial environment are we able to have a genuine interrogation of what is being done in our name by the civil service and bureaucracy.
If people are not entirely convinced that that happens in the United Kingdom, they should have a look at the reports dealing with Northern Ireland, of which I have a number here. They reveal the stultifying effects of permanent government without serious parliamentary challenge. I think we would all accept that, because of the unique circumstances in Northern Ireland, we do not have the degree of scrutiny of the civil service and bureaucracy that would be possible elsewhere.
What has happened in Northern Ireland is not that governance has been improved, but that governance has been allowed to decay and decline. Despite the excellent efforts of the Northern Ireland Audit Office, we see a quality of governance in Northern Ireland that would not be acceptable, if there were reasonable scrutiny, in any of the other three nations that make up the United Kingdom. We have played a particularly valuable role in that regard. I hope that that the standards that we have tried to introduce in Northern Ireland will be maintained by the Assembly once it is re-established.
I want to say something about the relationship between the Committee and the National Audit Office. Undoubtedly, many National Audit Office staff members are cleverer than all the members of the Committee put together, although there are occasions when I wish that they did not draw that to our attention so forcefully. Our role is distinct from theirs, and we must recognise that our action in championing their access, standards and criteria is valuable. We need not be experts in every subject that they investigate; in many instances, it is sufficient for us to put our weight behind their efforts.
If I have a criticism of the National Audit Office, it is one that I have voiced repeatedly when it has produced reports. I do not think that it pays enough attention to the social class impact of Government policies. It does not carry out a “social class health check” of policies and their implementation. I am continually disappointed by the way in which it allows many Departments not to make any assessment of the different impacts that their policies have on people of different social classes, and the lack of take-up among those with lower incomes and the like. I feel that we should try to incorporate that.
That is a useful point. It proves that we are an open society. Any old jerk can become the first major-general in the Territorial Army. To be fair to him, he did very much resent any suggestion that he had got there other than on merit. The subtext was that any member of the aristocracy could have become one of the Territorial Army’s high heid yins.
It was interesting that when I asked whether any proles or plebs had reached such a level in the TA, not only was I told that the TA did not keep the figures, but the witnesses resented the suggestion that anything of that sort should be monitored. I think the National Audit Office often overlooks the unconscious assumption that we live in an open society, and that there are no barriers. If I have the Chairman’s support, I want to continue to be able to impress such points on the NAO, and to raise them in Committee reports. I think it is up to us, as well as pursuing questions of value for money, to try to ensure that those citizens who are in the least fortunate positions in our society have just as much access to the resources provided by taxation as the Duke of Westminster.
I particularly want to make another point. I have brought my box of reports along with me, but colleagues will be pleased to hear that I am not going to read out the highlights of speeches. Rather, I want to demonstrate the scale of work that we undertake. I wonder whether the time has come for us to consider splitting the Committee in some way in order to allow Members to specialise rather more. It is impossible for us all to make meaningful contributions based on personal experience on every matter that comes before us.
We all want to discuss issues with the witnesses in front of us, but in my experience, some of the most constructive and positive contributions to questioning have come from those who can cast some light based on their personal experience, their constituency activities, or some expertise that they have gained elsewhere. It is not possible to have that degree of specialisation across the whole range of governmental activities. If we were to split the Committee to allow a degree of specialisation, it would reduce the burden on individual Members. None of us could adequately prepare for every Committee that goes on every week. We have to pick and choose, so some are missed out. We might be able to make better contributions if we were to revise our methods of operation.
Finally, Madam Deputy Speaker—you will be aware that when an MP says “finally”, it usually means that he or she is only about 40 per cent. of the way through, but wants to give the audience some hope; on this occasion, however, I mean finally—I view serving on the Public Accounts Committee as one of the most constructive roles that an MP can have. I am in the fortunate position of having spent almost all my time in the PAC under a Conservative Chairman. I say that because it means that Conservative Members are in opposition and we are in government, which has been a pleasure and long may it continue. I look forward to serving, hopefully, under several other Conservatives. I am conscious that each member of a Select Committee can serve for only eight years. When one of my colleagues said that change might come in 12 and a half years, I thought that it was going to be much longer than that before the Conservatives got into power. I look forward further to serving on the Committee and hope that, under the inspired chairmanship of the hon. Member for Gainsborough—or perhaps the hon. Member for Tunbridge Wells (Greg Clark) or the hon. Member for South Norfolk (Mr. Bacon) in due course—we will continue to hold the Government to account, as we have up to now.
The hon. Member for Glasgow, South-West (Mr. Davidson) is always a tough act to follow. In winding up what has been a very interesting debate this evening, I would like to pay tribute to the work done by the Public Accounts Committee and its Chairman, my hon. Friend the Member for Gainsborough (Mr. Leigh). I would also like to congratulate and thank Sir John Bourn and his staff at the NAO on the vital work that they do.
The PAC and the National Audit Office carry out vital work in safeguarding taxpayers’ money and rooting out inefficiency, incompetence and waste in the administration of government and the public services. Their work has been, as we have heard this evening, wide ranging and uncompromising over recent months. In his wide-ranging speech, my hon. Friend the Member for Gainsborough covered the Committee’s work, going back as far as 1690. He covered military readiness, consular services, adult literacy—and I was particularly pleased that he highlighted the Committee’s important work on cancer treatment.
On cancer, we have an example of both good and bad news. The PAC took note of the work of the cancer networks and improvements in cancer care, but it also felt that better co-ordination between those networks and the primary care trusts that actually spend the money was desirable. It signalled that simpler, clearer and more easily accessible guidance on how to detect the early-stage symptoms of cancer could do much to help remedy the deeply worrying disparities between cancer outcomes in affluent and more deprived communities. I have no doubt that the Government will act on that wise advice of the PAC.
The hon. Members for Portsmouth, North (Sarah McCarthy-Fry) and for Bishop Auckland (Helen Goodman) both focused on the Committee’s excellent report on value for money in the public services and on enhancing better project management. They also mentioned the vital importance of pilot projects and of ensuring that lessons learned in one Department can be spread across other Departments as well. They both looked at tackling complexity, especially in the benefits system, and acknowledged the challenge of the difficult tasks of simplification and of reconciling and balancing the needs of flexibility and simplification.
My hon. Friend the Member for South Norfolk (Mr. Bacon) expressed grave concern that the Home Office’s accounts were published with a complete disclaimer by the Comptroller and Auditor General. In effect, they were presented to Parliament unaudited, which is unprecedented for a major spending Department. My hon. Friend also outlined ways to prevent the NHS Connecting for Health scheme from turning into the sort of IT disaster that the PAC has all too often encountered. My hon. Friend the Member for Tunbridge Wells (Greg Clark) again had some good news and some bad news. He praised the impact of the PAC’s report on the Office of Fair Trading and noted the constructive response to the PAC’s criticisms and the increase in activity that they triggered, but he— like the hon. Member for Somerton and Frome (Mr. Heath) and others—expressed concern about the crisis in the tax credits system. He noted the Committee’s hard-hitting report on that subject, which was also mentioned by the hon. Member for Tooting (Mr. Khan).
As the Chief Secretary to the Treasury acknowledged in the debate on 7 June, there is now a consensus across the House in support of the principle of tax credits, but the PAC’s April report is just one of a succession setting outthe continuing and severe difficulties in their administration. It highlighted the fact that HMRC overpaid £2.2 billion in tax credits to 1.9 million families in 2003-04, much of it due to the design of the scheme, which bases provisional awards on income and circumstances from the previous year. The House has of course heard countless examples of the hardship that overpayment causes to millions of families landed with bills for repayment that they find it hard to meet. The latest figures show that of the 6 million families who receive tax credits, around 2 million were overpaid and 1 million underpaid, meaning that nearly half the payments in the system were incorrect.
The Committee noted that by March 2005, HMRC had set aside some £1 billion to cover debts that it was not confident that it could recover. And the loss to the taxpayer does not end there. Increasing the level of income disregarded for the purposes of calculating the final award has a significant cost. It has the same effect as formally writing off overpayments that cannot be recovered. The increase in the disregard is a key part of the package in the pre-Budget report designed to tackle problems in the tax credits systems, but—as my hon. Friend the Member for Tunbridge Wells said—when officials were challenged by the PAC about the cost of that change, they were unable to provide a figure. Paul Gray of HMRC indicated that such a figure could be supplied, but, regrettably, none has yet been disclosed to the Committee or the House.
The report revealed the continuing and grave problems with the tax credit computer system, which was responsible for at least £184 million in overpayments in 2003-04 and 2004-05. Amazingly, of the £71.25 million of compensation that the Government agreed with EDS, which supplied the defective computer systems, some £26.5 million depended on EDS winning further work from the Government. As my hon. Friend the Member for Tatton (Mr. Osborne) put it, in his characteristically forthright way:
“the company which ministers believe is guilty of messing up the tax credit computer system will pay full compensation only if it is given a chance to mess up another government computer system.”
The Committee concluded that HMRC did not have reliable or up-to-date information on levels of claimant error and fraud in tax credits, and that was seriously impairing its management of the scheme and its ability to safeguard taxpayers’ money. As we have heard, an organised assault on the tax credits website led to its closure in December 2004. We also know that at least £1.2 billion was lost to fraud and error in 2003-04, and possibly a great deal more. Again, the Treasury faces the acute embarrassment that the Comptroller and Auditor General has qualified his opinion of the Inland Revenue’s trust statement because of fraud and error in the tax credit system.
The significant sums lost to the Exchequer as a result of tax credit overpayments need to be viewed alongside the PAC’s reports on £3 billion lost in benefit fraud and error and nearly £13 billion lost in fuel duty and VAT fraud, the latter now so large as to undermine the accuracy of Britain’s trade figures.
A continuing challenge for the Public Accounts Committee is to ensure that the public sector acts in a commercially hard-headed manner when negotiating to buy goods and services from the private sector. That is one of the key factors highlighted in the Committee’s report on “Achieving value for money in the delivery of public services”, about which we have heard much this evening. Too often, the Committee has seen examples of manifest failure to achieve a good deal for the taxpayer.
For example, two years after the new Norfolk and Norwich university hospital opened, Octagon, the private finance initiative company that built it, refinanced the transaction, trebling the rate of return that it had predicted for its investors, from 19 per cent. to a staggering 60 per cent. The hospital trust received only 29 per cent. of the refinancing gains, despite taking on new risks and increasing the duration of the contract. Octagon kept £82 million. The Committee concluded that that refinancing produced, in its words,
“a balance of risks and rewards between the public and private sectors that, even for an early PFI deal, is unacceptable.”
The gross imbalance resulted from a failure to include a clause in the original contract to allow the benefits of refinancing to be shared between the public and private sectors. The Committee condemned that failing and noted that such clauses are now expected to be included in PFI contracts. The Committee famously described the deal as
“the unacceptable face of capitalism”,
but the report highlights failings in government as well. That is a bipartisan point, because the start of the negotiations took place under a Conservative Government, although the negotiations were concluded under Labour.
The evidence given to the Committee indicates that the Treasury and the Department of Health actively discouraged the trust from seeking a better deal. George Monbiot put the point with devastating clarity in The Guardian:
“The deal...was an Easter Egg hunt. In order to persuade the corporations to participate, the government left an extra £95m in the contract for them to find. This money represents the difference between the financial risk the government said they would carry and the far smaller risk...to which they were actually exposed.”
I suspect that it is unprecedented. It just demonstrates how the Conservative party is changing. George Monbiot said:
“The Department of Health told me that the government had not demanded a refinancing share in its early PFI contracts because they would not have offered ‘value for money’”.
“If the department believes that letting private companies walk off with £95m of free money represents good value, it's not surprising the NHS is in crisis.”
The PAC is, of course, presented year in year out with examples of projects that go over budget and out of control. For example, the Diana, Princess of Wales memorial fountain had to be closed for major alterations three weeks after it opened owing to design flaws which caused repeated accidents and flooding. The cost rose from £3 million to £5.2 million as a result of what the Committee described as “basic project management failures”. It wisely advocated that lessons be learned in planning the memorial for the Queen Mother and suggested that water-based features were probably best avoided.
Another project that caught the Committee’s attention was the BBC’s White City 2 development. The BBC made 300 variations to the contract and had to pay an extra £60.9 million above the price originally authorised by its governors. However, as we have heard, perhaps the key point to take away from that report is that it was produced as part of a voluntary agreement with the BBC governors to allow the NAO to undertake certain limited studies of BBC activity. The voluntary agreement ends in 2006 and the BBC wishes to retain the final say over what subjects the NAO can and cannot investigate in relation to the BBC’s activities. The BBC spends very significant sums of taxpayers’ money. In the coming years, as we have heard from my hon. Friend the Member for Tunbridge Wells, we will face many difficult decisions on matters such as the interrelationship of the BBC’s commercial and public sector activities, its role in new digital services and its internet presence, not to mention its significant taxi and hospitality bills. As the Chairman of the Committee said in his appeal, surely it is now time for the BBC to receive the same scrutiny as Departments, which are also entrusted with taxpayers’ money. I urge the Government to give the Comptroller and Auditor General full access and scrutiny powers over the BBC.
As the time gets ever later, I turn lastly to the PAC’s damning report on the deportation of failed asylum applicants, to which several hon. Members referred. In its report of March this year, the PAC concluded that the UK’s asylum policy had been undermined by the inability of the immigration and nationality directorate to deal promptly with asylum applicants whose request to stay in the UK had failed. The IND admitted that it did not know how many failed asylum applicants remained in the UK. The Committee concluded that it would take a staggering 10 to 18 years to clear the ever-increasing backlog of removals. The IND also admitted that more than 400 foreign criminals had been released from prison into the community. We now know, of course, that the numbers released were actually considerably higher and that many of those people had committed serious crimes.
In its understated way, the PAC dealt a devastating blow by concluding:
“it is difficult to conclude that the taxpayer is obtaining value for money in the efficiency and effectiveness of the Directorate’s operations.”
Its report set in train a series of events that led to the admission by successive Home Secretaries that their Department was “dysfunctional” and “not fit for purpose”, and to the sacking of one of the most senior members of the Cabinet. That is a classic example of the hugely important work performed by the Committee.
I commend the pivotal role that the Committee played in revealing the true extent of the crisis in the Home Office. I also commend the vital work that it does to safeguard taxpayers’ money and protect and cement our democracy. I commend its reports to the House.
It is a privilege to respond to the debate, and to the Chairman of the Public Accounts Committee and his colleagues. We have had a good and wide-ranging debate, which was led in an exemplary way by the hon. Member for Gainsborough (Mr. Leigh), who chairs the Committee. I was interested by the research that he had clearly done on the institution of the Public Accounts Committee. He traces the Committee back to the 17th century, which means that the Committee is not of a dissimilar age to the post of Financial Secretary to the Treasury, which I am privileged to occupy at present. The hon. Gentleman said that the characteristic of the Committee and its work was rightly objectivity over partisanship. Our debate has been conducted in such a tone.
Although this might not be obvious to some, the Government share many common aims with the Public Accounts Committee. They also appreciate the way in which the Committee helps them to deliver better value for money in public services, even if the Committee quite rightly makes the process rather uncomfortable at times for those involved.
I pay tribute to the work of the Committee and the Chairman of the Committee. The work load of the Committee is such that it meets twice a week and addresses a different issue each time. Anyone who has served on a Select Committee knows that that represents a formidable undertaking, and the Committee members carry out their work with great diligence and assiduousness.
I also formally recognise and pay tribute to the work of the Comptroller and Auditor General and the National Audit Office. They play an important role in supporting the work of the Public Accounts Committee, which, crucially for us all, is the principal way in which Parliament holds the Executive to account. The Committee is Parliament’s leading voice in the cross-examination of the Executive.
In that respect, I am pleased to report the progress that has been made on the Company Law Reform Bill since we last debated the PAC in January. Subject to the approval of the House, the new legislation should enable the Comptroller and Auditor General to audit companies in central Government, hopefully from April next year. That will be a significant further step towards implementing the recommendations of Lord Sharman’s report, “Holding to Account”. One mark of the Treasury’s respect for the NAO is the fact that my hon. Friend the Economic Secretary recently decided to ask it to conduct an independent review of the Financial Services Authority. That underlines the value that the Treasury places on the work of the NAO and especially the special commissions that it undertakes for us and other parts of the Government.
I was pleased to hear the Economic Secretary’s announcement that the Government had invited the NAO to look at the FSA, as that is a welcome development. However, on the subject of wider scrutiny, the PAC went to the United States, where the Government Accountability Office can follow the public dollar to state level. Indeed, we visited the GAO regional branch in Boston. Yesterday, I met the Auditor General for Wales, together with his staff in Cardiff, who can follow the public pound from the highest to the lowest level, which suggests that our arrangements, particularly for block grants via the Office of the Deputy Prime Minister to local government, leave a great deal to be desired. Obviously, the Audit Commission has separate responsibilities, but there is a case for increasing the NAO’s capacity to dig deeper should it wish to do so.
The hon. Gentleman has been a PAC member long enough to know that the NAO’s capacity is essentially a matter for the House rather than the Treasury. However, there may well be a case for following the pound through, as he put it. I shall come on to the scrutiny of public spending, on which a number of hon. Members commented, but it is important to make a clearer link between budgeting, accounting and reporting in the House.
First, however, may I respond to the contribution of my hon. Friend the Member for Portsmouth, North (Sarah McCarthy-Fry)? Like the hon. Member for South Norfolk (Mr. Bacon), she mentioned the PAC’s Washington visit, which clearly had a significant impact on the Committee. In discussing the Committee’s 36th report, she rightly said that the simplification unit and other programmes that had been put in place were a direct result of the PAC inquiry and report. That underlines the point made by the Chairman that 94 per cent. of the Committee’s recommendations have been accepted by Government. The hon. Member for South Norfolk dwelt at length on NHS information systems and development. The subject was not a formal part of our debate, as Mr. Speaker reminded him, but I am sure that the PAC will return to it again and again. I am sure, too, that we will have a chance to debate it properly.
Like the hon. Member for Gainsborough, the hon. Member for South Norfolk spoke strongly about the problem with the Home Office accounts. The Treasury shares those serious concerns. To put it bluntly, the Home Office failed to achieve the professional standards expected of it—the introduction of new accounting software is a routine challenge that Departments should be able to meet. With the support and active involvement of the NAO and the Treasury, the Home Office is working to remedy those shortcomings and to deal with weaknesses under the guidance of its audit committee and accounting officer, who are striving to do as thorough a job as possible, given the limited quality of the available data and the position at the beginning of the year. As for wider financial skills across Government, more than 70 per cent. of Departments, including the Home Office, now have professionally qualified finance directors. A further improvement is evident in their capacity to lay their resource accounts before Parliament before the recess. Some 86 per cent. of departmental accounts are expected to be laid before the summer recess, compared with 51 per cent. last year.
My hon. Friend the Member for Bishop Auckland (Helen Goodman) spoke about the 17th report of the Committee—an extremely important report that draws on the experience of the Public Accounts Committee over recent years and which, like my hon. Friend’s contribution, draws on good examples as well as bad in public service and project delivery. She cited the benefit modernisation programme, where order books were replaced by 2.5 million direct payments into bank accounts on time and on budget. My hon. Friend might have cited some of the other subjects that have been covered by PAC hearings of a similar nature—for example, NHS emergency care. Thirty-nine out of 40 of those using accident and emergency departments are now seen within four hours, even though since 1997 the numbers attending A and E are up by 39 per cent.
As the hon. Member for Gainsborough reminded us, the importance of public services is ultimately in the impact that they have on users. The PAC held a hearing on cancer mortality and confirmed that between 1996 and 2003 it went down 14 per cent. for those over 75. In relation to the Treasury’s more direct responsibilities, the online filing of self-assessment returns in 2006 meant that nearly 2 million taxpayers filed online. The system coped with enormous peak demands—more than 150 returns a minute at one point—a very significant and successful implementation of a major programme.
My hon. Friend the Member for Bishop Auckland also spoke about the importance of efficiency and the interim report on the comprehensive spending review that my hon. Friend the Chief Secretary published last week. Although it was published only last week, my hon. Friend the Member for Bishop Auckland has obviously taken a preliminary look at some of the ways that we can deliver savings of at least 2.5 per cent. a year in the CSR 2007 period. I know that my hon. Friend the Chief Secretary is working with the Public Accounts Committee to try and establish ways in which the Committee can be as closely involved as possible in the efficiency programme, so that members of the Committee can be confident that they understand the efficiency gains being made without encouraging Departments to concentrate on getting good public reports, rather than achieving the efficiencies required.
The hon. Member for Somerton and Frome (Mr. Heath) stressed that the PAC’s reports and its work are not all about bad practice, and that they contain some examples of excellent practice, as he put it. He is not a member of the Committee. I think he is the only Member contributing tonight who is not a member of the Public Accounts Committee, apart from the hon. Member for Chipping Barnet (Mrs. Villiers), who speaks from the Conservative Front Bench. The hon. Member for Somerton and Frome demonstrated the breadth of his interests by dealing with concerns in the Home Office, the Environment Agency, Her Majesty’s Revenue and Customs, and even his Somerset villages, which are, rather surprisingly, well served by the Environment Agency Wales for flood protection measures.
My hon. Friend the Member for Tooting (Mr. Khan) picked an interesting report as the focus of his speech—the 22nd report, which looked at maintaining and improving Britain’s railway stations. That inquiry by the PAC highlighted the poor state of many stations, particularly in respect of access for disabled people and security. In responding to the report, the Government made it clear that Network Rail is fully funded to maintain the fabric of its stations, and train operators should have priced station upkeep into their bids.
My hon. Friend’s remarks demonstrated how the National Audit Office can shine a forensic light on an overlooked part of public service and public spending and study that. The PAC can then hold its inquiry and report. It is part of building up parliamentary and public pressure to bring about reform, change and improvement. I pay tribute to the way my hon. Friend is clearly following up the PAC’s work on the subject and will not let the issue go.
I am grateful to the Financial Secretary, who is being very generous. With reference to the contribution of the hon. Member for Tooting (Mr. Khan), I had a chance to go to the Table Office and look at early-day motion 911, which I commend to all hon. Members. I have just signed it.
I am glad to hear that the hon. Gentleman is continuing the bipartisan tradition of the PAC.
When my hon. Friend the Member for Tooting dealt with the 37th report, he gave the other side of the tax credit story from the one given by the hon. Members for Somerton and Frome, for Chipping Barnet and for Tunbridge Wells (Greg Clark). My hon. Friend was right to say that end-of-year adjustments are inevitable in a system that is designed to be flexible in responding to the changing circumstances of families. The policy and operational changes that my right hon. Friend the Paymaster General has announced are designed to ease some of the problems inherent in that approach.
The hon. Member for Tunbridge Wells discussed tax credits, the report on the Office of Fair Trading and audit access to the BBC, as did the hon. Member for Chipping Barnet. NAO access to the BBC was considered as part of the charter review. Current arrangements involve the BBC’s audit committee holding discussions with the Comptroller and Auditor General, with the aim of framing a programme of reviews that the NAO can carry out. That is an important step forward. I should point out that the BBC is not part of government—an important principle and fact to remember—and that it is not, as the hon. Member for Chipping Barnet argued, directly comparable with a Government Department. The importance of its independence is part of the reason why the current arrangements are the right next step to be taken.
As an independent corporation, the BBC is determining—now in close in consultation, and then with the NAO carrying out much of this audit work—the appropriate audit programme for its activities. That seems to me the right way to proceed.
My hon. Friend the Member for Glasgow, South-West (Mr. Davidson) brought an element of entertainment, as well as enlightenment, late on in our proceedings, but he also brought to bear his long experience on the Committee and made two particularly serious points. First, he pointed out that the PAC is perhaps the one body that can be consistently and forensically critical of the Executive’s operation without being partisan. It is therefore not only fulfilling a very special role in the scrutiny of government in England and Wales, but clearly playing an important part during the period of the Northern Ireland Assembly’s suspension.
My hon. Friend the Member for Glasgow, South-West also argued, importantly, for the assessment of social class being a more regular feature of the way that the NAO studies the pattern of provision of, and the impact of, public services. He is right to stress that, because it is an important element in securing the equity in public service delivery that the hon. Member for Gainsborough identified as one of his six key ingredients in the report published today.
Although there have been no specific PAC hearings this year on the private finance initiative, the hon. Member for Chipping Barnet talked about the Norfolk and Norwich PFI hospital. I remind her that that PFI project opened early and on budget; the problems that the NAO and the PAC examined were to do with the refinancing of that deal. Lessons have therefore subsequently been learned, and all refinancing gains from September 2002 are now shared 50:50 between the public and private sectors. The Treasury has set up a taskforce to assist with refinancing deals in the public sector, as they become a more relevant feature of the conduct of PFI contracts.
In the short time left, I want to touch on three points that the hon. Member for Gainsborough stressed: the comprehensive spending review, this House’s scrutiny of public expenditure, and the report that his Committee published this morning. The CSR 2007 provides us with an opportunity for a fundamental review of the balance and pattern of public expenditure. We will take account of what investments and reforms have been delivered to date. We will identify what more needs to be done to meet the challenges and the opportunities that are ahead in the next decade and beyond.
The interim report that was published by the Treasury last Thursday is an important part of that process. However, in all the assessments that we make as part of the comprehensive review process we will use the lessons that can be learned from the work of the PAC. The seriousness and the rigour with which we are determined to approach the comprehensive spending review is demonstrated by the early settlements that were made and announced in the Budget, where for the Department for Work and Pensions, the Cabinet Office, Her Majesty’s Revenue and Customs and the Treasury the expenditure limits will fall by 5 per cent. a year in cash terms over the CSR period. The reason for doing this is that it will release almost £2 billion that we can redeploy to our priorities and to front-line services.
I move on to the parliamentary scrutiny of expenditure while I am on the theme of departmental expenditure. I am interested to note that this month the PAC is inviting the Chairman of the Liaison Committee to encourage the departmental Select Committees to devote more time to the scrutiny of expenditure plans. That is an important role for the PAC. The rights and privileges of the elected House of Commons to scrutinise public expenditure are a fundamental part of our democracy and an essential part of our parliamentary system. I welcome, therefore, the PAC’s paper, which was published earlier this month. I welcome also the report that was published recently by the Hansard Society called “The Fiscal Maze”. It, too, looks at the challenge of how Parliament can scrutinise more effectively the expenditure of the Executive. It is clear from the arguments set out in the Hansard Society’s report—it is also the view of the PAC—that we need to introduce a more systematic and challenging parliamentary scrutiny of spending plans. I believe that we need to be able to link more directly the process and scrutiny of estimates, budgets and accounts. In large part, that is a challenge for Parliament. However, the Treasury stands ready to work with Parliament on establishing workable arrangements for improving parliamentary scrutiny of planned spending.
Today, there was published the 63rd report this Session of the PAC, which I welcome. It builds on the 17th report, which was the major focus of our debate in January. It provides a good framework that Departments and public bodies could use when designing and delivering high-quality public services. The 10 steps that it sets out to achieve successful and high quality services probably provide a sound basis for the development of better public services. The six key ingredients that the hon. Member for Gainsborough identified and stressed are also a useful perspective. I am confident that the Government will be able to respond positively to the report within a couple of months.
The PAC, with the National Audit Office, brings an intense inquiry and analysis to the shortcomings of Government. I am reminded of the words of Edward Phelps, who in the 19th century was the Second Comptroller of the US Treasury. I am prompted by the comments of several Members in the debate to say that it is the examples of good as well as of bad that need to be considered. If we concentrate on the bad, there are risks. Edward Phelps said:
“The man who makes no mistakes does not usually make anything.”
The most important thing to do when things go wrong is to learn from the event. Undoubtedly, the work of the PAC helps us to do just that. As Cicero said,
“Any man may make a mistake but none but a fool will continue in it.”
I commend the work of the PAC. I commend the 63 reports produced by the PAC this Session. The Committee carries out important work on behalf of the House and also on behalf of the taxpayer and public service users.
With permission, Madam Deputy Speaker, I shall briefly sum up and, in particular, thank the Financial Secretary, who has just given a model summing up for a debate. He made an effort to go through every speech and ended with an important point about increasing financial scrutiny by the House of the whole budget process. When I started this process, I think that there was some scepticism about whether other Select Committees would be sufficiently interested in these issues, because in recent years they have tended to concentrate on policy. Following what the Financial Secretary said today, we have had an extremely important pointer now that the Treasury in a sense is giving a green light to the process upon which the Liaison Committee is embarking. Our meeting in October or November will be very important. I am particularly grateful for what the Financial Secretary said.
I apologise for the fact that I cannot at this late hour indulge in Ciceronian poetry and prose—I wish that I could. All I can do is briefly thank those hon. Members who have taken part. However, I should say to the hon. Member for Somerton and Frome (Mr. Heath) that he made an important point. We are talking about the scrutiny of £500 billion-worth of expenditure. The main part of parliamentary scrutiny lies in this Committee, and it is unfortunate that this debate has lost some of its zest in recent years and is dominated only by members of the Committee. I wish that we could find some way of getting other hon. Members to take more of an interest in these debates, but I say to the business managers that we will certainly not do that if we are still debating these issues at a quarter to midnight. We must pursue this, and I am grateful to the hon. Gentleman for what he said.
The hon. Member for Tooting (Mr. Khan) made a fundamental point, and the Financial Secretary made this point too, when he said that this is the one Committee that can be a critical friend of Government without being partisan. We take enormous care to try to ensure that our reports are balanced, that we encourage risk taking—the Financial Secretary quoted Edward Phelps on risk taking—and enormous care is taken with the press releases. The trouble is that whether it is the “Today” programme or newspapers, the media are not generally interested in good news. I apologise for that, but as politicians we recognise that that is the nature of our business, so we try to be a critical friend.
I thank also the hon. Member for Portsmouth, North (Sarah McCarthy-Fry); my hon. Friend the Member for South Norfolk (Mr. Bacon), who reminded us that to err is human, but for a really monumental cock-up, hire a new computer system; the hon. Member for Bishop Auckland (Helen Goodman), who dealt so effectively with the need for efficiency gains; the hon. Member for Tooting, to whom I have already referred; my comrade friend the hon. Member for Glasgow, South-West (Mr. Davidson); and my hon. Friends the Members for Chipping Barnet (Mrs. Villiers) and for Tunbridge Wells (Greg Clark), who brings a superbly gifted forensic mind to our debates.
We have had a good debate and we look forward to our next six months of work.
Question put and agreed to.
That this House takes note of the 4th, the 7th to the 9th, the 12th to the 34th and the 36th to the 42nd Reports, and the Second Special Report from the Committee of Public Accounts of Session 2005-06, and of the Treasury Minutes and the Northern Ireland Department of Finance and Personnel Memoranda on these Reports, Cm 6699, 6728, 6743, 6766, 6775, 6789, 6843, 6863 and 6884.
I propose to put together the Questions on the two motions on terms and conditions of employment.
Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),
Terms and Conditions of Employment
That the draft Adoption and Children Act 2002 (Consequential Amendment to Statutory Adoption Pay) Order 2006, which was laid before this House on 27th June, be approved.
That the draft Maternity and Parental Leave etc. and the Paternity and Adoption Leave (Amendment) Regulations 2006, which were laid before this House on 27th June, be approved.—[Huw Irranca-Davies.]
Motion made, and Question put forthwith, pursuant to Standing Order No. 18(1)(a) (Consideration of Draft Regulatory Reform Orders),
That the draft Regulatory Reform (Registered Designs) Order 2006, which was laid before this House on 19th June, be approved.—[Huw Irranca-Davies.]