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Public Accounts

Volume 481: debated on Thursday 23 October 2008

Mr. Edward Leigh (Gainsborough) (Con): I beg to move,

That this House takes note of the 5th, the 8th, the 14th to the 29th, the 31st to the 35th, the 37th, the 38th, the 42nd and the 50th Reports and the 1st and 2nd Special Reports of the Committee of Public Accounts of Session 2007-08, and of the Treasury Minutes on these Reports (Cm 7366 and 7453).

It is a pleasure to open the second debate in a little over five months on the work of the Public Accounts Committee. Since our last debate, the Government have managed to achieve the impossible through the incredible, with their lifeline to the banks. The impossible achievement has been to dwarf the scale of public money encompassed by the reports in today’s motion. In this debate last year, I was able to recite in a single sentence a list of public spending projects amounting to more than £60 billion. In the last month, some £500 billion has been pledged in an attempt to crack the ice covering our frozen financial system. Incredibly, the word “nationalisation” has re-entered the Government lexicon as the taxpayer now seems likely to own substantial swathes of our once mighty mortgage providers.

I am sure that Members will agree that there can have been no clearer signal that something was really up than the news that a crack team from Her Majesty’s Treasury was descending on Reykjavik. For the sake of those of our constituents whose savings are locked in Icelandic banks, including £7 million from West Lindsey district council, I can only hope it was not the same Treasury team who took four months to produce the Government’s response to our tax credits report.

Of course, the sobering events of recent weeks are not the subject of today’s motion. However, the House may be interested to know that I have spoken with the Comptroller and Auditor General about the audit of the £37 billion that the Government are injecting into the banks, which is supported by the recapitalisation scheme. He is proposing to examine whether the Treasury has been able to secure compliance with the specific commitments that the banks are making to maintain lending to homeowners and small businesses; to help people stay in their homes; and to meet the criteria that the Treasury has laid down for senior executive remuneration. He will consider those matters. Alongside those issues, he will want to consider whether the wider strategic interest in strengthening the business performance of the banks has been met, thus also protecting the value of the taxpayer's investment. The Comptroller and Auditor General is expecting to report once we have seen sufficient evidence of the Treasury’s progress towards those important objectives. No doubt, our Committee will wish to keep the implications for taxpayers under careful review following any National Audit Office report.

Personally, I perceive genuine risks in any prolonged Government holding in the banking sector, however necessary those holdings may have become in the current financial crisis. The temptation, as with the former nationalised industries, will be to impose extraneous requirements of pay, employment, backing winners and artificial lending priorities, which will hinder rather than help the banks’ return to financial health. In the main news on Sunday night, there was already talk about the fact that we—the public—own the banks and that they must therefore take a more public-spirited view when people fall behind with their mortgage payments. That is fair enough, but let us remember that the investments are taxpayer funded, and that the taxpayer is entitled to expect enhanced value, realised through an early return to the private sector. I am sure that that is the Treasury’s view, too.

The glacial storm that is creeping over the economy should give all Members who consider the Committee’s reports cause for cold, hard reflection. As economic prospects hardened a year ago, the comprehensive spending review stemmed the flood of gold that had previously rushed in—and out—of spending Departments. Now, with the flow of taxpayers’ funds diverted to the City, and the onset of an economic winter of uncertain harshness and duration, the constraints on Departments are likely to be tighter still.

In our previous debate on the matter, I noted that the narrowed ideological gap between the major political parties placed the efficient delivery of public services—and hence our Committee’s work—at the heart of the political debate. That is even more true today, for a moral imperative now embraces that political importance. Taxpayers facing difficult times have no more to give. Citizens in need will rely on public services to help them through in difficult times. A Government who rely on borrowing can afford no costly public expenditure failures. The duty of all public servants is therefore clear, vital and personal. It is to stretch every pound and squander none. That is where our Committee comes into the debate.

The Committee’s reports offer prescriptions from which, I believe, public servants can learn, and I want to emphasise today three themes that have a wider resonance. Sound financial management is paramount, reducing internal costs is essential and—perhaps most important and pertinent—understanding risk is critical if projects are to end on the right side of the dividing line between successful delivery and disaster.

Departments need to display strong financial management if they are to withstand the slings and arrows of changing economic conditions and deliver cost-effective public services. They need the requisite finance skills, commercial acumen, the right information and leaders who emphasise that money matters. I welcome the increasing priority that is given to professional finance skills. We are delighted to say—because it reflects a long-running campaign by the Committee—that all but two major Departments now have a professionally qualified finance director. Those appointments have brought new focus to financial management in Departments.

However, individuals cannot do it alone. Many permanent secretaries are the accounting officers who appear before our Committee, yet they have not a single financial qualification between them. They are not automatically held to account in the civil service for their management of resources. It cannot, therefore, be a surprise that so much remains to be done to embed in Departments a culture that money matters. A worrying lack of financial skills and awareness remains among non-finance staff. Budgetary control is hampered by inaccurate forecasting, and the quality of financial information needs significant improvement. If Departments cannot understand the cost of a service, the public can have little confidence that the service offers value for money.

To support better financial management, the National Audit Office has embarked on a series of reports that examine each Department’s financial management. For example, in the past two years, the Department for Environment, Food and Rural Affairs has budgeted to spend more than its Treasury funding limits. As the risk of overspending became clear, it had to make cuts, but there are also things to welcome. DEFRA has established more rigorous financial systems and this year’s accounts were delivered much earlier.

Our system of public financial management relies on transparency and clear oversight. Unfortunately, the Ministry of Defence tried to persuade us that the forecast costs of major defence equipment projects were under control by moving £1 billion to other defence budgets. Anyone with a passing familiarity with recent events understands that masking true cost is wrong and dangerous. I hope that the approach was unconnected to the fact that, despite initiative after initiative, lasting improvements in the delivery of vital equipment to our servicemen and women have yet to be achieved. Such creative reporting is the enemy of sound financial management and I do not believe that the Committee would want it repeated.

The Committee was also critical of aspects of the Ministry of Defence privatisation of QinetiQ. We recognise that the privatisation successfully protected the viability of that strategically important business and that the Ministry of Defence ran the 2006 flotation well. However, the NAO estimated that an extra £90 million could have been raised from the initial 2003 privatisation. Despite the Department’s protestations, it is clear that the sale went ahead at the worst possible time and that the Ministry of Defence weakened competition by eliminating bidders too early.

We were strong, too, in our condemnation of the conflicts of interest affecting QinetiQ’s senior management, which the Ministry of Defence failed to manage during the sale process. Public servants should not be negotiating their own incentive schemes with a preferred bidder. The result of the privatisation was a clear disparity in rewards, which the Committee found scarcely credible: while the taxpayer received £9 for every pound invested, QinetiQ’s senior management received an extraordinary £200.

Let us examine reducing internal costs. We all consider precious every additional pound that can be devoted to the front line and that does not have to come from increased taxes or raised borrowing. A year ago, the Government accompanied ambitious new efficiency targets with plans to sell £30 billion of surplus assets by 2010-11. The Committee had to express scepticism over claimed efficiency gains in the past, so I welcome the news that the NAO will audit those savings on a Department-by-Department basis. However, setting savings targets is easier than delivering results. Accounting officers should cut waste, reduce complexity and seek economies in some obvious areas.

Property should be an immediate target. That is elementary stuff. The Government are almost 40 per cent. worse than the private sector benchmark for using office space, with a potential saving of more than £320 million a year. I am pleased that the Office of Government Commerce has the ambition to seek savings of £1 billion a year, but it will need to do better than its performance against the two key milestones already missed. I trust that the Exchequer Secretary will look to her own house—or her own office block—given the Treasury’s parlous position at the bottom of the league for efficient use of space.

Another unrealised area for savings is using shared services. The Committee had strong doubts about the information on which the Cabinet Office’s target of £1.4 billion savings is based. Indeed, those Members present at the hearing will recall that the Cabinet Office had lost the calculations and the underlying data involved in its estimate.

Reducing complexity in processes is another requirement for an efficient public sector. Nowhere is the financial impact of complexity felt more strongly than in the Department for Work and Pensions; nowhere, that is, except for Her Majesty’s Revenue and Customs.

Benefit fraud and error continue to be a major drain on taxpayers, with £2.7 billion lost last year. I recognise the progress in reducing reported benefit fraud, but for customer and official error to have nearly doubled in the past five years to almost £2 billion suggests that our benefits system is not merely complex, but risks becoming unmanageable. We have said time and again that, if we are to get a grip on fraud and error, we must reduce complexity in the benefits system.

Meanwhile, our latest look at tax credits showed the highest rates of error and fraud in central Government. The annual amount may have reduced somewhat, but £4.3 billion remained to be recovered from claimants. In our hearing, we expressed doubt about how much—if any—will be recovered. Nearly £2 billion at least is in doubt. That level of error led the Comptroller and Auditor General to qualify his opinion on the HMRC trust statement for the sixth year running. Despite some improvements to the scheme, it is still not efficiently run. Everyone—claimant and taxpayer—has been let down. Let us hope that the pressure on families to pay back money that they have already spent does not make the coming economic winter coldest for those who can least afford it.

I come now to risk management. Sound financial management and reducing unnecessary administration are bedrocks to build on, as we have said again and again. It is the failure to manage risk that causes many project costs to soar and delivery to fail. The public sector must never be afraid to innovate or to take well managed risks. We never stand in the way of Departments doing that. Constant innovation is as essential to public sector success as it is to private sector success, but the consequences of inappropriate innovation and misunderstood risk have never been so powerfully obvious.

If there has, as yet, been no public sector equivalent of the weapons of mass financial destruction that have unleashed such devastation elsewhere, there remain too many examples for comfort of inadequate risk management in public sector projects. Government borrowing is at its highest for 60 years, so a sober look is surely needed at the risks of each new private finance initiative deal racking up debts for schools and hospitals. Those vital public services must remain both financially stable and operationally flexible. Knowledge and good health are too precious to put at risk.

Only this Tuesday, the London news programmes reported on how NHS trusts in London are now facing severe difficulties with their PFI projects for new hospitals. In conference after conference and in parliamentary questions I have queried the level of debt that the PFI is building up for our children and grandchildren. I have been constantly reassured by the Treasury and, indeed, by the National Audit Office that everything is fine. Listening to those London news reports about the increasing difficulty of London NHS trusts, however, I began to wonder whether my warnings had in fact been pertinent. Many others are worried about the level of debt building up through PFI projects.

We saw inadequacies in risk management in the Foreign Office’s approach to our liability for the 14 overseas territories; in our update report on the single payment scheme, which is still causing problems for farmers; and in the BBC. Perhaps it would help the corporation if the NAO were given full access to the books. We say that as often as the BBC repeats its programmes, so perhaps there is no point in going on saying it.

Failures to anticipate and manage risk were encapsulated in our report on the Bicester asylum accommodation project. Almost £30 million was spent without delivering any benefit to the taxpayer or in any way furthering asylum policy. It was a controversial project, yet the Home Office did not recognise the serious risk of planning delay. Nor did it give explicit recognition to its own changes to the asylum system—a classic case of the right and left hands expressing surprise at meeting each other in the same place.

Let us hope that those in charge of a considerably larger project—the 2012 Olympics, which has been in the news again this week—proceed with a greater appreciation of the risks and a higher level of competence. I am sure that all Members present would like to congratulate our sportsmen and women in Beijing on their excellent performance. They finished fourth in the Olympic medal table and second in the Paralympic table four years ago. I was particularly pleased that our sailors who practise my own sport proved more successful than me in my recent damp experience in the Solent, where I managed to overturn my dinghy in a dead calm—perhaps an allegory for some of our political careers.

Applying lessons to the Olympics from the management of risk in other public sector projects does not give one a wholehearted sense of comfort. There should be realistic assumptions about likely costs and realisable benefits. The estimate of the 2012 budget at the time of the bid—at just over £4 billion, although originally it was £2 billion—was clearly unrealistic in ignoring major factors such as contingency provision, tax obligations, policing and wider requirements.

The budget has now mushroomed to £9.3 billion, while over-optimistic estimates of private sector funding have been scaled down from £738 million to £165 million today. Watch this space, as I am sure there might well be further reductions. With a revised budget, one could say that that is water under the bridge. My Committee welcomes the fact that the programme is broadly on track, but arrangements to manage the whole programme are not yet in place. We must guard against pressure to change venues and infrastructure and we must be quite clear about the costs and consequences of any such changes.

Another lesson is that unquantifiable benefits should be made clear, yet the Government’s target for 2 million more people to participate in a sport or physical activity by 2012 is based on no conclusive proof that winning Olympic or Paralympic medals influences levels of participation in the community. We must not get too dazzled by the gold medals in Beijing. The PAC is not a tabloid; it is not bedazzled by gold medals, but works in the interest of the taxpayer. Instead, we need to see a plan for using sporting success at the games to improve levels of participation.

It is also important to have contingencies if matters take an unexpected course. To support medal goals, the Department for Culture, Media and Sport hopes to raise about £100 million from the private sector. Perhaps the Minister can confirm today that there is still a realistic chance of raising that money, as we warned back in 2006 of the risks of leaving it too late.

There must be a contingency plan for protecting the funds of the sports most likely to win medals in 2012, and the total final cost depends on proceeds arising from the disposal of assets such as the Olympic village after the games. In today’s climate, that looks increasingly uncertain. Given these uncertainties, potential demands on the £1 billion of contingency funds that have not yet been earmarked will need very careful monitoring.

Of course, no risk to any project can be effectively managed without accurate evidence. Departments are responsible for ensuring that Members of Parliament are not misled, even inadvertently, by the evidence they provide. We were therefore very concerned that the Department for Transport gave the Committee unreliable information on the rate of evasion of vehicle excise duty. We produced our report, drawing on its figure that the rate of evasion of duty by motorcyclists was 38 per cent. Yet shortly afterwards, new statistics for evasion, based on a new methodology, put the figure at 9.8 per cent. We expect Departments to be accurate; if they are not sure whether their figures are reliable, they should say so and, if necessary, apologise for any mistakes, as I did.

In conclusion, the Public Accounts Committee operates from the sound base provided by Tim Burr and the staff of the National Audit Office, who have our grateful thanks, as without them we could do nothing. I am also grateful to the Government for welcoming the Public Accounts Commission’s proposals to enhance the NAO’s governance. The commission has spent a lot of time on that and I think that it has it right. I look forward to the inclusion of the necessary legislative changes in the Constitutional Renewal Bill in the near future. In the meantime, I am pleased to say that the wheels are in motion to find a permanent successor to Mr. Burr.

As ever, we are ably assisted by Mark Etherton and the staff of the Committee office. I also pay tribute, of course, to my fellow Committee members, who continue to work hard to hold the Government to account, irrespective of party or politics. Week in and week out, the Committee gives meaning to the spirit expressed by Benjamin Disraeli that

“all power is a trust; and we are accountable for its exercise.”

It is a spirit that some appearing before us find disconcerting, but it has never been of greater value than in the current cold climate.

Citizens’ interest in the earnings that they pass over to the Government does not end at the point of taxation. Those spending public money are exercising a trust on behalf of the public, and parliamentary accountability is the embodiment of that trust. The Committee provides a guarantee to the public that their interest is not left unrepresented. We do so in times of both prosperity and adversity. Our duty is unaffected by economic fortunes, and public servants’ duties to Parliament remain unaltered. Trying times may call for tough messages. The House and the public can, I believe, be assured that our Committee will not shrink from that task. I commend the motion to the House.

It is a great privilege and pleasure to follow the hon. Member for Gainsborough (Mr. Leigh). As Chairman of the Public Accounts Committee, he does an excellent job, and he has just given the House a powerful and in-depth appreciation of our work. We have spent many hours covering the issues that he has managed to cover in about 20-odd minutes. For that, we are in his debt.

I begin by paying tribute to the staff who assist members of the Public Accounts Committee. It is because of their hard work and professionalism in support of its members that the PAC is held in such high regard—and, of course, without the hard work and initiative of the Comptroller and Auditor General and the support of the National Audit Office, it would not be half as effective as it is. Without the National Audit Office, Parliament and our democracy would be the less, Governments would not be held to account, and public spending would lack the in-depth scrutiny that we are able to give it. Britain’s National Audit Office is, I believe, the envy of parliamentarians around the world.

The PAC is not simply an important cog in the wheel of Parliament; I consider it to be the very heart of the mechanism by which the people, through their elected representatives, hold the Government to account for public expenditure. The broad range of subjects that we investigate and the wide-ranging nature of our inquiries ensure that all Government Departments are open to examination. Echoing the words of our Chairman, the hon. Member for Gainsborough, I wish that the BBC—although it is not a Government Department—were part of that scrutiny. It is quite wrong, in my view, that a body that spends billions of pounds of public money is not open to the same scrutiny as any Government Department. It is the first to broadcast the news if anything goes wrong with any Department, while closing its own doors to detailed public scrutiny.

There can be little doubt that there is no hiding place when witnesses come before the Committee. We tend to give them a hard time. My hon. Friend the Member for Great Grimsby (Mr. Mitchell), who is present, has described the Committee’s work as a blood sport, and perhaps some of those who come before us have the same impression when they walk out of the door after a session of one and a half or two hours.

Let me take this opportunity to talk about some of the lessons that I have learned during my time as a member of the Committee. I suppose it is ironic, in one sense, that I should use the phrase “lessons learned” when it has become abundantly clear to me that many Departments are incapable of learning lessons as a result of projects that go wrong. The two overriding impressions with which I am left after each session of the PAC are that when a project goes wrong no one takes responsibility, and that—perhaps more important—it rarely seems to occur to Departments to conduct a “lessons learned” exercise when a project goes wrong, or indeed right.

At the time of the recent review of the accounts of Her Majesty’s Revenue and Customs, the Comptroller and Auditor General issued a qualified opinion on the regularity of tax credits because of the high levels of error and fraud. I believe that the hon. Member for Gainsborough said that this was the sixth successive year in which a qualified opinion had been issued, and there is still very little evidence that the problems with the system are coming under control. Six years on, the situation remains the same: £1 billion was overpaid in 2006-07, and £4.3 billion remains to be recovered from claimants, some of it because of error and some because of fraud.

Time and again, the complexity of applying for tax credits and the lack of clarity in the information that is provided when someone submits a claim have been cited as major causes of the difficulties with the system. Indeed, the Committee’s fifth report on tax credits states that many claimants struggle to understand them, and cannot understand why they have been overpaid either. There have been many complaints about the process for recovering overpayments, and the ombudsman continues to receive, and uphold, a large number of them; but only now is HMRC giving people support to help them to make their claims and avoid such problems. It is a little too late for families who may wish that they had never become involved in the tax credit system in the first place—which is a great pity, because it has made a huge difference and benefited a great many families in our country.

Given those problems with HMRC and tax credits, we have to ask, “Where are the lessons learned?” I am convinced that the failure to learn lessons led to the outrageous situation in 2005 involving the European Union single payment scheme for farmers. The cost of implementing the scheme was budgeted at £76 million, but in March 2006 it had reached £122 million. The Department for Environment, Food and Rural Affairs and the Rural Payments Agency had expected to reduce the agency’s staff by 1,800 and to make efficiency savings of £164 million by 2008-09, but difficulties in processing claims led to the recruitment of additional staff, and the scheme’s implementation has now cost £46 million more than the budget.

When I sit in the House or in Committee, I sometimes reflect on my time as a Defence Minister, when I struggled to find money to improve the accommodation of our servicemen and women and their families—which was often in the news—and on what I could have done with a fraction of that £46 million.

In my constituency, Friends of Newbridge Memo are seeking to restore a wonderful building which was built after the first world war. Miners and their families paid a penny a week to provide that facility for the community, with a library, a ballroom and meeting rooms. The Celynen Collieries band practises there, and indeed was founded there. The building was erected in memory of the boys from Newbridge who went to the great war and did not come back. It was runner-up in the BBC’s “Restoration Village” competition. Friends of Newbridge Memo need £4.9 million to begin putting the building back into shape. Their application to the Heritage Lottery Fund was turned down, and I am sure that they would have welcomed just a small portion of the £46 million by which the Rural Payments Agency has gone over budget.

My area also desperately needs a rail link from the Ebbw valley to Newport. The line currently goes to Cardiff. It will be completed eventually, but it could be completed next year with a fraction of the money that is being wasted on projects like that. Cancercareline in my constituency provides wonderful support, mainly for women suffering from cancer. Home-Start helps families who are struggling with the difficulties of bringing up young children. The money that is being wasted here could provide them with funding for decades, so that they could do more wonderful work in the community. That makes me very angry and frustrated.

It gets worse. According to the latest report, the agency has estimated that there were overpayments for the single payment scheme amounting to more than £20 million in 2005 and £17 million in 2006, and it has still not resolved the problem of how to get the money back.

The most extraordinary aspect of all this is that no one takes responsibility for what happens. The culture has to change. The hon. Member for Gainsborough referred to the present economic situation. Nowadays, even bankers cannot be certain that their gold-plated jobs, massive salaries and generous bonuses will continue if things go wrong. Why, then, should those who are responsible for the failure to deliver public services that are vital to our constituents be immune from the consequences of failure?

I agree with the right hon. Gentleman about the BBC’s “Restoration Village” programme. Pulham St Mary, the village in Norfolk where I live, made it to the last 12. I am pleased to say that it has just received a lottery grant.

As for the Rural Payments Agency, one person did take responsibility. When Johnston McNeill finally appeared before the Committee, he gave a surprisingly good account of what he had done. However, we gained the clear impression that, as chief executive, he had not only taken the rap but been hung out to dry, and that others in DEFRA and the agency, far from taking responsibility for what had happened, got away scot-free and prospered elsewhere.

I am grateful to the hon. Gentleman for reminding me about that session. That gentleman did come before us. He was very frank, and he did take responsibility. I agree that he was hung out to dry, and I think that the heads of many others should have been on the chopping block for the awful waste in the agency.

The reason for many of the problems and failures in managing complex projects comes down to the fact that many civil servants are ill-prepared to run the commercial-type projects their Departments are now engaged in. Central Government now manage more financial resources than ever before, and according to a National Audit Office report published in February that sum will grow to £678 billion a year by 2010-11. That report also stated that six Departments, accounting for more than £45 billion of Government expenditure, still did not have a professionally qualified finance director on their main board. The Chairman, the hon. Member for Gainsborough, has updated us, and that is now down to two Departments, so some progress has been made. However, it is almost unbelievable that such massive organisations should not have a finance director on their board.

The report highlighted the difficulties and dangers of not having properly qualified staff. Almost 70 per cent. of Departments cited the level of skills of non-finance staff as one of the three most significant barriers to improving financial resource management across Government. One has to wonder whether this may be the reason why there have been so many commercial blunders. The Home Office spent £29.1 million planning and designing the purpose-built accommodation centre for asylum seekers at Bicester, only for it to be cancelled. The enormous problems delivering the national programme for IT in the NHS, which will cost £12.7 billion, arose because officials did not actually understand the limitations of the technology. This is basic stuff for those involved in such massive undertakings.

For all these mistakes and such waste of public money, there seems to me to be no real incentive to get things right first time. No one is ultimately responsible for any decision. Ministers may come and go and civil servants may move on, and the ownership of a project can change hands several times. Therefore, the NAO and the Public Accounts Committee will frequently only provide objective scrutiny of a project years after it started, when it is too late to influence the final outcomes.

I referred at the beginning of my speech to the lessons that I have learned while serving on the Committee. Perhaps the biggest challenge is that Departments must be far better at monitoring how projects are managed. They need regular reports on how major projects are being managed, and internal audits so that we can see what is going wrong and what is going right, and learn lessons from that. Senior staff have to take ownership of major projects and should bear the consequences if they go wrong. In that way, we will begin to reduce this awful waste of taxpayers’ money. The hon. Member for Gainsborough said that we must stretch every pound and squander none. I entirely agree. If that happens, perhaps future PAC hearings will be less of a blood sport.

In listening carefully to our revered Chairman of the Public Accounts Committee, the hon. Member for Gainsborough (Mr. Leigh)—and I always listen to our revered Chairman carefully—I noted that he made at least two important points. First, he laid out the systematic failures of public expenditure programmes. Secondly, he highlighted the huge new task that confronts us—because, after all, we are now in a situation in which public expenditure is ballooning and Government expenditure is encompassing bailing out the whole financial system almost across the globe, and there is also a continued roll-out of private finance initiative projects, which will increasingly be the way in which Government spend money. Tax revenues are, therefore, ever more precious, and effective targeting of public expenditure has never been more important, and waste has never been more unforgivable.

The Chairman has put forward sensible, important and strategic proposals for Government consideration, and he has done so in a wholly constructive spirit. I think we are a wholly constructive Committee. To be fair, at times the PAC has an attack-dog reputation, as was alluded to in the previous speech; it has a reputation for gratuitously roughing up senior civil servants, and especially those on large bonuses. However, the arrival of the hon. Members for Sedgefield (Phil Wilson) and Edinburgh, South (Nigel Griffiths) and the right hon. Member for Streatham (Keith Hill) has changed that just a tad. We have possibly been a little slower to condemn key Government spending programmes—or, possibly, they have—or the way Governments deploy resources when they embark on spending programmes. However, this is not a battle between critics and defenders of programmes, or between optimists and pessimists, or at least that is not how I see it. Instead, the Committee is essentially evidence-led; we are interacting all the time with a massive resource, the National Audit Office, to which we are deeply indebted.

I am not going to embark on a Cook’s tour of all our reports in the past Session, but I would like to alight on some that have brought back many memories for me, and to highlight those that contain important messages. First, we had a raft of reports on taxation—the evasion of vehicle excise duty and on tax credits and tax form reports. Significantly, they underline how much could be gained through an efficient tax system and how much could be lost through a grossly inefficient system, and therefore what great gain is to be had simply in getting it right.

One interesting report, although not directly about taxation, was on managing risk in overseas territories. It turned over a stone that covered the vast and murky world of tax avoidance and tax evasion, which is a whole industry in places such as Bermuda, where I think there are about 80 per cent. of all hedge funds. We found that huge amounts of money were being moved around the world by companies that had connections with this country. Surely it is unacceptable that those corporate pirates—the hedge funds—can hide out there, free like the old-time pirates, to create havoc on the financial markets and to account to no one. Surely that must be tackled.

Another set of reports were about Government efficiency, and we examined Government property. We have recently heard, and moaned, about the culling of tax offices, which has certainly been an issue in my constituency and something about which I have strong views. When surveying it, I felt that we were unable to judge the real gains, and we are unable to do so now as the programme unfolds. I am not sure whether anybody is in a position to judge the real gains in property, because so much has already been leased under commercially confidential private finance initiative arrangements. We simply do not know what those are worth or the result of surrendering the leases.

We examined the NHS. We will all recall the issue that arose a year or so ago concerning the NHS being overdrawn or in the red. We examined its return to balance and agreed that it was a wholly good thing, and we awarded congratulations where they were due. I must say that I personally baulked at the spectacle of the north-west subsidising London, as it appeared to do according to the accounts that I looked at, and at times I found it hard to distinguish true efficiency gains from creative accountancy or simply the same money being accounted for in different ways.

Most poignantly, we examined the plight of neonatal babies and the variations in their fortunes across the nation. We all had to accept that that was not directly a function of NHS spending but due to wider intractable problems, public health issues and so on. It is an incredibly difficult problem to tackle but modest progress is being made, and we were all grateful to see that.

Something that stuck in my mind, and about which I was reminded by the question that the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) asked at Prime Minister’s questions yesterday, was our report on people leaving the services. We concentrated particularly on the less qualified individual—not the lieutenant but the private, the squaddie leaving the services. It seems to me there is a problem that demands immediate attention but that genuinely can be rectified.

We established that too many young men who join the infantry, often as a path to personal salvation and often with problems and a relatively deficient educational background, pass through the Army and eventually end up on the streets, sometimes unhoused, usually untrained for civilian life and certainly woefully unprepared. That was vividly illustrated in the hon. Gentleman’s question yesterday, when he pointed out that 10 per cent. of the prison population have been through the services. There must surely be something that the Army, the services or somebody can do about that. We cannot let that situation continue. We have to do more for those people when they join, when they serve and when they leave.

I close my remarks by suggesting where the PAC and the NAO may wish to go next, following the progress that we have made over the past term. Following our inquiry into pathfinders and housing regeneration, there is a genuine need to look into the targeting and efficiency of the whole regeneration budget and the various budgets that constitute regeneration. We have to challenge the assumption that the process is always meritorious and that all the money is well spent. My belief is that much is, in fact, being wasted.

Following the QinetiQ inquiry, we need to look into the whole issue of remuneration in the higher reaches of the civil service, the bonus culture that has grown almost without our noticing, and the transfer of top people to and from Whitehall and the conflicts that that might involve. Such an inquiry would be deeply unpopular in many circles, but I believe that it has to be done and is long overdue. Also, probably, in the overdue category is the need to remove the bad odour hanging over defence contracting and commissioning with overseas states, including, dare I say it, Saudi Arabia. We perhaps need to take a close look at recent contracts, rather than raking over the past.

Finally, I turn to a point that we have not dealt with at all in the two previous Sessions. We need to examine public value in our railways: the stewardship of Network Rail, which is a bone of contention in this House; the quasi-monopolies of the rolling stock leasing companies, or ROSCOs; and the Department for Tranport’s role in the whole kaleidoscope of interactions that make up the railway system. As thousands of people make their way home tonight, no inquiry could have more resonance with the general public than one into overcrowded trains that cost premium prices.

It is a great pleasure to follow the hon. Member for Southport (Dr. Pugh), who is a forensic member of the Public Accounts Committee; his contributions are always appreciated by its members, of whichever party.

I endorse the Chairman of the Committee’s comments about public expenditure, and the recent bank recapitalisation, in particular. It is entirely appropriate for the Comptroller and Auditor General to examine the huge sum involved on behalf of taxpayers, and I very much hope that the Treasury agrees with that and will assist the National Audit Office in every way.

Secondly, I wish to comment on the issue of financial management, which has been to the fore in many of the Committee’s reports. When I first starting asking what proportion of principal finance officers—finance directors, as they are now called—in Departments have an accountancy qualification, the answer was 23 per cent. The Treasury recently told us that the answer is now 91 per cent, and although that figure excludes the big exception of the Ministry of Defence’s finance director, who is in charge of £32 billion of expenditure, enormous progress has been made. I congratulate the Treasury and other Departments on starting to realise that the topic is important and that they have to do something about it. The progress should not go unremarked; the Treasury has understood the importance of the matter.

That makes it all the more important for the Treasury to give a sensible account of tax credits, the subject of the Committee’s eighth report. It stated that

“there is little evidence the Department has the scheme”—

the tax credits scheme—

“under control. Many claimants continue to struggle to understand tax credits and why they are overpaid. There have been many complaints about the process for recovering overpayments and the Ombudsman continues to receive and to uphold a large number of complaints…This level of error led the C&AG to qualify his opinion on the HMRC Trust Statement for the fifth year running. The Department still has no targets for reducing error and fraud.”

If we think that financial management is important, and if the Treasury thinks it is important enough to ensure that qualified finance directors are in place across Whitehall, surely it is important enough to ensure that the department that comes directly under the Treasury’s own control—Her Majesty’s Revenue and Customs, which has the task of collecting the money that we then spend on various public expenditure programmes—is itself under sufficiently tight financial management that it can account for how it spends its money. At the moment, it is unable to do so—it has not been able to do so for several years. I hope that we will be told when the Treasury expects the Comptroller and Auditor General to be able to sign off HMRC’s accounts as clean, because it is only right that what is good for other Departments should be good for the Treasury and its subsidiary departments.

I wish to make another quick point about tax credits. A settlement was reached between EDS and HMRC concerning the tax credits fiasco. The Treasury originally claimed that EDS should pay it £209 million, but that was later cut to an agreed settlement figure of £71 million. Only about £44 million of that was paid in cash or near cash; the remainder, £26.5 million, was to come from future revenues on contracts that EDS had not yet won with government. In other words, it is to come from future business. Apart from the fact that that gave Government Departments a rather strong incentive to award EDS further business despite, rather than because of, its track record, it has been clear that over the past two and half to three years since the agreement was reached hardly any money has been paid. Most of the £26.5 million is still unpaid; a few hundreds of thousands have been paid and there was one payment of £20,000. The chairman of HMRC for the time being knows that every time he comes before the Committee—unfortunately, I was abroad when he came before us last time, in early October—I shall ask him how much money he has had. He always comes prepared with the answer. Indeed, his distinguished predecessor Paul Gray, who honourably resigned over the issue of the missing discs, said that he would have been most disappointed had the question not been asked. I will continue to ask the question.

I am sorry that the hon. Gentleman missed the last occasion, but the question was asked in one form or another and litigation was threatened by the chief executive of HMRC. I do not think that we believed him, but the hon. Gentleman might be interested in that observation.

I am grateful to the hon. Gentleman, who brings me to the point that I was about to make, which is that the various representatives of HMRC have made it very clear that they have been documenting millions of pages of material relating to the case so that they can, if necessary, litigate. But they really ought not to have to. It is in the nature of large-scale computer contracts that they hardly ever go to litigation because, at the end of the day, the only people who win are the lawyers. It is much better to avoid litigation. However, EDS should recognise its responsibilities in this area.

If one goes to the Vote Office and asks for the PAC bundle, one is given all this material I have beside me. My hon. Friend the Member for Tiverton and Honiton (Angela Browning) said that she was rather intimidated by it; after all, it was Fidel Castro who said that any speech of less than four hours cannot be doing any good. I was tempted to be a little more expansive, but the Chairman reminded me that it is impolite to speak for longer than the Chairman himself. He only spoke for 20 minutes, so I will have to restrain myself.

I wanted to comment briefly on QinetiQ, which seems to have displayed some unwelcome tendencies among civil servants. Lord Gilbert, the former Labour Defence Minister, said on the “Today” programme about Sir John Chisholm, the boss of QinetiQ:

“Never once in my presence did Sir John Chisholm indicate that he might have a conflict of interest or he was going privately to be enriched by what was going on.”

In the Defence Committee, the hon. Member for Crawley (Laura Moffatt) also quizzed Sir John Chisholm at great length about whether or not there was a financial gain for him and whether he was likely to get shares. The transcript can be seen on page 19 of the evidence. It was absolutely clear that he evaded telling anyone that he was going to benefit financially or through shares. The Chairman of the Defence Committee said:

“You know what I am getting at. I do not want to see people leaving the Ministry of Defence who have been part of the negotiation… and within 6 months 12 months or so ending up on a tripled salary.”

We know that, for an investment of £130,000, Sir John Chisholm ended up with £25 million of equity in the business. It is probably a bit less than that now, but the principle still applies. No safeguards were put in place. The permanent under-secretary, Bill Jeffrey, made it clear to us that there were no safeguards. The Treasury must revisit the whole issue of QinetiQ and make sure that in any future transactions of that kind, better safeguards are put in place. Many of our constituents are very angry about it and many parliamentary colleagues were very angry about the fact that such a transaction was allowed to occur.

I wanted briefly to mention the progress on the Rural Payments Agency, which the right hon. Member for Islwyn (Mr. Touhig) mentioned. Johnston McNeill, the chief executive of the agency, came before us and I was quite impressed by his evidence. He gave quite a good account of himself. I have read in detail the Environment, Food and Rural Affairs Committee report on the whole fiasco and he did have a lot of responsibility. But it is also clear that that should have been shared more widely.

I find it extraordinary that an agency with the title of the Rural Payments Agency had the job of making payments but was unable to tell farmers either the date when they would get their payments or how much they had already been paid. I once worked out the number of payments per employee of the agency, and I think that it was 29. The employees could have been sent out to the farms, with a day for travel there, a day on the farm and a day for travel back, and the whole thing could still have been done and dusted in three months if the payments had been made by personal visit and manually. If people phone their banks, they can find out if they have received a payment and for how much, but that so-called payments agency was unable to provide those figures, which speaks eloquently of the scale of its failure.

I hope that the Treasury studies the reports from the PAC and the Environment, Food and Rural Affairs Committee and tries to learn the lessons. I agree with the right hon. Member for Islwyn that not enough effort is always made to learn the lessons, and that must change.

There is a hopeful straw in the wind, because the Treasury has appointed Mr. Martin Read, the former boss of Logica, to try to teach it how to run IT projects and to jettison them as quickly as possible when it becomes apparent that they have gone wrong, again. There was a tremendous headline in a story in an online magazine about the appointment, although it may not be entirely parliamentary:

“Ex-Logica boss to teach how to identify crap IT”.

The project apparently involves Mr. Read looking at how to keep

“dedicated teams on projects from start to finish”

and at

“not being afraid to abandon a project just because it’s high profile”.

However, the article points out:

“Both those aims would run totally counter to the traditional…way of doing things. The very essence of politics and public sector work is to never finish a project and to get out while the going’s good. And because no one has a start to finish view of a particular project, no-one can really see how crippled it is, so the chances of anyone sticking their neck on the line and saying it should be pulled are next to zero.”

I hope that that is too cynical a view and that Mr. Read’s work will yield some benefits. The fact that he was forced out of Logica after a profit warning following a European buying spree in 2007—so that he presumably bought the companies involved at the top of the market—causes me some concern, but I wish him well.

My final remarks concern the national programme for IT in the health service. We do not have a report on that before us, although it is a long-term project that has been running for some six years, and is therefore now six years late. Two years ago it had been running for four years and was four years late, so little change there. There has been a development since we last had a chance to discuss it—the withdrawal of one of the major contractors, Fujitsu. Baroness Thornton described its departure in the other place as “a sign of strength”, which is an interesting way to put it. Essentially, Fujitsu was prepared to fulfil the terms of its contract, but the Government have said that they would rather keep the project money than have that happen, thus risking a £700 million lawsuit, which—according to the press—Fujitsu is now threatening. And that is a sign of strength, apparently. It reminds me of Tom Lehrer’s comment when Henry Kissinger received the Nobel peace prize that it was the end of satire. If that is a sign of strength, what would be a sign of weakness?

I shall begin by offering my thanks to my hon. Friend the Member for Gainsborough (Mr. Leigh) and members of his Committee for the work that they do. I shall pick up on two reports, the first of which relates to shared services. That is an area in which I have some practical responsibility, in that I had political responsibility for delivering a shared services centre in a large local authority. As I am a committed decentraliser, the centralisation inherent within shared services was something of a bitter pill to swallow, but the potential from shared services is so enormous that it is difficult to ignore.

I would like some reassurance on the models for shared services centres. They have become much more sophisticated, so they are no longer about the centralisation of everything in one place but about a number of different shared services that can work in parallel, supporting each other in partnerships or through federated solutions that deliver more of the benefits without creating the centralised monster that these things can become.

My experience has been positive and has delivered a high degree of success, with considerable savings. Let us be clear about those savings, however. They come from removing people from the pay roll where there is considerable duplication in areas such as finance and human resources. If shared services come with considerable savings, they also come with considerable cost. Success can be measured in a number of ways, not just in cost savings. This is a chance to avoid and remove duplication and to simplify processes, but, most of all, the implementation of shared services, if delivered in the right way, can be a fundamental tool in achieving culture change within an organisation and sweeping away a wasteful and bureaucratic culture.

I would be interested to hear comments on a few lessons that I took on board from my experience. First, the key to success is to have not only a strong business case but a superb level of detail up front in the implementation plan. It is not just about the practicalities of buildings and technology. Any organisation will find that multi-tasking means that bits of jobs are here and there. It is not unusual for somebody in finance, for example, to spend 40 per cent. of their time on finance and 60 per cent. of their time on something else. That is quite difficult to accommodate within the concept and model of a shared services centre, but unless that is done, the opportunity is missed not only to centralise the 40 per cent. that is devoted to the finance function but to challenge the viability of the remaining 60 per cent.

Secondly, it is absolutely essential to have a clear timeline, detailed financial information and an idea of exactly where the savings will come from. My experience is that that will change as the project advances, but unless one knows where one is at the start—or at least where one wants to be—it all ends up in an awful mess. I understand that a number of attempts at setting up shared service centres have already fallen foul of that. It is right to insist on detailed project plans and to measure progress frequently.

Thirdly, it is important not to be too ambitious. Most Government Departments could do with setting up a shared service centre just for that Department first, before the Government try to take an interdepartmental approach. If they try to extend too quickly, that will lead to problems because of the differences in culture—even fairly small ones—between different Departments. In the case of the shared services centre that I set up for my county council, for example, we refused from the beginning to follow the Government’s advice to try to do it in one go by bringing in district councils, the police authority and whatever else. The differences in culture would have meant that that would have been too difficult and would have upset the financial business case. I would have been happy to consider doing that in the future, and I hope that those still involved in the project would be happy to do so, but it has to be done incrementally, so that people can be absolutely sure of the costs and the savings that arise.

Fourthly, the project cannot be divorced from a hearts-and-minds initiative. As I mentioned earlier, this is about major cultural change. In my experience, one of the biggest bits of cultural change was driving home the idea of the internal customer and of the needs of that customer. There are huge penalties and risks of failure if that point is not taken on board, and the IT requirements got right, from day one.

My fifth point is that is essential to have a separate governance structure that includes customers and simple service agreements. Such a structure ensures that customers have a stake in the shared services centre, and it also helps to secure efficiencies.

Finally, it is very important that someone from the commercial sector outside Whitehall is hired to run any shared services centre that is being set up. If a centre is not run on proper commercial lines, the risk is that it will fall back into the bureaucracy from which it came.

The second report to which I want to allude, somewhat more briefly, is entitled “Ministry of Defence: Leaving the Services”. The reputation of RAF Benson in my constituency is that it is extremely good at looking after the human resources needs of its personnel, but I am concerned about the effect that leaving the services can have on a range of health and family issues, as well as employment. That is why, in 2009—I hope in association with the Soldiers, Sailors and Airmen Families Association and the Royal British Legion—I shall be running surgeries on the base to fill in some of the gaps.

I took a look at the interview form that is completed for early service leavers, and it is not the most personal form that I have ever come across. As far as I could see, there is only one small box for additional personal information, with most of the rest of the form being concerned with handing people on as quickly as possible to other organisations, and to the jobcentre in particular.

I am aware that the National Audit Office found in 2007 that services for early service leavers were inconsistent, and I hope that the Minister can reassure me that there is some measurement of whether that consistency is being put into the system. It is important that early service leavers in my constituency and elsewhere have access to consistent services.

In addition, I should like the services to be joined up more with the services offered by local government, especially in relation to homelessness. Early service leavers are referred to a list of places, but the interview form does not seem to include any element that relates to passing them on to local government. Therefore, I was not surprised that many people responded to surveys asking for an evaluation of the resettlement packages by saying that they were not useful to their needs. I urge the Government to come forward with firmer proposals in that respect.

I should like to begin by saying how much sheer pleasure I get from being a member of the PAC. I am very enthusiastic about it, and consider it the most interesting Committee appointment that I have ever had. The work that we do is an enormous source of satisfaction, covering as it does a wide spread of interest and subjects, and I compliment the hon. Member for Gainsborough (Mr. Leigh) on his skilled chairmanship, despite the many divergent views among members. Moreover, our Chairman always makes a very pointed and effective introduction to our sittings. The fact that he steals most of the questions that I would want to ask in my interrogations is purely incidental, because I suppose that that is his job. It has also been a pleasure to work with members of the Committee. The hon. Member for South Norfolk (Mr. Bacon), who is modestly exiting the Chamber before I can pay him any compliments, is one of the most effective questioners and financial analysts with whom I have ever worked. My right hon. Friend the Member for Islwyn (Mr. Touhig) brings to Committee a whole sheet of detailed questions, written on yellow paper in red ink. My correspondence is normally in green ink, as he will appreciate. His effective questioning of officials and Departments has been an inspiration. It is a pleasure to work on the Committee with those people. It is marvellous training or preparation for a ministerial job that I shall never have. It has been wasted on me; it came at the wrong stage in my career.

Well, revolutions might happen, and we are all socialists now, so I have not altogether given up hope. I am very well trained, thanks to the Committee and to the hon. Member for Gainsborough. I want to make that clear, because it is such an effective Committee.

I now want to express one or two reservations about problems. In some—or most—senses, our reports do not make the impact that they should. It is a confusing situation; a National Audit Office report comes out, and usually hits the headlines, and some months later, the Committee produces a report saying much the same thing. People are not sure who is saying what. The impact is dulled because the reports come out in two stages. We do not follow up on our reports effectively enough; that is a failure on our part. On the Table we can see a pile of our reports. We are a very hard-worked Committee.

The Committee Clerks ring us up individually and ask us whether we want to do a radio or television interview about this, that or the other. I remember dealing with an unnecessary, expensive detention centre that had been built in the countryside around Oxford somewhere. I unearthed the fact that there were no security arrangements, as it had been built in that place because there was no bus service. Anyone escaping could not get a bus to the station to make their getaway. That was an extraordinary fact. Having revealed it in the course of the Committee’s inquiries, I was asked to make a statement, but there was not time, and I could not do it adequately. We need a press office attached to the Committee to make sure that our reports have the impact that they deserve.

The fact that our reports do not have the impact that they deserve is indicated by the attendance at today’s debate. There is dynamite in many of those reports. It is red meat that the Opposition should be devouring; they should be mobilising to use it against the Government. The left in the Labour party should be using it to further their views about the efficiency of Government spending, yet it goes unnoticed. The reports sit there on the Table, we briefly mention them, and then they are forgotten. The lack of interest in our reports and the lack of effort that we make to put their content over to the public are disappointing.

That is in total contrast with our American counterpart committees. I have watched them on C-SPAN, the Cable-Satellite Public Affairs Network. They are very effective; they are all on television, and they all have powerful, effective questioning. They haul the mightiest in the land before them and get headlines in the newspapers—and it is always a pleasure for a politician to get headlines in the newspapers. The lack of interest in our proceedings is depressing. It is partly our fault, because we do not have time to put over the arguments and give them political impact.

It is unsatisfactory that we are always dealing with issues posthumously. We interview a body’s current accounting officer, but the people and officials responsible for the decisions that we are questioning and criticising have retired, been moved on or moved out, or been made governor of some remote colonial possession that still lingers in the Government’s purview. We never deal with the people who made the mistakes.

Does the hon. Gentleman agree that the most interesting thing about the NAO’s regular reports on the Olympics—I think that there have been three or four—is not simply that they are about the Olympics but that they are not “posthumous”, as he described it? They look forward to an event that has not yet taken place, and are getting in on the act much earlier in the cycle. Does he agree that that could represent a model that the NAO and, in turn, our Committee could apply to other areas of Government spending?

Absolutely. We need to keep a running analysis as the situation develops, as it puts us in a more powerful position. However, in most subjects, we are not in that powerful position. The best instance is the Ministry of Defence information system, with which we dealt yesterday. The contract is behind schedule and over cost, as several such big contracts are. It was decided to introduce it in 2000, but—I speak from memory of yesterday’s discussions—it was finally introduced in April 2005. The accounting officer with whom we dealt was amiable and effective in giving us the official view, but he was appointed in November 2005, so he had no responsibility for the system that he had to explain and defend.

The one instance in which the official responsible appeared before the Committee was in the case of rural payments, and they were revealing about the procedures involved. I wish that we could have that experience more often. There is a problem with all the big IT projects that the Government are keen on. The intention is absolutely fantastic: details about this patient or that case or issue are open to access in any part of the country, depending on which train the laptop was left by the civil servant responsible. It is marvellous to have such access. There is too much enthusiasm for big projects, which are often too big. Every single one is inadequate; they are usually behind schedule—NHS Connecting for Health is one such project—well over budget and face many problems that are glossed over. There should be a centralised Government system to allow the civil service to vet and authorise those big projects before they go ahead, because I am not sure who is responsible for them.

In fact, the Office of Government Commerce is in the middle of developing a system that does just that. It is called the major projects review group, and it aims to get a handle on strategically important projects, whether they are large or small, and do precisely what my hon. Friend said, from beginning to end. It is a new way of doing things and I, for one, hope that it will remove some of the blood sport that my right hon. Friend the Member for Islwyn (Mr. Touhig) discussed in his speech.

That is good to hear, and it is right that we should do it. However, it is a little late. It is closing the stable door after several big horses have bolted—and they are now wandering around the countryside, putting money into contracting firms and kicking people. Until now, the role of the OGC has been that of a marriage bureau, lining up Departments with IT firms and consultancies, rather than looking at the projects themselves and asking, “Are they too big? Are they trying to do too much?” That is the usual tendency, but we should ask whether those projects are going to produce a palpable gain, and what the position of the heritage system is while the new system is installed. That is never thought through, and I do not know why. I do not know whether Ministers are pushing the virtues of big computer contracts on the civil service, hoping that once everything is mobilised in such a fashion, government will be more efficient and cheaper to run and they can fire all the civil servants. I do not know whether it is a question of fashion in the Departments. I do not know whether every Department must have such a contract and the bigger it is the better, or whether there has been zealous salesmanship on the part of the companies. Who is to tell? Certainly, the projects are oversold, and the civil servants do not seem competent at cutting down to reasonable dimensions the brochures and vision that they are given by the salesmen and asking, “Is this really going to work?”

There is a problem, and I am delighted to hear that something is being done about it, but at such a stage it is too late in our experience. We are left with several big projects that will be very difficult and very draining financially before they are working. There should be a degree of pre-testing, which does not seem to have occurred. Yesterday we were looking at the information system in the Ministry of Defence. When the computers were to be installed, it was found that they could not work in the existing buildings without serious modifications. They were never pre-tested. Again, some general review should require that and should require Departments to justify these big projects before they are authorised.

Some means of central authorisation is necessary, and some degree of sanction against the firms that oversell the projects in the first place. On the tax credits issue, EDS had to pay compensation because of the inadequacy of the systems that it had installed, but that compensation was geared to EDS getting more Government contracts from which it could pay the compensation for the mess that it had made on the first Government contract. What an insane situation. If a firm screws up one contract, it gets other contracts to help it pay for the compensation on the contract that it screwed up. I have never heard anything like it.

I do not know much about banking, but I can say that there is insufficient disciplining, control and sanctioning of companies if they fail. I should like to see the same procedure as for Gershon-style economies—the grinding Gershon wheel that is supposed to squeeze fat out of the Departments all the time, as they go along. That goes on remorselessly, even at a time when Departments are trying to carry on some major function. The Rural Payments Agency is a classic example. Because of the Gershon economies, people are being fired at the same time as the agency is embarking on one of the biggest tests of its efficiency and payments system that it is possible to imagine. The result is that it is understaffed, the people who know the work have gone, and the agency must hire them back again to make up deficiencies.

Such economies must be co-ordinated. There is another example coming along in the Department for Work and Pensions, which is proposing to fire a large number of civil servants just as we all know that the coming recession will increase the number of unemployed, create more work for the Department and make its life more difficult. Nevertheless, it is proposing substantial reductions in personnel. The functions, personnel and computer systems of a Department need to be co-ordinated.

I turn from such general preoccupations to a few specific points about some of the reports that we are discussing today. I was somewhat worried by the tax credit system, which we dealt with a week ago. It was implemented in too inflexible a form, which has resulted in large sums of money having to be clawed back from the poorest sections of society. Mainly because of the inflexibilities of the system, the people whom it was meant to help must repay large sums that they cannot afford and which, in fact, will never be recovered.

The suspicion crosses my mind that Her Majesty’s Revenue and Customs, which does not want that burden—it is used to taking money from people, not giving it to them—is embarrassed by the situation and has therefore implemented the giving back or credit system in such a ham-handed fashion that the system is discredited. That is too malign a thought for our civil servants, but things have been cumbersome and the HMRC has been far too slow in bringing them into line. The testing has been inadequate. The system itself is good, but its implementation has been clumsy.

The treatment of those who are being and have been asked to pay back large sums—they are particularly so for them—is in total contrast to what we saw in another of our reports on HMRC, about the management of large business corporation tax. According to Private Eye and evidence given to us, the businesses that pay large sums in corporation tax are wined and dined by HMRC. Their representatives are taken out to expensive restaurants and asked how HMRC can be nicer to them, what would oil the wheels, and how the companies can be made to cough up voluntarily—a proposition that must be extraordinary to the large corporations. All that is in great contrast to the treatment of the poor, whose faces are ground in the debt and who are pursued in the most cruel fashion. They are taken to court and forced to repay.

The report on the taxation of large corporations was very worrying. The position taken towards such corporations was, on the whole, one of trust—“We trust the chaps to fulfil their obligations.” But we all know that a culture of tax avoidance, and in some cases tax evasion, permeates the whole of business. Companies, particularly big companies, are not paying the social rent that they owe this society for profits generated in this country. News Corporation Ltd is the classic example: it has very profitable investments in this country, but its tax affairs are fiddled through a whole plethora of tax havens and it does not make anything like the contribution that it should to this country, given the revenues and profits that it generates here. That is the culture, yet those are the chaps whom we are asked to trust to pay their tax obligations.

The TUC has estimated that tax avoidance by companies and the wealthy costs everyone at work £1,000 a year. In other words, a total of £13 billion is lost through tax avoidance. We try to get to grips with the issue, but our effectiveness is nothing like that of the American committees. They have been dealing with the same culture as ours: big firms sell tax avoidance—and tax evasion—schemes to the companies in the knowledge that it will be profitable to implement them until the Internal Revenue Service catches up with them, as it eventually does.

Interestingly, following a US Senate committee inquiry into the design, marketing and implementation of abusive tax avoidance schemes, KPMG, a firm of which I have heard, admitted criminal wrongdoing and was fined $456 million. That involved shuffling money around the world. The Committee found that major banks such as Deutsche Bank, HVB Bank, UBS and NatWest provided purported loans and credit lines for the purposes of tax avoidance. Those schemes were sold by KPMG and there is the same system here; it is just less publicised and more covert, because we never get to hear of the details.

The US Senate report showed that from 2000 to 2007 Morgan Stanley helped clients to dodge payments of US dividend taxes of more than $300 million. The late lamented Lehman Brothers indulged in the same scheme. When e-mails from within Lehman Brothers were produced before the Senate committee, they showed one executive telling another that

“the cash register is opening!!!!”

and another saying:

“Outstanding…Let’s drain every last penny out of this”

market opportunity.

Those were the American investigations. We do not have the power and effectiveness of those committees—I wish that we did. We need to go into this area because it directly affects this country’s finances on a massive scale, shifting the burden of taxation on to individual taxpayers in favour of a big industry of tax avoidance and evasion in which companies are not paying their way. Our recommendations were very good, but we encountered the disadvantage of their not being publicised enough and not becoming part of a major debate.

We pointed out that whereas the Americans have an estimate of the tax gap—in other words, the tax that corporations should be paying as compared to what they do pay—we found that HMRC had no measure of that tax gap and appeared reluctant to develop such a measure. Unless we have a knowledge of the sums at issue and how the matter is being dealt with, we cannot possibly deal with it. An outstanding recommendation of ours was that it should develop such a measure and it should be publicised. We need to know what the tax gap is, how much has been avoided and how much has been evaded. We found that as HMRC has reduced the use of generic avoidance schemes, tax advisers have developed bespoke schemes that are now flogged to help business.

We found, too, that HMRC would find difficulty as regards its staffing in coping with the clever, highly paid boys who devote their whole lives to devising schemes that can be sold on to the banks and other businesses to avoid taxation. There is clearly a problem in terms of the amount that HMRC can pay its staff compared with the amount paid by the institutions—the big accountancy houses and others—in developing these schemes. The two areas are totally unmatched. HMRC’s large business service faces a loss of skills and industry knowledge as more experienced staff are due to retire. It will have to recruit people with the skills and ability and at the pay level necessary to cope with this issue.

This is an excellent report on our part, but it has fallen with a dull thud and without the public reaction that it should have generated and deserves. We are dealing with a major political issue—one of a whole series that we come across in our work. We need to be able to promote it further, push into the political forum and get it discussed instead of seeing it falling mutely like a feather on the waters; I was about to say a tomb of silence, but I am mixing my metaphors too much. We are doing important and valuable work—frightening work in the sense that there is so little sanction and so little discussion at the end of the day. Apart from that, more power to our elbow.

It is a great pleasure to follow the hon. Member for Great Grimsby (Mr. Mitchell); he is never a feather to fall silently on water.

I begin by apologising to the House for not being here at the beginning of the debate as I had a prior engagement. I gave my personal apologies to my hon. Friend the Member for Gainsborough (Mr. Leigh), and I pay tribute to his chairmanship of our Committee. I would like to put on record how much we on the Public Accounts Committee owe to the National Audit Office for the calibre of report that it puts before us. The reports are always of such high quality that it is a pleasure to work to them, although I sometimes find it rather challenging to have to read up on two separate subjects a week.

I would like to touch on some common themes, not just in the reports that are before the House today which have recently been considered by the Public Accounts Committee, but in what happens once the NAO report has been published and we are yet to take evidence. One cannot help but feel that the moment an NAO report arrives in the public domain the Department it refers to goes into frenzied activity in order to try to mitigate some of the recommendations or criticisms before the permanent secretary and other officials are required to attend an evidence session. I am sure that it is just hearsay that there is a special training course for permanent secretaries who may have to appear before the Committee.

During the time I have served on the Committee, I have not found any discourtesy in the treatment of civil servants, although probing questions are asked. However, there are times when the subject matter that we are dealing with reflects not so much the role of the accounting officer but the policy behind it, and often one wishes that not just civil servants but the Ministers responsible for the policy were appearing before us. Unfortunately, as the accounting officer, the permanent secretary has to account for the public expenditure. One cannot help feeling that, given the number of times in evidence we are told, “Since the NAO report was published, we have made huge improvements”, the reports are seen as a trigger for improvement.

That picks up on what Members from all parties have referred to during this debate: the need to look at how the civil service and Departments work—individually and collectively, because often there are cross-departmental issues. If the NAO has picked up on difficulties, discrepancies and lack of good use of public money, surely there should be a better mechanism in individual ministries so that they can identify much of that for themselves and address it before the NAO trigger is reached, valuable though it is—although we would not wish the Committee to be decommissioned because it was no longer seen as necessary. Ministries are reactive to the reports, and one wonders what is lacking in their structure that means that they do not pick up on such issues earlier.

I would like to make some suggestions that pick up on what others have said today. Like many Members, I am occasionally invited to speak to the National School of Government, formerly known as the Civil Service College, and as a former Minister I hold the training of civil servants in our country in high esteem. I know that it is fair game to criticise the civil service, but we have one of the best civil services in the world, and its training is very good. However, somehow it has lagged behind the commercial sector in integrating core management skills into the workings of the organisation—or in this case the Department. I shall come on to the IT skills and commissioning that has been mentioned. As a member of an institute that is interested in management, I feel that Departments should improve their skills in two core areas.

The first area is management information systems. It is key that such systems are considered, whether for an individual project or a strategic overview of a Ministry in carrying out its duties. People should be properly trained to ensure that information is both timely and relevant to ensuring that the Ministry works efficiently. My hon. Friend the Member for South Norfolk (Mr. Bacon) said that he had identified a lack of accounting skills in key positions. One would have thought that that was pretty basic. If one has a work force who lack skills, one should adjust one’s recruiting programme and in-service training to ensure that the skills are obtained or recruited in. As time goes by, one gets the impression that that work is not done quickly enough to tackle some of the problems that we consider in the Public Accounts Committee.

The second area is project management. Outwith the IT side of things, project management should be integrated more, and the skills associated with it should be integrated into Departments. Lack of continuity has been mentioned. A long-term project is difficult to achieve when there is no continuity among the people who have to oversee it. Sometimes that cannot be avoided, but if a project has been set up properly, with a proper management system, one should be able to replace key people as it progresses without causing detriment to it. The reports from the NAO and the PAC suggest that the civil service should completely review its training and recruitment for and management of those two core functions.

Some of the problems that the reports identify are persistent. Even when they are identified, it is often difficult to ensure that they are corrected in a timely manner. Although there are several examples, I shall refer to the single payment scheme, about which our report states that, although most farmers are being paid earlier than they were in 2005, “errors persist”, and that the Government run the risk of being fined hundreds of millions of pounds. One would think that every warning bell in the Ministry would ring at that. Apart from the practicalities of getting the scheme right, the Ministry was heading down a road that would leave the British taxpayer culpable for such a fine. That should have been picked up early. If proper project management had been applied to the scheme, the problems might have been avoided. The does not apply only to the single payment scheme—there have been persistent problems with tax credits and pay-as-you-earn.

Before my hon. Friend moves on from the single payment scheme, let me point out that, although there might not have been adequate project management, a series of Office of Government Commerce reviews was published in the back of one of the NAO reports on the Rural Payments Agency. They showed that, time and again, the OGC gateway process produced red traffic lights, but nothing happened. At no point did anyone at the centre say, “Stop.” Things simply carried on.

Indeed. That is why I believe that such projects need to be properly managed, and key people need to take responsibility for them. If there is a properly drafted project management scheme, those responsible should be easily identifiable. As my hon. Friend said, that did not happen and, as he pointed out in his speech, the appalling record keeping compounded the single payment scheme’s problems. As I said earlier, I believe that the political imperative was sometimes to blame. Sometimes it would be helpful to have a Minister rather than a civil servant present. I recall that when the right hon. Member for Derby, South (Margaret Beckett) as Secretary of State for Environment, Food and Rural Affairs announced the single payment scheme to the House, it was done in a very hurried way.

Let me come on to information technology commissioning and the overseeing of IT, which lie at the heart of many of the problems brought before the Public Accounts Committee and covered in its reports. It seems to me that the single payment scheme is a classic example of a policy being introduced hastily—possibly against the advice of civil servants at the time, although how would we know for sure? If more time were taken and more trialling done before a policy was rolled out as a national scheme, the Government and relevant Departments would hopefully pick up more of the many problems caused by complex IT schemes—problems for our constituents and, more particularly for the PAC, problems that lead to a huge waste of taxpayers’ money.

I say again that I am not an IT expert, so I am nervous of venturing down the path of making recommendations on IT to the Government, but it seems to me that the commissioning of software is a particular problem and that the people who draw up the specifications in the first place often do not have the necessary qualifications or knowledge. That brings me back to having proper management information systems—all these issues feed into each other—that are necessary in order to commission correctly.

There are always going to be glitches with major IT projects—there are bound to be; it is never going to be perfect the first time round—but by trialling and sorting out the glitches before a programme is rolled out, the Government and Departments could avoid many of the difficulties. That applies not just to DEFRA—or EFRA as it is now often called—but across the board. Perhaps one of the worst examples was the commissioning of projects in the Ministry of Defence, but problems have been evident in the NHS and the Department for Work and Pensions, as well as in the Department for Environment, Food and Rural Affairs and the Ministry of Defence.

I hope that as a result of today’s debate the Minister will take forward some of the overall concerns that have been expressed. We have heard specific complaints about individual reports, but I am referring to overall concerns about recurring problems and common themes that the PAC all too often picks up in its reports.

I conclude by noting the opportunity presented to the PAC to come back to its reports more frequently than at present. It is very difficult to decide which of the National Audit Office reports should be considered in an evidence sitting—ideally, we would like to consider them all. Two a week when the House is sitting is a lot of reading, but, equally, the power of the PAC in comparison with other Select Committees is that it has the opportunity to call the permanent secretary and other officials back in order to monitor progress after the previous report. We already do that to a degree, but in my opinion, not enough. If we could bring reports back more frequently, where appropriate, we could make more of a difference to some ongoing and persistent problems.

It is a pleasure to respond to this debate, which has been fascinating to listen to. Speaking as someone who spent about 14 or 15 years in business and industry before becoming an MP, I know that many of the issues spoken about today make a lot of sense, as I often ran up against them in industry.

The excellent Chairman of the Public Accounts Committee—I shall pay further, more detailed tribute to him shortly—rightly opened the debate by pointing to the considerable changes that have occurred since we debated the previous PAC reports back in May. If we had thought back in May that we would see the current bank rescue plan, hear the word “nationalisation” being used more frequently than it has been for years, and witness the general worsening of our country’s fiscal position—the Governor of the Bank of England delivered a bleak prognosis only this week, and today the Institute for Fiscal Studies has reportedly flagged up a potential £125 billion black hole in the public finances—we would have found it difficult to believe that all that could happen so quickly.

There is no doubt that times are changing, but one of the reassuring facts to which we can cling in these changing times is that not everything changes; some things remain constant. For me, the work of the PAC is one of the reliable constants that we have in public life. There are a number of reasons why the Committee works so well, and I hope to discuss them briefly, but first I want to add to what others have said about some of the issues raised in the reports.

The Committee’s leadership is, of course, critical. There is no doubt that the ethos of the Committee—its tenacity, and its forensic ability to look under the difficult stones and rocks presented by the Government—is embodied in my hon. Friend the Member for Gainsborough (Mr. Leigh). He set out very clearly the challenges that the Committee faces in examining so many different topics. As we have seen today, it contains a unique combination of talents: an eclectic mix of members, with a massive variety of not just skills but opinions. I pay tribute to its Chairman for his ability to corral that diversity of talent, skills and opinion into such powerful reports. There is real verve in the Committee’s work and, beneath it all, a clear understanding of what it is there to do—to play a critical role in carrying out its parliamentary scrutiny of the work of Government.

What strikes me when I listen to and participate in debates on the PAC is the breadth of its remit. We need only consider the sheer breadth of the issues covered by the reports, which range from tax credits and PAYE in the eighth report to the 2012 Olympics in London in the 14th report, the single payment scheme in the 29th report, and benefit fraud. People are often asked to engage in a trade-off between quantity and quality, but—as was made clear by my hon. Friend the Member for Tiverton and Honiton (Angela Browning)—although the Committee’s members may have to wade through an awful lot of material, they make no trade-off in favour of either quantity or quality. It produces numerous reports, which are always of extremely high quality.

I was particularly interested to hear the Chairman’s views on financial management, reducing internal costs and understanding risks. I felt that he hit the nail on the head in highlighting those three elements. Without them, it is difficult for any Government of any political persuasion to deliver true value for money, which is, of course, the key focus of the PAC.

As was suggested by my hon. Friend the Member for Tiverton and Honiton, in today’s IT age there should be more scope for understanding of the financial management of Government than ever before. We should have better data and information to enable us to exert control over public expenditure, and over the devising of policy more generally, by means of effective decision making. However, that does not seem to be happening, as has been emphasised in a number of the PAC’s reports. Three examples are the tax credits report, the benefit fraud report and—this was close to my heart because I am a London Member—the 2012 Olympics report.

I was shocked to see in the benefit fraud report that £2 billion of taxpayers’ money has been lost owing to customer and official error, and it is worrying to learn that that has doubled in the last five years. There is no doubt in my mind that the complexity of the benefit system is one of the key reasons why this is able to happen.

On tax credits, we heard that £4.3 billion of taxpayers’ money remains to be recovered. All those who hold their constituency surgeries on a weekly basis, as I do, regularly see people who have been the victims, as it were, of overpayments and who are now having to struggle to pay the money back. The Committee is right to point out that there must be a question mark over how much of that £4.3 billion that has been overpaid will ever actually be recovered.

I was particularly interested in the London 2012 Olympics report, and I was fascinated to learn of the Committee’s concerns about the unrealistic original budgeting for the Olympics. As an accountant, I shared those concerns about the robustness of that budget when the Olympics Bill passed through this House. It is one of the reasons why I was one of the few Members who voted to cap the contribution of the London taxpayer to the London Olympics budget; I had a clear sense that an increase in that budget would be required, and that that would swiftly make its way into the taxpaying liability of London taxpayers—and, unfortunately, I can clearly see that happening. I hope that over the coming years the Committee will be able to return to not only difficult issues such as tax credits and benefits fraud but the London Olympics, to continue to watch how taxpayers’ money is being managed and how the Government are delivering value for taxpayers’ money.

My hon. Friend the Member for Gainsborough raised the very pertinent and valid issue of financial skills and awareness among not only civil servants who are responsible for budgets, but those who are non-financially responsible, as it were. With my background as an accountant, I fully understand why being able to manage budgets is important, but it is also vital for the accountability of Government, because when all the political rhetoric of this place is set aside, in my experience all we are often left with is the figures. Therefore, being able to understand what the figures mean is crucial for parliamentary accountability. As my hon. Friend the Member for Henley (John Howell) articulately pointed out, it is essential to have the figures in place against which Government can be held to account on whether they planned ahead or went into the necessary detail. The reports often rightly point out that there was not sufficient planning ahead on key projects or enough detail in implementation plans, and that insufficient project management skills were brought to bear. The result is that we lose taxpayer value for money and gain Government waste.

Another reason why it is vital that all civil servants have an ability to manage finances—after all, they are all ultimately responsible for some form of taxpayers’ money in their activities—is that when people understand how to manage the budgets they are impacting on and responsible for, they have the confidence to be able to take better decisions. The worst situations I have come across in industry have been when I have been confronted with people who were not clear about how to manage their resources, and who therefore would resort to ever more elaborate ways of hiding that fact by generally making their resource management as complex as possible, as once other people understood how they were managing their budgets it became clear that they were not doing so very effectively. Therefore, giving people the toolkit to manage their budgets better means that we are bound to have much better taxpayer value for money.

I also welcome the upcoming national audit reviews of the financial management of each Department, because I have no doubt that the reviews themselves and the reports they generate will be of great value to the Departments and will also provide valuable fodder for careful consideration by the PAC. If government is to be set up for success, it is vital that we have good financial control, clear accountability and good information and transparency across the board. We must confront issues, whether climate change and carbon footprints—that is ultimately about how broadly we examine the carbon impact of different options—immigration and the contribution that migration brings to this country, or another diverse topic, calculating our debt. Ultimately, it is critical to understand what are the right figures to examine in any given situation, and that means good training. It is only with good training that we will end up with much better decision making.

I share the frustration of the right hon. Member for Islwyn (Mr. Touhig) about waste. He talked about the very real impact that it has on projects in his constituency, and we can all think of such projects in our own constituencies. I instantly thought of Elliott school, which is desperate for capital spending to make it a school that we can be proud of, and the lifts that we are keen to get at East Putney station to make it accessible to everyone. Such projects bring into sharp focus the cost of waste, which is much more than just a figure—it is money that cannot be spent on the key projects that communities across Britain would like it to be spent on. We all have such projects in our constituencies, and they demonstrate clearly why the work of the PAC is so important.

Comments have been made about responsibility for decisions and waste, which is critical. Running through all the comments has been frustration and the sense that there needs to be more accountability and responsibility for things when they go wrong. Having come into the House from industry, I get worried that it seems that the best way for a civil servant to stop their next promotion is to say no to a Minister and to be the person who tells him or her that things are not going well and that change is needed.

I agree with a great deal of what the hon. Lady is saying, but I wanted to pop up while she was talking about promotion and civil servants to point out to her that Ministers have no bearing whatever on who is promoted in the civil service. That is done independently. It actually sometimes gets a bit frustrating for Ministers to see people who are doing a superb job not being promoted as much as we might want. There has always been a strict separation.

I am very grateful for that extremely helpful intervention. It brings me to the point that I was trying to make, which is that a lot of risk management goes on in government, but sometimes it is—dare I say?—too focused on short-term political risk rather than the longer-term delivery risk of particular projects.

My hon. Friends the Members for South Norfolk (Mr. Bacon), for Henley and for Tiverton and Honiton made clear points about the issues that the Public Accounts Committee has highlighted, especially those to do with IT projects. I know that the hon. Member for Great Grimsby (Mr. Mitchell) shares our real frustration with a whole range of projects, but he said that we are all socialists now. Although I have said that I am concerned that things are not looking good in our country at the moment, I do not think that they are quite that bad. I share much of his frustration, but that was definitely one comment with which I could not agree.

I found the comments of the hon. Member for Southport (Dr. Pugh) extremely interesting. He was the one Member who talked particularly about property management. That topic perhaps does not get as much attention as it ought to, and I was extremely pleased to see the PAC examine it. As the Member whose constituency contains the site of the old Putney hospital, which has been derelict for 10 years, I have found it amazing that property management across government sometimes happens at a pace that seems glacial compared with what would happen outside this place. The Committee’s report on that matter was quite important in generating a debate not just inside but outside the House.

I shall wrap up by again congratulating the PAC and its Clerks. It plays a crucial role in our parliamentary democracy and in ensuring that the Government and Ministers are accountable. As I said, its spirit is embodied in the articulate, forensic and tenacious approach of its Chairman, my hon. Friend the Member for Gainsborough, who opened today’s debate. I wish the Committee well in the many challenging reports that I am sure it will produce over the next few months, and I look forward to our next chance to debate the results of those reports in this Chamber.

It is a great pleasure to have the opportunity to respond, once more, to our debate on the Public Accounts Committee’s reports—this is the third time that I have done so. Today’s debate has demonstrated not only the wide-ranging nature of the PAC’s work, but the fascinating insight that it gives its members into the way in which government works. I speak as a three-times member of the Committee; I was a member when I was in opposition and when I was on the Back Benches in government after having been a Minister, and I am now a member, although in the slightly more formal sense of being the Treasury team’s representative on the Committee.

I have always been a great advocate of the Committee’s worth; it proves its worth every time it sits. That tradition has been carried on under its current Chairman in the usual fine way, and I too congratulate him on the work that he does. The Committee builds on a great, long and proud tradition of ensuring that public moneys, which are voted by Parliament, are properly accounted for in respect of value for money and ensuring that the appropriate lessons can be learned when reports are produced.

In these difficult and turbulent times, thinking about what the Committee does might not be to the fore. People might call its work accountability and they might dismiss it as housekeeping, but it is even more important in difficult and turbulent times; a recurring theme of today’s speeches has been that public expenditure and getting value for every pound spent becomes even more important. I know that members of the Committee are driven by a strong desire to secure high quality public services and value for the money spent, and I share that desire.

Working in the Treasury recently has obviously been challenging, but I suspect that the same could be said in respect of every finance ministry in the world, as we have been struggling to deal with the turbulence and the unique set of circumstances endangering the global financial system. Some of us have only read about such times in history books; actually experiencing them is a different thing. In this storm, the Government’s priority is financial stability, as my right hon. Friend the Chancellor of the Exchequer has repeatedly made clear in statements to the House. We are determined to do whatever it takes to secure that stability, and we have already put in place a comprehensive package of measures to support the financial system and to protect ordinary savers and businesses, who rely on a strong banking system in order for the economy to work. We maintain a careful watching brief.

As a number of reports this week from the CBI, the National Institute of Economic and Social Research and the Governor of the Bank of England have made clear, we are in very difficult and challenging times. The economy is dealing with the biggest shock to the system for generations, and the Government will continue to act to ensure that we get through these challenges in the fairest way possible. I assure all hon. Members that we will continue to pay extremely close attention to the work of the PAC, even in times when the attention of the media and others who follow our debates is torn to other areas.

The Government take the recommendations of the Committee very seriously and have a good record in implementing the vast majority of them. This year in response to the Committee’s requests, Departments will report progress on all their outstanding agreed recommendations in their autumn performance reports, which I think will be an extremely good discipline on them. It may focus a few minds and ensure that things that may have slipped off the radar suddenly re-emerge so that that they can receive the focus that they deserve.

I want to respond to some of the issues raised by right hon. and hon. Members. The Chairman of the Committee, the hon. Member for Gainsborough (Mr. Leigh)—whom we all love and who has had a lot of praise today—had a little dig at the Treasury with respect to the efficiency of the use of the Government’s property and pointed out, helpfully I thought, that the Treasury sat at the bottom of the list. We have taken action to mitigate that and have continued to increase our building occupancy since 2005-06, increasing our net internal area figure—the hon. Gentleman will know what that is —for 1 Horse Guards road, our main building, from 21.9 sq m per full-time equivalent person to 16.62 sq m, which I think is significant progress.

We continue also to look for new tenants to take up the vacant space but I hope that the hon. Gentleman will recognise that the fact that the Treasury’s main building has some constraints upon it because of its listed status, the wide range and sweep of some of the stairwells and the width of some of the corridors make it difficult to use absolutely every square inch in the efficient way in which some newer buildings might be utilised. However, I assure him that we continue to try to make progress on that, and we have made some.

The Committee Chairman said that there was a narrowed ideological gap between all parties. I do not know whether that means that we are all socialists. The hon. Member for Putney (Justine Greening) was denying that earlier. I have an inkling that the ideological gap has widened in the last few months and we are no longer talking about how to manage a system established post-Thatcher and Reagan, but are looking to see how the pieces will reorder themselves after the shocks that we have had. This is only a personal opinion; ideological gaps might be widening rather than narrowing, but I am sure time will tell.

My right hon. Friend the Member for Islwyn (Mr. Touhig) expressed great frustration, which everybody shares, at the opportunity cost of money that is wasted and what could have been done with it if it had been used more effectively and efficiently. That is right at the heart of the work that the Committee does and my right hon. Friend represented the zeal with which those of us who have been privileged enough to sit on the PAC during the course of our parliamentary careers—at whatever stage that might be—can identify and feel. Committee members in the debate today have managed to get across that motivation. I share his ambition to reduce the “blood sport” nature of the Committee’s hearings, even though Ministers do not appear before it, a fact that has been commented on today. If the hearings are less like a blood sport, it will improve the efficiency and value for money of Government expenditure. I therefore share my right hon. Friend’s ambition to try to make them a kinder experience.

The hon. Member for Southport (Dr. Pugh) made some interesting points, ranging from money laundering in foreign dependencies to the review of neonatal care, which was similar to the work that the Committee did last year on social care—taking a more thematic approach to areas that do not always get considered. He also talked about the report on leaving the services, which was raised by other hon. Members. He set out a forward agenda, and was possibly making a bid that the Chairman will doubtless consider and will make a few civil servants shake in their boots, as he suggested consideration of the remuneration of senior civil servants. Far be it from me to comment on that, because the Chairman will obviously decide how he wants to take forward the work of the Committee in conjunction with his colleagues.

As usual, the hon. Member for South Norfolk (Mr. Bacon) walked in with a huge box full of all of the reports that we are discussing. I have a list of them on a large piece of paper, but he has a box of them, which sums up the way in which he approaches his work on the Committee. He is on top of all the detail of its scrutiny. He asked why EDS has not paid HMRC’s compensation. There was a PAC hearing on 8 October at which the subject came up—[Interruption.] Ah, the hon. Gentleman was in Turkey so he missed the vital information that would have answered his question. The acting chief executive officer of HMRC said that it was in delicate negotiations on that very subject. The time by which HMRC expects to be paid runs out in the next couple of months and the acting CEO made it clear that he intends to be paid, but asked for the Committee’s forbearance while the discussions concluded. The Chairman said that that was reassuring. I am sure that the hon. Member for South Norfolk will pursue the issue the next chance he gets, if he is not in Turkey—

May I just point out that I was not on a beach: I was speaking at a symposium on the changing role of Parliament and the budget process.

That is entirely typical of the hon. Gentleman’s commitment to his duties and how seriously he takes the whole issue of financial control and probity.

The hon. Member for Henley (John Howell) gave the House the benefit of his experience of introducing shared services in a diverse and complex organisation. I for one think that he has picked on the right areas for attention, and it is important that those who are thinking about removing duplication and achieving efficiency savings through shared services take into account the issues that he raised. We agree that there is great potential to make savings in that area, but it has to be done properly and effectively or else it can be counter-productive. We agree that there is potential to make central Government savings, and that is why my right hon. Friend the Chief Secretary has announced the operational efficiency programme, which has a particular strand to consider the potential for shared services. I shall point out the hon. Gentleman’s observations to those who are doing that work.

The enthusiasm felt by my hon. Friend the Member for Great Grimsby (Mr. Mitchell) about his appointment to the Committee was obvious to all who listened to his speech. His enthusiasm has not dimmed since his last contribution to such a debate, which is always a good sign. We know that the trend is possibly even up when it comes to enthusiasm. I agree that it is a pleasure to work on the Committee, having done so twice. I also agree that it is very good training for a ministerial post. I am sure that those Members who have had the privilege to serve in government and who have been on the Committee would agree that it gave us a great deal of insight and never leaves us when we are making our decisions. It has a positive bearing on how we approach ministerial life. If my hon. Friend aspires to a ministerial post, then he never knows—stranger things have happened. I wish him luck if he has any ambitions in that direction.

I have to say that in 16 years in this House, I have never seen my hon. Friend grovel. He has obviously decided that I have no influence in these matters and his grovelling must be going elsewhere. I wish him luck with it.

My hon. Friend made some extremely important points about the culture of tax avoidance and evasion. Obviously, we take that issue extremely seriously, although I suspect that he doubted that. I shall draw his comments to the attention of HMRC.

The hon. Member for Tiverton and Honiton (Angela Browning) did what many other hon. Members have done today and went from the specific to the general. Common themes always come out when one is considering value for money, such as how one can create a process that minimises the chances for waste and increases the possibility that we will get the best value for money that we can. She identified that core management skills and project management skills are important. As a former Minister, she will know that some areas of Whitehall are better at that than others. There is a general recognition in the senior civil service that there is a shortage of project management skills for many reasons, but I can assure her that the Office of Government Commerce and senior management figures in Whitehall are extremely aware of that and are taking action to try to deal with it.

I recall, in a former life, being required at very short order to remove all ruminant feeds from every mill in the country. We did not have the staff with the project management skills to do that at the Ministry of Agriculture, Fisheries and Food at the time, so we borrowed people from the Department of Trade and Industry, who were very competent. Obviously, one would like every ministry to have its own skill set, but is there enough identification between ministries of people who could be seconded to do specific tasks?

I agree with the hon. Lady’s general observation. There are weaknesses in particular Departments, but there are also weaknesses because of the silo nature of Whitehall. The connections between Departments are often not as strong as any of us would like to see. I reassure her that the OGC is apprised of that fact, particularly with respect to procurement. I know that procurement is not everything, but £175 billion of public procurement a year, of which £70 billion is carried out centrally by Whitehall Departments, is quite a big slug of money to focus on to begin with. That is why we are conducting procurement capability reviews in every Department, and they will be published. We are having a very good exchange with senior managers, who are engaging not in a defensive way but in a way that demonstrates that they are willing to learn.

As part of transforming the Government procurement process, we are also trying to give much more training and recognition to procurement professionals across Whitehall. We want to begin to create a cross-Whitehall and cross-departmental culture of procurement. That will benefit both procurement and project management, and there are solid foundations for the development of an approach that will break through the silo mentality that everyone who has been in Government will have experienced. Everyone in the House who deals with Departments can sense that mentality and knows that it exists. I am optimistic that we are making progress in that area, but I cannot say that all the problems are solved and that there is not a shortage of procurement skills in the public service.

The hon. Member for Gainsborough asked whether the hopes of the Department for Culture, Media and Sport to raise £100 million from the private sector to go to the training and support of elite British athletes were still realistic. Obviously, I should like to begin by joining him in congratulating our sports men and women on their excellent performances in Beijing. We will all remember their various triumphs for a long time, but we also need to recall that, in addition to the lottery funding, £265 million of Government revenue was given to elite athletes for training and support ahead of the Beijing games. For the first time ever, that money included individual living cost allowances that enabled the athletes to focus on full-time training for their sports. That was very successful in helping them to achieve the excellence that they did achieve. We stand by our commitment to give our elite athletes the best possible preparation. There can be no absolute guarantee of private sector funding, especially in circumstances that are changing as much as the present ones, but we continue to work towards securing it.

I shall take a little of the House’s time to talk about some of the general issues raised by the hon. Member for Gainsborough. He asked about the governance of the National Audit Office, and a great deal has happened in that respect since our last debate five months ago. We need to recognise the changes to the NAO that will take place in the coming year, and I am especially grateful to the hon. Gentleman for his continuing efforts, which he mentioned in his contribution, in helping to bring about essential reforms to the office’s governance, as recommended by the Public Accounts Commission. We all want those reforms to be introduced, and I am pleased that the process of appointing for a new commission chairman and new Comptroller and Auditor General has begun. I have every expectation that successful candidates of the right calibre can be announced in due course.

I should also like to record the Government’s gratitude to Tim Burr, who has displayed impressive abilities as CAG. He deservedly commands the respect of the Government and all of us in the House as he guides and leads the organisation through this period of transition. We need the NAO to hold the Government to account, and he is tenacious in ensuring that that continues to happen.

As I have said on previous occasions, I believe that full and open financial transparency is an essential characteristic of a modern parliamentary democracy. The hon. Member for Putney said that when all the political rhetoric is settled, in the end the numbers remain. It helps us to interpret them if we get them in a timely fashion. The PAC, supported by the NAO, has been at the heart of the scrutiny process for an extremely long time. I think that the Committee as an entity goes all the way back to Gladstone—although I am obviously not referring to its present membership; we might feel quite old sometimes, but I hope that we never feel that old, collectively or individually.

I recognise and applaud the Committee’s unfailing and challenging examination of the Government’s use of the money that Parliament has voted to them. It undoubtedly aids parliamentary accountability. However, we cannot allow ourselves to sit on our laurels just because the Committee has existed for so long and is venerable; we have to keep looking into how we can modernise the way in which the system works. Our alignment project, which the Prime Minister announced in July 2007 in the Green Paper “The Governance of Britain” aimed to carry out that modernisation. When implemented, it will simplify and put in a more consistent format public spending plans, parliamentary Supply estimates and published resource accounts. In essence, that means that Parliament and the public will be able to compare apples with apples, and pears with pears, instead of apples with pears, or chalk with cheese.

I hope that the project will greatly facilitate a reasonable understanding of where money goes, how it flows through the system, where it was when Parliament voted on its use, and to what effect it was used. Members of Parliament, Select Committees, the public and commentators should be able to track departmental spending more easily, all the way from the planning and budgeting stages to the out-turn. The alignment project does not sound particularly exciting, but those of us who have seen how it will work when it is finished are excited by it, and I am sure that the Committee is, too.

As we said earlier, the Committee has managed to publish 30 reports since our last debate on the subject. It is exhausting just looking at them. We have had a flavour of them today. Those listening to our debates will appreciate the sheer breadth of the work that has been done. It is no mean achievement, and it clearly demonstrates the Committee’s huge work load. I want to say a few words about the Committee’s 44th report. The formal Treasury minute has not yet been presented to the House, but the report is about the roll-out of the Jobcentre Plus office network, which I was involved in when I was a Minister at the Department for Work and Pensions. It was heartening to read the Committee’s report, and it is pleasing to know that when things go well, the Committee fully acknowledges the achievement.

I agree with the report that there are important lessons to learn from any transformation project, and certainly from the transformation of Jobcentre Plus from a decrepit and inefficient network of 1,500 offices scattered randomly around the country. As I recall, the furniture was bolted to the floor when I was first responsible for them. The offices have been changed into a high-quality, well-located network of 800 offices fit for the 21st century. Staff in the offices will have a very important job to do, given what has happened to unemployment figures in the past few months. The offices are now more efficient and are equipped to do that job, thanks to the effective transformation of that public sector service.

I was just looking through my pile of papers, having forgotten the Minister’s comment that the Treasury has not issued a minute on the report in question. The single most interesting aspect of that Jobcentre Plus report—this is reflected in its first recommendation—is that the three witnesses before us had, between them, 112 years of experience. Lesley Strathie, the then chief executive of Jobcentre Plus, and the other two witnesses had, between them, well over 100 years of experience. They started as clerical assistants, not fast-track administrative trainees. Are there not potentially huge lessons for Whitehall to learn from that, in light of what we have been saying about project management?

I would like to congratulate and commend Lesley Strathie, then chief executive of Jobcentre Plus, on the work that she and her team did to bring about that transformation. The hon. Gentleman makes a perfectly reasonable point. I always found, when I was a Minister in the Department for Work and Pensions, that stress-testing reforms with the people on the front line who use the systems, and getting their feedback on what I was trying to do, was far better than any number of consultants’ reports, glossy though they may be. Consultants were completely unused to the experience of using and administering the system daily. Lesley Strathie and her team clearly learned that lesson when they were undertaking the transformation. I thank the Public Accounts Committee for giving credit where credit is due, because it is important that credit is given, as well as honest criticism.

That was an exceptionally good report, and Jobcentre Plus made a huge difference; the staff have been empowered, and their whole attitude is completely different. Is not the report something that the Government should send to every permanent secretary in Whitehall, saying, “If they can do it, you can do it”?

I suspect that if we sent an e-mail to every permanent secretary and asked them to look at the report, that would be a better way of doing it, and I certainly undertake to draw it to their attention.

I understand the irritation of the Committee and its Chairman at the publication in February by the Department for Transport of revised vehicle excise duty evasion estimates for 2007, which indicated that evasion was much lower than cited in the PAC’s fifth report published a month earlier. I am very sorry that the subsequent publication of a Treasury minute, made in error, compounded an unfortunate series of events. That sounds like a film or a book, but it is something that Committee members and the NAO had to put up with. I hope that Members accept that at no time did the Government seek to mislead or somehow embarrass the Committee. Lessons have been learned from that experience, and we will strive to avoid a recurrence of such an episode.

We should after all rejoice that following the introduction of an automated number plate recognition system, evasion of vehicle excise duty, with its implications for accurate licensing information and the detection of crime and public revenue, is at a low level, which is something we all welcome. People who see the police using that information to great effect, as I have in my local area, to prevent further crime, know how important it is to have accuracy.

The PAC has expressed continuing interest in the private finance initiative, and its recommendations and reports on the matter are invaluable. Hon. Members have helped us to review, reflect and revise our views. The Committee has added value by choosing a wide and useful range of topics over the years. It has helped us assess and analyse the risks in infrastructure projects, and improve the means of procurement and efficiency. We look forward to continuing that fruitful dialogue as we extend the range of approaches to complex procurement, always seeking best value for money for the taxpayer.

The PAC’s recent recommendations in its September report, “HM Treasury: Making changes in operational PFI projects”, were welcomed by the Treasury. I was pleased that the Committee endorsed recent Treasury guidance that will help to ensure that value for money is obtained when changes are made, and that it has also endorsed the roll-out of training programmes to support contract management. Before I conclude, may I touch on the concerns expressed by the hon. Member for Gainsborough about the apparent largesse of space at the Treasury, which I have addressed in a separate note outwith my speech? Finally, may I repeat my gratitude for the hard work of the PAC and the National Audit Office, which ably supports it. Together, they make a major and lasting contribution to the performance and delivery of public services across the United Kingdom, and they keep the Government and public servants on their toes. Their work will continue to be as effective as it has always been, and I look forward to working with them in future and, if circumstances allow—one never knows—to other occasions such as this.

It is a pleasure briefly to thank everyone who has taken part this afternoon. I thank the right hon. Member for Islwyn (Mr. Touhig), who made the first speech in the general debate, and initiated an interesting theme to which we have returned several times and to which the Committee, too, may have to return. Why do civil servants not take responsibility? Are we rewarding them enough for success? Are we sacking those who fail? Of course, they are never sacked. The theme was taken up by the hon. Member for Southport (Dr. Pugh).

I am divided in my own mind about these matters. One part of me is rather old-fashioned—perhaps old Labour. I support the traditional concept of the British civil service as incorruptible, with staff remaining in it all their lives, and as not having a great interface with the private sector, which can cause many problems. So part of me is old Labour and part of me is old Conservative, in that I recognise the importance of financial inducements in promoting productivity. That is why we now have bonuses in the civil service. “Bonus” is almost a swear word because of what is happening in the banking sector, but we have to get it right.

If ever there were to be a change of Government, I know that the new Government would place great emphasis on saving money. If we are to save money in this respect, there must be inducements for the civil service. The Government have already tried it. It is a difficult area, but with the help of the National Audit Office, the Committee would be well placed to try, in a completely non-partisan way, to understand what is going on inside the civil service and how we are promoting efficiency.

That point was taken up by the third speaker this afternoon, my hon. Friend the Member for South Norfolk (Mr. Bacon). On the door of the Chairman’s office, there is the word “Assiduity”. That applies to my hon. Friend more than to any other member. He is incredibly assiduous. He had a first in the debate: he was the first Member, as far as I know, to refer to the words of Mr. Crapper without its being taken up by the Chair. That will no doubt be noted in “Erskine May” as a new form of insult.

I can tell the House that when I was a Minister at the Department of the Environment, Transport and the Regions, I had a debate on the thing that Mr. Crapper produced. I refer to toilet flushes, not what hon. Members might be thinking. So that has featured on the Floor of the House before.

I apologise; it was not a first for my hon. Friend the Member for South Norfolk.

I thank my hon. Friend the Member for Henley (John Howell), who is a new Member of our House. He is not a member of the Committee. There is a grave danger that these debates become a Committee love-in and we all just slap each other on the back. We welcome him coming in from outside, with his private sector experience. He spoke with great knowledge about the value of shared services, which is not a sexy subject. I am not sure that his predecessor as the hon. Member for Henley would have been very interested, but it is an important subject and huge savings can be made.

As usual, we much enjoyed the speech of the hon. Member for Great Grimsby (Mr. Mitchell), as we greatly enjoy him as a member of the Committee. He lightens the atmosphere so often with his biting tongue. He took us to task for not having the bite of congressional committees and seemed to suggest that we could get more publicity for our hearings and our reports. That is an extremely difficult tightrope to tread. We cannot be partisan. We cannot, and I never do, attack Ministers. We must be consensual and take the whole Committee with us, but despite all that our reports are hard-hitting and we get to the heart of matters. It is a difficult balance to achieve.

I thank my hon. Friend the Member for Tiverton and Honiton (Angela Browning) for her comments and what she said about the importance of management information. I thank my hon. Friend the Member for Putney (Justine Greening) who, as an accountant, comes with a particular financial expertise. We are grateful for her remarks. She, too, referred to the problem that has been a theme of the debate: civil servants and whether they should say no. I think civil servants need to seek directions more. There is a procedure for that, and this is where the Public Accounts Committee is intimately involved. If a permanent secretary thinks a Minister is asking for something that is not financially viable, he can seek a direction. If he seeks a direction, it will come to our Committee. Permanent secretaries should be more willing to use that ultimate weapon. Civil servants must say “No, Minister” more often.

Lastly, I thank the Minister. It is such a joy; one sits through so many debates in which Ministers do not refer in any great detail to what has been said, but she took half an hour to refer to virtually every point that had been made. In particular, she was careful to reply to some of the points that I had made earlier. By the way, I do not think that it does any harm to share one’s notes with the Minister before the debate, as I do—jaw, jaw is better than war, war after all. If a Minister is warned about what a spokesman is going to say, they will be more able to reply to the points, and this Minister does that extremely well.

I did not deal with the new governance in any great detail; we sorted that out through the Public Accounts Commission, and the National Audit Office now has a robust new governance. I now have a difficult job. Under the statute, the Prime Minister and the Chairman of the Public Accounts Committee have to appoint the Comptroller and Auditor General. That is a wise procedure; by definition, the Prime Minister is a member of the Government and by definition the Chairman of the PAC is a member of the Opposition.

We are now starting the process and trying to carry it out in a completely modern and open way. The old days, when such things were done in private and some senior civil servant was just tapped on the shoulder, are not with us any more. A very well regarded firm of head-hunters has been approached and advertisements have been placed in the newspapers. Anybody from the private or public sectors can apply. There will be a very small appointments committee; obviously, I will sit on it. The Prime Minister, who has other things on his mind, will be represented by the permanent secretary to the Treasury. We will be advised by Tim Burr, who has intimated to me that he does not wish to apply for the permanent role of Comptroller and Auditor General.

I have said all that because the appointment will almost certainly be made before our next debate. I assure the House that I consider my new duty to be one of the most important that I have had to undertake during my time at the House of Commons. The man or woman who is the new Comptroller and Auditor General will have one term only, for a maximum of 10 years; after that, they will not be able to return to the public sector or any part of the private sector with which they have dealt. They will be unsackable for 10 years and nobody will be able to influence them. There is no more important job than that of the Comptroller and Auditor General in ensuring financial and general accountability. I hope that we get it right and I ask for hon. Members’ support as we try to do so. We will do our best.

Finally, I thank the Minister for what she said about the financial alignment project, which sounds boring but is unbelievably important. As every Hansard report shows, there is no doubt that we have one of the best audit systems in the world; however, we also have one of the weakest Budget systems in the world. We have a strong National Audit Office. Some of us have studied supreme audit offices around the world, and I am not sure how we could do things much better in respect of considering what has gone wrong in the past. As the hon. Member for Great Grimsby said, one of the problems with our work is that we often look at things too much in the past.

I have tried to speed the whole process up to ensure that the National Audit Office works quicker, reports come to us quicker and we report quicker. The system works pretty well, but we have a very weak Budget system. One reason for that is that it is virtually impossible for Members of Parliament to understand the process. It is all much easier and better done in the United States Congress, where the President proposes a Budget through the Office of Budget and Management. It goes to Congress, and what emerges at the other end bears no relation to what the President has proposed. The President proposes; Congress disposes.

We will never get to that situation in this House, because the Government are drawn from the legislature; we will never go down the congressional route and perhaps we never want to. However, we have to get a much more transparent system of considering the Budget. Through a sub-committee of the Liaison Committee, I have been working with the Chairman of the Treasury Committee, and we have been working with the Government, who should take a lot of credit for getting the whole process moving. That was their initiative and they should be congratulated on trying to bring more transparency to the whole Budget process.

As usual, we have had a good debate. We will carry on trying to do our job, and I commend the motion to the House.

Question put and agreed to.


That this House takes note of the 5th, the 8th, the 14th to the 29th, the 31st to the 35th, the 37th, the 38th, the 42nd and the 50th Reports and the 1st and 2nd Special Reports of the Committee of Public Accounts of Session 2007-08, and of the Treasury Minutes on these Reports (Cm 7366 and 7453).