Public Accounts

Economic Recovery – in the House of Commons am 1:46 pm ar 22 Hydref 2009.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee, Chair, Public Accounts Committee 1:46, 22 Hydref 2009

I beg to move,

That this House
takes note of the 1st to the 6th, the 8th to the 11th, the 13th to the 23rd and the 31st Reports of the Committee of Public Accounts of Session 2008-09, and of the Treasury Minutes on these Reports (Cm 7568, 7622 and 7636).

It gives me great pleasure to move this motion, which stands in my name and that of other honourable members of the Public Accounts Committee. Whatever else the election will bring-we do not know-it will call time on my chairmanship, and I will have to make way for whoever is fortunate enough to become the 46th Chairman of the Public Accounts Committee. Our next bi-annual PAC debate is not scheduled until next April, and I suspect hon. Members may have other things on their mind rather than being in this Chamber to attend that debate. This will probably be the last such debate of this Parliament, so it provides a good opportunity to reprise what we have tried to achieve in this Parliament and to reflect on what we might achieve during the rest of it.

Our special position in Parliament, which is reflected in these debates, stems from our focus, which is completely unlike that of any other Committee. We focus on the actions of senior civil servants in implementing policy, rather than those of Ministers in deciding it. We never interview Ministers; we only ever interview civil servants-no doubt to the relief of many a Minister.

Talking of Ministers, I must welcome the Exchequer Secretary to her place. I hope that she enjoys her current incarnation as much as she did her previous time as a very valued member of our Committee. I am sure that her personal experience on the PAC convinced her, as has mine, of the desire of all members of the Committee to maintain our independence of thought and to divorce ourselves from the murky old waters of partisanship. One of the nice things about this three or four-hour debate is that we do not get involved in party politics at all. One thing that I am most proud of in the 391-or whatever number it is-Committee meetings I have chaired is that we have never had a single vote, not one.

I shall thank all members of the Committee later, but at this point I would like particularly to thank the Father of the House, Mr. Williams, who cannot be here today as he has had to go back to Swansea for constituency engagements. He is a long-term member of the Committee who has given me invaluable advice for many years. I am very grateful to him for what he has done for the Committee and I particularly want to put my thanks on record.

So what is our purpose? It is simple-to demand that taxpayers' money is well spent in the pursuit of better public services. Whichever corner of whichever political party one sits in, how could one disagree with such objectives, especially in the face of the fiscal tsunami that is breaking around us? We are all aware of our difficult financial plight, as national debt has reached worrying levels and small businesses and ordinary people are struggling to keep their heads above water. So, whichever party finds itself occupying the Government Benches after the next election, then, sensible ways to reduce public spending will be all the vogue. The current talk of cuts and savings highlights the importance of the Committee. There is spin and there is counter-spin, but those are not our department: it is to protecting the taxpayer's money that the Committee dedicates itself, week in, week out.

I believe that the reports we are debating, and the many other reports that we have produced for this Parliament, shine an unbiased light on how Government can save literally billions-thousands of millions-of pounds by applying good sense and common practice to public services. There are no radical new ideas; it is simply a case of plain common sense in the way in which public services are run.

Sometimes our hearings leave me wondering whether too many people ignore the basics of good administration because it all seems too obvious, or because it has all been said before. Perhaps it has been said before, but that does not necessarily mean that it has been applied. Civil servants do not need to reinvent the wheel. Simply by looking at the problem, taking on board sound advice and acting in a planned, considered and thorough way, they can save themselves time, money, and a grilling from the PAC. Whoever wins the next general election, I hope that we shall not immediately see a blaze of new initiatives and new policies. The first thing that we should do is do well what we have already undertaken.

According to information that I have received from the National Audit Office, over the eight years since I took over the chairmanship of the Committee in 2001 the action taken by Departments in response to our recommendations, including those in some of the reports that we are considering today, has saved the taxpayer, at a conservative estimate-that is "conservative" with a small "c"-more than £4 billion. I wish that all the members of the Committee could have received a 1 per cent. commission. I do not know whether The Daily Telegraph is listening to this, but that would have given each of us the tidy sum of £40 million. I think that we would have been cheap at the price. We have heard so much bad publicity about Parliament over the past six months; what a pity that newspapers are so uninterested in the solid hard work of Committees such as ours. I do not think that saving £4 billion is a record to be sneezed at.

I must thank all Committee members past and present. Later, of course, I shall be delivering my usual thanks to the National Audit Office. Let me say straight away that we on the Committee claim absolutely no credit for this. The reason why ours is the most effective Committee in Parliament is that we have 800 civil servants working for us. They provide us with the bullets and we fire them. However, I must thank all the Committee members who work so hard firing those bullets at the civil servants who appear before us.

In debates such as this, there is a danger of our becoming too self-satisfied. Let me quickly come down to earth, and say that we have not achieved nearly enough. We can still do much more. If we extrapolate the savings that have already been achieved in some areas, or examine the scope for bringing the costs of functions that are common across government into line with the best, we see that billions more could be saved. There is absolutely no doubt about it. That is not me speaking. According to the National Audit Office, whose members are not politicians and are not trying to make a political point, we could save billions more without changing a single policy, simply by doing better what we are already doing.

I have written to the Chancellor of the Exchequer, and I shall place the letter in the Library because it is a public document. It will also be copied to my hon. Friend Mr. Osborne, the shadow Chancellor, and Dr. Cable, the Liberal Democrat shadow Chancellor.

It will come as no surprise that in writing the letter, I received some help from the National Audit Office. It contains the accumulated thinking of myself and the NAO on how we could save more money by doing things more efficiently. I hope that it will serve as a useful adjunct to public debate over the next six months. It sets out five areas where savings and improvements have been made, and where we think that more could be achieved: better financial management, better information management, reducing complexity and improving processes, exploiting the scale of spend, and improved outcomes. I hope that the House will forgive me if I go through them one by one. I think it terribly important, because I am not sure that anyone else has conducted a study of this kind independently.

We believe that £560 million has already been achieved by Government implementation of some of our recommendations. Effective financial management helps Departments to manage their budgets, to allocate resources to achieve priorities, and to deliver services cost-effectively. The introduction of resource accounting in 2001-02 was intended to realise those benefits, but the financial management of Departments remains a long way short of the world-class aspirations of Government. Basic management actions can result in considerable financial savings.

Here are just a few examples of what can still be achieved. As I said, we believe that we have saved about £4 billion. What can still be achieved? The sum of £29.2 million is still to be saved through improvements in Ministry of Defence stockholding. The MOD has a long history of holding too much stock of the wrong type, and of shortages of key items needed on deployed operations. We have produced numerous reports on that. We concluded that the MOD needed to take radical action to tackle its inventory management and bring it up to the standards of modern supply-chain management. Following our report, the MOD agreed an impact of £29.2 million.

As for museums and galleries' commercial operations, £15.3 million could be saved. Museums and galleries' poor business skills meant they were making losses on activities that were supposed to generate income. The Committee recommended that they set five-year targets for income growth with milestones supported by plans based on a systematic review of their assets and opportunities, an appreciation of which areas are most profitable, and an assessment of the risks.

We can give further examples of what could be achieved. For instance, there are potential savings of £1.3 billion in reducing running costs. Benchmarking costs would enable Departments to see how they compare with others. That is a very simple thing which does not happen enough in Whitehall. Considerable scope for savings exists in other running costs. For example- this calculation is based on the 2007-08 figures- £464 million could be saved if the Department for Communities and Local Government, the Home Office, the Department for Environment, Food and Rural Affairs and the Department for Transport brought their accommodation costs per staff member down to the same level as those of the former Department for Business, Enterprise and Regulatory Reform, while £85 million could be saved if the accommodation costs of the Department for Work and Pensions were brought down to the level of those of Her Majesty's Revenue and Customs, and £813 million could be saved if the DCLG, DEFRA, the DWP and HMRC brought their IT costs per staff member down to the level of those of the Ministry of Justice.

I am sorry to rattle through those figures. They are all in writing and they will all be in the Library, but it is important for me to put them on the record to show that by means of simple benchmarking-if every Whitehall Department performs at the level of the best-we can achieve enormous savings in Government.

The next big area of potential saving is, of course, staff numbers. I am not talking about changing a single policy. I am not talking about affecting any efficiency in the front line. I am not talking about taking away a single nurse, doctor, teacher or soldier. We believe, however, that there are potential savings of £2.5 billion to be made. Some Departments have cut staff numbers in recent years, and they are to be congratulated. I am thinking particularly of the DWP, HMRC and the MOD. Savings in the staff bill have, however, been offset by salary increases above inflation, redundancy payments and increased staff numbers in the health sector, the Home Office and the Ministry of Justice. We believe that an estimated £1.7 billion could be saved across government if all Departments matched the level of staff reductions achieved by the DWP, HMRC and the MOD. If the higher-cost Departments reduced their average costs to the level of those of the Ministry of Justice, the saving across Departments would be about £800 million. We believe that those savings could be achieved without any impact on the front line.

Talking of not affecting the front line, what about back office costs? We believe that there are potential savings of £1.4 billion. In 2007, the Cabinet Office estimated that £1.4 billion of the £7 billion that central Government spend annually on finance and human resources-is that not an incredible figure?-could be saved if Departments shared back-office functions. Despite considerable discussion and planning, so far we regret that achievements have been limited.

So far £1.2 billion has been saved as a result of the work of the Committee but better quality information and better use of information can improve the quality of services and stem the leakage of public money through fraud and poor compliance. Our work to improve information management has led to impacts totalling £1.2 billion. These are some examples of what has been achieved, but the scope for Departments to do more is considerable in terms of better information management.

By following our recommendations, HMRC has increased corporation tax yield by improving the way in which it interacts with businesses. HMRC implemented a more structured approach to risk assessment and engages directly in the management boards of businesses that pose higher risks.

Levels of television licence fee evasion fell following our recommendations to ensure that the related database was complete and accurate and that anti-evasion activity was better targeted. A total impact of £50.2 million was agreed.

The next big area on which we believe more work can be done is reducing complexity and improving processes. Badly designed and overly complex services waste resources and frustrate the citizens who have to use them. From 2001, a total financial impact of £812 million has been agreed including, for example, £110 million from DWP following our recommendations on how to reduce errors, appeals and delay in the medical assessment of sickness and disability benefits.

We have identified further areas where simplification can result in significant savings; for example, there is a potential saving of £2.6 billion in public sector construction. Improved processes include reduced volatility and uncertainty in work, funding to allow the supply side to invest in skills and innovation and appointing fully integrated supply chains. These are some of the basic steps needed to release at least £2.6 billion of annual savings in public sector construction. I am sorry to blind the House with all these figures but they are important; we are not talking about cutting the real work of government but about making government so much more efficient so that we can all do more to help ordinary people to get on with their lives.

Benefits reform is a huge area on which I can touch for only a minute or so. There are potential savings of more than £110 million. Options for reform that should generate efficiency savings over time include simplification of the overall system, on which we could have a three-hour debate alone. We have a hugely complex benefits system in which at least £100 million could be saved. Greater efficiency and innovation in helping people into work and improving the administration of housing benefit and tackling bureaucracy have a potential saving of £10 million.

The next area is exploiting the scale of spend. We believe that we have achieved about £1.1 billion-worth of savings so far. As the UK's biggest customers, the Government have considerable scope to exploit their purchasing power and to improve how they finance and handle commercial contracts. There is virtually no debate about this, but the scale of potential savings is huge. The Committee has published more than 70 reports on private finance initiative deals, and the cumulative effect of our recommendations has led to improvements in the PFI procurement. We do not simply believe that; we know it.

Departments are significant consumers of private sector goods and services but have been slow to exploit their bulk purchasing power. They must demonstrate capability in managing large commercial contracts. The Government have not done that very well. Our reports on procurement have generated agreed impacts of £1.1 billion. Implementation of the recommendations across government led to impacts in 2007 and 2008 totalling £142 million.

Prescribing is another huge area. The pharmaceutical industry spends £850 million a year on marketing products to GPs-an incredible sum. We found that the NHS was spending at least £200 million more each year because of GPs prescribing too high a proportion of higher-cost branded medicines. Our recommendations that primary care trusts take steps to ensure GPs prescribe more cost-effectively and on the introduction of benchmarking between primary care trusts resulted in a switch from branded to generic drugs and a saving for the NHS of £157 million-money that can be applied to the front line.

We have identified further areas where Government could better exploit their purchasing power. For instance, on food procurement there are potential savings of £220 million. By developing commercial skills and knowledge about the specialist food and catering markets and more joint purchasing, savings of £220 million in food procurement are possible by 2010-11.

On goods and services there are potential savings of £520 million. The Office of Government Commerce's Buying Solutions enables Government to buy goods and services for their portfolio of products and reports, which can result in significant savings, but by driving performance across all activities and enhancing staff skills and incentives, there is potential for at least £520 million of extra savings.

We have had reports on the use of consultants and there are potential savings of £408 million. We agree that the Government have made progress in achieving efficiency gains in the use of consultants, but there is a lot further to go. By combining reduced spending with better value for money, there is scope to find £408 million.

Our recommendations to improve social and environmental outcomes have resulted in a total agreed impact with the Treasury of £217 million, but there is scope for public bodies to do a lot more. For instance, a fifth of all car crime happens in car parks, but only a small proportion of public bodies across the country have established secure car parks. We recommended actions for the Home Office to raise police detection rates, improve the effectiveness of automated number plate recognition and make car parks more secure. Implementing those actions resulted in a fall of vehicle crime that produced a total agreed impact of £23 million. That is a tiny example in one small area of achieving an impact of £23 million.

In 2001, DEFRA estimated that 8 per cent. of the land area in England was at risk from flooding from rivers, tidal rivers and estuaries, and we have all had many representations on that. We recommended that the Environment Agency improve its urgency on flood warning systems to protect life and property. We also concluded that the agency should take action to ensure the most effective use of the funds available for inland flood defences. After DEFRA acted on the Committee's recommendations, a financial impact of £21 million was agreed in 2006.

I apologise for rattling through that and hope that I have not bored the House too much, but I felt that it was terribly important to put on the record what we have achieved so far and what we believe could be achieved. No matter who wins the election, the Treasury has been given a potential saving of £9 billion-not by me, but by the expertise of the NAO officials behind what I have said.

There is more we could go through were we allowed more time. What I have read out is by no means a definitive list. For instance, our 14th and 20th reports-on Chinook and on the major projects report-suggest plenty of scope for further improvement in the MOD. There are plenty of other areas on which I have not touched.

My quick calculations show more than £9 billion of potential savings waiting to be grasped by the Treasury. That may not have been scrutinised rigorously, line by line, in the Committee, but it indicates clear potential. On this the PAC and the Treasury are on the same side. The Treasury knows that there is great potential to make savings from better administration. Indeed, it has previously set targets to save tens of billions of pounds, not least in the operational efficiency programme, but potential and targets amount to naught without action that realises them, and in many cases the action needed is nothing more radical than effective administration-simply getting the basics right, every time in every Department. I do not claim that that is an original thought, but that does nothing to diminish the value behind the thought.

The Committee's 17th report found another area where getting the basics right would reap rewards. We found that central Government Departments spent a huge amount-more than £12 billion in 2007-08 alone-buying in services such as IT and facilities management. If we buy a service in business, or in real life, we look out for every single pound because we know the other guy is doing just that, but cosy relationships and a lack of control prevail. After analysing those huge contracts, the National Audit Office advised the Committee that about £300 million could be saved each year. It is high time that Departments subjected suppliers to the public sector to the same pressures that those suppliers face in business. No taxpayer's pound should be an easy pound of profit, but too often it is.

In order to show how that can be done, let me give an example that was presented to the Committee. In 2003, the Committee investigated how the Prison Service bought goods and services. To be honest, we were not very impressed, but the Prison Service dealt with our report with sound common sense. It paused, acknowledged the situation, took expert guidance and set about putting things right. The Committee returned to the Prison Service in our sixth report, and we found that changes to its procurement approach had saved £120 million over five years. That is a great achievement, and I am very pleased to give the Prison Service the credit it deserves today. I would say this to officials: "Don't be shy. When you save money, change a process or control a system and find efficiencies, shout about it."

We had the Foreign Office in front of us yesterday; the permanent under-secretary Sir Peter Ricketts appeared before us. It had one of the poorest financial management systems, but it has achieved a great deal. The Treasury must ensure that such good practice is spread around Whitehall. Departmental counterparts must be told how they can achieve it too, to help make it common practice, not best practice. There are too many examples of best practice in Whitehall, in the sense that often what we suggest in a report might be acted on by the Department concerned but other Departments do not take up the recommendations.

We have the bundle of reports on the Table before us, and I do not want to go through all of them, because I have taken up enough time. [Interruption.] No, no; it would take too long, and other Members wish to speak. Let me offer a couple of examples, however.

I am proud of what we have done in trying to shine a light on some of what I call the Cinderella areas in the NHS-those areas of medicine that were not given the priority that perhaps cancer or heart services were given. The Committee has achieved a great deal in bringing to light deficiencies in how we deal with stroke patients and hospital-acquired infections, for example, and we produced a very good report on end-of-life care. The fact is that most people would prefer not to die in hospital, but because of a lack of NHS and social care support services many people do so when there is no clinical need for them to be there. There is a lack of training in basic end-of-life care among front-line staff. The Department acknowledged in its reply that such care has not always had the priority it should have had and recognised the need to improve the provision of care for adults. I hope that we can make progress on that, therefore.

Let me turn to the Commonwealth Development Corporation-I am chopping and changing from one issue to another, as we deal with every part of Whitehall. The level and nature of CDC executive remuneration is relevant to its efficiency. The remuneration of the chief executive-of what is, after all, a public body-increased from £383,000 in 2003 to £970,000 in 2007. We were not very impressed. Admittedly, that huge increase in his public sector salary, now amounting to the best part of £1 million a year, reflected CDC's exceptional financial performance, and advisers concluded that CDC executives were paid below the median for such a group. That is fair enough in that they could probably earn even more in the private sector. However, CDC does not compete for cash to invest, offers high job satisfaction and has since 2004 successfully recruited and retained talented staff, so why are we paying so much to the chief executive?

On Her Majesty's Revenue and Customs, tax credits and income tax, it is true that policy changes have helped HMRC to reduce recoverable overpayments from about £1.9 billion to £1 billion annually, but it has not given claimants the support that they need in making claims and reporting changes in circumstances, and it is planning to introduce new measures again. HMRC estimates that in 2006-07 claimant error and fraud led to incorrect payments of between £1.31 billion and £1.54 billion. That shows the amount of work that has to be done. We should also remember that these are only a few examples taken from across Whitehall.

The Ministry of Defence's ability to sustain its nuclear deterrent in the future is dependent on the collaboration of the United States. We found that the new class of submarine is likely to remain in service beyond the extended life of the existing Trident D5 missile, which will be renewed in 2042, and must therefore be compatible with any successor missile developed by the US. The MOD has received a series of assurances from the US that any new missile will be compatible with the UK's new submarine class, but assurances are not enough. Nevertheless, the concern remains that the MOD has no direct control over the development of new missiles.

The Chinook Mk 3 helicopter project has been a catalogue of errors from the very start. We reported on it several times. The original contract is ill defined, preventing easy access to software source coding that was key to enabling certification of airworthiness. Further operational requirements and difficult commercial negotiations led to a protracted five-year negotiation period and slow decision making under a contract known as "fix to field". We have reported on that many times, and we hope things are finally coming right.

I shall offer one final further example, taken from the bundle of documents on the Table, to show what we are trying to achieve. Last but not least, I turn to the national programme for IT in the NHS. We could have a debate on that alone. The Care Records Service is at least four years behind schedule, with the Department's latest forecast putting completion at 2014-15. By the end of 2008, Lorenzo, the care records software for the north, midlands and east had not been deployed throughout any acute trust and in only one PCT. Given that we are now talking of spending £12 billion, that is not good enough.

Photo of Richard Bacon Richard Bacon Ceidwadwyr, South Norfolk

In the light of what my hon. Friend has just said about the national programme for IT, does he agree that the Treasury minute answering conclusion 6, which basically says that the Department remains confident in the potential of both Cerner's Millennium and Isoft's Lorenzo to work effectively, is remarkably optimistic?

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee, Chair, Public Accounts Committee

We have found that the Department has been consistently optimistic. We wish it well, of course, but given the sums involved-£12 billion-this is very worrying.

I will not list any more examples. Within the terms of the debate, other Members may refer to more of them if they wish to do so. We might get one more chance before the end of this Parliament to have a debate, but we do not know. Therefore, may I just thank a few people? I thank my colleagues in the Chamber, and those who currently serve on the Committee or have done so over the past eight years. They have to dedicate a great deal of time. The Committee meets twice as often as any other Committee and has a huge amount of paperwork. I also thank the Committee staff, particularly our former Committee Clerk, Mark Etherton, who has just left the role. I welcome our new Clerk, Sîan Woodward, who I am sure will be a huge asset to the Committee.

I cannot talk about the PAC's work without acknowledging the National Audit Office. It has a new head, Amyas Morse, whom the Prime Minister and I appointed last year. Mr. Morse is the first qualified chartered accountant to become the Comptroller and Auditor General. He continues to provide the PAC with excellent evidence, on which our work depends. He takes over the NAO's reins with relish, succeeding Tim Burr, who I also thank. I know that the organisation will go from strength to strength under Mr. Morse's leadership. I welcome the publication of those parts of the Constitutional Reform and Governance Bill that will place important changes to the NAO's governance on a permanent footing. We have modernised the whole organisation and it has a proper board of management, so I hope we can now move forward.

Finally, surely it is high time that the benefits of public scrutiny to which I have referred can be applied to other areas. I shall end on this point, because it is perhaps the most important. The NAO is denied regular access to three hugely important and publicly funded bodies: the Bank of England, the BBC and the Financial Services Authority. I welcome the Culture Secretary's recent statement:

"It is time for the BBC to allow the National Audit Office access to its accounts."

I agree with that, although it is not before time. The BBC spends billions of pounds of public money and it should be fully accountable to Parliament-there is no threat to its editorial independence. The CAG should have statutory financial and value-for-money access to examine how the BBC spends public money. That should prevent a recurrence of the difficulties that he met in his study on the BBC's radio production efficiency when, disgracefully, the BBC tried to limit his remit-that must never happen again. Given the Government's vital interest-and now investment-in the financial sector, it would also make sense for the CAG to audit the FSA and the Bank of England. The Bank is spending billions of pounds of public money, so it should be properly audited through Parliament and be accountable through Parliament and the Public Accounts Committee.

Now is not the time for us to address this-we will start by dealing with the Bank, the FSA and the BBC-but in the next year, in the next Parliament, it will be time to renew the civil list, for which more money will doubtless be asked. That will be a good opportunity for the civil list also to be subject to the scrutiny of the PAC, the NAO and Parliament. That is for a future Parliament to decide. We can make progress now on the BBC, the FSA and the Bank. I hear very encouraging noises from the Treasury on that, so I very much hope that the Exchequer Secretary to the Treasury will in her summing up be able to give more encouragement than we have had in the past.

Beyond this House, the coming months will prove rocky for many of our constituents; there will be tough decisions for individuals and for the country at large. I urge those from this House who make such decisions to keep in mind the work of the PAC, and to remember-I say this to the Treasury-that we are a friend not a foe. We seek to ask the questions our hard-pressed constituents would ask, and our interest is in striving for better results for the taxpayer. If we make a few witnesses squirm, it is because every pound that our constituents give matters. It is a pound less for their businesses or their families in hard times; their contributions should be spent with respect. That is the common purpose of our Committee, and I commend the motion to the House.

Photo of Colin Breed Colin Breed Shadow Treasury Minister 2:23, 22 Hydref 2009

It would be very difficult for the Chair of the Public Accounts Committee, Mr. Leigh, to thank himself, so may I thank him on behalf of all of us? We are deeply appreciative of the work that he has done in the eight years-he will be there a few more months yet-on the Committee. He has raised its profile considerably in the public mind, used the media properly, exposed things that should have had light shone upon them and given good advice-I am surprised that it is only £4 billion that he has saved. His overview, which is contained in his letter-I fortunately received a copy of it-is an excellent summary and the starting point from which any future Committee should look deeply.

As the hon. Gentleman says, the Committee is not about just saving money, although that is extremely important; its work often has other, almost better, implications. In this regard, I can think of two of the things that he mentioned in passing, the first of which is secure car parks. Anyone who has had their car broken into or damaged in a car park will use their insurance, but they will encounter the hassle, work, inconvenience and so on that persists from that. It is unquantifiable financially but has a huge effect on people's lives. If we can save money and avoid that, it must be good for everyone.

My second example relates to flooding. I do not know the number of Members whose constituencies contain areas prone to flooding, although the figure is probably more than we realise; the number of such areas has been increasing in recent times. My constituency has suffered major flooding near the coast. Insurance is becoming more difficult to obtain, and the sheer heartache, stress and so on that is visited upon people when they have been flooded is enormous. Again, that is financially unquantifiable, but we must begin to understand that not only is saving money a good thing in its own right, but that doing things better can have even more profound outcomes. I congratulate the hon. Gentleman, his Committee and the National Audit Commission on the work that they have done. They have had some notable successes and I am sure that there will be many to come.

I am a member of the Treasury Committee. I suppose that everybody thinks that their own Committee is the most hard-working, the most valuable, the best organised and so on, but when I knew that I was going to be responding in this debate, I looked at the work of the Public Accounts Committee and was astounded at the amount that it has got through-the reports that it has produced and work that it has done. Although members of the Treasury Committee may feel that we do a lot of work, we have to acknowledge that the work done by the PAC is impressive.

I, too, wish to refer to just three of four reports that have been important to me, as well as to my constituents and others. The first such report, to which reference has been made, is the one on the Ministry of Defence and the Chinook Mk 3. Although my constituency is that of South-East Cornwall, it is close to Devonport dockyard and the Royal Marines, and many of my constituents have direct relationships with our troops. Within that community, and slightly wider than that, the saga of the Chinook Mk 3-those eight years of incompetence and bad decision-making, let alone the enormous cost and so on-has gone down extremely badly. At a time when we have seen inefficiencies and the lack of some equipment, the thought that millions of pounds have been wasted on machines that will not even get into the air for years and the basic mismanagement that that has brought out has left a sour taste in a number of people's mouths. The Ministry of Defence appears to have frittered away, through bad decisions, millions and millions of pounds, yet it seems to be penny pinching on some of the vital equipment that our troops need when they go into theatre.

Clearly, many lessons can be learned across the board about the way in which contracts are negotiated, if we cannot get that sort of agreement with our so-called allies-with the people who are supposedly helping us in these situations. I am at a loss to understand how we have got to a situation in which we cannot sort out the software source coding with a great deal more alacrity.

The next report-the 11th report, on the UK's future nuclear deterrent-follows on from that. Devonport dockyard is the home of Trident when it is being refitted. It has been an enormous boost to the local economy and significant numbers of my constituents work there. The beginning of the debate on Trident has been watched with great interest and this report is a good start to what ought to be a full debate on the costs of the defence side as well as on all other aspects relating to this major policy area.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

Will the hon. Gentleman remind us what the Liberal Democrat policy is on Trident?

Photo of Colin Breed Colin Breed Shadow Treasury Minister

We are not in favour of renewing it, but the decision does not need to be taken now. We have at least another four years before we have to make the final decisions. In those four years, all sorts of things could happen, such as proliferation in states such as Iran, a greater sorting-out of the technology and a better understanding of the alternatives and their costs. I do not think that the debate has reached a point where anybody can make a final decision. There is an objection to Trident in general and to its amazing costs-indeed, my hon. Friend Dr. Cable has put it down as one of the big-ticket items that has to be considered given the financial state of the country.

We need to develop a clearer picture of what is happening in the proliferation states and those that possess, or seek to possess, nuclear weapons. We need to try to reinvigorate the process of multilateral disarmament, but we will have to make a decision soon-in the next two, three or four years. The report offers an excellent opportunity to go over many of the aspects of it.

Finally in the section that we might call "defence" comes the 20th report on the major projects-the 20 biggest MOD projects that have suffered an increase in costs of some £205 million and delays totalling some eight years. By any measure, that is very significant. We all know that defence projects tend to go over budget and to take longer-we have discussed how that happens in defence debates-but at a time when we are looking for significant savings over all aspects of Government expenditure, perhaps we need to redesign how the procurement process is undertaken. The report makes some useful comments and suggestions about how that might be done.

Photo of John Horam John Horam Ceidwadwyr, Orpington

The hon. Gentleman is discussing a very interesting point about procurement, and I take his point, but is he aware that one of the recent problems with MOD procurement has been the so-called smart procurement system that was introduced about eight years ago? It has, perhaps unintentionally, had the effect of penalising small suppliers and small companies in the defence field. It causes great problems for small companies, which can often do things much more cheaply, effectively and swiftly than some of the giants. Is the hon. Gentleman aware of that problem?

Photo of Colin Breed Colin Breed Shadow Treasury Minister

I am only too aware of that. Even in my constituency, the very small firms that can be light on their feet, which are often set up by people who come out of the military to set up their business on retirement-experienced technicians with enormous experience and the qualifications to undertake some of this work-find it difficult to engage with the large firms on the contracts. One way in which procurement can be speeded up and quite a lot of money can be saved is if the small and medium-sized enterprises are much more engaged in the process, perhaps through some sort of contractual arrangement. I entirely agree with the hon. Gentleman.

The strategy may be a bit outdated, having been written more than 10 years ago. We know that there is to be a strategic defence review, but many of the earlier assumptions have been undermined by our experiences in Iraq and Afghanistan. The fact that our enemies can move around much more swiftly and expose weaknesses in our defences means that we need to review our urgent operational requirements much more often. As the PAC report pointed out, future contracts need to be much more flexible and adaptable so that we can be much lighter on our feet. The key question is how that recommendation can be taken into account, as this has always been an extremely difficult and perennial problem, going back decades if not longer.

The Committee Chairman mentioned the report into the oversight of the CDC group by the Department for International Development. The matter had been brought to hon. Members' attention somewhat before the report was begun, although I suspect that the fact that everyone had so much on their plates meant that not many got around to looking at it. I was extremely pleased with the report, and mention has been made of matters such as the chief executive's salary and so on, but what stands out for me is the fact that CDC is not doing what it was set up to do.

We need to revisit how CDC operates. Of course it is important that it makes a profit, but that is a heck of a lot easier to do if it deals only with certain markets and businesses. Enhanced performance may lead to larger bonuses-who knows?-but the assumption was that CDC would work in smaller markets, with more difficult companies and in the more difficult areas of the world, because that was where there would be a crying need for support. It appears that DFID has taken its eye off the ball, so it needs to go back and make sure that CDC does what we believe that it should. That may make the sort of profitability that CDC has achieved a heck of a lot harder, but the organisation was not set up to make easy profits in easy markets. That is not what Parliament or the country want: we want it to go into the more difficult areas of the world and help developing countries to get their indigenous businesses going. In that way, they can become more successful economically and less in need of aid and assistance as a result.

The report contains some excellent stuff. I know that it has probably been alighted upon because the media are very interested in matters such as the salaries of chief executives, but it put a spotlight on the operation of CDC and showed that it was not really doing what we wanted it to do.

I turn now to the letting of rail franchises. I use the train to and from Cornwall every week and am only too well aware of the performance of the rail franchises, especially First Great Western. The company's acronym is often expanded in a rather derogatory way but-I do not know whether this has anything to do with the PAC-there has been a lot of improvement even though there is still a long way to go. However, there are many matters on which it has been difficult to shine a spotlight. In my part of the world, for instance, FGW's intention to raise car parking charges did not exactly encourage people to use trains.

Another problem has to do with the massively complex and expensive fare structures. A fortnight or so ago, I bought a ticket at Paddington using my senior rail card. I was given a ticket for £40, and I said, "No, you must've got this wrong." The person in the ticket office replied, "No, this is a special deal for people over 55. We assumed that you must be over that age because you've got a senior rail card." I asked whether it was a return, and was told that it was. It is astonishing that one can get a return all the way to Cornwall for only £40. I was not aware that it was possible-although I suppose the offer had been marketed-because the normal cost is around £200. The fare structure is so extraordinarily complex and expensive that it must be beyond most people.

The problem is that the train companies are competing against internal flights. I suppose that some people might see it as unfortunate, but it is cheaper to get a flight from Plymouth to London City airport than it is to travel by train. The flight takes an hour and half, but the train takes three and a half hours, plus half an hour on all the other bits and pieces. We are trying to promote rail use, but it is cheaper to travel by air.

Then we have the overcrowding problem. Some people thought that that was a planned strategy-that if there was lots of overcrowding, the company could stick the price up and thereby both adjust its profitability and decrease the overcrowding. The whole question of rail franchising will come back again-at least I hope it will. Although there has been reasonable improvement recently, there is still a lot to be done. If we want public transport that is inexpensive and easy for people to use, so that we can meet our emissions targets and so on, we will have to look more closely at how rail franchises are operating and whether the companies are doing what they said they would do.

As a member of the Treasury Committee, it was inevitable that I would want to discuss the PAC's 31st report, on the nationalisation of Northern Rock. The Treasury Committee reported on that as well, of course, and I think our reports complemented the PAC report well. I have never taken the view that the Northern Rock affair was necessarily a forerunner of the disaster that we have seen unfold since. Northern Rock was not, in the jargon, a casino bank; unfortunately, however, it had access to the casino and it was that access that greatly assisted its downfall. Very early on, the FSA, if not the Bank of England, identified Northern Rock as one of the legendary outriders, operating way beyond the general mass of its competitors and going far out on a limb. However, had that bank undertaken some de-leveraging and sorted out some of its wholesale contracts and so on, I think it would have had a fighting chance of avoiding failure and subsequent nationalisation.

I wish to examine the idea of success and the direction in which we are to go now. The PAC report comments that

"Goldman Sachs commenced work as the Treasury's financial adviser in September 2007".

It has been interesting to see reports of Goldman Sachs's current profitability and the bonuses it is paying-no doubt, it secured a decent fee for its work for the Treasury. It is also interesting to read that the agreement between the Treasury and Goldman Sachs, which

"included a monthly retainer plus a success fee", was not reached until some time after Goldman Sachs commenced its work, but that "success was not defined." I am not certain whether success is defined now or what Goldman Sachs is likely to receive by way of a success fee. Nationalisation is one thing, but if the public are to get some success out of Northern Rock, some hard work needs to be done. It is not just a matter of paying Goldman Sachs some sort of success fee, based, no doubt, on its view of what constitutes success.

Some work has recently been done on the potential for restoring Northern Rock as a mutual-dividing it into a good bank and a bad bank, with the bad bank being managed out by UK Financial Investments and the good bank being put back into the market as a mutual, perhaps to encourage revitalisation of the mutual sector. Some good work has been done on that, particularly by the Building Societies Association. I hope that the Treasury, the Public Accounts Committee, or both will consider the possibility that value for money for the public may be gained from more than the financial repayment of the support Northern Rock was given. If Northern Rock was returned to the market as a mutual, it could be a catalyst for the revitalisation and expansion of the marketplace for financial companies-banks and mutuals. Our aim could be not only to get Northern Rock back into the market and to get back some of our money, but to use it as a means of kick-starting a renaissance in the mutual sector. I hope that the PAC, the Treasury or both will look at that in the not-too-distant future.

Finally, I thank the members of the Committee for all their hard work. I think that it is about the oldest Committee, and it is clearly one that should be given all the support and resources that it needs. After the next election and over the next few years, saving money, as opposed to just spending less, will be an extremely important component of any Administration. Whoever serves on the Committee, they will be providing a valuable service to this country and to the enormous number of people who feel very let down in many ways. If they begin to see that Parliament is on their side in saving their money and improving their services, that will do a great deal more to restore the reputation of this House.

Photo of Austin Mitchell Austin Mitchell Llafur, Great Grimsby 2:45, 22 Hydref 2009

We can assume that this will be the final debate about the reports and activities of the Public Accounts Committee before the election, which will probably be on 6 May next year, I understand. Before people rush from the Chamber to make a note of the date in their diaries, I should say that it is not infallible. I hope that this will not be the last debate, however, because we will continue to work for up to six months until the election and there will be matters to report on during that period. We need to keep up the pressure on government to improve performance which these six-monthly debates give us. This is our one voice that is heard more widely than our mere Committee hearings and reports, and we should use it to the maximum.

As befits a deferential member of the Committee, I agree absolutely with our Chairman, Mr. Leigh. He gave a commanding overview of what we have reported, and he pointed out the serious savings that, based on our reports, can and should be made. The Committee has identified a number of failures that if rectified would produce serious money that could be used for other things which, if implemented, as I hope they will be, would provide better government and a more efficient public service. We need to keep up the pressure, rather than say that we will abandon it now to go into the wild fields of electioneering, with all the media exaggeration of what can and cannot be saved. Today I am perfectly happy to echo the hon. Gentleman, and to take time out of my own campaign to retain Great Grimsby as a Labour seat to back him and the Committee's efforts.

Being a member of a Select Committee is generally one of the few delights of a Back Bencher's somewhat dreary and pressured existence, but being a member of the Public Accounts Committee, which as Mr. Breed said is the oldest-and certainly the best-Committee, is the best part of the job. It has been a sheer pleasure to be on the Committee and see so much of the inner workings and possible failures of government, so I congratulate the Chairman on his chairing of the Committee and his summary today of our performance. With that grovelling servility, I shall move on to my own remarks.

These debates are a chance to establish an overview of the Committee and the failures in government that it points up. At the Public Accounts Commission the day before yesterday, I was delighted to hear that that is also the intention of the new Comptroller and Auditor General. He wants to develop a system for bringing out the common patterns of failures and weaknesses in the public services. I hope that that will ultimately produce a manual of mistakes that have been made, which will be an invaluable practical teaching guide, particularly for the training of civil servants. It will also be valuable to us, as a Committee, in letting us know what to look for in terms of the common patterns of failure and chief weaknesses. That will put our debate on a very practical level as opposed to the emotive comment and populist onslaught from the media, who take minor failures, exaggerate them as if they were general practice and then denounce the entire machine-the civil service and Government Departments-for failing to take account of them.

That emotive level of debate is not an appropriate one for us: our job is to find the common patterns of failure and to eliminate them. That will become even more necessary as the recession increases the importance of Government intervention. From my point of view politically, the problem is not big government, as the Leader of Opposition has identified it-it is not about the scale of government but about the efficiency of government. Bigger government is inevitable as the only way of coping with a recession and economic difficulties. Our job, as a Committee, is not to argue about the scale of government but to make it more efficient and to see that it functions economically and effectively to serve the purposes of the public. We are not part of the populist argument, but we are an invaluable tool. The real need is not for bigger or smaller government but for efficient government and an efficient public service, which will itself be more economical, as our Chairman said, and save an enormous amount of money for the wider purposes of government, giving more satisfaction to the people.

I want to concentrate on the pattern of common failures and weaknesses in government that are responsible for a lot of the opprobrium in which Government Departments can be held. I am interested in the notion of the continuous grinding away of efficiency savings year by year whereby we can count on a certain amount for, say, this year. That is often responsible for fairly disastrous failures.

At the Rural Payments Agency, for instance, the efficiency savings led to the firing of public servants and a diminution of the role of the RPA just as it hit the crisis of rural payments and the common agricultural policy, and it had to re-employ people to do the job and provide the knowledge that the fired civil servants had provided. That is not efficiency, but gross incompetence. This is not just about relying on a grinding process of efficiency savings-we need an invigilation of the processes to ensure that they are effective instead of imposing a general restraint on them.

Let me give my view of the common problems. First, there is the propensity to spend huge sums on consultancy payments, largely to the big accountancy houses, which under this Government have grown fat on enormous contracts. Admittedly, I slightly exaggerated in our last debate when I gave the figure in billions rather than millions of pounds; I do not suppose that it is possible retrospectively, at a six-month remove, to correct Hansard. However, whether it is millions or billions, these sums are still huge and unjustifiable. It is an abdication of responsibility by Ministers, who formulate a policy and get it sanctioned by a consultancy report without giving the civil service-the senior civil service, in particular-its normal role in policy formulation, which is to encourage, to advise and to warn. It becomes a coalition of Ministers and consultants who justify the policy on the basis of consultancy reports and then use them to argue in its favour. However, those consultancy reports are often ineffective and they are all an expensive way of anointing and sanctifying particular projects.

Many of the reports have been inadequate-we heard of an example in our hearings just this Monday as part of our inquiry into Metronet. Tens of millions of pounds were spent with Freshfields, PricewaterhouseCoopers and other big consultancy houses for auditing the contracts, giving advice on them and ensuring that they were okay. At the end of it all, despite all the advice and what it cost, the contract with Metronet effectively bombed. It was not valid or effective. It did not provide the Department for Transport with a means of controlling output or performance, or really with any role in performance at all. It was partly responsible for the failure of the Metronet project and the fact that the Government had to pay £1.7 billion in the four years before that failure. That should have been the sum of the payments over the full life of the contract. It was a big expenditure of public money-more than £400 million effectively wasted -because of inadequate corporate governance and oversight, and because the contract itself was not an effective way of maintaining control.

That is the situation all too often. We get advice from consultants, who are not then held accountable for the failure that they should have anticipated. There needs to be more effective oversight, and not just by the Committee, because our oversight is posthumous. The money is gone by the time we come to deal with it. We try to close stable doors after horses have bolted at enormous expense. Oversight should perhaps be provided by the Office of Government Commerce, which needs a stronger and more effective role than that of an advice service or the toehold of accountancy houses in Government so that they can push their case for contracts. It should have an audit and control role over those contracts, and it should ensure that performance is adequate. If it is not, it should demand sanctions and penalties.

The same is true of IT contracts. All too often, Departments seem incapable of dealing with the wily stratagems and sales patter of consultancy salesmen, particularly from the big houses, who offer expertise, but over-praise the product in question and forecast that it can do more than it actually can. Departments, in turn, try to set too many objectives to be accomplished, which always leads to failure in IT contracts. When we try to do more with an IT system than it can bear, it inevitably breaks down and performs inadequately. There is failure on both sides, on the part of the Department and the salespeople.

We see that problem in various reports before us. Implementation of the defence information infrastructure programme is running 18 months late. We recommend that the Ministry of Defence should ask its contractor ATLAS to monitor and report regularly on the health of legacy systems and develop contingency plans for each system, funded by the management fee that it receives. That is an explicit criticism, but it is too late. The matter should have been overseen by the OGC and the MOD itself when the contract was agreed.

Mr. Bacon will no doubt wax eloquent about the NHS national programme for IT, as he has so often in the past. Here is a contract, however, that is so curious that it is inexplicable to me. Our report showed that the care records service is at least four years behind schedule. Of the original four local service providers-the main suppliers responsible for implementing systems at local level-only two remain. The others have dropped out.

The Government have found that while they can direct NHS trusts and primary care trusts to take the systems, they have no such power over foundation trusts, even though the system would generate substantial benefits for patients. Therefore, foundation trusts have not participated, which pulls the plug, in my view, on the whole system. That is another example of a contract that was not adequately thought through or adequately audited right at the start.

The Government were trying to do too much with the systems, which were over-sold. Departments need better advice to put them on a more secure and effective platform for controlling the suppliers of the IT systems they deal with. As the Chairman said, no taxpayer pound should be the source of easy profit. That is an absolute maxim. However, in consultancy and IT services, the taxpayer pound has been a source of far-too-easy profits. We need to control that, exact penalties where necessary and blacklist firms that are over-selling in that fashion to see that they do not make the same profits and mistakes in future.

The third common factor that we point out and which I derived from the reports we are dealing with today is that the Government do not think through their purposes or the difficulties of achieving their objectives clearly enough. Because they are an idealistic Government, and because my party is idealistic, they are a Government of impulsive gestures-"We will do so and so!" The gestures come from the heart, which is okay-most of my gestures come from the heart; it is just that I am less competent than I assume the Government to be-but the consequences of implementation are not thought through. If projects fail, it increases public alienation and cynicism about the Government's purposes and objectives.

Our report on the letting of rail franchises by the Department for Transport includes another example. One would have thought that that was a fairly straightforward technical and financial matter, but our report shows that promises, with Government concurrence,

"of bringing 1,300 new rail carriages into service by 2014"- we should do that because of the overcrowding and pressures, particularly on London commuter services but also on the east coast main line, which I use-

"look over-optimistic", which they are. We promised 1,300 new rail carriages by 2014, but, as the report continues:

"There are only 423 on order so far, and another 150 carriages are the subject of negotiations. It takes 30 to 36 months to mobilise the supply chain", so there is no prospect of that happening. It just was not thought through. We issue the promise-rightly, because it becomes something that we want to achieve-but we do not take account of the practical considerations in delivering it.

There are more examples of things that have not been thought through in our "Widening Participation in Higher Education" report, the result being:

"The Department..." has not developed

"a single source of information to enable potential students to identify easily the bursaries and grants for which they may be eligible."

If participation is to be widened, that is a fundamental, straightforward requirement, but it was not done. Guidance to young people on how to access higher education is a variable quantity. The Department and its partners should develop guidance on the financial support available. Again, we will the end, but do not define the means. It is another failure to think things through.

The same problem is seen in improving adult literacy. We proclaim the intention, but we do not use the practical means of fulfilling it, such as educating people in prison. The same is true when it comes to energy use reduction. There is a confusingly wide range of energy saving advice. In that case, we will the end but provide too many means, none of which make enough of an impact to achieve the objective. That is the third common pattern of weakness.

I also include tax credits, which have been the subject of a long series of considerations by the Committee and the NAO. Tax credits were well intentioned. It was right to put money in the pockets of less well-off working people and to pay it to them directly through the tax system. But because of the excessively strict rules on which the Treasury insisted, the system was inflexible. The earnings of people who are in and out of work fluctuate wildly, and the result is overpayments or underpayments, and poor families end up facing demands for enormous sums that they cannot possibly pay back in the time allowed.

Photo of Colin Breed Colin Breed Shadow Treasury Minister

I am sure that the hon. Gentleman's analysis is shared by us all, but does he agree that part of the problem is that face-to-face meetings have almost been abolished, due to the use of IT, so people cannot sit down and go through their details with someone? When people are trying to sort out their tax credits, they have to go through up to four different offices, never speaking to the same person more than once. Trying to sort the problem out has been vastly too expensive and protracted, and has only increased the agony and stress of the people the tax credits were designed to help.

Photo of Austin Mitchell Austin Mitchell Llafur, Great Grimsby

I agree with the hon. Gentleman. The tax credit system has been combined with the dreaded efficiency savings, which have led to the closure of offices in Manchester and Bristol, and the concentration of services in Birmingham. Grimsby has lost the ability to conduct face-to-face meetings. The Child Support Agency is another case in point. It tried to provide face-to-face meetings through regional facilities, which quickly failed. A particular problem with the tax credits is that MPs have a hotline, and direct access, but the public do not. People want the system to be explained to them, so what they can apply for is explained to them and what they cannot apply for is justified. That cannot be combined with efficiency savings that reduce the staffing levels of HMRC offices up and down the country.

The same problem happens with jobseeker's allowance. People want face-to-face advice, but increasingly they have to obtain advice through the internet or on the telephone. That is not an adequate approach to dealing with a sector of society that does not have the greatest understanding of the system-I do not, and they certainly do not-and how to work it. In all these instances, the failure to think through how to implement the Government's good intentions more effectively is a major weakness.

The Chairman dealt with the issue of defence procurement effectively, and we have had effective control over that area. The major problem in that respect is that we have entered into commitments in Afghanistan and Iraq-in my view, we should not have entered into them-without the means to fulfil them. The result has been an enormous increase in spending, including last-minute increases, and unsatisfactory performance.

The basic problem is that we are trying to fight a war that is over-the cold war-with weapons of high-technology, aircraft carriers that need frigates mustered all around to protect them and nuclear submarines. Those are weapons from a cold war era that is over. We now face continuous bushfire wars scattered around the globe, for which we need not high-technology equipment, but simple, straightforward and reliable equipment and a power to intervene rapidly.

I shall not go into that further-I just wanted to mention it-but it is part of the weakness of failure to think through what we are doing. I am not criticising the Government's good intentions-as I said, I, myself, am overflowing with them-but I am questioning their practicability and the Government's failure to think through the problems.

Another of our difficulties is that we are deal with everything posthumously. We are trying to close the stable doors after the horse has bolted; we are dealing not with the people who caused the problem, but with their successors, who naturally come along, profess every good intention and promise that it will not happen again. They go away and, in the main, implement our reports, but if we cannot get the perpetrators, it is a very unsatisfactory way to proceed. We got them once on an issue concerning the Rural Payments Agency, and it was very illuminating, but we did that only after exceptional effort. It should be part of our routine that we are able to speak to the people directly responsible for the problems.

We need a power to ensure that our recommendations are implemented-in other words, we should be able to audit them after a year to see whether they have been implemented. We also need wider access to bodies. As the Chairman of the Committee said, it is ludicrous that we cannot cover a major spender such as the BBC, which would be less criticised for being over-grandiose and imperialistic in its ambitions to run everything if it gave the assurance that it would be effectively audited by the Committee and the NAO. That would guarantee that BBC spending was efficient, effective and welcome.

I think also of the Financial Services Authority, the Bank of England and the civil list. I do not particularly want to remove the glitter that surrounds the civil list-I have lost my earlier enthusiasm there-but Buckingham palace, in its attempt to explain to us exactly what was involved in the maintenance and repairs at the palace, missed a good opportunity: we were invited along, but not given any food, which did not produce the best and most welcoming mood. I did not go for that very reason. If we were not to be fed, I did not want to know, although perhaps that was selfish on my part. As an ambitious over-eater, going to the palace would have satisfied my social-climbing ambitions, but not my culinary ambitions. We should certainly cover the civil list, but I say that with no great enthusiasm.

The Committee also needs a bigger staff. The NAO has a big staff; its work is welcome and important, and its staff are very good-I am constantly impressed with them. However, we need a Committee staff to fill in the gaps between the NAO reports and our inquiries. Those are often media gaps: what has the debate centred on since the NAO reported, which quite often happens a few months before we deal with a given matter? What is the measure of public opinion? What have the media been saying about the issue? What has Private Eye-often a valuable source of information-been saying? What has happened in the Departments concerned since the report? Addressing those issues would allow us to make more effective and trenchant inquiries.

However, with those reservations-and, I am afraid, a somewhat excessive contribution, justifying my desertion of Grimsby's needs to be here tonight-let me say that, for me, this has been six months of real pleasure, interest and effort, in one of the best jobs on the best Committee serving the House.

Photo of Richard Bacon Richard Bacon Ceidwadwyr, South Norfolk 3:15, 22 Hydref 2009

I am sure that we are all equally horrified by the fact that Mr. Mitchell has finally brought his remarks to a conclusion. I thought that he was just getting into his stride, but alas, we shall have to wait until next time.

It is a great pleasure to take part in this debate and a particular pleasure to see the Exchequer Secretary in her place, because she was for some time a doughty member of our Committee, bringing an expertise in defence. I remember being in the Pentagon with her on a Committee visit when we were all jaws agape at her penetrating analysis of world defence problems. I only hope that she brings the same penetrating glare to public expenditure from inside the Treasury and applies what Sir John Bourn described as a necessary maxim in defence procurement generally: namely, that we should have rather less infanticide and rather more contraception.

I will be relatively brief and concentrate on two issues, one general and one specific-the National Audit Office and its strategy, and one of our reports, about the national programme for IT in the health service. The hon. Gentleman was right that there is nothing that I like better than wallowing in the interstices of the national programme for IT. I am delighted to say that on this occasion I can do so within the terms of the motion, because one of the reports that we are focusing on is about that subject.

However, I would like first to say a quick word about the Comptroller and Auditor General, whom we were pleased to see in his post and giving evidence recently about the NAO strategy. He said something in the new strategy that I thought was particularly interesting. It is quite obvious that his beady eye has been caught by the fact that permanent secretaries have to sign statements of internal control. That sounds pretty anorakish-perhaps because it is-but it is important, because it means that permanent secretaries have to write, in their own blood, that they have no reason to believe that their control systems are not up to the job in hand of controlling the resources of their Department.

Depending on how the NAO treats it, that is potentially a serious thing for permanent secretaries to be saying, and it is clear that the new Comptroller and Auditor General intends to hold them to their word. Indeed, in its new strategy, which runs from 2010-11 to 2012-13, the NAO has been quite explicit that:

"public bodies need to be confident that the resources for which they are responsible are appropriately managed and controlled."

The strategy continues:

"We intend to strengthen the work we do on statements of internal control to ensure that they are supported by robust evidence that controls are sufficiently reliable."

Amen to that, although some may wonder why that has not been happening hitherto. Some people may say that it has been happening, at least in outline or process form, but it has plainly not been happening to a sufficiently strong degree.

The central issue is how people in Whitehall are promoted and end up running Departments. Indeed, Mr. Amyas Morse, the Comptroller and Auditor General, made that point in evidence to the Public Accounts Commission just the other day when he said that the NAO is to set out some thought leadership on the elements

"in a basic management culture that you'd expect to see if you're going to be able to drive and control resources effectively."

He continued:

"I do think you can't assume in the public sector that's an inherent management culture of the kind that you find in the private sector because people don't spend their whole lives in the public sector trying to improve profitability. They would say to you, 'That's not my first role'."

He added:

"So the ideal skill set for the civil servant isn't one primarily focused on being able to control resources very tightly against particular objectives."

In fairness, he also pointed out that

"the organisations were created with different ends in mind so trying to champion that in the public sector is something that we need to work at".

It has already been pointed out that, in the present financial climate, the capacity to control resources very tightly against particular objectives is going to be an essential feature of successful management in the public sector in the years ahead.

That brings me neatly to the national programme for information technology in the health service. That was the subject of our second report, which was published on 27 January 2009. Members will know that the programme is now expected to cost £12.7 billion, although the original figure that was floated was £2.3 billion. It went up to £6.2 billion, then it became £12.4 billion, and now it is £12.7 billion. In a nutshell, the central problem is that, in the entire period since its inception, no serious public work has been done to compare what is to be delivered by the programme with the original output-based specification in the contract-not least because the contracts are all secret and we cannot see what they say. If such a comparison were to be done, it would show an enormous gap between the two. It was only the extremely high ambition of the output-based specification that justified the enormous cost of the programme in the first place.

Over the years, the programme has been steadily de-scoped further and further-in many cases, behind the backs of NHS managers-so that, one day, the providers will be able to say, "Look, we've delivered, and it's a success. We've achieved our objective." It will not be the original objective, however. These actions make it extremely difficult to compare the outcomes with the original objective, but some of us remember that objective.

The Treasury minute that responded to our Committee's report is liberally sprinkled with the sentence

"The Department accepts this recommendation."

That is very welcome news. I want to turn in particular to PAC conclusion 6, which I shall quote briefly for the record. The Committee stated that

"the Programme is not providing value for money at present because there have been few successful deployments of the Millennium system"- a software system provided by a company called Cerner-

"and none of Lorenzo"- another software system, from a company called iSoft-

"in any Acute Trust. Trusts cannot be expected to take on the burden of deploying care records systems that do not work effectively."

That is good news. The Committee's conclusion continued:

"Unless the position on care records system deployments improves appreciably in the very near future (ie within the next six months), the Department should assess the financial case for allowing Trusts to put forward applications for central funding for alternative systems compatible with the objectives of the Programme."

I want to take a moment to look at some of the Treasury's responses to those points. The Department's response No. 17, on page 11 of the minute, states:

"Although the Department does not agree the six-month timetable, it does agree that the position on the deployment of care records systems needs to improve appreciably over the coming months".

I do not think that anyone would disagree with that. Indeed, the Exchequer Secretary's predecessor did not disagree with it, when she wrote to me on 14 November 2007, following a debate on the work of the Committee on 23 October 2007, in which I raised concerns about the Lorenzo system and said that I was worried that the statement in the Treasury minute that Lorenzo would be available by the end of 2008 was incorrect.

Angela Eagle was Exchequer Secretary to the Treasury at that time, and she replied that it would indeed be okay in the end, because Lorenzo was going to be deployed around what were called early adopter sites in the summer of 2008. She went on to say that

"early adopters will get access to the first release next spring"- that is, spring 2008-

"and the second release later in the year, prior to their being made more generally available three months later."

The fact is that there has not been a single deployment of Lorenzo in 2009, and there has not even been a plan to have a single deployment of it. The reason is that the handful of deployments attempted have been an absolute mess, causing chaos in the hospitals where they were tried. That brings me back to the Treasury's conclusion in response No. 15, where it says that it

"does not accept that the Programme is not providing value for money at present."

I tabled a question yesterday about the number of hospital trusts where Lorenzo has been partially deployed, asking how many users-how many concurrent users-of Lorenzo there are. I look forward to the answer, but the Exchequer Secretary will not need to consult the written answer that has not yet been written to know that the answer is not very many. It is literally just a handful, which means that the cost per user is not what one would expect. If one was deploying a software system in an acute hospital with 3,000 to 4,000 workers, one might expect that the cost per user would be a few hundred pounds per user per year, but the cost is going to be many hundreds of thousands-possibly even more than a million-pounds per user per year. How that is consistent with conclusion No. 15-with the Treasury saying that it does not accept that the programme fails to provide value for money-I simply do not understand.

It is not just that Lorenzo is not working. The other system produced by the other main company involved-the Cerner Millennium system-has also caused absolute havoc where it has been deployed. Barts hospital has been forced more or less to its knees because of the Cerner Millennium system. Back in March this year, it suspended its 18-week reporting-one of its obligations, saying it expected to resume them in September. It did not do so, and by the beginning of this October it had a backlog of 23,000 breaches.

We could talk about missed targets, but what really matters is that patients are being kept waiting longer than they should-in some cases, for longer than six months-because the hospital is unable to manage its information as a result of struggling with that dreadful system. As a consequence-it gets worse-the hospital is to be fined £400,000 a month by its primary care trust, NHS Tower Hamlets. This hospital already has a deficit of £6.7 million. That is no reflection on the clinical work done at Barts hospital, some of which is absolutely outstanding-world class, with no question about it. Yet having a system that does not work properly foisted on it is hampering its ability to continue to be a world-class hospital.

I am afraid that it gets still worse. Under the terms of the contract that the NHS has signed with the local service provider, BT, to deploy Cerner Millennium in the south of England, if the NHS fails to deliver four new greenfield sites that are ready and willing to take the Cerner Millennium product, it will be liable to pay BT £44 million. If all goes well, the Department of Health will pay £73 million to BT for installing Cerner Millennium in four hospital trusts in the south, but not if those trusts baulked at taking the software-they would, of course, be quite right to do so because it does not work. What is more, the Treasury tells them that they do not have to take it, as note No. 16 of the Treasury minutes states:

"Trusts will not be expected to take the systems until they work effectively".

Thank you, Treasury-and quite right, too! That means that if the trusts cannot be persuaded to take the systems because they do not work-they will not, of course, if they do not work-the taxpayer will have to pay BT 60 per cent. of that £73 million for not taking them.

By the way, this is not as a result of one of the old contracts; it is a result of a contract signed quite recently. Let me quote from a piece in e Health Insider of 1 October:

"The liabilities date not from the beginning of the National Programme in the NHS but are set in a contract signed just three months ago".

There are still some very serious problems with the national programme for IT in the health service.

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee, Chair, Public Accounts Committee

In the light of my maxim that no taxpayer pound should be a source of easy profit, has my hon. Friend conducted any research into how much profit has gone to the private companies involved, and how much they have sucked out of the Exchequer so far?

Photo of Richard Bacon Richard Bacon Ceidwadwyr, South Norfolk

I am afraid that the answer is extremely hard to find. The Government will say that value for money has been obtained precisely because the original contract required that suppliers were not to be paid until they had delivered, but the position is not quite as simple as that. In some instances suppliers have been paid by the back door in respect of other programmes, and it is therefore difficult to see where they have made money and where they have lost it. I have little doubt that suppliers have lost a lot of money, but I would much rather see them offer the NHS something that it wants and be paid a reasonable profit in return than see patients kept waiting, hospital waiting lists in a complete mess, and hospitals unable to tell whether they have sent cancer patients messages with the results of their oncology tests. I would much rather see something that actually worked and produced value for money.

Our recommendation 6 states:

"Unless the position on care records system deployments improves appreciably in the very near future", the Department of Health should allow hospital trusts to seek central funding. We think that rather than funds going to local service providers that have not delivered, trusts should be able to look to the Department for those same funds, in order to spend them on systems that they actually want and that stand a chance of delivering something. That is the way in which to achieve value for money.

We have already lost a great deal that we are not going to get back. What I want to hear from the Exchequer Secretary is how she thinks we can start making some sense of this mess, and how she thinks we can start receiving sensible answers to some of the questions that a number of us have been asking for a very long time.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury) 3:31, 22 Hydref 2009

This is the second of these debates to which I have responded on behalf of the Opposition. In my parliamentary experience at least, they remain unique in respect of the multiplicity of subjects covered. In some contexts breadth is an indicator of superficiality, but the reports that we are considering today provide ample evidence of the forensic abilities of the Public Accounts Committee, and I am delighted that we have heard from a few of its members this afternoon.

We were, of course, treated to a masterly opening summary from the Committee's Chairman, my hon. Friend Mr. Leigh. It is a great sadness and a great pity that this may be the last debate of this nature to take place under his chairmanship. I have seen in his office on the second floor of this building the photographs and engravings of his predecessors, and I am sure that his own portrait will be a worthy addition to that collection. It may even end up having pride of place, given his work over the past eight years.

I shall talk in due course about the importance of my hon. Friend's contribution and that of his Committee in the current context of a record public sector borrowing requirement and a record deficit, but let me say first that, during his eight years in charge, my hon. Friend has done a brilliant job. One of my regrets is that I do not expect to have served under his chairmanship. He says that he has secured £4 billion in savings, which is indeed a proud record, but he does not want to rest on his laurels; he wants to do more. If he is able to find a further £4 billion in savings, perhaps over the next six months, we should all be extremely grateful. I had been going to say that it would be even better if he could find £175 billion in savings, but in fact he helpfully told us where further large-scale savings to the tune of £9 billion might be found. I am sure that my colleagues in the shadow Treasury team will examine that in some detail in the coming months.

While giving the details of where savings could be made, my hon. Friend also attacked increases in Government spending in many areas. One of the more remarkable facts is that at the same time as the rapid increase in public borrowing, there has been a 4.8 per cent. increase in Government spending over the year to September. That is, of course, far above the rate of inflation.

I commend the Chairman for his years in charge. I am sure that he will maintain his close scrutiny of public spending after the election in whatever role he takes on-although I for one hope that we may squeeze in one more public accounts debate if the Government decide to delay the election until May or even beyond.

Mr. Breed highlighted two or three important reports, including one on the appalling blunders on the Chinook project, about which I will talk as well. I was a little more surprised by his words on Trident. If I understood him correctly, he was praising the good work at Devonport dockyards and the boost to the local economy in Devon and Cornwall as a result of Trident. But he then went on to tell us that he was not in favour of renewing the project. I am not sure how that will go down in that part of the country.

The hon. Gentleman was on much safer ground when he referred to CDC and its failings, which I will also mention. One of the other reports that he mentioned- I was not going to look at this one-was on the letting of the rail franchises, a fascinating topic. Generally I am a strong supporter of privatised rail. I have used trains in the hon. Gentleman's constituency quite a lot. He knows that I was brought up in Looe. The last time I took the Liskeard to Looe line was in 2007, when I thought that the quality of First Great Western rolling stock on that line left a lot to be desired. I hope that it has been renewed since. [ Interruption. ] By the look on the hon. Gentleman's face, it would seem that, unfortunately, it has not. Nevertheless, it is still a delight to use the Looe valley line in his constituency.

Mr. Mitchell was unique in being a Labour contributor to the debate. I agree that efficient government is essential but I must strongly disagree that big government is inevitable. Big government is by its nature inefficient.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I see the hon. Gentleman shaking his head but I challenge him to find anywhere in the world that has gained efficiency by increasing the size of its government. However, I agree with him on the huge sums paid to consultancies and how undesirable that is. History will record that one of the defining characteristics of the new Labour Government over these past 12 years has been the extraordinary waste of money on consultancies.

I am looking forward to seeing the Committee's report on Metronet-the report is not before us today-whose failure will have a direct impact on my constituents. I am glad that the hon. Member for Great Grimsby raised the issue today. He rightly focused on a number of MOD, education and other IT projects and, despite our vastly different political views, I think he spoke a great deal of common sense in terms of his desire to see better value for money in public spending, even though he and I might disagree on the precise size of the cake.

My hon. Friend Mr. Bacon spoke with his customary forensic skills and fluency and outlined important changes-I will have to read his comments carefully-as to how the NAO will effect better financial controls in Government Departments, which sound like they are welcome. He also said some important words about the culture of the civil service and on working to change attitudes in the public sector in the present environment to focus more on efficiency; getting more for less, as the leader of my party put it.

My hon. Friend then launched a devastating critique of the NHS IT contract and its moving goalposts in terms of objectives and what has been delivered in a project that will come to symbolise Government waste as whole over the past 12 years. His examination of the details of the failings and the Treasury's failure to get a grip, as well as the astonishing consequences for frontline NHS services, should be compulsory reading for all Treasury and Department of Health Ministers.

I mentioned the apparent lack of enthusiasm of Labour and Liberal Democrat members for debating the Government's earlier motion on securing the recovery. I note that, in this debate, there has been no Liberal Democrat speaker from the Back Benches and only one Back-Bench Labour speaker; although the hon. Member for Great Grimsby can hardly be described normally as a pro-Government speaker. It is a great pity that in a full day to debate first the economy and then the public finances, there has been almost no contribution from Labour or the Liberal Democrats.

Several themes have emerged today, but all against a common backdrop. No one in this Chamber can fail to be aware of the woeful state of the public finances. The deficit this year is projected to reach round about £175 billion; £14.8 billion was borrowed in September alone, the highest figure on record. September's borrowing brings net debt to a staggering £824.8 billion and means that debt as a percentage of GDP increased by 2.5 per cent. in just one month, to 59 percent using the Treasury's own figures. To put it another way, the Government are currently borrowing £500 million a day.

To see the seriousness of the situation we are all faced with, we only have to open the inside back page of The Economist and note that of the 42 countries in the magazine's tables, Britain has the worst budget deficit of all, currently estimated to be heading to about 14 per cent. of GDP. That is twice what it was coming out of the last two recessions. The work of the Committee becomes ever more relevant in such a context, and its reports will prove a valuable resource for the next Government, of whichever party.

Value for taxpayers' money should, of course, always be a priority for those charged with its proper use, but it is a duty that the current Government neglected in a milder economic climate. Perhaps this was an unconscious effect of their verbal trick of labelling all spending as investment and regarding it as an automatic good irrespective of frameworks and controls, and sometimes irrespective of ends. Whatever the cause, there has certainly been a pattern of failure to ask the right questions or to draw the right lessons from mistakes, and the reports before us today provide further evidence to support this view.

Collecting the stack of documents from the Vote Office, one ended up with a veritable armful of reading after a slightly hassled clerk had fished out each of the 27 reports-I think that is the right number. As many Members have suggested, the large number of reports presents a dilemma as they all contain insights into their objects of inquiry but it is impossible to comment on all of them. I will focus on some of the reports that particularly interested me, but I shall be as comprehensive as possible in the available time.

A number of reports focused on defence. After both the roll call of those who died in the service of our country over the summer months and the general debate last week, the House has been particularly aware of defence matters since it returned from the recess. There are four reports on the Ministry of Defence before us. One has a particular bearing on the situation of our troops in Afghanistan, and all have some relevance in the debate over resources.

The Chinook helicopter provides crucial heavy-lift capacity for the Army. It played a battlefield role in the Falklands war and has done so ever since. The current versions were ordered in 1995, in what the PAC described five years ago as one of the worst examples of equipment procurement it had ever seen. The latest report on the eight Chinook Mk 3 helicopters suggests the delays are abysmal "even"-that is the Committee's telling phrase-by the MOD's standards. The Committee says:

"The absence of these helicopters has meant that British troops in Afghanistan have had to make do with fewer helicopters, make an increased number of dangerous journeys by road and, due to the specialist nature of the Mk3, rely on heavily modified Mk2 helicopters for use on high risk special operations."

Further, the night enhancement package referred to at the end of the assessment is, as the Committee discovered, still regarded as a key safety risk by Joint Helicopter Command.

It is shameful that our soldiers have died from roadside bombs when additional helicopter support might have prevented the need for some of the road journeys they undertook and that our troops continue to undertake as we speak. While the Government can, and do, point to other measures they have taken since, that cannot alter the fact that our forces would be safer were it not for a series of Whitehall blunders, many of which have been examined by the PAC.

Even the abandonment of the "fix to field" project, a decision taken to accelerate additional lift capacity, led to a 70 per cent. increase in the costs of the successor reversion scheme. The Government dispute the Committee's claim that this was due to inadequate analysis and lack of consultation with Boeing, but an impression of hurried misjudgement remains.

The departmental response also seems reluctant to accept the MOD's tendency to over-modify what are intended to be off-the-shelf purchases, or the extent to which the pursuit of perfection on paper leads to defects, delays and cost overruns in practice. While they may sometimes be unavoidable, modifications of contracts run a high risk of undoing the advantages that off-the-shelf procurement can offer, and the attitude displayed is worrying. When our country is at war and lives are being sacrificed, it is damning to know that equipment shortages and deficiencies could have been avoided.

Almost the only encouraging note in the entire Chinook report is the reported 20 per cent. increase in flying hours resulting from joint work with Boeing on maintenance procedures. Better use of our existing assets will be essential in Afghanistan and elsewhere. The capabilities review that my Front-Bench colleagues have outlined is just one aspect of the Conservative response to these problems.

The other reports on the MOD indicate the scale of the challenges that may face it. The major projects report states:

"In the last year, the 20 biggest projects suffered a further £205 million of cost increases, and 96 months additional slippage... Total slippage stands at over 40 years".

Although we accept the uncertainties involving new technology, those statistics bear witness to endemic failures in project management in the Department. Projects are not mysterious entities, and basic causes of project failure are the same whether projects are defence-related or civil, public or private. Yet again and again in the pages of these reports we read about over-optimism and poor controls.

The report on the defence information infrastructure system is a case in point. The project was 18 months late at the time of publication as a result of fundamental weaknesses in planning. This huge project is replacing separate systems ranging from those within Whitehall to the onboard systems on Royal Navy ships. The cost was last estimated at £7.1 billion, and some 150,000 terminals are involved, yet assumptions were made on the basis of "totally inadequate research", the timetable was too ambitious and no pilot was undertaken before rolling out the implementation. Like so many Government IT projects-I will discuss the NHS IT system shortly-this one has come unstuck, and is 18 months behind schedule. It should not be necessary for PAC reports to have to include among its recommendations such basic advice as the following:

"Where accurate information is not available, assumptions should be prudent and cautious."

It is extraordinary that a need was felt for such basic advice to be included in the report.

Existing legacy systems are also known to be at risk of failing. Meanwhile, the Government's contractor, the ATLAS Consortium, has still to meet many of the original requirements. The capability to handle securely classified information and information held about personnel is in doubt. Perhaps the Minister could indicate what progress the Government have made on the continuing data security concerns. On major equipment procurement decisions, progress seems to have been ruled out. Ministers seem to be leaving all the difficult choices to a future Government. If their intimations of the future come to pass, our priority would be to introduce a much more rigorous and commercial approach. The Department must learn from complex civil programmes if it is to have any hope of completing projects on time and to budget. We believe that greater commercial discipline is the only way to deal with the management of vital and expensive military programmes, and it is essential that industry is brought into the process at an early stage.

As my hon. Friend the Member for Gainsborough also outlined, there are more encouraging signs from the Ministry of Justice and the Office of Government Commerce in respect of regular procurement from within the Prison Service-we are very pleased by that-which achieved cash savings of £120 million in the 2007-08 period under review. The Committee claims its share in that success and with some justification, as was acknowledged by the witnesses in its evidence session. The critical 2003 PAC report was used as the starting point for the reforms, which are now being implemented across the MOJ.

The use of online catalogues and procurement teams to make better use of the purchasing power of the service as a whole holds lessons beyond that one Department. The potential savings from allowing units within and across Departments access to each other's contracts are significant, and do not appear to have been driven forward by the Office of Government Commerce to the extent that they should. Prices and service levels negotiated by one become available to all, and low-volume purchasers benefit from the advantages of high-volume supply. That is an important way in which costs can be brought down-we will all have to pay more attention to this-in some cases dramatically, while also improving quality. The Department's response indicates that it offered to participate in OGC workshops and training events. On the basis of the Committee's evidence, I hope that that has happened.

The OGC's record on contract management is the subject of another of today's PAC reports. As it records, central Government spend more than £12 billion annually on IT and other service contracts, and there are some basic concerns. Of those contracts, 56 per cent. had no associated contingency plan for supplier failure whereas 28 per cent. had no documented management plan at all. Worse, the report goes on to state:

"Of the contract managers surveyed...25 per cent. of those responsible for contracts that had been running for at least three years had undertaken no value for money testing of ongoing services. And 41 per cent. of contract managers had not tested the value for money of new services."

The OGC's responsibilities are secondary, as it is obviously the Departments that provide the management. However, it accepts a long list of areas for improvement.

The oral evidence provided by the OGC's chief executive to the PAC at least seems to demonstrate understanding of what is required. As the Committee concluded, however, until Departments' behaviour changes, incidents such as the SATs testing fiasco are likely to recur.

Let me move on to the national health service information technology fiasco. Perhaps the most prominent contractual and project failure of them all is the national programme for IT in the NHS, with total costs projected to reach nearly £13 billion, assuming full implementation is ever achieved. The Committee's summary, in my view, is surprisingly mild in the circumstances, although the facts speak for themselves. Most of the mistakes were made before 2006-before the period under scrutiny today-but there remains the question of whether the Government are throwing good money after bad. There are real doubts about the ongoing viability of the programme and one of the Committee's recommendations is to allow trusts to put forward applications for central funding to develop alternative systems.

Incredibly, in rejecting that recommendation, the Department of Health stated that it does

"not accept that the Programme is not providing value for money at present".

That must be one of the most extraordinary admissions from a Government Department in relation to the PAC. The Department has never published a compelling cost-benefit analysis for its top-down imposition of a structure for which there was so little demand and for which the costs were always projected to be vast. It seems that the Government will remain in denial until the very last.

The Opposition believe that integration should be pursued through local procurement that is open to national, open standards. Any action that we take if we are elected will depend on what we inherit, but we intend to halt and renegotiate the local service provider contracts to prevent further inefficiencies and to dismantle the central IT structure.

Photo of Richard Bacon Richard Bacon Ceidwadwyr, South Norfolk

I was interested to hear what my hon. Friend said about renegotiation of contracts because one argument that is sometimes adduced-wholly falsely, in my view-is that there would be such huge penalties that it would not be possible for contracts to be renegotiated. Does he agree that since disputes with IT contractors never end up in court and since IT contractors want to work for government again in the future, there is almost always a way through that does not involve huge penalties on either side?

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

My hon. Friend is absolutely right. The Government have, at their peril, underestimated their power in negotiating these contracts and ironing out details of them. In some cases, providers owe part of their existence to the Government, so the Government need to start punching their full weight in approaching this contract.

Let me move on to the Department for International Development-I shall try to be a little briefer on this point. DFID needs some scrutiny, and I do not think that many speakers have focused on this report.

In addressing the damage that the Government have wrought on the public finances, we have been clear that the NHS should not face budget reductions. However, that in no way removes the need for it to provide value for money. Given the increasing demands being placed on the NHS, efficiencies will also be essential. Similarly, although we gladly honour the UK's spending agreements on international development, the pattern of that spending and the associated standards of financial management must improve.

The PAC report on DFID's operations in insecure environments highlights the need for change. I think that many hon. Members will agree that DFID's performance in conflict zones such as Iraq and Afghanistan needs urgent improvement. Its spending in such environments has increased to more than £1 billion, but project success scores in the same environments have fallen while expenditure has risen. It is true that one might expect success there to be lower than in secure states, but the deterioration should concern all of those who want us to succeed in places like Afghanistan.

My hon. Friend Mr. Mitchell, the shadow Secretary of State for International Development, made a similar assessment when the PAC report was published. He said that

"brave DFID staff work...in dangerous environments to improve people's lives, but their individual courage must be supported by radical policy and management improvements.-[ Hansard, 13 November 2008; Vol. 482, c. 1019.]

I fully agree with that.

It is important that the monitoring of projects for fraud and corruption is enhanced, as the risks of both are greatest in unstable countries, yet insecurity appears to have been used as a reason not to undertake full assessments of the expenditure made. Surely the potential for destabilisation demands the opposite approach-we should be more careful about expenditure in such environments.

The PAC report on departmental oversight of the CDC group has been highlighted by a couple of speakers. It reveals further failures to monitor and control public spending in an effective way, and that is especially true when it comes to the remuneration of senior staff. The strong financial performance of CDC notwithstanding, it cannot be right that the chief executive of a company that is wholly owned by the taxpayer received an increase in pay of nearly £600,000 in a space of just four years. It is extremely hard to justify total pay of around £1 million when one has complete job security and, despite the fact that the Department has tried to make comparisons with the private sector, when one does not have to compete for capital to invest. We have drawn attention to excessive pay in quangos, and this appears to be a parallel case.

A number of the reports about education and skills were equally damning about many aspects of the Government's approach in recent times. In due course, we will all end up paying for the deficiencies in literacy and numeracy on the part of both children and adult learners. To the Government's credit, the departmental responses to the indictments in the PAC's reports on schools acknowledge that too few people possess the key skills. However, there is little indication of fresh plans to turn the situation around, and we can ill afford the current lack of progress to continue.

In conclusion, we need to return to the question of the size of the deficit. As we know, the Government are borrowing around £500 million a day, and one has only to see the various reports from OECD and other bodies to grasp the seriousness of the situation.

The deficit poses grave dangers to the country. Ours is the worst of any major nation, but the Government sometimes say we do not need to worry because, as a percentage of overall gross domestic product-as I said, it was at 59 per cent. but it is rising rapidly-it is still below the level in other countries. For instance, in Japan it is 188 per cent., in Italy 116 per cent., in Germany 78 per cent., and in France 77 per cent. The Government remind us that our deficit is only marginally larger than that of the US, but a number of the countries in that list have very strong domestic savings markets that we unfortunately lack. The danger is that we could become overly dependent on foreign buyers of our gilts.

I end by returning to the theme of the day. The need to make savings can never have been greater, as with the need for proper scrutiny of what is spent-hence the role of the PAC. I think that all hon. Members owe a debt of gratitude to the Committee and its Chairman, my hon. Friend the Member for Gainsborough. I look forward to hearing the Minister's response to a number of the points raised in the debate.

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury 3:59, 22 Hydref 2009

It is an enormous pleasure to respond to the debate on behalf of the Government. As Mr. Leigh said and Mr. Bacon mentioned, I have served as a member of the Public Accounts Committee under the chairmanship of the hon. Member for Gainsborough, and I congratulate him on the work he does. I am no stranger to public accounts debates, either: by looking back in Hansard, I confirmed that I attended and spoke in the debates on 26 January 2006 and 18 July 2006; and, after leaving the PAC on becoming Parliamentary Private Secretary to my right hon. Friend John Healey, who was then a Treasury Minister, I attended the public accounts debate to which he responded.

Serving on the Committee and seeing how ministerial decisions have been implemented gives one an insight that is really helpful when one takes up a ministerial post. We all know that Ministers make decisions in good faith-that was mentioned by my hon. Friend Mr. Mitchell-but, of course, that is not the end of the story. If those decisions are not implemented effectively, it undermines both the policy and the Government's relationship with the people. That is why the Government have increasingly emphasised policy delivery-actually doing what we said we would do. Today's debate has again emphasised not only the wide-ranging nature of the Committee's work, but the fascinating insight it gives its members into the way government works. As a former member of the Committee, I can attest to that.

The Committee builds on a great, long and proud tradition of ensuring that public moneys are properly accounted for and provide value for money, and that the appropriate lessons can be learned when reports are produced. In these times when money is tight, as many speakers mentioned, it is even more important to ensure that we get the best value for money for every pound spent. That is where the Committee keeps Government up to the mark. I have just seen the letter from the hon. Member for Gainsborough to the Chancellor, which again illustrates the benefit that the Committee provides in terms of improving value for money.

In his letter, the Chairman gives examples of how the Committee has helped Departments to achieve substantial savings and of where he thinks we can go further. All such suggestions are, of course, gratefully received. I do not want to match his list with a list of what the Government are already doing in each of the areas he highlights in his letter, nor do I wish to anticipate what we might say in our response to it, but I shall give a couple of examples. In financial management, where the hon. Gentleman highlights back-office costs, the Government have targeted savings of some £4 billion through standardisation and shared services; and in public sector procurement, we expect to achieve savings of some £7.7 billion through the operational efficiency programme. We all acknowledge that there is more to do, however. We shall examine with interest the specific examples in the hon. Gentleman's letter, and respond to his comments.

Photo of Richard Bacon Richard Bacon Ceidwadwyr, South Norfolk

On the point about shared services, will the Exchequer Secretary always bear in the back of her mind, if not the front, the Committee's report on shared services in the Department for Transport? That was the project that cost about double the amount it was supposed to save and the computer spoke to people in German.

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury

I am sure that that will be borne in mind when we are looking at the use of shared services. When considering how we can improve procurement, a one-size-fits-all process does not work. In discussions with one of the officials taking over procurement, it was made clear to me that, when looking at outside procurement, one sometimes has to take into account local factors that can deliver better value for money, rather than just look at the matter across the piece. That is certainly something that I take very seriously.

We know that some 90 per cent. of Committee recommendations are accepted by Departments. That shows that the process of investigation by the National Audit Office, Committee hearings and Committee reports are useful. Departments improve as a direct result of the investigative process: for example, in its 13th report, the Committee acknowledged that the Department for Work and Pensions' handling of customer complaints' had significantly improved since the 2005 report by the Comptroller and Auditor General.

Many reports are critical, but what is good about the Committee is that, even in a critical report, it gives credit where credit is due. It was therefore helpful that in its 18th report, which a couple of hon. Members have mentioned, the Committee acknowledged that the Commonwealth Development Corporation had performed well, outperforming the market while investing in poor countries, since the Department for International Development restructured it in 2004. The Committee acknowledged also that, since taking over from the Strategic Rail Authority, the Department for Transport had, in letting rail franchises, delivered to planned time scales and protected taxpayer interests.

The Government's perspective on accountability has inevitably been coloured by recent events in Parliament and elsewhere, and those have placed increased emphasis on the need for public accountability from all public institutions and public servants. There is a greater awareness of the value of transparency in underpinning confidence in the use of powers under which public authorities operate. It has rapidly become essential to justify the trust placed in public organisations that use public resources of all kinds.

A real public interest is at stake, too. Some people, in Parliament and elsewhere, perceive genuine value in demonstrating that public powers are used as they are intended. The Government, and other public authorities with which they work, can gain stature and public support only if they show themselves willing to account for their stewardship honestly and responsibly. We are all now even more conscious of the need for probity in the use of public funds. Trustworthy public audit is the best way to make people confident, all-round, that the right standards are being achieved and maintained.

The NAO's role is unique in providing that assurance, and that is why it is important that the Comptroller and Auditor General be able to audit central Government bodies. The CAG's sphere of influence has grown over the years, and it has recently been extended to a number of central Government companies. When new central Government bodies are set up, the Government now expect the CAG to become their external auditor. If the CAG does not, there must be a good reason why.

I am pleased to say that the Treasury has been at the forefront of such moves, ensuring, for example, that United Kingdom Financial Investments Ltd, the company that was set up to manage the Government's shareholding in banks, is audited by the Comptroller and Auditor General.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

The Minister is praising transparency at UKFI, so will she tell the House why Ministers continually refuse to answer parliamentary questions about the Government's substantial bank holdings, saying that the service is managed at arm's length from the Government and, therefore, the details cannot be made available to Parliament? Surely, if the Minister believes in full transparency, there should be full answers to hon. Members' questions.

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury

It is important that our holdings in those banks be managed commercially and, as such, by UKFI at arm's length. The point that I was trying to make was that UKFI will be audited by the CAG, setting the precedent whereby we believe that the CAG is the right person for the role.

The hon. Member for Gainsborough made a cogent case for auditing a range of public bodies, and the Government agree that it is in the public interest that statutory authorities demonstrate that they provide value for money. The NAO has a valuable role to play in delivering transparency and accountability, so I am pleased to announce today that the Financial Services Authority has decided to appoint the CAG as its financial auditor from the next financial year, 2010-11. That will enable the Public Accounts Committee to receive and investigate reports into aspects of the economy, efficiency and effectiveness of the FSA's performance. I welcome that decision and believe that it can only enhance the FSA's standing and enable it to show how well it discharges its business.

I assure the House that the Treasury continues to explore opportunities to play a bigger role in delivering transparency and accountability in other bodies that use statutory powers or public funds in the public interest. That must include a full audit of the BBC, as the hon. Gentleman said, and the Government will explore with the BBC how that should be accomplished.

In the debate, Mr. Breed rightly observed that while we should concentrate on saving money in quantifiable terms, we should also consider the social and environmental benefits, which are not so easy to quantify. He referred to the report on the Chinooks, as did other Members. That episode has been well documented and lessons have been learned, but I think we can all agree that it is important that the aircraft are available as soon as possible. We envisage that the first aircraft will be available for training before the end of this year; I am sure that we would all welcome that.

I was a little confused by the hon. Gentleman's comments about Trident. The PAC report clearly states that the time line is very tight, but he said that we do not have to make a decision now and can delay it. In that case, there would be plenty of time to rethink the policy.

Photo of Colin Breed Colin Breed Shadow Treasury Minister

It depends on whether the life of the existing hulls can be extended, which is a possibility. If there is an undertaking to obtain new hulls, then yes, the time line is quite tight, but many of us believe that the existing ones are perfectly satisfactory for at least another four years, which would offer that period for further reflection.

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury

As the policy of the hon. Gentleman's party is not to have Trident at all, I am sure that he is not particularly bothered whether that would leave us with a bit of a gap in procurement.

I was interested in the hon. Gentleman's comments about his bargain rail fares, available on his senior railcard; I look forward to the time when I may get one and take advantage of similar bargains.

As regards Northern Rock, the hon. Gentleman spoke about success fees. We share his concern that costs should be tightly controlled. In fact, in this case the success fee was at the discretion of Her Majesty's Treasury, and none was paid. I want particularly to pick up his point about the mutual sector and the possibility of returning Northern Rock to it, because I want to make it clear that no doors have been closed. Obviously, as a Co-operative MP I am particularly interested in the mutual sector. In our White Paper, "Reforming financial markets", we examined the need for diversity of provision to balance risk across the financial services sector, and how the mutual sector could help to provide that. I am aware of a research paper from Oxford that offers a suggestion on how that could be done. Officials at the Treasury are looking into that, and I would welcome it if the PAC and the Treasury Committee did so too.

We then heard from my hon. Friend the Member for Great Grimsby. For a short time, I overlapped with him on the PAC, so I am well aware of his forensic investigations when he questions witnesses. Today he returned to one of his favourite themes-consultants. When used correctly, consultants can provide great benefits, but we certainly recognise that we can do more to improve value for money. As he knows, we have introduced the consultancy value programme to implement the NAO and PAC recommendations. Our approach is that a business case needs to be made to ensure that consultancy adds value and that consultants are not used in circumstances where civil servants could meet the need, but there will be occasions when the use of expert consultants is the most efficient option. I took his general point about policy decisions needing to be taken in good faith; I picked up on that at the start of my remarks. They also need to be implemented effectively, and that requires effective planning and risk management right from the start.

I thank the hon. Member for South Norfolk for his kind remarks, and I well remember our visit to Boston and Washington. He talked about defence expenditure. Before I entered Parliament, I spent my time on the other side, trying to win MOD contracts, managing MOD contracts, and accounting to the MOD for the cost of those contracts, so I have a little insight into that. Changes in requirements and specifications cause the biggest headaches, certainly for the supplier, and probably for the MOD as well. Moreover, our armed services obviously want the latest and best equipment, and that causes pressure and tension. Again, it comes back to the need for effective planning at the start and effective project management. The newly formed defence acquisition reform project is currently working on the matter and addressing the recommendations of the Gray report.

We all acknowledge that the NHS IT project is hugely ambitious and that it is essential that we get it right. It is obvious to everybody that many challenges remain. We still believe that Cerner Millennium and Lorenzo will be able to support the NHS in the long term. Local service providers have been set a deadline of the end of November to demonstrate significant progress in the acute sector. They will have to demonstrate that Lorenzo has been successfully deployed by Computer Sciences Corporation across a non-acute site and is on track to be deployed in an acute site by March 2010, and that there is a high degree of confidence in CSC's ability to deploy across the NME-north, midlands and east-area by January 2016. BT will have to have successfully deployed Cerner in an additional acute site, and there must be a high degree of confidence in its ability to deploy across London by October 2015. As set out in the Treasury minute, the Department of Health will provide a note on progress by the end of this year. I shall examine the Hansard record of the detailed points that the hon. Member for South Norfolk made and write to him with a detailed response.

Finally, we had the contribution of the Opposition spokesman, Mr. Hands, who shares my respect for the hon. Member for Gainsborough as Chairman of a very important Committee and for the work of the PAC. I had the pleasure of serving on the Committee and believe that it is the most important Committee in the parliamentary system.

The hon. Member for Hammersmith and Fulham touched on many defence projects, including the defence information infrastructure programme, which I have not mentioned so far. It has now been delivered to all the Ministry of Defence's major headquarters, and roll-out rates for the past 18 months have been significantly higher than those of early 2008. Although there were originally delays, I hope that we are making progress.

The hon. Gentleman moved on to the Office of Government Commerce, which regularly assesses Departments' procurement functions. It is working closely with the NAO to finalise new guidance on contract management in complex procurement, which should be published before the end of the year. It is also working to embed the joint NAO and OGC good practice contract management framework and share best practice across Departments.

The hon. Gentleman mentioned the CDC and the Department for International Development, and he touched briefly on the paper about working in insecure environments. It is not an option for DFID not to work in such environments-the question is how we manage that work. Pay levels reflect market-beating performance and are closely linked to delivery of the Department's objectives. Independent evidence from the World Bank suggests that financial performance is a good proxy for the likely impact of CDC investment in reducing poverty.

The Constitutional Reform and Governance Bill received its Second Reading two days ago. Some Members have taken a close interest in such measures as those on judicial appointments and the standards of the civil service. Those are important, and I would not suggest in any way that they do not matter, but to my mind the provisions to modernise the governance arrangements of the Comptroller and Auditor General and the NAO also have considerable importance. They implement the recommendations of the Public Accounts Commission in its 15th report.

As the House knows, the commission wanted to ensure that the CAG had authority to form completely independent judgments about the audits and value-for-money studies conducted by the NAO, while maintaining systems of governance and internal controls consistent with best practice. I believe that the Bill will achieve those aims and set the NAO on a confident course towards even better performance. The new NAO board, which I wish well, should help to guide its staff to stronger and more incisive insights into the use of public funds, and we can all look to benefit from that. I am grateful for the helpful way in which the NAO has assisted the Treasury in getting the provisions right.

I welcome the appointment of Mr. Amyas Morse, who took up his post as Comptroller and Auditor General on 1 June. He is the first CAG with extensive private sector experience, and I know that he has already set about his task with diligence and integrity and is working closely with the new NAO board under the chairmanship of Sir Andrew Likierman.

I express my gratitude for the hard work of the Committee and the NAO, which provide able support. Everyone will agree that together they make a lasting contribution to the performance and delivery of public services across the UK. They keep the Government and public servants on their toes, and their work will continue to be as effective as it has always been.

If this is indeed to be the last PAC debate before the general election, it will be the last time that the hon. Member for Gainsborough moves the motion, because he is to relinquish his chairmanship having served through two Parliaments. I believe that he chaired his first PAC hearing on 22 October 2001.

I pay tribute to an important innovation that the hon. Gentleman made as Chairman: Committee reports that look across Whitehall. In particular, the Committee's 17th report, from December 2005, in which I was involved, "Achieving Value for Money in the Delivery of Public Services", was a tour de force that looked through some 400 Committee reports going back 10 years. The conclusion was that there were seven key aspects of public service delivery that Departments needed to improve to achieve value for money:

"Plan carefully prior to implementation...Strengthen project management...Reduce complexity and bureaucracy...Improve public service productivity...Be more commercially astute...Tackle fraud" and

"Better and more timely implementation of policies and programmes".

We can see from today's debate that those things are as important today as they have ever been, and I encourage all public servants to read the report and take heed of the advice.

Finally, I wish the hon. Gentleman well. He is a most assiduous Chairman of the PAC and during his tenure has enhanced its fearsome reputation as a robust and challenging scrutineer of public finances. I am proud to have been a member of the Committee under his chairmanship and I am delighted to have been able to respond to this debate.

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee, Chair, Public Accounts Committee 4:21, 22 Hydref 2009

With the leave of the House, perhaps I could say a few words of thanks to the Minister for her kind personal words and for her tribute to the Committee, on which she served. I also thank those who have taken part in the debate. There have not been a huge quantity of Members present, but we have made up in quality what we lacked in quantity. All their comments were interesting. I shall not repeat them-they have been summed up very well-but I shall offer some personal reflections.

I do not want to go back over the CDC in any great detail. We know that it has made itself more efficient, but I say to Mr. Breed that some of the salaries in some parts of the public sector-close to £1 million-are frankly obscene and not called for. My personal view, for what it is worth, is that nobody in the public sector should earn more than the Prime Minister. People in the public sector receive many other compensations and I do not think that we need such enormous salaries.

The hon. Gentleman mentioned Northern Rock. Our report was interesting-I am not going to get into the politics of whether it was right to nationalise-and I hope that if ever such a situation arises again, officials will look at it, because many lessons can be learned about timely action.

I thank Mr. Mitchell, who kept our debate going with great verve. We are grateful for his forensic examination in our Committee. Again, I will not go through all his comments, but he mentioned the Rural Payments Agency-we are to have another hearing on that agency on Monday. The key point is that the English system was just far too complex compared with the Scottish, Welsh, Northern Irish and continental systems. That goes back to what the Minister said in her concluding remarks on our generic report about making Whitehall more efficient, reducing complexity and planning carefully. We really have to cut through the complexity if we are ever to deal with what is going wrong in the RPA.

As usual, my hon. Friend Mr. Bacon gave us a masterclass on the NHS computer system. He is the House's expert on it. Again, if we are to make any progress on the system, we must cut through many of the knots that are binding hospitals to a failed concept and allow them to break free; otherwise, we may go on sinking good money after bad.

I am grateful to my hon. Friend Mr. Hands for what he said. He mentioned the major projects report. The truth is that the MOD is trying to do too much. Without getting into the wider politics of it, we will probably have to cut the number of Trident submarines. These programmes are constantly being shifted sideways and some very difficult decisions will have to be made after the general election.

Lastly, I thank the Minister for what she said. She made a very important announcement today when she said that we would extend full audit by the Comptroller and Auditor General to the FSA. She also hinted that the Treasury has a much more open mind about the BBC and the Bank of England. We have scored an important victory today-one down, two more to go-and we will carry on working. I am grateful to all those who have taken part in the debate. In the past six months there has been so much publicity about what Members of Parliament have cost the taxpayer, but some Committees and some Members provide a good deal for the taxpayer. Saving £4 billion over eight years is not to be sniffed at. I am proud of what we have achieved and I wish the Committee and my successor every success for the future.

Question put and agreed to.

Resolved,

That this House takes note of the 1st to the 6th, the 8th to the 11th, the 13th to the 23rd and the 31st Reports of the Committee of Public Accounts of Session 2008-09, and of the Treasury Minutes on these Reports (Cm 7568, 7622 and 7636).