Public Accounts

Part of the debate – in the House of Commons at 4:58 pm on 12 February 2004.

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Photo of Mr Howard Flight Mr Howard Flight Shadow Chief Secretary to the Treasury 4:58, 12 February 2004

I pay tribute to the Chairman of the Committee and all its members and to Sir John Bourn and the NAO for fantastic work on 54 reports. All hon. Members here this afternoon must agree that this has been a fascinating and incisive debate. The PAC and the NAO are very much the unsung heroes of Parliament and the civil service.

Dare I say that it is perhaps a pity that we are having the debate today, when we are about to break up for half term? It is certainly a great pity that more hon. Members have not attended. We are debating some £250 billion of public expenditure, and without wishing to sound patronising, I feel that it is pathetic that there are not more MPs here to learn something about how that money is spent. At the end of the day, if Parliament is not to be just a theatre of performance, surely its most crucial role involves that very item. The thought occurred to me—perhaps not seriously—that attendance should be made compulsory.

I am sure that the Government are somewhat disappointed that the massive increase in spending since 2000 has not, as yet, delivered more. Figures from the Office for National Statistics suggest that something like 85 per cent. has gone into public sector inflation, which is now running at 8.5 per cent.—that is up from 1.6 per cent. in 1997. The big question of our time for the Government, the Opposition and all mature economies of western Europe is how the public sector is to become more efficient. It is fairly clear that there is no great appetite throughout Europe for further tax rises, but with populations growing older, there is an increasing demand for services. The efficiency of the public sector is thus right at the centre of politics everywhere.

I shall comment briefly on the excellent speeches that have been made. I liked enormously the robustness of the Committee's vice-chairman, Mr. Steinberg. I wholly agree with several key points that he made—namely his tactful criticism of the occasional arrogance of the civil service. He also highlighted the Ministry of Defence's frequent failure to manage equipment and problems with asset tracking.

Mr. Allan focused on a matter about which he has a great deal more technical knowledge than I, although I have endeavoured to give it some attention over the past two years: the pretty poor record on public sector information technology projects. He quoted from the Committee's 44th report on the Libra project—we have all focused on that. We all know that such matters have been the Committee's territory for a long time because it has produced many reports on IT projects. The problems remain substantially unsolved. I learned from my prior career experience that top-down IT projects never work. Unless they start with the people concerned at the cutting edge, and work upwards with people being prepared to adapt, one ends up with a top-down system that fails.

Jon Trickett was wonderfully straightforward. He articulated his frustration and sadness at the waste of public expenditure; I share that motivation myself. He suggested that parliamentary scrutiny bodies were generally inadequately resourced, and pointed out systematic problems in the procurement process. Indeed—dare I say it?—it seems to both the Government and the Opposition that relatively straightforward savings could be achieved by introducing a considerably more professional procurement process throughout the public sector. He said that private finance initiative costs of tendering were too high, which is clearly what experience shows, and he pointed out problems of an oligopoly, if not a monopoly, of supply to the public sector.

I give personal thanks to my hon. Friend Mr. Bacon for helping me to get on top of 54 reports in a relatively short time. I was interested to hear his identification of the way in which the MOD had been caned in the swaps market because it did not seek adequate advice. He also focused on the problem of having a single bidder for Government contracts, and not only on the PFI side. If one suddenly increases spending on public sector investments massively, one runs the risk of driving up prices because too few providers are available. My hon. Friend also pointed out the major problem that attempts to address housing benefit fraud, and fraudulent benefit payments in general, have been given up.

My hon. Friend also made the important point, in relation to IT, that the mandate of the Office of Government Commerce does not give it the power to prevent projects, in good time, from going off the rails. I have learned that, perhaps surprisingly, Italy is the EU country with the most effective record in managing IT projects. One reason for that is that a very small body at the centre of government, comprising partly the private and partly the public sector, has precisely that power. That body has to vet a project initially and then monitor it, and it has the power to stop public sector IT projects if they go off the rails.

Jon Cruddas, as a new member of the Committee, made a valuable contribution in which he stressed the problem of the natural lack in the public sector of the discipline that competition and the market bring to the private sector. He stressed the need to rethink how optimum efficiency can be achieved with the additional £61 billion that the Government are spending in the public sector.

I step back to ask what the PAC and its processes are all about. To me, the PAC's function is analogous to the internal audit function in a business. The PAC, with the NAO, is the internal auditor, although many businesses use an outside party in conjunction with their own to perform that internal audit. The PAC functions as the non-executive directors, while the House of Commons functions as the body that represents the shareholders, but the recommendations of the internal audit are essentially for the civil service and Ministers, so that they can improve the delivery of public services and learn from all the work done.

In a business context, the board's normal response to the findings of an internal audit is to continue to require information from management until it can see that the lessons learned have been implemented and the problems thrown up have been resolved. My main disappointment, from all that I have read, is the relative lack of effective implementation of all the lessons that the PAC and NAO have learned from all the work done. All that excellent work is recorded, and is there for the public sector, the Government and civil servants to learn from. As pointed out, that work has saved £1.5 billion, but everyone reading the reports of recent years must have stepped back and said, "My goodness me; far more than £1.5 billion could have been saved if what the PAC found had been implemented."

Of the reports before us today, I have counted 10 in which the PAC says, "We have said this before and nothing has happened," and another 20 that make the same point in essence. Many of the reports that deal with PFI and the problems associated with it repeat criticisms that have been made before.