Public Accounts

– in the House of Commons at 4:16 pm on 26th January 2006.

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Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee, Chair, Public Accounts Committee 4:16 pm, 26th January 2006

I beg to move,

That this House
takes note of the 17th and the 20th to the 52nd Reports of the Committee of Public Accounts of Session 2003–04, the 1st to the 30th Reports of the Committee of Public Accounts of Session 2004–05, and the 1st to the 3rd, the 5th, 6th, 10th and 11th Reports and the First Special Report of the Committee of Public Accounts of Session 2005–06, and of the Treasury Minutes and the Northern Ireland Department of Finance and Personnel Memoranda on these Reports, Cm 6271, 6282, 6302, 6303, 6304, 6332, 6355, 6416, 6441, 6458, 6468, 6496, 6577, 6578, 6579, 6609, 6667, 6668, 6682, 6689, 6712 and 6724.

I am pleased to welcome Members to the Public Accounts Committee debate. It is the first of its kind since June 2004, and in the lengthy intervening period the profile of public sector efficiency, which has been at the heart of the Committee's work ever since its creation 140 years ago, has been raised, certainly in part, by the Gershon review. Given this context, we have a lot of highly topical issues to cover today.

The Committee is proud of its work since our last debate. We have published no fewer than 76 reports on issues at the very top of the policy agenda, including 21 in this Session so far. Our high profile and hard-hitting output has included a report on UK military operations in Iraq. That report recognised the commitment, bravery and professionalism of our armed forces, but noted shortcomings in the channelling of supplies to front-line forces.

We also considered the uncertain future of renewable energy, advising the Government to subsidise the development of new technologies and to engage fully in the nuclear power debate. We further concluded that the operation of tax credits has been an absolute nightmare for a significant minority of claimants, who cannot understand how much they are due, or why, in so many cases, such large overpayments have been made.

We also highlighted a simply unacceptable postcode lottery in the prescription of anti-cancer drugs, waiting times for scans and chemotherapy treatments. We found that people who live in a northern city are almost twice as likely to die of cancer as those who live in an affluent area in the south. The cancer of those who happen to live in a deprived area is likely to be much more advanced by the time that it is diagnosed, and they are less likely to survive. We urged the Government to address that issue as a matter of urgency.

Many of the Committee's recommendations have been implemented in the past 18 months, thereby translating them into practical service improvements for the taxpayer. Some 276 of the Committee's recommendations—93 per cent., which is way above the percentage achieved by any other Committee—were accepted by the Government in 2004–05. I pay tribute to the Treasury for accepting 93 per cent. of our recommendations; its doing so is entirely in line with the cross-party nature of our work.

Photo of Ian Davidson Ian Davidson Labour, Glasgow South West

The hon. Gentleman said that 93 per cent. of the Committee's recommendations had been accepted. For purposes of comparison, what was its record under previous Chairmen? Has he achieved a higher or lower proportion, and does he set himself a target?

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

I am sure that my very distinguished predecessor as PAC Chairman achieved just as high a rate. He has moved on to even better things, and I do not want to criticise him in any way, but the Committee has gone from strength to strength over the past four or five years. That has nothing to do with me—I have just happened to be Chairman in that time—but it does have to do with the structure of the Committee, the National Audit Office and many other factors. Things have gone pretty well.

I shall offer only three or four examples of our successes, although I could go on and on. However, I regret that the Committee is also the Public Accounts Committee for Northern Ireland while Stormont is suspended.

The Committee does not pull its punches, and our recommendations are hard hitting. We are consensual, but that does not mean that we go for the lowest common denominator. On the Jobskills programme in Northern Ireland, we said:

"Our overall impression is that Jobskills is one of the worst-run programmes that this Committee has examined in recent years. We noted a quite astonishing catalogue of failures and control weaknesses, all of which pointed to a disturbing level of complacency within the Department."

That programme has since been axed.

The Committee's report on light rail projects stressed the need for rigorous financial viability tests prior to approval. As a result, the Department for Transport shelved plans for three new light rail developments because it realised that it could not guarantee against price escalation. Last year, the Committee highlighted the fact that the Inland Revenue had adopted many of the recommendations proposed by the PAC six years previously. As a result, it had become 66 per cent. more efficient in its administration of inheritance tax.

The Committee also reported recently on Energywatch and Postwatch, which we described as "feeble". We suggested that those bodies could reduce costs by re-examining their regional structures and sharing administrative functions. In response, Postwatch centralised its complaint handling function in Belfast, and Energywatch, with the support of Postwatch, set up a consumer action network to find ways to achieve better joint working.

It is a testament to the Committee's work that our recommendations on the private finance initiative and on public-private partnerships have saved the taxpayer no less than £750 million, according to the NAO. If the Committee's members were paid on a commission basis, we would not need to remain Members of this House for very long.

Complementing the impacts that I have described is the increasing scale of media coverage enjoyed by the Committee, which is greater than that received by other Committees. That degree of attention to our work can only aid us in pressing for value for money.

Photo of Sadiq Khan Sadiq Khan Labour, Tooting

Is the hon. Gentleman concerned that the media sometimes highlight our criticism of the Government, and pay less attention to the occasions when we praise Departments on their efficiency?

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

That is the media's besetting sin, but we try to structure our reports and press releases so as to strike a balance. We try to pay tribute to the Government when things go right, but it is the nature of the media that they engage in negativity and prefer criticism to congratulation. However, in its reports, the Committee tries hard to congratulate the Government—the customer—when they have done well. We do our best in that regard.

It is a tribute to the Committee that we do not get involved in policy. We deal in the nuts and bolts of things. We are not policy wonks, as we engage in what people care about. That is why we get considerable coverage. For instance, the entire front page of today's edition of The Independent is devoted to one of our reports, and the same happened with The Guardian earlier this week. It is proof of my consensual nature that I have actually started to read those newspapers.

Credit for the Committee's achievements should go, in part, to hon. Members who have departed the House since the last PAC debate. We are sad that they have left, although I see Jon Cruddas in his seat. However, I am confident that the new members will help carry forward the momentum generated by their predecessors. I welcome to the Committee my hon. Friend Greg Clark and the hon. Members for Burnley (Kitty Ussher), for Bishop Auckland (Helen Goodman), for Bristol, West (Stephen Williams), for Orkney and Shetland (Mr. Carmichael), for Portsmouth, North (Sarah McCarthy-Fry) and for Tooting (Mr. Khan). I also welcome to the Committee Mr. Mitchell, who, ironically given the relative youth of some of the members of the Committee, is the newest member of the Committee, and a valuable member too. He has already turned up pretty well every time and, in his usual robust style, has given permanent secretaries a real grilling. We welcome him.

Irrespective of how long hon. Members have been in the House, I am sure that each and every member of the Committee will continue to add something uniquely valuable to our work. Members of the Committee both past and present will understand the hard work and commitment that membership demands. We meet twice as often as any other Committee. So I know that I will not be alone in expressing my thanks and deep gratitude to Mr. Nick Wright, our Clerk, and others who support the Committee, especially the National Audit Office. It is no secret that without the NAO we would not be able to do anything.

We must also remember all those who have served on or worked for the Public Accounts Committee in the past decade. The Committee has issued more than 400 reports and questioned hundreds of senior officials. Witnesses have provided the Committee with vital insights into the challenges that they face in their ongoing battle to improve public services.

I want to outline this afternoon the key findings emanating from the Committee's reports over the past 10 years—findings that are present in the Committee's work since my last address and which lie at the heart of current policy discourse on achieving value for money in the delivery of public services.

Indeed, as the parties come closer and closer together on policy—[Hon. Members: "Ah."] I make no comment on that, of course. The debate on how policy is implemented is even more important. That is why the role of the PAC is ever more central.

If one lesson stands out from the work of the PAC over the years, it is that Government Departments in any Government are masters of spending public money, but often far less proficient at ensuring that it translates into better public services. It is in keeping with the non-partisan nature of today's debate and of the Committee to say that the problem has plagued Governments of all persuasions over the years. The Committee recognises the difficulties involved and that often the processes are much more complex and much larger than those in the private sector, especially with IT projects. However, some progress has been made. The Committee has commended the Government's efforts to develop more effective services for older people. Our report on emergency hospital care identified a large and sustained reduction in the length of time that patients spent in accident and emergency.

Welcome as such improvements are, for many years the Committee has also pressed Governments to devote greater attention to public sector efficiency as, all too often, they have failed to learn the wider lessons of the Committee's recommendations. While supporting the good intentions expressed by Gershon, the Committee would like to see practical evidence of real-life efficiency savings being realised. Departments are responsible for delivering those savings, and the Government's programme of departmental capability reviews designed to assess Whitehall's ability to implement policy effectively is significant. The Committee has noted many times that policies are too often cursed by weak management and implementation approaches. We welcome the recent development, but we would like more information on how the programme will be taken forward and rolled out.

Despite those welcome initiatives, however, more must be done to achieve value for money in public services. I shall devote the rest of my speech to outlining the Committee's seven recommendations for getting more out of our public services. Hon. Members can study those recommendations in greater depth by referring to the Committee's 17th report of the current Session, entitled "Achieving value for money in the delivery of public services."

The first recommendation is that those responsible should properly prepare and plan project implementation. Successful implementation rests on careful planning that takes into account a programme's risks and business requirements. Now, all that can be just anorak talk, but let us look into some practical examples. The Committee concluded in its report on asylum decisions that the Home Office failed to put in place sufficient staff and structure to cope with a significant rise in asylum applications in 1999 and 2000. In its report on road congestion, the Committee criticised the Highways Agency for installing cheaper, less sophisticated technology in the south-east in order to close a technology gap between the regions on the basis that it would be upgraded at a later date. Had the agency not reversed that decision, it would have cost £64 million more than progressively installing more sophisticated technology from the outset. To avoid such fiascos in future, Departments need to draw up realistic timetables and leave plenty of time for planning and detailed specification. The Committee would also like to see greater use of pilots to test schemes before their large scale implementation.

Secondly, Departments must strengthen project management. Time after time, the Committee has come across poorly managed Government projects. One of the most alarming examples of poor project management was the Government's purchase of eight Chinook Mark 3 helicopters that could not be used because the Department failed to specify the avionics system when it drew up the contract. No doubt the Chinooks have been consigned to some remote aircraft hangar, but it is something of an understatement to say that they are doing very little to promote our national security.

Like defence procurement, IT procurement is all too often synonymous with delay, overspends, poor performance and even abandonment. Encouragingly, our report assessing the impact of the Office of Government Commerce's initiatives on the delivery of major IT-enabled projects recognised the potential for gateway reviews to secure significant improvements in IT procurement. We also called for gateway reviews to be published, and recommended that the Comptroller and Auditor General be notified where IT projects get "double reds" within that process. I am encouraged by the OGC's agreement to our latter recommendation, but disappointed that it has rejected the former.

The Committee continues to recognise the need to strengthen project management capabilities. Departments need more realistic business cases and time scales, and risk must be understood and better managed. Large, complex projects should be broken into smaller, more manageable components, and reliable contingency plans should be put in place.

Our third proposal concerns the need to reduce complexity and bureaucracy. Too often, public services are unnecessarily complex and bureaucratic. For example, the difference in error rates in passport application forms that are checked by the Post Office for a fee and those submitted directly by customers—1 per cent. and 15 per cent. respectively—shows that people have difficulties with that particular form. The Committee has pointed out that Departments have an obligation to make sure that their forms are straightforward and easy to complete. Looking across Government, the Committee has called for the simplification and streamlining of complex processes that increase costs. For example, the structure of the social fund is so complicated that mistakes are made in almost half of the applications for certain benefits.

The fourth recommendation is the need to improve public service productivity. Delivering quality public services rests on their efficiency and productivity. Our report into sickness absence in prisons confirmed that unusually high levels of sick leave were detrimental to the overall efficiency and productivity of the Prison Service. As well as costing the taxpayer around £80 million in 2002–03, sickness absence increases stress and lowers the morale of other staff. In that particular case, I am pleased to note that the Minister recently reported that in nine of the 10 prisons with the highest levels of sickness absence as identified in our report, sick leave has been reduced by 36 per cent. since 2002–03, which is an example of a report making a difference.

Much still remains to be done to improve public service productivity. The introduction of resource-based accounting and budgeting is certainly a step in the right direction, because it helps Departments to use their resources more productively and deliver their services more efficiently. Welcome though these developments may be, Departments still have some way to go in improving public service productivity. They need to match resources better to work load to meet the public's demand for services, and they should tackle bottlenecks in service delivery chains.

Fifthly, we believe that Departments need to be more commercially astute. Such measures have already been introduced in Britain's biggest and best companies. Indeed, the Committee thinks that Government Departments can learn a lot from boardrooms throughout the country. When one considers that central civil service Departments alone spent more than £15 billion a year on goods and services, it is vital that they demonstrate that they are commercially astute. All too often we find that Departments are lacking in that area. The Committee reported that fewer than a quarter of procurement staff in Departments had Chartered Institute of Purchasing and Supply qualifications. Of the 20 Departments, agencies and non-departmental public bodies that spent the most on procurement in 2002–03, only three had commercial directors. Their role explicitly covered all corporate engagement with the private sector and the wider business world, as well as procurement strategy.

I am pleased to note that the situation has since improved, but Departments must do more to strengthen their commercial expertise if they are to maximise their assets for public benefit. Across the Government as a whole, the Committee wants Departments to take greater advantage of their buying power to secure better deals, to award contracts on the basis of value for money instead of lowest price and to make greater use of partnership arrangements with suppliers.

Sixthly, there is a need to tackle fraud. Fraud has been a long-term concern of the Committee. In addition to producing a report on benefit fraud, it found during its investigation on VAT that a staggering £11 billion of VAT that is meant for the public purse is going into the pockets of fraudsters, cheats and those making genuine errors. We urged Customs to introduce tougher penalties for evasion and the under-declaring of VAT. We called for it to take full advantage of its merger with the Inland Revenue to improve data matching as a means of identifying traders in the shadow economy.

We also highlighted the problems among European member states on agreeing what actually constitutes fraud. In our report entitled "Financial management of the European Union", we recommended that the UK presidency of the European Union should be used to support the Commission in its action to improve accountability in the European Union through the development of a road map towards a positive statement of assurance. We also called on the Government to press for the simplification of the rules and regulations governing the common agricultural policy and structural funds to reduce the scope for fraud and error. Now that the UK presidency has come to an end, can the Minister detail the extent to which the Government have implemented those recommendations? Will he give assurances that the UK will continue to press for those vital reforms during the Austrian and French presidencies and beyond?

Seventhly, I urge the Government to implement policies better and in a more timely way. It is important that they have clearly thought-through implementation plans and reliable information on which to base decisions about new policies. For example, the Committee's progress report on hospital-acquired infection highlighted the worrying dearth of information about the extent and cost of such infections. For example, the regularly cited figure of 5,000 deaths each year due to hospital-acquired infections is unreliable and dates from the 1980s. Good policies and successful implementation rest on the availability of reliable and up-to-date information. It is imperative that Departments understand the scope of problems before they set about addressing them.

As I have outlined, the Committee makes a valuable contribution towards the development of more efficient and effective Government policies. In the coming months, we shall face numerous opportunities to add to our work. We shall continue to deal with the access issues raised by Lord Sharman's report of 2002 on the audit and accountability of central Government. The Committee is delighted that Lord Sharman's recommendation that the Comptroller and Auditor General be given audit access to non-departmental public bodies that are companies and their subsidiaries has been taken forward in the Company Law Reform Bill. The Committee would like to thank the Treasury and the Department of Trade and Industry for their support on this matter and looks forward to the smooth passage of the Bill in the near future. However, we just hope that similar progress can now be made on gaining full access to the BBC's accounts. The Committee has valued the experiment that has allowed the Comptroller and Auditor General, under special arrangements, to have limited access to the BBC. However, as I have said in the past there should be no limit on the freedom of choice of the Comptroller and Auditor General if the licence fee payer is to be assured of value for money. The expected renewal of the BBC charter, which is scheduled for later this year, provides the perfect opportunity to address the matter.

The Committee's formal agenda includes hearings on the National Audit Office's major defence projects report for 2005, and reports on supporting elite athletes, faster access to better stroke care, the closure of MG Rover, corporation tax, and improving poorly performing schools, to name but a few.

In conclusion, the distinguished Committee of which I am proud to be Chairman continues to serve the nation well, analysing important and topical issues and recommending practical improvements to our public services. I commend its work to the House.

Photo of Iain Duncan Smith Iain Duncan Smith Conservative, Chingford and Woodford Green 4:40 pm, 26th January 2006

On a point of order, Mr. Deputy Speaker. I do not usually raise points of order, and this has nothing to do with the debate. It has struck me in the past 24 hours, particularly in the past two hours, that developments of remarkable significance are taking place in the Gaza strip and Israel, with Hamas claiming to be the majority party after the recent election.

We have had statements from most countries concerned, including the United States. We know what Israel's attitude is—it refuses to deal with Hamas until certain conditions are met. We know that large sums of money may be withdrawn from the Palestinians as a result of the election, and there are pending possibilities even of military action in the area. What we do not have is any sense of the Government's position with regard to that remarkable election result.

I have just heard that within the past hour the Prime Minister made some form of statement to the media, yet no member of the Government sees fit to come to the House. As we are not sitting tomorrow, have the Government indicated to you when they are likely to treat the House with courtesy and give us some indication of what their attitude is and what their responsibilities will be as a result of the election?

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

I am not aware of any request from the Government to make a statement on the matter. Equally, the Chair is unaware of the contents of anything that is being said by the Prime Minister or any other senior Minister on the subject. The Minister on the Government Front Bench will have heard what the right hon. Gentleman said. The situation could be remedied within the earliest possible period and the right hon. Gentleman could seek to encourage that by putting in a request for an urgent question. Mr. Speaker has always indicated that Members impatient for information can try that route, even though he does not guarantee that he will be able to grant it. The House will also have heard what the right hon. Gentleman said, and we must await developments at the earliest possible moment.

Photo of Jon Cruddas Jon Cruddas Labour, Dagenham 4:42 pm, 26th January 2006

I want to say a few words about my experience as a member of the Public Accounts Committee, although I feel a little like an impostor this evening, as I ceased to be a member of the Committee just before the last election because of issues that were developing locally in my constituency relating to community cohesion and demography. In one sense, the reason that I came off the Committee is one of the reasons that I am interested in the debate about the workings of the PAC and am keen to participate in its work in the future.

I am particularly interested in the relative efficiency of state activity through investment in the reform of public services, alongside a more dynamic analysis of demography and resource allocation with reference to spatial economic development and population movements, especially in urban communities. That is the context for my remarks. I was a member of the Committee at the time that it prepared some of the reports to be discussed today, and some of the comments that I made then related to the question of how the state could keep up with and make sense of rapid movements of populations, especially in urban communities in cities such as London, and especially in poorer parts of the city, such as the east side of London, which I represent.

First, on the working of the Committee, I, too, want to put on record the extraordinary servicing of the Committee supplied by Nick Wright and his team. They do an admirable job and are a credit to the public service. I pay tribute to the work of the National Audit Office, the rigour of its analysis and contribution to public debate, and the amount of money that it saves taxpayers. The PAC is a unique space to consider the relative efficiency of state activity, in that it allows for discussion of a pan-governmental strategy and with accounting officers and key civil servants. We are not just awash with the contributions of politicians.

The issues that the PAC covers are centre stage politically. The unanimity reached on the Committee's work, despite the fundamental fault lines between the departure points from which the different parties consider the activities of the state, has always interested me. I sense that the Conservative party, for example, sees state intervention as essentially destructive to the efficiency of economic interrelationships, whereas the Labour party deems the relative properties of state activity from a more benign departure point. It is interesting to see how those are reconciled in the Committee's work, which is a comment on the abilities of the Chairman.

On investment and reform, I want to address the issue of demographic movements in urban communities. A number of the debates in and reports of the PAC inherently assume that there are static populations and therefore static issues of resource allocation, but there might be a case for trying to build in a more dynamic analysis of the sheer scale of population movement below the radar. I shall give a couple of examples.

I recently asked a number of parliamentary questions about the population of the borough of Barking and Dagenham, of which I am one of the representatives. The Office for National Statistics replied that the population stands at 164,600 and that that has fallen since 2001, when it was 165,700. Anyone who lives in the community that I represent is aware that there has been massive migration into the borough. However, that is not caught in the headline assumptions for public policy purposes of the baseline quantitative allocation of resources to any public service.

The Government have accepted that there is a minimum of 570,000 unauthorised migrants in the country, not including dependants, and the NAO has said that there are 280,000 failed asylum seekers in the system. From informal discussions with Ministers it seems that the assumption is that the majority of those people are in London, and they do not live in Kensington and Chelsea. There is a magnetic pull towards poorer communities and areas with lower cost housing. The cost of housing in Barking and Dagenham is the lowest across the city.

Alongside those unauthorised migrants, the massive house price inflation over the past four or five years has created a magnetic pull to the area for families who aspire to their first step on the property ladder. The third element is that, as a result of the consequential effects of the right to buy, the private housing market has become much more vibrant. That has meant lower rents, which other local authorities have used as a reason to transfer a lot of their priority-housing families.

Cumulatively, therefore, there has been a massive transfer of people into the borough. That is off the radar of the headcount for public policy making. I do not see how a dynamic analysis can be pulled together in order to interpret the relative efficiency of state activity—arguably in communities that are most in need of a dynamic form of state intervention. We have an extraordinary legacy of poverty and under-investment in poor quality public services. In trying to reconcile that legacy with the dynamics at work in global cities such as London, we return to the question of how to gauge the relative properties of state activity.

The massive movement of people into the borough has not just happened over the past two or three years. Dagenham also sits centre stage in the so-called Thames Gateway, the population of which is set to rise by 700,000 or 800,000 over the next 10 or 15 years.

The headcount in my borough, for public purposes, is about 165,000, and the assumption is that it will grow by 35,000 to 40,000 over the next 10 years. We can therefore assume a 33 per cent. increase in the number of people in the borough, even on the basis of the statistics that we currently use for public policy making. The data supplied by the Mayor of London from the Greater London Authority's data management and analysis group—"Statistics of schools in London"—demonstrate that, over the past three years, there has been an increase of more than 10 per cent. in the school roll in the borough. This is despite the fact that, for public policy purposes, the communities are deemed to be quantitatively static, in that they remain at 165,000. If we assume an increase in the population proportionate to the increase in the school roll, we can assume that the population figures could be at least 10 per cent. higher than 165,000.

The tabulations showing the breakdown according to ethnic background in the borough's schools show an extraordinary demographic shift in the qualitative makeup or heterogeneity of the community. Over the past two years, the proportion of white British kids in the schools has dropped by more than 9 per cent., and, year on year, there has been a 4.5 to 5 per cent. increase in the number of children from black African communities in the primary and secondary schools. We can therefore begin to piece together the extraordinary transformation that is occurring in the size of the borough and, within that, the massive change in the demography of the racial makeup of the borough, neither of which is being caught by the analysis supplied by the Office for National Statistics for the purposes of public policy making in relation to the population of the borough.

I shall tell the House why this is important. The reason that I left the working of the Public Accounts Committee was because we were having a massive outburst of far-right activity in our community. Over the past year and a half, we have had five local council elections, at each of which the British National party has polled an average of 35 per cent. of the vote.

Photo of John Hayes John Hayes Shadow Minister (14-19 Reform and Apprenticeships)

The hon. Gentleman is absolutely right about migration being a key factor in housing demand, and consequently a factor in driving forward house price inflation. Does he agree that, since this Government came to power, public sector house building has roughly halved from its mid-1990s level? In addition, does he agree that a way of satisfying that additional housing demand would be to create a more fluid housing market in which more people owned their own home—as many people in public sector housing want to—which would create space for people currently in temporary accommodation who cannot get on to the public sector housing ladder?

Photo of Jon Cruddas Jon Cruddas Labour, Dagenham

The purpose of my rather protracted walk through these statistics is to come to the issue of public service allocation, and public policy issues such as housing. We have seen a tripling of the number of people on the housing allocation and transfer lists as the population has expanded, which puts huge pressures on public services and deserves an adequate public policy response. The far-right activity to which I referred is one of the barometers of the pressures that are building up, and housing is one of the critical issues in that regard, as are health inequalities. Every issue relating to public policy investment needs an adequate public response, in order to make sense of the dynamic and extraordinary movements of population 10 miles down the road.

That is why I want to come back to the workings of the Public Accounts Committee. The Chairman has talked about seven issues relating to the relative merits of public sector activity. I would like the Committee to add another. I would like it to develop an adequate analysis of the relative ability of the state to deal with the demography at work in our urban communities that is creating such pressure points in urban areas of Britain. My urban community is extraordinary, because of the sheer scale of the population movement into it and the qualitative changes within it. As I said earlier, the epiphenomenon of the far right is materially grounded in such dynamics.

I want to return to some of the issues of public policy-making that lie behind that. I know that my hon. Friend the Financial Secretary is interested in the subject. Indeed, next week he will visit my constituency to examine some of those issues. There is a collision between a long-term legacy of poorly performing public services and poverty, and the extraordinary change that has created the scene on which the far right is operating. Some of its activities are grounded in issues of distribution that are geared by that extraordinary movement of people.

The situation puts enormous pressures on the state, both nationally and locally. The Government have an incremental strategy to refinance public services; the question is, can they tread water, let alone tackle a moving target in the form of growing populations that are not captured in the headline head count on which public policy is based? All the change has occurred since the last census, and the population figures on which public policy is based assume that the population is falling. None of that includes unauthorised migrant workers. According to some estimates, this city has a population of 7.4 million and could contain 100,000 extra people somewhere, over and above the formal head count.

I realise that all that raises huge issues of public policy, but I ask the Chairman and the Committee to bear it in mind when considering their future programme.

Photo of Kitty Ussher Kitty Ussher Labour, Burnley

I believe that my constituency contains more BNP councillors than any other constituency in the country. We certainly need to consider the way in which Government policy responds to extreme and fast changes in demography, but the population is increasing not just in urban areas but in all areas where there is a sudden shift in the economy. My constituency is simply a town, not a city, and house prices have collapsed in recent years, although they are now improving to some extent. We should take account of the critical nature of change in the economy, rather than the direction in which it moves.

Photo of Jon Cruddas Jon Cruddas Labour, Dagenham

I do not want to be too definitive in identifying the turning points that create such phenomena. I merely wish to draw attention to certain issues that need to be considered in different ways in different parts of the country. East London has a rapidly growing population. Public policy-makers cannot keep track of it, let alone get ahead of it. That is before account is taken of illegal migrants who are invisible for public policy-making purposes. Then there is real-terms house price inflation, and on top of that the long-term legacies of poverty, underinvestment and poor-quality public services. A rich seam is created on which, given our social formation, the far right is manifestly able to work. That takes different forms in different parts of the country, but we should be acutely aware of the way in which demography can contract or expand, and the effect on social cohesion in any part of the communities that we represent.

My borough has long-term problems of health inequality. I believe that, apart from Easington, it has the worst health-equality profile in terms of investment per head. Two years ago, the Government said that they would overcome some of the health inequalities and move us closer to the formula for investment. The resulting increase will kick in this April. Arguably, since the Government decided to invest so that we could move to where we should have been in 2001, the population has moved even further from the baseline for such decisions. In real terms, therefore, the health inequalities are worsening despite the Government's attempts to resolve them. I use that as an illustrative example of the tensions that this creates in terms of policy making.

Housing is the other acute issue in terms of public sector provision, not least in a community that was built on the principle of socialised housing—council estates.

Photo of John Hayes John Hayes Shadow Minister (14-19 Reform and Apprenticeships)

I am reluctant to interrupt the hon. Gentleman's fascinating account of his local experiences a second time, but I am sure he agrees that, given the fallen nature of man, the best that any Government can do is mitigate the inevitable sorrows of human existence. The point that I was really making to him is that that is partly about what government does and does not do. By encouraging greater housing ownership, we could reduce the demand on public policy and on the Government to supply housing. That would enable social sector housing to pick up some of the slack, which, unfortunately, ends with people being housed in unacceptable temporary accommodation. The fluidity in the housing market that I have described is beneficial in that it reduces pressure on the Government and allows them perhaps to accommodate those who find themselves in difficult circumstances.

Photo of Jon Cruddas Jon Cruddas Labour, Dagenham

It seems to me that that argument always rests on the assumption that there are sufficient economic activity and wage rates in a community to sustain people so that they can purchase any extra supply of private housing. In my community, which is the lowest wage-cost economy in Greater London, and given the house price inflation of the last four or five years, the private housing market is disappearing in front of people's eyes in terms of their capacity to get into it. That means that all roads lead back to public housing investment, which is part of the discussion that I will have with my colleague the Financial Secretary next week.

I shall conclude, as I think I have made the point. I enjoyed working on the Committee and hope to sit on it again in future. It should begin to consider how it might add in a dynamic analysis of demography, especially in our urban communities, alongside this rigorous analysis of the relative efficiency of public sector activity in the economy.

Photo of David Heath David Heath Shadow Leader of the House of Commons, Shadow Spokesperson (Cabinet Office) 5:02 pm, 26th January 2006

It is a great pleasure to follow Jon Cruddas, who is right to point to the potential effects of failure of public policy in creating division in a community. I am glad he had the opportunity to make that speech.

I applaud the work of the Public Accounts Committee, and indeed of the National Audit Office. It does an inestimably important job. I have never had the privilege to serve on the Committee, but before I became a Member of the House I was an audit commissioner, working in a similar area. The co-ordination between the Audit Commission and the National Audit Office is hugely important in itself. One thing that I hope we can establish is that there are no gaps between the two bodies, which are responsible for checking the use of public funds.

I also pay tribute to how the Committee works. It clearly works with a degree of unanimity despite, as the hon. Member for Dagenham said, different starting points, although I suspect that those, to an extent, have been coalescing recently, with the possible exception of that of the Chairman, Mr. Leigh, whom I consider a real Conservative. The danger for real Conservatives is that they find themselves ghettoised, like socialists on the other side of the Chamber, and unable to have their position recognised by those on their Front Bench.

The Chairman was also right to point out that the publicity attendant on the work of the Committee is hugely important. It gains an awful lot of publicity, for good reason, but that in itself is a spur to better performance. Indeed, the fact that the Committee exists is a spur to better performance. The fact that civil servants and Ministers know that they are accountable to such a body is important: even if they do not have a report written about them, they know that they might have to face a difficult interrogation.

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

On the key aspects, this is the only publicity—we are not supposed to mention this—directed at civil servants. None of our reports ever criticise the Labour Government or Labour Ministers. We never get involved in politics. It is important that civil servants know that this public spotlight is on them. That, as the hon. Gentleman says, is a spur to better performance.

Photo of David Heath David Heath Shadow Leader of the House of Commons, Shadow Spokesperson (Cabinet Office)

That is right, and the Committee should not be used for party political purposes. Every Member wants to see good, well performing public services. Irrespective of whether one agrees with the policies pursued by Ministers, the administration of public services must be as efficient and effective as possible. If it is not, there is a waste of public money that could be used for better purposes. That is the crucial importance of the Committee.

The Committee Chairman referred to seven different categories of importance; I have three. I recognise that a lot of the work of the Government is good and is recognised as such by the Committee and the NAO. A lot of programmes are properly administered. However, there is certainly a need to examine where there is mismanagement, as was reflected in the comments of the Chairman, when there is the misguided application of policy, which is different from mismanagement, and when there is fraud.

Mismanagement can cover a great deal but the particular point that stuck in my mind after reading the reports concerned procurement, which is a huge expenditure on the part of Departments. Procurement is a specialised activity and I know, from my experience as leader of a county council, that the capacity for making mistakes in large scale procurement projects in the public sector is enormous. At times, the public sector does not have some of the tools that are available to the private sector to do its work.

We have more than enough examples of major errors in procurement, particularly in IT. That lesson still needs to be learned by the public sector and one has only to look at the Home Office to see a catalogue of disasters. That makes all the more important the amendment passed in another place recently that suggested that the NAO should break with tradition and pre-empt the passage of a Bill in order to look at the IT consequences of the identity card scheme.

One area in which I am particularly interested is the tax credits system, which was referred to in the reports. Clearly there has been a breakdown of the tax credit IT systems, largely as a result of rushed procurement in the first instance, with Ministers demanding a system before it was ready. There were serious consequences for the Exchequer as a result.

Defence is another area of concern. I was staggered by the findings of the Committee, which show that there is an overspend on the 20 large-scale defence projects of £5.9 billion, which, when coupled with the cumulative delay of 206 months revealed by the Committee, is a serious problem; not just in terms of value for money or the finances of the country, but in terms of the finances of the Department. That money should be spent on protecting our troops in theatres of war. That can and should be improved. I know that there has been progress as a result of smart procurement, but it is still not good enough.

On the misguided application of policy, it concerns me that when we have significant divestment of Government assets, we get best value for them. The most immediate worry is in the MOD with QinetiQ. No one should be sanguine about the fact that if this company sells its shares at the top of the price range, it will give its chairman £26 million in profit, its chief executive £22 million and, if that were not bad enough—at least those people were working within the company—an American finance company, Carlyle, which chooses to direct its finances through Guernsey for tax purposes, will receive £623 million. Does that not suggest that, somewhere along the line, a national asset was sold at too cheap a price? I believe that it was, and that the Committee should examine that.

Another aspect of misguided application of policy is in the area of health. Investment in the health service is unprecedented, which is very good news that we all welcome. The outcome, however, is that hospitals are still closing their wards to operations until the new financial year. Something is going seriously wrong when that is the case. The sooner that we get to the bottom of that, in terms of the application of policy, the better.

My last point is on the broad area of fraud. Fraud is simply a form of theft. When it is fraud against public bodies or the Government, however, it is our money, corporately, that is being stolen. I want to return to the tax credit system. Clearly, there has been organised fraud against the tax credit system, through identity theft from within, it seems, the Treasury. We know that officials knew about it a year ago. We know that the Paymaster General was told about it six months ago. Yet nothing was done until recently to address the issue. I hope that the Committee will take up that issue, because millions and millions of pounds have been lost from the Exchequer through this fraud. We must know why appropriate action was not taken earlier.

The Committee has addressed benefit fraud, and it is right to do so. VAT fraud stands at £11 billion, and we need to know from the Government what they are doing to address that.

Photo of Richard Bacon Richard Bacon Conservative, South Norfolk

On tax credits, we are familiar with the fact that the accounts of the European Union and the Department for Work and Pensions are qualified. But is it not a scandal, although less well known, that because of the problems with tax credits, the trust accounts of the Inland Revenue have been qualified by the Comptroller and Auditor General?

Photo of David Heath David Heath Shadow Leader of the House of Commons, Shadow Spokesperson (Cabinet Office)

I think that it is. Her Majesty's Revenue and Customs, as it now is, should be beyond reproach in this area. Because such fraud has been allowed to develop and devour public funds, however, that department has a serious problem. I want to be assured not only that the Committee is aware of that and examining it, but that the Government recognise that they have a serious problem, which needs to be addressed as a matter of urgency.

The intervention of Mr. Bacon brings me to my last point, which is on the Committee's opportune report on fraud in the European Union. How long have we talked about the potential for fraud within the European Union? How long has the European Commission simply sat on its hands rather than take the appropriate actions? We have the European fraud office, l'Office Européen de Lutte Anti-Fraude—OLAF—but there is no direct link between OLAF and national audit offices of the member states. There is no common methodology, or even, as has been mentioned, a common definition of what comprises fraud rather than irregularities. We need to get this right, and I echo the call for clarity from the Government as to exactly what they achieved during the UK presidency. If they did not achieve the necessary breakthrough in dealing effectively with fraud, I hope that they will pursue the issue as a member state through the next presidency and the presidency after that, and for as long as it takes to get to the point at which European Union accounts are no longer qualified because it is impossible to account for fraud.

The issues that the Committee takes up on our behalf are enormously important for the country. We should not run away with the idea that all Government functions are in chaos and that mismanagement is the rule of the day. Where that does occur, however, it is important that we identify it, and even more importantly, that we address it, deal with it and improve in future.

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland 5:14 pm, 26th January 2006

I am sure that it will not surprise hon. Members to hear that I was rather a swot at school. I always remember listening to the radio and hearing about the all-powerful Public Accounts Committee, so I am particularly glad to take part in the debate. I want to offer some thoughts on the way in which the PAC works and on how we may improve what we do.

I pay tribute to the great support that we have received from our Clerks, Nick Wright, Emma Sawyer and the other people in the office, and to Sir John Bourn and all the civil servants at the NAO.

The evidence for all the reports on the list for the debate was taken before the general election. Some of them have been approved since the election but all the real work was done before the election. Obviously, that raises the question of how timely the work of the Committee is and what we could do to improve the timeliness of the work of the NAO and the Committee itself.

Photo of Sadiq Khan Sadiq Khan Labour, Tooting

Does my hon. Friend agree that, by the time the report of the PAC is eventually published, those who prepared the first NAO report and those who gave evidence have forgotten what the original grievances were?

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland

I am sure that there is a lot in what my hon. Friend says, although since I have not yet been in that situation, I would not like to be too firm on the matter. However, I agree that there is that risk. When new Members arrived on the Committee, there seemed to be uncertainty about what we were approving. I raise the matter because it would be good if the Committee could do the work more speedily. Of course, we need to maintain the standards of the NAO reports and not put it under ridiculous pressure, but slightly shorter and quicker reports would improve its work.

Photo of Kitty Ussher Kitty Ussher Labour, Burnley

I agree with what my hon. Friend says and it mirrors my experience as a new Member. Does she agree that, when there is a big delay between the initial NAO report and the publication of our deliberations, often as much as six or nine months later, or even longer, in many cases, the problem that the NAO identified has already been fixed?

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland

I am grateful to my hon. Friend for making that point. With regard to specific issues, what she says is true, but one of the most noticeable things is that there are recurrent themes in the reports. I want to refer to some of those, which the Committee has to look at repeatedly. That suggests that some work is intrinsically difficult for Government to do and we need to concentrate on improving Government's capability to do those things.

First, Members have talked about the big IT programmes. The 25th report on congestion and the 27th report on IT projects dealt with those. The continuing and probably necessary reliance of all Governments, whatever their complexion, on large IT projects is a triumph of hope over experience.

Secondly, another recurrent problem is the tendency for large capital projects to overrun, hence the difficulty in controlling their costs. A third problem, which comes out in the report on tax credits, the benefit system and asylum, is the great difficulty in running systems that of necessity are large and bureaucratic, because they deal with large case loads, and in personalising them to individuals. It is especially difficult to run such systems because, by definition, they are run by the state. They are not areas where choice and competition are possible, or even imaginable. The question is how to improve the efficiency of such systems. Another issue, which arises continually in the papers before us and in evidence from officials is the problematic interface between the public and private sectors, such as the shortages of key skills in the public sector and the question of salary relativities. Again that comes through in lots of areas.

That said, there are many virtues in the way in which the Committee works. A key virtue is the specificity of the reports. It means that we avoid the rather generalised management discussion about outcomes, outputs and targets and look at what is happening in a particular case to particular people. I know that officials sometimes feel that we are rather harsh on them and that we use our constituency cases to back up a criticism. I suggest to officials who might read the record of this debate that senior officials get an over-rosy picture of how well systems are operating. When they visit local offices they are shown exactly what is going best, what is new and what is innovative. Somewhere between us lies what is really going on in the public services.

There is the issue of the way the Committee works. Is it too confrontational? Does that reduce the quality of the information that we retrieve? Currently it is fashionable to decry Punch and Judy politics and to look for something more consensual. There is also the question of whether the arrival of more female members on the Committee will feminise the working and make it more consensual.

Photo of Kitty Ussher Kitty Ussher Labour, Burnley

Did my hon. Friend notice the comments of the newest member of the PAC in this week's The House Magazine when he said after his very first meeting that he feared he was far too nice for the Public Accounts Committee?

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland

I had not noticed that. While I started off by believing that a consensual approach was appropriate, after only a few months I can already see that unless the Committee is tough on people giving evidence, there is vast scope for evasion. As a comfort to witnesses who may have to face the PAC, during the Christmas recess I had a recurring nightmare that I was being grilled by the PAC. I would wake at 3 am to the even more terrifying realisation that I was the one who was meant to be doing the grilling.

That of course is related to the question of who takes responsibility for decisions when things go wrong. Colleagues who are long-standing members of the Committee have expressed frustration that it sometimes seems as if in Whitehall no one ever takes final responsibility. A mess is made and people are moved on. Being capable of giving an elegant defence is more important for the careers of officials than the reality of whether they are good at delivering. There is something that we need to address for that reason, and that is the advent of boards and non-executive directors in Whitehall, and their impact on accountability.

Traditionally, Ministers are responsible for policy, and accounting officers, the permanent secretary of the Department, for the way the money is spent. A few weeks ago we attended a seminar in the Treasury. It was explained to us that Ministers retained responsibility for, for example, the content of the Budget, but that the boards would share responsibility for the way in which Departments are run. In a policy Department such as the Treasury or Foreign Office, that distinction makes sense, but in other Departments, such as the Department for Work and Pensions or Her Majesty's Revenue and Customs, where half the issue is the way in which individual civil servants are treating members of the public, that is not a realistic distinction. We need to look at this area, possibly in conjunction with the Public Administration Committee. Clearly there are overlaps between their responsibilities and ours for examining these structures.

Finally, I want to say something about propriety, by which I mean, is public money being spent on the purpose for which it was voted? So few people will be listening to this debate that I shall risk a diplomatic incident by calling this the "Why we are not Italian" problem. There is a story—I am not sure whether it is apocryphal—concerning two cities in Italy. Two motorways connect them because different people in the Italian ministry of transport were on the take from different parts of the Mafia. We in this country do not traditionally suffer from such problems, and the 18th report on financial management is clearly relevant in this regard.

However, maintaining high standards of propriety is very important to the state of our democracy. We must avoid corruption. Decisions must be transparent and those in public office must be accountable to the people who elect them for the decisions that are finally taken, and not to some other group. Of course, maintaining high standards is also important economically: it promotes efficient markets, rational choices and value for money. I fear that, once lost, the culture of the proper use of public money would be very hard to restore. We only have that culture because of the great work of our predecessors, particularly in the 19th century. We need to renew our focus on this issue.

There is a proliferation of complex financing schemes such as private finance initiatives, public-private partnerships and local improvement finance trusts. I am not saying that such schemes are not useful in themselves in leveraging in more capital and new skills, but the risks associated with people moving rapidly between the public and private sectors—between being the customer, and being the person granting the contract—are clear. We would be foolish to close our eyes to this issue, as even the briefest look at the back of "Private Eye" every fortnight will tell us. I hope that we can address it in the forthcoming Session.

Photo of Richard Bacon Richard Bacon Conservative, South Norfolk 5:27 pm, 26th January 2006

It is a great pleasure to follow Helen Goodman, who provided the House with a penetrating analysis of the Committee's work, and of some of the issues and problems with which it has to deal. I agree with a great deal of what she said. She certainly does not sound like a new member of the Committee, but of course, she was a Treasury official for a while. We also know—I am not sure that she knows that we know—that she was the original teenage scribbler. She has now been promoted from scribbling to offering penetrating analysis, and we welcome her and the other new members of the Committee to their positions.

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland

I should point out that I was not a scribbler; I was the original teenage kid.

Photo of Richard Bacon Richard Bacon Conservative, South Norfolk

The hon. Lady was a deputy scribbler, perhaps.

Like the hon. Lady, I want to pay tribute to Nick Wright, Chris Randall, Emma Sawyer and Ronnie Jefferson, who run the Committee's office; to the press office of the National Audit Office, which is headed by Barry Lester, with able support from Mark Strathdene and others; and to the office of Sir John Bourn himself. I should point out by way of correction that members of the NAO are not civil servants and that in fact, the Comptroller and Auditor General is an Officer of the House of Commons. That is of incalculable importance. Even if it is a constitutional nicety, it says something very important about the way in which the system is structured.

I want to focus on private finance initiatives, particularly those relating to hospitals. The Committee has examined a wide range of PFI projects and a wide range of hospitals. We have looked at the Darent Valley hospital and the Dartford and Gravesham hospital. We visited the UCL hospitals and recently examined the Norfolk and Norwich hospital, which is in my own area. The issues associated with hospital procurement illustrate some important themes that merit further scrutiny and discussion not only by the Committee, but by the Treasury.

We are all familiar with the standard PFI model as it has developed. It started out as a design, build, finance and operate model, whereby the Government said to operators, "Go off and do it, and tell us when you've done it." There have been many successes; indeed, not even critics of PFI would deny that an increasing number of buildings have been delivered on time and on budget, with substantially reduced, if not completely eliminated, cost overruns.

The NAO's figures show that, in 2001, 76 per cent. of projects were delivered on time and 79 per cent. to budget. That compares with 30 per cent. on time and 27 per cent. to budget for conventional procurement. More recent Treasury figures tell an even better story, with 88 per cent. of projects delivered on time and 79 per cent. to budget.

We all know examples of conventional procurements that have gone horribly wrong—the Jubilee line extension, the British Library, the Scottish Parliament building, and even Portcullis house. In the latter case, all kinds of problems were encountered. The wrong kind of bronze was used on the roof, and the windows cost £23 million more than they were supposed to. The president of the Royal Institute of British Architects told me recently that it would have been cheaper to clad the exterior of Portcullis house with 7-series BMWs. That shows the scale of the problems that conventional procurement can encounter, and that PFI has offered a successful alternative in many cases.

There is no doubt that PFI has led to significant improvements, or that it is here to stay. The question is whether we are getting the best possible value from the way that PFI procurement is conducted. There is growing evidence that we are not, a conclusion that is especially well illustrated by PFI hospital procurement.

Many of the problems have to do with design, and they could be avoided with more thought and a better assessment of requirements in the early phase of procurement. For example, the Cumberland infirmary in Carlisle was a 45-year contract costing £65 million. The contract called for a 474-bed hospital, but the new infirmary has a capacity of 444 beds. Floor capacity in the old sites that it replaced amounted to 57,000 sq ft, but the new site has only 42,000 sq ft. The infirmary has been criticised for having cheap components that need refitting at short intervals. The maintenance costs are 50 per cent. over projections, there is poor drainage and plumbing, and limited signage. Patients exiting cardiology have to go through five sets of swing doors, even though most of them are in wheelchairs.

The new 450-bed district general hospital in Durham was built on the Dryburn site to rationalise services provided previously at Shotley Bridge and the old Dryburn hospital. There, the pathology lab flooded three times in the first 18 months, twice with raw sewage. There is poor ventilation and air filtration and the fixtures and fittings are of poor quality. Some of the lightweight storage cupboards are unable to take the weight of routine equipment.

The opening of the hospital in Bishop Aukland, in the constituency of the hon. Member for Bishop Auckland, was delayed by two months for modifications. The generator and the core electrical systems had to be redesigned immediately after the hospital opened.

The Norfolk and Norwich university hospital is on the border of my constituency. Most of my constituents go there for medical treatment, and many work there. The negative pressure rooms were not properly operational for two years. A nurse lifted ceiling tiles in third-floor ward areas and found air ducting lying in unconnected lengths. The job simply had not been finished. I am pleased to say that the hospital has since spent some money on modifying those rooms and they are fully operational, but other problems remain. For example, there is no ventilation in the kitchens: 30° C working conditions are common, and a temperature of 44° C has been recorded. In addition, delivery loading bays are inefficient, and there are numerous reports of health and safety problems due to layout and the poor materials used in construction.

When it is published, the separate PAC report on refinancing will reveal some startling facts about the financial engineering used, not to increase the number of beds or to build a new wing, but solely to accelerate the rate of financial return, from 18 per cent. to over 60 per cent.

The new Hereford hospital has 354 beds. The boiler house opened with no water treatment plant. There were materials defects, doors were too heavy for the opening restraints. Engineering workshops designed for five staff regularly have 13 people working in them, and three lifts had to be refitted within the first 12 months.

I turn now to Worcestershire, a county for which I have a particular affection, as I had my appendix taken out in a hospital there some years ago. In the Worcestershire acute hospitals NHS trust's modern, 452-bed facility, the back office conditions are too cramped. Corridors are too narrow to pass two beds side by side. There is also an inefficient and unused one-way system.

It is worth saying that these are not just snagging issues that occur with any new building. They are design problems. It is not normal to refit three lifts in the first 12 months. One does not redesign the generator and the core electrical systems immediately after opening a new hospital and call it snagging. Corridors that are too narrow to pass two beds side by side are not a snagging problem. A pathology lab that floods three times in 18 months, including with raw sewage, is not a snagging problem. They are fundamental signs of poor specification and design. The current PFI procurement process makes such design more likely, not less.

As well as inadequate quality, we are also seeing spiralling costs. The average cost of bidding for a PFI hospital has risen from £7.5 million two years ago—itself an extraordinary figure—to more than £11.5 million now. RIBA believes that a conservative estimate of the cost of abortive bids is about £500 million per annum across the sector. As part of the company's operational profitability, that inevitably gets rolled into the cost of the losing consortium's next bid. Even the winning consortium is likely to have factored in the cost of its previous unsuccessful bids.

The process is simply making the whole industry more expensive. It is also excluding many capable medium-sized contractors. In effect, it is a Government-sponsored oligopoly. It is wasteful. Parallel teams work up designs that require a considerable amount of professional time and skill at a time when, as the hon. Member for Bishop Auckland said, there is an acute skills shortage. It is worse than that, because the most expert clients are the ones who can recruit the best designers, who then compete with each other while the other bids have less experienced designers, leading to lower overall quality of design.

Once a consortium has won, another key question arises that, in some ways, is even worse in terms of its consequences, namely, who, then, is the client? The client is not who one would think it would be. It is not the hospital trust; the designer's client is the consortium. So there will be pressures. A marked degradation has been seen on many occasions in the design quality after financial close.

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland

Does the hon. Gentleman agree that part of the issue is not the overall cost but the point at which we are spending money on big projects? We are not spending it early enough. We are not investing early enough in skills within the public sector. Hence, we find ourselves spending more later on.

Photo of Richard Bacon Richard Bacon Conservative, South Norfolk

We find ourselves spending more later on in spades, and wastefully. In the recent exercise with St. Mary's, Paddington, the bidding round failed, cost £50 million and produced nothing of worth. They are having to go back and do it all again. We recently heard about the problems with Bart's, with potentially £100 million of fees lost.

The hon. Lady anticipates a point that I intended to make later by drawing an analogy with the way in which defence procurement works. As we have said in some of our reports, the assessment phase should receive a greater proportion of the resource that goes into the project. Designers are having to respond to pressures from the leaders of consortiums, who are usually a combination of the building contractors and the banks, to build to the lowest cost or to facilitate the easiest building method. That may be sensible or it may be in the best interests not of the client but of the consortium that has to deliver it. The client is interested in the best possible hospital within the available budget for patients.

The problems are so widespread that the Treasury cannot say that it is not a problem and neither can anyone else. It is a significant problem. The question is what do we do about it? RIBA, along with others, has evolved what it thinks may be part of the answer. It has called it smart procurement, which leads directly to the point that the hon. Member for Bishop Auckland was making. In smart acquisition, part of the emphasis is on spending more of the resource earlier.

In our third report of the 2005–06 Session, HC410, we said in terms:

"The amount of work undertaken in the assessment phase is still not sufficient to enable sensible investment decisions to be taken . The Department's own Smart Acquisition guideline suggests that up to 15 per cent. of the cost of a project should be spent in the assessment phase."

That is for defence procurement. I do not want to promulgate a particular percentage, but it is clear that the point is analogous to what is going on in PFI hospitals.

Essentially, it is about getting the design team much nearer to the client. I have talked to the institute and it does not appear to be a case of architects or other professionals talking up their own book, which might be expected from any professional body. That is not what the institute means. It means getting civil engineers, quantity surveyors and others to work closely with the relevant hospital trust at a much earlier stage to eliminate problems by having a much closer understanding much earlier of what is required. That effectively allows the client to drive the process more strongly, with greater information and control, and power over the outcome.

In that context, it is interesting to consider the situation in Northern Ireland. As the Chairman said earlier, we have had many reasons to look at Northern Ireland, including the Navan centre, the sheep annual premium scheme and the recent Jobskills project. Many of the projects we have looked at have been a disgrace, but the Department for Health, Social Services and Public Safety, especially the Health Estates Agency under the management of John Cole, is blazing a trail. Because of the slightly different context in Northern Ireland, it has gone further down the path and I urge the Financial Secretary and other Ministers to examine what has been done there and whether the rest of the UK could learn some lessons about how PFI can be conducted.

The issue is not only about designers: it is about the whole built environment sector coming together to produce better outcomes for taxpayers. The initiative that the institute has evolved is now at an advanced stage and preliminary discussions have already taken place with the Treasury. The institute has talked to public sector clients, building contractors, civil engineers, quantity surveyors, building surveyors, facilities managers, insurers and banks, and is looking to produce a final cross-industry position paper. My plea to the Financial Secretary is that the Treasury should engage with the process seriously. These are welcome moves by the industry to produce a better, more mature and more efficient PFI market. I urge the Financial Secretary to meet the main players who, in my view, are seeking genuinely to eliminate problems and produce better results to turn PFI into something that delivers even more value for taxpayers who are, after all, paying for it.

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Labour, Portsmouth North 5:42 pm, 26th January 2006

Like other hon. Members, I wish to pay tribute to the Committee administration. Nick Wright and his colleagues have been extraordinarily helpful to new members like me. Nothing is too much trouble for them, even if some of our questions at the beginning must have been very irksome to them. Mr. Leigh has proved to be a most assiduous Chair, taking care to make new members feel welcome, and I thank him for that.

The NAO have also provided an excellent service. I particularly welcomed the morning that new members spent with the NAO, which certainly gave me a greater understanding of the auditing process and how the team operates, and also admiration for the sheer volume of reports they produce. The briefing papers produced by the NAO are a valuable resource for hard-pressed MPs and serve as guidance on the best way to probe with our questions.

As a new member, I approached my first meeting of the PAC with some trepidation, as I knew its fearsome reputation. I have to say I was not disappointed. The style of questioning proved to be as uncompromising as I had been told, but now I have a few sessions under my belt I can see why that should be so. Although I hope that I have never been rude or discourteous, I have sometimes been frustrated if I feel that the witnesses are evading the issues, or, more often, spinning out their answers because we are time limited. The object of the evidence sessions after all, is not for witnesses to escape unscathed, but to be called to account for how they are delivering value for money for my constituents and the constituents of every other Member in this House.

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

I just wanted to put on the record that since I have been running the Committee, we have tried to stop personal abuse of senior civil servants, which was a feature of the Committee before. I know that these debates are noted in Whitehall, so I wanted to say that while it is important to be robust, we are more polite than we were even five or 10 years ago.

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Labour, Portsmouth North

I was not there 15 years ago, so I do not know what it was like then. Recently in The House Magazine, my hon. Friend Mr. Mitchell likened the Committee, after his first meeting, to

"Paxperson on speed, playing 'happy slapping'."

I certainly do not recognise that description.

I am delighted to have been appointed to the Public Accounts Committee because it gives me the opportunity to examine a wide variety of subjects—far more than if I served on a Select Committee that hones in on just one matter. I have learned since becoming a Member of the House that my constituents expect me to be an expert on absolutely everything and the Committee is an excellent training ground for that.

I was taught during my accountancy training that value for money is the three E's: economy, because one does not pay £5 for something when it can be bought for £3; efficiency, which is when one gets the absolute best use from resources without wasting any of them; and effectiveness, which is delivery on all policy goals. The Public Accounts Committee drives at how value for money is achieved.

Before I entered the House, I worked in the manufacturing industry in the private sector. Our objective was to deliver shareholder value in a competitive environment. The tools that we used over many years to deliver that were effective risk management and project management, which were raised by the hon. Member for Gainsborough—yet another example of cross-party consensus. If we get those two things right, we will have gone a long way towards ensuring that British taxpayers get the maximum bang for their buck and that high-quality public services are delivered to all who need them.

We are short of time for the debate, so I shall focus on just two Committee reports. The 15th report of the 2004–05 Session, which has been mentioned already, was called "Managing risks to improve public services". Risk management has quite rightly risen high up the agenda of the delivery of public services because it enables resources to be prioritised to deliver the best outcomes to the majority of people. Risk management will never completely eradicate unpleasant surprises, but when it is used effectively, it can minimise them. It enables Government Departments to plan proactively, rather than just reacting.

Government Departments now share delivery with a huge range of partners outside the traditional Government machinery, such as local authorities, charities, voluntary organisations and the private sector. The Government do not have direct control over how those organisations operate, so good risk management is essential if the partnerships are going to work effectively for the public. Many of those partner organisations work under service level agreements. It is vital that proper risk assessment is done at the start of the process so that all possible contingencies have been considered when the agreements are drawn up.

The report showed that at the time at which it was written, there was some way to go before risk management would become embedded in the culture. In June 2004, only 10 per cent. of Departments considered that the process was fully embedded, although three quarters stated that it had been implemented in key areas. I was especially worried that the report showed that just 45 per cent. of Departments in the NAO survey said that they identified and assessed risks in policy making. That seems to be pretty fundamental because if they do not identify whether there is sufficient capability and expertise to implement a policy and measure that against a range of possible outcomes, they are not giving themselves a fair crack of the whip. They are then operating crisis management, not properly planned management.

If risk management is not embedded in the culture, there is a risk that innovation will be stifled. We all realise that we have to examine new and innovative ways of delivering public services, especially if we want to target those services at hard-to-reach groups. However, we can do that only if we are aware of the risks involved in developing new ways of delivery and have robust processes to manage those risks. I would like us to tap into the undoubted talent of our Government employees to come up with innovative ideas, but before they will do that, they will need to feel that the Government have a positive attitude towards managed risk taking. I thus welcome the Treasury response that competence in risk management should be recognised in the context of the professional skills for Government programme. I am also encouraged by the agreement of the Treasury to the PAC conclusion that it has a key role of promoting continuous improvement in risk management and embedding risk management into spending reviews. I cannot emphasise enough the importance of embedding risk assessment and risk management at a sufficiently early stage—that point has already been raised—and I would hope that that is understood.

Moving on to project management, the third report of the 2005–06 session has already been mentioned—the Ministry of Defence major projects report. Having been involved in two major complex projects in my former business life, I know only too well the importance of effective project management. Risk management is linked to that. How well one has planned for contingencies is usually an indicator of how effective one's project management is, particularly on complex projects with many dependencies.

Breaking the project down into manageable units with clearly defined tasks and clearly defined ownership for those tasks before the project starts is vital. Setting realistic time scales for tasks and getting the balance right between realistic time scales and adequate contingency is also vital. The project leader must be accountable and must have sufficient authority and leadership to keep on top of the project, motivate the team, avoid a blame culture, encourage innovation and keep the project on track.

In project management, as in risk management, work put in at the early stages pays huge dividends. I echo the point made by Mr. Bacon, who has left the Chamber. The PAC's conclusion in the major projects report was that the amount of work undertaken in the assessment phase was still not sufficient to enable sensible investment decisions to be taken, particularly where the guidance stated that up to 15 per cent. should be spent on assessment, particularly of complex projects. The onus should be on those approving investment in large complex projects to ensure that sufficient time and resource has been spent on the planning phase.

I note the Treasury response that the effectiveness of the assessment phase cannot be judged by the amount of time spent in that phase. Of course the amount spent may not have been spent wisely, but it is an indicator, and one that should carry a great deal of weight. As a former financial controller myself, I can only congratulate the PAC on its recommendation that financial controllers should always be part of the main project team. In my experience, the presence of the person controlling the purse strings is a very effective deterrent to allowing the costs to overrun as the first resort, rather than as the last resort, after every other alternative has been explored.

The Treasury has acknowledged that there is a shortfall in project management skills and key leadership competences, and has proposed a review of the leadership development scheme to counter this. However, speed is of the essence, given the large sums of money being spent. The proposed completion of the review in April 2006, following which there will be an ongoing programme of improvements, is too slow. It means that we have already missed the boat on a number of projects.

There is a further report on major Ministry of Defence projects to the PAC next week and I await with interest our interrogation of witnesses to see whether they think improvements have been made in risk management and project management, the two key factors that I and other hon. Members have identified in delivering value for money, not just in the MOD, but across all aspects of Government.

Photo of Greg Clark Greg Clark Conservative, Tunbridge Wells 5:52 pm, 26th January 2006

Thank you very much, Mr. Deputy Speaker. I am grateful to have caught your eye. Like Sarah McCarthy-Fry, I am thrilled to be a member of the Public Accounts Committee. It is the best possible training to see not only how parliamentary Committees work, but how Whitehall works, and I am grateful to have that opportunity.

Like previous speakers, I pay tribute to the work of the Committee secretariat, to the National Audit Office and to the chairmanship of my hon. Friend Mr. Leigh. Like the hon. Member for Portsmouth, North, I found that attending my first sitting of the PAC rather took my breath away, with the ferocity of the questioning, but we have got into our stride and started to give as good as we get.

It is important that we question witnesses robustly. One of the things that I have noticed during the hearings that we have had so far is that increasingly, there are organisations that are neither directly accountable to the electorate nor subject to the rigours of the marketplace, so it falls to us as the Public Accounts Committee to be almost the only possible scrutineers of their performance. That is not a happy situation. A class of organisations is developing that are neither part of the accountable public sector, nor subject to market disciplines. They are part of a kind of para-state that it is particularly difficult to interrogate. I refer to three examples.

The first example causes me frustration because it was the subject of one of our hearings and has been covered in the reports before us: Her Majesty's Revenue and Customs. In a hearing on the complexity of benefits and tax credits, we considered a recent change in policy—the increase in the earnings disregard for tax credits from £2,500 to £25,000. Clearly, such a step change has a cost attached to it, and it strikes me that part of our core remit in assessing the value for money of Government policy is to find out what those costs are.

The transcript of the evidence reads like an episode of "Yes, Minister". It took about 19 questions to solicit from the officials responsible whether any estimate had been made of the cost of the change. It turned out that there was an estimate. Of course there was; any increase in a disregard from £2,500 to £25,000 is clearly a major policy decision and Revenue and Customs had assessed it. An undertaking was given that not necessarily a robust estimate but the one that was made in assessing the policy would be disclosed to the Committee. I waited for that disclosure to be made, and I waited and I waited, and I continue to wait.

I tried the route of parliamentary questions. I tabled a question before Christmas for answer on 20 December, but no answer came from the Treasury. There was neither a Christmas card nor any form of greeting from the Chancellor. I asked for the estimate that had been made when the policy was being assessed, but the answer that was finally given on 10 January was entirely unsatisfactory and diversionary:

"Precise estimates of the change in entitlement resulting from the higher disregard . . . will not be known until 2006–07 awards have been finalised in early 2008."—[Hansard, 10 January 2006; Vol. 441, c. 556W.]

The PAC gives us our one and only opportunity to ask questions of officials who are not directly accountable in any other forum, so it is particularly important. It is therefore disappointing that such an important Committee does not have quite the set of teeth that we need. Parliament's role of scrutinising the Government is very important and should be treated with respect. To exclude from scrutiny by the Committee and therefore the House such a major area of Government spending is not in accordance with the principles on which the PAC was established all those years ago.

The second area is the national health service. In this arena of para-state organisations, where accountability is difficult to exercise, we have different parts of the NHS going by different names. We have primary care trusts, strategic health authorities and trusts, but they are all part of the NHS. We should have one NHS and that should be accountable. Indeed, it is important to getting value for money that it is accountable. By way of illustration, in my constituency operations and out-patient appointments are no longer being allocated or offered to those who need them, but the identity of who can be held responsible for that is obscure.

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland

The hon. Gentleman's point is interesting but issues concerning the hospital in his constituency prove the exact opposite. It is because hospitals are accountable and because there are limits on the amount of money that they can spend that such management action has been taken—albeit with the unfortunate consequences to which he refers.

Photo of Greg Clark Greg Clark Conservative, Tunbridge Wells

Let me describe those consequences. As the hon. Lady knows, we are a value-for-money Committee: we scrutinise the value for money of public expenditure. What is going on in my hospital trust is illustrative of a national problem and of exactly the kind of problem that our Committee is here to interrogate. The problem is that the primary care trusts are running out of money. The financial year end is on 31 March and the PCTs are telling the hospital trusts that they will not finance any more out-patient or in-patient procedures in this financial year.

Let me explain the consequences of that in value-for-money terms. Hospital consultants and surgeons continue to be employed by the trust and to have their salaries paid. The operating theatres remain open and available, but they are not used. Patients are waiting to be treated, yet consultants and surgeons are being told to go off and play golf, read the newspaper or twiddle their thumbs, on full pay, because they are not allowed to trigger a charge—which is, after all, just a mark on an electronic ledger—this side of 31 March.

None of us would doubt that the patients need to be treated. People need to have their hip operations, for example, and they will have to be carried out at some point. However, because of this arbitrary deadline, capacity that is available now is not being used, but it will have to be used in the next financial year, and shared with the patients who come on to the lists in that year. Who knows, perhaps that will give rise to overtime payments or to capacity constraints. This is clearly not offering value for money.

I have spoken to the executives in these organisations, and I feel for them. It is very difficult to know what to advise them to do. The trust is merely following the inevitable consequence of the PCT's decision not to fund any further procedures. The PCTs are under apparently irrevocable instructions not to make funds available if there has been more activity during the year. Whoever is responsible, the consequence is a loss of value for money.

There are solutions available, however. One possibility is that, if a PCT and a hospital trust have had their allocation of activity for one year, any further activity could be charged at marginal cost, rather than the full tariff. After all, the only costs that would be incurred in carrying out these operations would be the cost of lighting the operating theatre and of any consumables used during the operation. That is one example, but who would take responsibility for making such a decision? Not the Secretary of State. She would say that these matters are now devolved to the PCTs and the hospital trusts. Yet the PCTs and the trusts have no locus to be able to take decisions that would remedy the problem. So we have a situation that, in economic and value-for-money terms, is completely mad.

This is an example of the lack of accountability that is fundamental to the system, and our Committee has an important role in scrutinising such issues. I just wish that the powers of the Committee extended perhaps not to the ability to interrogate Ministers, but to the ability to cause Ministers to take responsibility for some of the consequences of their policy actions.

My final observation is on the Office of Fair Trading. This is a body that is only very indirectly accountable to Parliament, but it nevertheless exists to enact the will of Parliament as expressed in, among other things, the Competition Act 1998.

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

I thank my hon. Friend for giving way. I just want to put it on the record, in regard to the point made about tax disregards, that the Comptroller and Auditor General has full access powers and I have asked him to go in and get the relevant information himself if it is not forthcoming. He can go into the Treasury and get it.

Photo of Greg Clark Greg Clark Conservative, Tunbridge Wells

This is a useful power, but there is a disappointing aspect. We know that the information is available; it merely needs to be disclosed to us, and the idea that it may not be is worrying. Perhaps the Financial Secretary will tell us that he can remedy the problem.

The Office of Fair Trading was equipped with vigorous powers to promote competition, which are crucial to the economy, but its performance seems quite lax. Powers such as the power to compel evidence and the power to fine miscreants up to 10 per cent. of their turnover are not being used, and seem not to be used at the discretion of the officials responsible. Ministers are not responsible for the decisions, and it is difficult for anyone other than the PAC to exercise any leverage on whether the OFT is implementing the will of Parliament, which it was set up to do.

Our Committee has a crucial role, and as more organisations that are not directly accountable either to customers or to Parliament are established, its role will become even more important; but we should not kid ourselves that our present powers are more effective than they are. We have power to expose poor practice, and to commend good practice where we find it. I hope that, if we take the suggested route, a new culture will develop. I hope that, as our findings and the recommendations of the National Audit Office present a unique opportunity for scrutiny, they will be taken particularly seriously. That is important to the efficiency and performance of the public sector.

Photo of Kitty Ussher Kitty Ussher Labour, Burnley 6:06 pm, 26th January 2006

It is a pleasure to follow Greg Clark. He has a consistently rigorous and persistent line of questioning in our Committee, which has proved extremely effective.

My hon. Friend Sarah McCarthy-Fry spoke of the need to control risk. Some might say that I flatter the hon. Member for Tunbridge Wells simply because he represents my parents-in-law in the beautiful village of Goudhurst. I am not sure what form the risk to me might take if I got on the wrong side of him, but I am sure that it would be substantial. Nevertheless, I assure him that my flattery is sincere. It is a pleasure to serve alongside him.

Many Members, notably the hon. Members for Somerton and Frome (Mr. Heath) and for South Norfolk (Mr. Bacon), discussed smart procurement and the need for Government to procure effectively. I assure them that help is at hand in the form of my ten-minute Bill. I hope that I may use this opportunity to advertise it, Mr. Deputy Speaker. It seeks to enshrine in law the requirement for Departments to procure 2.5 per cent. of their research budgets from smaller companies, thereby harnessing the best scientific brains to find new and innovative solutions to public procurement and policy questions. I am sure that that is what we in the PAC aspire to do.

Photo of Richard Bacon Richard Bacon Conservative, South Norfolk

I am fascinated to learn that the hon. Lady is to present a ten-minute Bill. Might she find time during her 10 minutes to discuss the Clinger-Cohen Acts in the United States, which compel Government agencies there to publish in a statutory framework the gateways during the procurement of IT projects? Such a requirement would be very welcome in this country.

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. I do not think that on this occasion we should expose what might be the substance of the speech of Kitty Ussher when her Bill is presented. I think that we should stick to the agenda before us.

Photo of Kitty Ussher Kitty Ussher Labour, Burnley

I will, of course, follow your advice, Mr. Deputy Speaker, and not ruin the suspense for—I am sure—many Members. I shall be making my speech the week after next.

Let me add my tribute to Sir John Bourn and all the staff at the National Audit Office, to the rigorous nature of their reports and to the support that they give our Committee, which is such an important part of our democratic structure. I also pay tribute to our Clerk, Nick, and his team, who have been so patient in explaining the Committee's procedures to new members like me. The same applies very much to the Chair, Mr. Leigh, and to the senior Labour Committee members—as well as the Conservative members—who have courteously taken the trouble to advise me on the way in which the Committee works and how to get the most out of it.

It is initially daunting to find oneself on a Committee that considers two new subjects each and every week—a far cry from the more traditional Select Committees, which shadow Departments and have the leisure of deciding on their own subjects and investigating them forensically and in depth over weeks or months. For us, the hard work and the forensic work are done by the National Audit Office. We are the mechanism through which it airs its work. Through it, we are able to hold Departments to account.

As a cross-party representative grouping of unwhipped Back Benchers, we are, I guess, the voice of the people, taking the evidence presented through the forensic skills of the NAO and asking the questions on behalf of ordinary British taxpayers, namely, are we getting value for money from the taxes we pay and, to use the phrase used by my hon. Friend the Member for Portsmouth, North, are we getting enough bang for our buck?

On the whole, I have been fairly impressed by the answers that we get. The Chairman of the Committee referred to our December report, which considered the cumulative conclusions to be drawn from the last 10 years of our Committee's work. He rightly explained the number of recommendations that we have been making, but the first paragraph of that report makes it crystal clear that Governments over the years have acted on most of our recommendations and in doing so have, in many cases, secured financial savings, improved the standard of public services and tackled the risks to successful delivery.

Most striking is the effect of the Gershon review, which in 2004 made recommendations that would deliver £20 billion of savings through better organisation and smarter procurement, and would release more resources for front-line public services. I know from my experience in a previous life as one of those dreaded special advisers the fear that would run through Departments at the thought of being hauled in front of the Public Accounts Committee. Accounting officers really feel the potential pressure of that, which is a good thing because it means that they will perform their duty more effectively.

I want to pick out an example in relation to a report that falls within the scope of the motion. It is extremely important and perhaps merits further work, and it follows the line of comment of my hon. Friend Jon Cruddas in that it considers the spatial effect of Government policy. It is the 51st report, 2003–04 Session, which considers success in the regions, the impact of the Government's regional policy and, specifically, the operation of the regional development agencies, as well as the contribution that they could make to the success of Government policy throughout the country.

In 2004, when I was not a member, the Committee concluded:

"Current RDA targets concentrate too much on short-term contributions to Whitehall objectives and too little on longer-term regional economic impact."

That was true at that time. There was a tendency for all Departments, when wondering how to implement their policies, to instruct the RDAs—certainly in the English regions—to implement an aspect of Government policy, with the result that the RDAs had myriad targets and no real mechanism to prioritise them. Our conclusions were accepted by the Government, which is one reason for them seeking to align RDA strategies more closely with their economic policies and plans, as well as the relevant public service agreement targets.

The Committee also recommended that the Department of Trade and Industry should measure the impact of the RDAs on regional economic performance—the growth and prosperity in each region—by means of improved data. The Government accepted that recommendation and, as a result, their statistical service will, in each region, publish regional data by March 2007. Those will be completely delivered by 2009, which sounds a long way off, but unless we understand exactly what is happening in each region we will not be able to get the policies right to deliver in that area. Adding up the effect in every region means considering the transformation of the entirety of England.

If our aim as a Government is to extend opportunity across the country, regardless of which town we happen to call home, understanding the levers that have an effect on each part of the economy is crucial. As powers and budgets are devolved to the RDAs, their ability to impact on regional and sub-regional economies is increased, but without the ability to monitor the effect there will be a danger of public money being misused. That is what we are trying to avoid.

The Government have a high-level PSA target to reduce the disparity of growth rates between regions, a stretching target and one that the Committee should revisit. I thank the NAO for agreeing to do some analytical work leading, I hope, to a report later this year on the effectiveness of the Government's policies in this area.

Our Committee can make a large contribution to the economic theme. Recently the Treasury has made progress in extending our understanding, as a nation, of the levers of economic growth. It is not to make a party political point to say that now that unemployment is low, to raise GDP we need to focus on productivity—the amount of wealth produced for each person in work. It is a dry economic word and one cannot just affect it by waving a wand. The effect of the Treasury's work has been to make us realise what we do need to wave to get the growth that we all want. We need to ensure competitive markets, raise skill levels, increase investment and so on. There are officially five drivers of productivity.

If that is our high-level objective, the next question is whether taxpayers' money spent in this area has the desired results. It is a difficult question, but we need to focus on it. It is difficult because it is notoriously hard to make a link between the micro and the macro; how can one create a link between the amount of taxpayers' money spent on these various economic levels and the actual eventual outcome in terms of macroeconomic indicators, productivity and ultimately GDP?

Without an attempt to quantify the links, there is a danger that millions, or billions, of pounds of taxpayers' money can be spent without having the effect on the economy that all of us want. I hope that other members of the Committee agree that we need to return to this question and that there are questions that we need to continue to ask, be it on competition, agencies—we had such an opportunity recently—the DFES and its work in raising productivity through the skills agenda, or the DTI, and specifically business links, and its policies to raise entrepreneurship.

To sum up, it is a pleasure to be on the Committee. I thank all those who have helped me to climb my learning curve in an attempt to serve on the Committee to greater effect. I hope that, through our work, we shall be able to play a part in not only securing greater value for money, but raising the level of growth in our country.

Photo of Maria Miller Maria Miller Shadow Minister (Education) 6:17 pm, 26th January 2006

Before I contribute to this important debate, I wish to bring to the attention of the House that a long-standing member of the Public Accounts Committee, my hon. Friend Mr. Bacon, has an important engagement on Saturday: to marry his fiancée Victoria. I would like to wish him every happiness.

The role of the PAC in holding the Government to account and recommending improvements to public services is truly unique and the ability of the Committee to put a spotlight on critical and topical issues is vital in the parliamentary process. We have heard a good deal about that today, but I wish to take it a bit further.

In many ways, I urge the Government to view the PAC as their own in-house management consultancy, something for which many outside organisations pay vast sums of money. Perhaps the Government already view the Committee in that way, which is why, as with management consultancies, many of the points that the Committee makes are not listened to as carefully as they should be.

My hon. Friend Mr. Leigh has said that over 90 per cent. of the recommendations made by the Committee are accepted. I would like to look at some of those that need to be put into action. My hon. Friend has said that the Committee does not take issue with the Government as to whether increases in expenditure are right; rather its remit is concerned with ensuring that massive increases in public expenditure actually count and are translated into a clear improvement in front-line services. We have heard as much today.

A number of the reports produced by the PAC undertake that task, and none more so than the report on early years and child care published in June 2004. In that report, the PAC considered in detail the Government's child care policies and strategy at that time. Government expenditure on child care is set to increase by 24 per cent. in the next three years, as the Secretary of State reminded us only too recently in the debate on the Childcare Bill. Over the past eight years, Government expenditure on child care has been £17 billion. The report highlighted that the Government need to tackle the problem of the long-term viability of the expansion of child care provision that they have funded. Significant increases in investment are planned into the future, and the Committee rightly concluded that it is vital to ensure that that money is spent effectively.

Provision of child care plays an important part in both the social and economic future of our country. Affordable and flexible child care is one of the most important concerns for many families. It is only right that the Government should consider how more families can use good-value, good-quality child care. Two thirds of women who have children are in work, and half of all women who have children under the age of five are in work. The trend is for more mothers to be in work. We need robust policies on that, and it is of paramount importance to ensure that our child care strategy is viable in the long term.

The evidence taken by the PAC in its report highlighted that for every two new child care places opened in the past four years, one child care place has closed. In particular, closures of child minding places have increased significantly. When only 10 per cent. of the work force works from 9 to 5, however, child minding can often be the only source of child care that meets parents' needs. The Equal Opportunities Commission gave evidence to the PAC that highlighted stark uncertainties in the future for many of the new child care organisations operating in many parts of the country. It cited that 25 per cent. of all out-of-school clubs are making a loss, spiralling to two out of every three in more disadvantaged areas. That is not sustainable in the long term. That causes me concern, and from reading the report, it clearly concerns the PAC, too. The Committee also reviewed the National Audit Office report on child care, which shows that half the organisations that I have been talking about have made no plans to identify new funding streams for when their time-limited funding streams come to an end. That must be a cause of real concern.

While the Government have agreed with the PAC's findings and conclusion that more needs to be done to help to ensure the long-term viability of our child care, they have not done as much as they might to take those critical findings into account in practice. The Committee took important and informative evidence from the Sure Start unit and the Department for Education and Skills, which clearly stated that to be viable in the long term, child care organisations needed to operate at 80 per cent. occupancy rates—80 per cent. of all places filled with children. That would give them an opportunity to break even, and provide a sustainable future for our child care providers. I know from visiting child care providers in my constituency that that is a fair figure. In each year since the Committee's report was issued, however, the average occupancy rates for child care providers have fallen. That makes it increasingly difficult for providers to break even and to continue to offer those critical services in our communities.

Reports commissioned by Laing and Buisson show clearly that in January 2004 average occupancy rates in nurseries in the UK were 85 per cent. In January 2005, that had slipped to 83 per cent., and most recently, the same organisation found that in October 2005 the average occupancy rate in our nurseries had slipped below the magic figure of 80 per cent. to 76 per cent. As I have said, that level is cited by Sure Start as being below that which creates financial viability for those organisations.

It is to be welcomed that child care in the UK has expanded. When I had to go into the marketplace after having my first child, I had enormous problems in accessing affordable child care. That problem continues to concern me and many of my constituents. However, we must look at the reality of the situation. The sector remains in a very difficult position. There is much uncertainty. Why are more of the new places not being taken up? Is it that they are not the places that people want? Is it the high cost? The cost of child care provision in this country remains among the highest in Europe. Much of the Government's strategy does not take into account the importance of informal, family-based child care, which makes up a large percentage of existing child care provision in the UK. Perhaps more needs to be done to examine that and to unpick why we are in a position that causes concern.

One thing that working families need is certainty about their child care support. I am sure that many hon. Members will know from first hand experience that that is vital. Whatever system is put forward, it has to have at its heart the ability to sustain provision in the long term. I endorse that conclusion in the PAC report. It is not desirable for parents or families to be uncertain about the future provision of child care. Whether it is a child minder, nursery or after-school club, parents need to be able to plan their lives and those of their children in the knowledge that it is good-quality child care provision.

My hon. Friend Mr. Leigh observed that the PAC's work is to ensure that massive increases in public expenditure actually count. In the child care sector, it is clear from the Committee's review of the facts, which was apolitical, as the Committee stressed, that the Government need to do more to review the action that is being taken. There are exciting plans under the Childcare Bill for children centres in every community. It is an enormous investment. There is a strong argument for some caution because quite large and fundamental concerns remain about the long-term viability of the Government's approach. When the market is still struggling to accommodate the Government's approach to funding, it is time for caution. Working better with existing child care providers has to be at the heart of our child care strategy. We need every pound invested to work hard to provide long-term solutions that count and give parents the certainty that I have talked about. The evidence in the PAC report suggests that a sizeable proportion of the provision is hanging on by its fingernails.

The Government need not just to listen and to accept the Committee's reports, as we heard earlier, but to do something about those findings and about the concerns that have been raised. The Childcare Bill is proceeding through the parliamentary process. Many of the points that I have made today were raised by other hon. Friends in debates. It is an important issue. A key element of the Bill is the new duty on local authorities to take steps to provide sufficient child care provision. That is an expansion of their responsibility in the sector at a particularly difficult time. Can we continue to allow one child care place to be lost for every two created? Existing providers must be able to plan for the future and the long-term financial success of their organisations. The continuing fall in occupancy rates perhaps hints that we have not got to the root of the problem of child care provision in terms of cost and the role of other family arrangements.

Some of those shortcomings could be helped by local government playing more of a role in determining child care. I acknowledge that. After all, it is much better placed to understand its communities. However, to reiterate the PAC's point about sustainability of provision, how sustainable is the role of local government in child care, given the fact that the Government will not provide any additional funding for that new and pivotal duty?

I applaud the work of the PAC in holding the Government to account and applaud the PAC's objective of ensuring that public expenditure counts. However, I call on the Government to do more than just accept the Committee's work and to take this opportunity to use the expertise of this group of people to improve all our services for the good of our community.

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury 6:30 pm, 26th January 2006

I am delighted that my first speech at the Dispatch Box concerns the hugely valuable work of the Public Accounts Committee. For well over 100 years it has been keeping a watchful eye on the activities of the Government and the way in which they spend the money of British citizens.

In the period of the Committee's work that we are considering today, it has continued its long tradition of producing hard-hitting reports, which I believe have had a significant impact on the work of the Government and the way in which they carry forward their policies. There can be few more important tasks for a parliamentarian than to scrutinise the spending of taxpayers' money. I pay tribute to all the members of the Committee and its Chairman, my hon. Friend Mr. Leigh, for carrying out their watchdog role in such an effective and dedicated manner. I should also like to join others in paying tribute to the staff of the Committee and to Sir John Bourn and his staff at the National Audit Office for their detailed, dispassionate and tireless work in this area.

My hon. Friend made, as one would expect, a wide-ranging speech on the work of the Committee over the past 18 months, the themes of which I will return to in my speech. Jon Cruddas talked in depth about population growth issues in his constituency and statistical analysis of demography, and its impact on social cohesion and infrastructure provision in his area. Mr. Heath chose three themes: mismanagement, referring to IT disasters, which cropped up several times during the debate, misguided application of policy, in particular the Qinetiq project, and fraud and the crisis in the tax credit system. Helen Goodman spoke of improving the methods of the PAC and expressed concerns about some of the IT programmes that the Committee had looked at, describing them with accuracy as often a triumph of hope over experience. My hon. Friend Mr. Bacon gave us an in depth account of what can go wrong with private finance initiatives and hospital provision. Sarah McCarthy-Fry informed us that applying accountancy skills and effective project management could have a tremendous benefit if applied more widely in public procurement matters. My hon. Friend Greg Clark emphasised the importance of robust bodies not accountable to the public or the marketplace, and spoke in rather frightening terms of a para-state which is difficult to interrogate properly. Kitty Ussher referred to smart procurement and paid generous tributes to her colleagues on the Committee. I agree with her that in many ways the PAC is the voice of the people in keeping track of their money. Finally, my hon. Friend Mrs. Miller spoke with great insight into and information about child care problems and the PAC report on early years.

Given the Committee's vast output and the late hour I cannot hope to cover all the reports. Instead I shall focus on a few of the more striking conclusions. Also I shall look to the lessons for the future. I should like to take this opportunity to point out how it would be useful to those embarking on preparations for the London Olympics to read some of the reports that we are discussing. That would help them avoid many of the mistakes that have characterised Olympic projects in the past. My constituents in Chipping Barnet are among the council tax payers expected to pick up the bill for the 2012 games. It is my fervent hope that the Government and the various organisations preparing for the Olympics follow the wise advice of the PAC in effective planning and project management. Let us hope that in a few years' time we are not standing here discussing a coruscating PAC critique of overspend on the 2012 games.

As we have heard this afternoon, much of the work of the PAC focuses on achieving value for money in the public services. As the Chairman pointed out, there can be few issues more central to modern political discourse than this one. The sums at stake are huge. The Comptroller and Auditor General has calculated that a mere 1 per cent. efficiency improvement in the spending allocated to Departments over three years could release £14.5 billion to redeploy on front-line services. I find it difficult to believe that the Government's Gershon review or the Opposition's James report would have been initiated without the trailblazing work of the PAC; nor might we have seen the creation of the Government's departmental capability reviews without the PAC's bringing pressure to bear on achieving value for money for the taxpayer.

Although some of the issues addressed by the PAC are complex in the extreme, much of its advice is a matter of simple good housekeeping and sensible project management. Time and again, it has emphasised the importance of carrying out an effective and thorough planning process—a theme mentioned already today—including an in-depth assessment of potential risks and problems; of ensuring that all timetables are realistic; of breaking down complex projects into smaller, more manageable components; of putting in place reliable back-up plans to maintain services in the event of problems; of retaining a strong management grip on all projects at all times; and above all, of acting commercially when procuring services from the private sector, and applying hard-headed commercial common sense to contract negotiations. I am sure that Members in all parts of the House will regretfully agree that the reports that we are discussing today demonstrate that the PAC's message has yet to percolate widely throughout Whitehall. Good practice in one Department too often fails to spread across to others. Examples still abound of projects on which taxpayers' money is wasted because of poor planning, and of lessons from past failures not being learned.

The PAC's report on Operation Telic identified worrying mismanagement that exposed troops in Iraq to increased risk as a result of inadequate supply of important equipment. We heard this afternoon about the notorious case of the Ministry of Defence's purchasing eight Chinook HC3 helicopters for some £250 million, only to find that they were unusable. The report described this as

"one of the worst examples of equipment acquisition that the Committee has seen".

In its report on asylum decisions, the National Audit Office estimated that up to £500 million could have been saved if the Home Office had been able to put in place sufficient staff and infrastructure to meet the significant rise in asylum applications in 1999 and 2000. Sadly, we are all too well aware that a recurring theme in the PAC's deliberations is IT projects that go horribly wrong. In the most recent of many reports on this issue, the PAC expressed concern that the systems set up by the Government to prevent procurement disasters, such as the gateway review process, are too often overridden. A case study in how such projects can go wrong is set out in the PAC's damning report on the Criminal Records Bureau, and in its report on the transfer of GCHQ computers. The cost of that transfer was initially estimated at some £41 million; it eventually rose to nearer £450 million.

Photo of Richard Bacon Richard Bacon Conservative, South Norfolk

I had a conversation with the former Minister—I shall not embarrass him by naming him—who was responsible for the decision to go ahead with the Criminal Records Bureau project. He told me that he sat in a room with 12 people, read the relevant information, said, "This isn't going to work, is it?", and twelve voices replied, "Yes, Minister." Does that example not indicate the lack of independent advice available to Ministers on these complex projects?

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury

I agree, and my hon. Friend makes the point very well. It is particularly important that Government Departments heed the PAC's advice to act commercially and ensure that they look at a wide range of providers. One problem with IT procurement is that only a very few firms are competing for large Government contracts.

Another theme returned to time and again by the PAC, and which was referred to by its Chairman today, is the disadvantage arising from complexity in the provision of public services. As well as being more expensive to run, the more complex the process is, the more likely it is that mistakes will be made. The PAC has estimated that rectifying errors costs the Department for Work and Pensions £1 billion every year. But looking at the financial cost of rectifying errors is to understate the human cost in terms of frustration and upset. All Members see that frustration daily in our constituency postbags.

A recent and disturbing example of the problem was explored by the Committee's report on tax credits. It states that the complexity of the tax credits system is one of the major causes of the problems that we have witnessed over the past few months. Complexity means that customers and officials find it hard to understand the system, which increases the number of mistakes that they make. It also makes it more difficult to rectify the mistakes once they are made, and increases the opportunity for fraud—a point made by Mr. Heath.

Recent developments have shown just how serious the problem is, with the Government forced to shut down their on-line applications systems because of large-scale identity fraud involving the names of thousands of workers at the Department for Work and Pensions and Network Rail.

The Committee also noted that the way that the system was structured contributed to significant problems even where no mistakes were made. The system of provisional awards routinely overpays customers—a major factor in the crisis that means that many of the very poorest families are suddenly subject to demands to repay large sums of money. As a result, MPs and citizens advice bureaux have been inundated with distressing complaints from people forced to take desperate measures to repay the money that they owe. That very disturbing example provides a graphic illustration of how the work of the PAC goes beyond dry matters of Government spending and statistics and touches on real lives and hardship.

Further examples of how complexity can hinder the efficient provision of public services were highlighted in the Committee's report on regional policy. For example, it found that, in the Thames Gateway area, a multiplicity of different organisations were responsible for regeneration. The Committee wisely advised that the Government should have a presumption against establishing new institutions and new tiers of bureaucracy unless it was clear that policy objectives could not be achieved through existing bodies.

The Committee also noted the severe difficulties faced by organisations in the regions that have to grapple with many different funding streams—in the south-east, there are no fewer than 40 such streams. Much of that complexity results from the complexity of EU schemes, which brings me to another PAC report on the EU budget.

The House is well aware that, for the past decade, the EU's own auditors have refused to sign off on their accounts—a shocking fact when compared with the exemplary standards of scrutiny demonstrated in the UK by the NAO and PAC. However, one of the biggest roadblocks to cleaning up the EU's accounts is the complexity of its agricultural support and regional aid programmes, which gives rise to high levels of fraud, error and maladministration. Only when the EU heeds the advice of the PAC and many other bodies and radically streamlines and simplifies its regional aid and agriculture programmes will there be any real hope that, one day, we will be able to ensure that every euro of the EU budget is properly accounted for.

Another telling example of where complexity and bureaucracy get in the way of the efficient delivery of public services is revealed by the Committee's work on transport. When it looked at rail services, it established that the process for introducing new trains involved no fewer than 60 key stages. From my own constituency work, I know how difficult it can sometimes be to get things done on our rail network. It took many years of campaigning to get one of my local stations renovated. On the day that it was formally reopened, a cast of thousands from all the multiple different organisations that had to be involved in the project was in attendance.

I hope that Government, Opposition and all those working in the rail industry can strive to put in place some of the Committee's recommendations for streamlining and simplifying how we run this crucial part of our transport infrastructure. I am sure that we would all agree that an efficient public transport network is vital for our international competitiveness and for the quality of life of our constituents.

The Committee also had invaluable advice in relation to the public-private partnership for the London Underground. It expressed concern at the complexity of the structures put in place to operate the tube, and of the process by which PPP contracts were concluded. The deal took five years to conclude and transaction and consultancy costs soared to a staggering £455 million. The resulting contracts are opaque and difficult to understand. Many of my constituents complain to me almost daily of the dire performance of the Northern line, but the complexity of the PPP structures makes it very difficult to hold those responsible for the tube to account. Whether one asks the Government, the Mayor or Tube Lines, somehow the fact that my constituents cannot get to work in the morning is always somebody else's fault and somebody else's problem.

One of the striking aspects of the work of the PAC is the wide range of areas that it looks at. It is not just the computer overspend disasters; it looks at a whole range of areas. It has done some extremely valuable work on health, of which today's publication of a report on cancer is merely the most recent example. The Committee can claim much credit for pushing the issue of hospital-acquired infection right to the top of the political agenda. It is one of a number of areas in which the Committee's work has stretched over many years and several reports. Back in 2000, the Committee expressed its concern that the NHS had little grip on the problem or the measures needed to tackle it. Worryingly, returning to the subject four years later, the Committee commented that the response to its earlier report had been patchy and that there was still a distinct lack of urgency on several key issues, such as ward cleanliness. Let us hope that the recent political attention devoted to this issue will mean that the PAC's next report on this matter will have better news for NHS patients.

Lastly, I should like to look briefly at the Committee's valuable work on the Government's programmes on HIV/AIDS. In its thoughtful and considered report on this issue, the Committee recommended that greater priority should be given to tackling the social and economic aspect of the epidemic. The report details the devastating impact the disease is having on the work force of many developing countries, impairing their ability to cope with the epidemic and to run public services or a functioning economy.

Yet between 1997 and 2003, only 1 per cent. of DFID's country-level spending was focused on this issue. Perhaps more seriously, the Committee noted that the priority given by the Government to their HIV/AIDS projects was not reflected in the spending of the multilateral agencies funded by DFID. In particular, the Committee discovered that, at the time of reporting, only £19 million of the £1 billion contributed by DFID to the European Commission was spent on programmes related to HIV/AIDS.

In recent months, tackling the epidemic has rightly shot up the international political agenda. I hope, therefore, that there is now a much greater awareness of the importance of this issue among the multilateral organisations with which DFID works. However, it is frustrating to read the evidence given to the Committee from senior officials and experts in the area who freely admit that aid is spent more wisely and effectively if it is spent directly by the UK Government rather than via an international intermediary such as the European Commission. In the light of the conclusions of the report and the urgent need to tackle the AIDS epidemic, there seems to me to be a very strong case to ask DFID to reconsider the level of funding that it deploys via the EU and switch far more of its resources to programmes that it administers directly or via NGOs. I am sure that the Financial Secretary will agree that the priority here must be saving lives rather than EU sensitivities.

I imagine that HIV/AIDS is a subject that has never been raised before in a debate on the Public Accounts Committee, but I make no apology for doing so. I have chosen this topic to end on for two reasons. First, the significant amount of money now being devoted to such programmes must be effectively scrutinised. We must all be well aware of the difficulties of ensuring that aid for developing countries is effectively and wisely spent. Secondly, I highlight this issue because of the pressing need to tackle an epidemic that has seen 65 million infected and 20 million dead from the disease in the last two decades. I am pleased that the PAC found time in its busy schedule to address this humanitarian crisis. I pay tribute to the Committee's work on this issue and on all the other high-quality reports that we have had the honour to consider this afternoon, and it is with great pleasure that I commend them all to the House.

Photo of John Healey John Healey The Financial Secretary to the Treasury 6:50 pm, 26th January 2006

We have had a very good debate this afternoon, led by Mr. Leigh, but with a further nine excellent contributions. It is my privilege to respond on behalf of the Government.

The Public Accounts Committee makes a special contribution to our system of parliamentary scrutiny of the Executive. The Government, especially the Treasury, share several common interests with the Committee and the National Audit Office. We have a responsibility to ensure that taxpayers' money is used economically, efficiently and effectively, and we want to see the delivery of public services to a high standard, with both the public and private sector working well together and applying the best practices and standards of management and skills.

We see, from the prolific series of reports that the PAC produces and from the contributions to the debate this afternoon, that the PAC does not pull its punches. But however critical, the Committee mostly operates without being politically partisan. That remains one of its traditional strengths as Parliament's leading inquisitor and champion in challenging the Executive. It is rightly tough on Departments and agencies. Accounting officers sensibly take any appearance before the PAC more seriously than almost any other aspect of their responsibilities.

For those reasons, I pay tribute to the work of the PAC members and, in particular, to the hon. Member for Gainsborough who is starting his sixth year as its Chairman. I wish also formally to recognise and pay tribute to the work of the Comptroller and Auditor General and his staff at the National Audit Office in supporting the Committee. I also wish to add a word of appreciation for Brian Glicksman, for his hard work and his dedication to the Committee. He retired recently after being the Treasury Officer of Accounts for six years and he told me recently that he has appeared before the Committee almost 150 times.

I wish also to welcome Mrs. Villiers, who delivered her first speech at the Dispatch Box this afternoon. It was very accomplished and a good contribution to the debate. We look forward to many more appearances, as I am sure she does herself. Based on some of the reports before us, she urged us to look forward not only to the challenges of trying to tackle the problem of HIV/AIDS, but to the Olympics. However, she raised some words of caution on that score. I may say that in my experience, there is an unprecedented effort going into putting in place arrangements for good project management in preparation for the Olympics. I am sure that the PAC will follow those developments closely, as will the hon. Lady as shadow Chief Secretary. We in the Treasury will certainly follow closely the work of the various bodies responsible for preparing for and delivering the Olympics.

The hon. Member for Gainsborough drew attention to the Committee's 17th report. I have to say that this is something of a tour de force, encapsulating as it does a decade's worth of the Committee's experience and conclusions. It helpfully draws those together in seven coherent themes which he set out for us this afternoon. Each one contains some potent pieces of advice for the Government. Although in each case the Government are already taking action, the Committee shows us that there is considerable scope to improve in the future. We are studying the report carefully and we will respond point by point within the customary two months. The hon. Gentleman has been able, in a timely way, to use the debate to lay stress on the particular observations to which the Committee wants us to pay close attention.

The hon. Gentleman raised several other important issues. As he acknowledged, we are taking the opportunity afforded by the Company Law Reform Bill to enable the Comptroller and Auditor General to become eligible to audit non-departmental public bodies that are companies, as well as their subsidiary companies. By doing that, we are fulfilling a major commitment that we made in response to Lord Sharman's report on audit and accountability in central Government. I was pleased that the hon. Gentleman described himself as delighted by the move. The Treasury and the Department of Trade and Industry was helped in no small way by the close co-operation of the National Audit Office as the policy and detailed proposals were developed into the firm plans that are now in the Bill. I hope that the Bill will receive a smooth passage through both Houses.

The hon. Gentleman pressed arguments that he has made before on making the BBC subject to the audit arrangements of the Comptroller and Auditor General. The Government are evaluating the existing arrangements for the audit of the BBC. As the hon. Gentleman knows, the NAO already has a role. It seems appropriate to do that evaluation as part of the charter review and we are thus considering whether any further changes are warranted.

The hon. Gentleman asked what had happened regarding the financial management of the European Union following the publication of the Committee's 18th report. He would have heard Ministers say that a key priority of the UK presidency was to ensure that progress was made on the European Commission's initiative of a road map towards what it called an integrated internal control framework—the hon. Member for Chipping Barnet might already be familiar with that. The UK co-chaired a panel of experts from all member states that met in Brussels on 21 and 22 September to examine the matters that were raised by the Commission's proposed road map. The outcome of those deliberations provided the basis of the draft conclusions for the meeting of Economic and Finance Ministers on 8 November. The recommendations of the PAC report played an important role in drafting the conclusions that were agreed at that meeting. The hon. Member for Gainsborough asked for an assurance that Ministers will continue to press for progress. From this point on, UK officials will be working closely with colleagues from not only Austria, but Finland, to ensure that the action points from the plan are taken forward under those countries' presidencies.

Although the Liberal Democrats' Front-Bench spokesmen are increasingly thin on the ground these days, Mr. Heath has showed rather more staying power than many of his colleagues. He had already done sterling work from the Front Bench for the Liberals on the Criminal Defence Service Bill earlier today, but he stayed on to speak in this debate, although I must say that he seemed to be speaking for the Liberals from both the Front and Back Benches. I appreciated the fact that he realised that a lot of the work of Government is good, although he sketched out his three specific worries about mismanagement, the misguided application of policy and fraud.

In a reflective contribution, my hon. Friend Jon Cruddas set out several of his worries about trends in population movement and make-up. He also told us clearly the serious social consequences that they can sometimes have. In preparation for the comprehensive spending review, the Treasury is undertaking an analysis of the demographic changes that the country faces in the long term. I will find out whether some of the general points that he made, rather than, perhaps, his specific ones about local authority grant distribution, can be incorporated into that work.

My hon. Friend Helen Goodman made an extremely reflective contribution to the debate and several of her points will be pertinent to the way in which the Public Accounts Committee approaches its work in the future. She expressed an enthusiasm for more timely reports. We share that appetite, so we are glad that the Comptroller and Auditor General has recently undertaken to try to publish some shorter reports that can be more quickly prepared, such as the recent report on MG Rover on which I believe that the Committee will hold a hearing next month.

I welcomed the contribution of Mr. Bacon. It was something of a milestone, as it was his last speech in the House as a single man. We on the Labour Benches wish him and his fiancée Victoria very well for their wedding this weekend. He spoke about the progress that has been made through PFI procurement and recognised the substantial improvement that there has been, with projects delivered on time and within budget, but he also exposed flaws that the Committee has found in specific PFI projects.

The hon. Gentleman urged me to look closely at the work being led by the Royal Institute of British Architects. I am aware of that work. A meeting of officials in the Treasury is shortly to be held with that group to examine the analysis and conclusions that it has been preparing. I welcome RIBA's contribution to the debate on the design of PFI. We will consider very carefully whether and, if so, how, its proposals can be integrated into the Government's overall procurement policy.

Undertaking enough design up front during the procurement is already in line with the Treasury's policy. We want to ensure that we have a well enough informed public sector client to manage projects properly, and we need to make sure that they have done enough preparation before launching a procurement. Design is an important part of that, but there will clearly be a trade-off, which must be examined, to ensure that the risk transfer is not jeopardised by undertaking too much of the design before involving the PFI contractor.

My hon. Friend Sarah McCarthy-Fry spelled out clearly and convincingly the lessons on good management to be drawn from the private sector, which it is essential that the public sector learn. Her own business expertise before becoming a Member of the House will clearly be a great asset to the Committee. She stressed the importance of good risk management to effective procurement. I am pleased to say that the National Audit Office has complemented the Government's efforts to force home the message that risk management should be embedded in departmental planning, just as she urged, by collaborating with us in the Treasury to publish a guide which we call "Good Practice in Tackling External Fraud".

Greg Clark demonstrated from the Conservative Benches the fresh talent that is being brought to the PAC, although the points that he raised about the cost of changes in the tax credit system relate to the recent hearing, on which the PAC has not yet published its report. He has the answers now, and no doubt he and his colleagues will make a judgment on those and the report will reflect that.

The hon. Gentleman also touched on the problems of the NHS trust in his constituency, and on NHS trust finances more generally. I remind him that three quarters of local NHS organisations are balancing the books or in surplus. I remind him also that the Secretary of State for Health recently announced what she calls decisive action to turn round the minority of NHS organisations that have significantly overspent their budgets. It remains the case that the Government will have trebled investment in the NHS by 2008, and that throughout the country, including in the hon. Gentleman's area, we can see that that investment means extra doctors and nurses, improved quality of treatment and shorter waiting lists for that treatment.

Photo of David Heath David Heath Shadow Leader of the House of Commons, Shadow Spokesperson (Cabinet Office)

I do not dispute what the Minister has just said, but he must realise that there are a number of hospital trusts dotted around the country that have gone through the process of getting their management in order and are trailing, as it were, in surplus, but are nevertheless saddled with insurmountable debts from previous management failures, which are proving an impossible burden for them and causing detriment to the patients in their area through no fault of the present management.

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. First, that was not a point of order. Secondly, it is necessary to allow the Minister to respond to one intervention before he takes another.

Photo of John Healey John Healey The Financial Secretary to the Treasury

The task is not impossible, because the vast majority of our NHS organisations are succeeding. What my right hon. Friend the Secretary of State announced was ways of making sure that the proper support is available for those that are struggling.

Photo of John Healey John Healey The Financial Secretary to the Treasury

I am reluctant to give way to Mike Penning. He has been in the Chamber off and on during the afternoon, but he has not contributed to the debate, so if he does not mind, I shall give way to the hon. Member for Tunbridge Wells, who is a member of the PAC and made a contribution earlier. Then I shall conclude my remarks, as I am anxious to let the Chairman of the PAC have the final word, as is traditional.

Photo of Greg Clark Greg Clark Conservative, Tunbridge Wells

I am grateful to the Minister for giving way. He is right that more money is being spent on the NHS, and I whole-heartedly welcome that, but my point was about value for money. It does not make sense from the point of view of value for money not to perform operations when people are ready, willing and able to conduct them but to have to defer them to a date after 31 March when they might have to work overtime to do so. It is not about the volume of money; it is about the systems that are resulting in a lack of value for money.

Photo of John Healey John Healey The Financial Secretary to the Treasury

The hon. Gentleman and his colleagues on the Public Accounts Committee may want to look at the question of financial management and control and value for money in that context. If they do so, I look forward to the conclusions that they draw.

I noted the mention made again by my hon. Friend Kitty Ussher of her ten-minute Bill. I hope that the hon. Member for South Norfolk is a sponsor, because he is clearly in favour of her proposals. She stressed the attention that the PAC can give to economic policy, especially in the regions, and I certainly welcome that interest.

I hope that Mrs. Miller sees the fact that 93 per cent. of the PAC's recent recommendations have been adopted and put into practice by the Government as confirmation, which she encouraged, of how seriously we take the Committee's work, although we do not quite see the Committee as somehow our in-house management consultancy, as she suggested. She talked about the importance of child care to both the social and economic future of this country. I welcome her strong, albeit reasonably questioning, support for the policies that we are pursuing. She is right to say that we want every pound invested in child care to work hard.

In closing, I want to touch on two vital general areas for the Government in which the PAC also has an active interest: first, the efficiency programme following the Gershon review, which the hon. Member for Gainsborough mentioned, as did my hon. Friend the Member for Burnley; and, secondly, the comprehensive spending review.

The Government are committed to improving public sector efficiency following both the Gershon and the Lyons reviews. Departments own their efficiency plans, however, and it is their responsibility to report on their own progress. They do that in the autumn performance reports and the annual departmental reports. The Chancellor also provided an update on the aggregate progress, both at the Budget last year and in the pre-Budget report, and the Treasury reports on overall progress on efficiency as part of reporting on our spending review 2004 target 9. The efficiency programme is delivering results, as the Chancellor showed in his recent update: £4.7 billion on efficiency gains released back to the front line. In addition to the monetary figure, a total head-count reduction of 31,000 was confirmed and the relocation of a total of 6,300 staff was completed.

Those aggregate gains are based on departmental returns that are reported against a very robust measurement framework on a quarterly basis. Every pound reported can be traced to individual delivery programmes. Those returns are scrutinised and checked for consistency quarter on quarter. However, we will not consider them final until they have been subject to a full verification, which is of course carried out after the end of each financial year.

The comprehensive spending review sets an important context in which we can consider and incorporate recommendations received from the PAC. A decade on from the first CSR, the 2007 comprehensive spending review will represent a long-term and fundamental review of Government expenditure, and it will cover departmental allocations for three years, beginning in 2008–09. Since 1997, the Government have shown that we can deliver for Britain a strong economy and sound public finances at the same time as sustained and sustainable growth in investment in public services. But what we need now is an assessment of the long-term challenges facing our country and our public services, focusing on the major global and domestic long-term trends to which public spending and public services need to respond over the next decade. That assessment must also focus on the conclusions of the long-term reviews that are already under way into the future of transport, skills, pensions and local services.

Britain faces a rapid increase in the old-age dependency ratio. We also face an intensification of cross-border economic competition, an acceleration in the pace of innovation and technology, continued global uncertainty and threats, as well as increasing pressure on our natural resources and global climate. These challenges will have fundamental and far-reaching implications for our public services and they will require innovative policy responses, co-ordination of activity across Departments, and sustained investment in key areas.

The comprehensive spending review will be tough and challenging. It will take a zero-base approach to assessing the effectiveness of Departments' existing spending in delivering the outputs to which they are committed. The review will also look at how the public expenditure framework can best embed and extend ongoing efficiency improvements and support the long-term investments needed to meet these challenges. The CSR therefore offers an important opportunity for the Government to take stock of what we have achieved and to prepare for the challenges ahead—one to which I am sure the PAC will make an important contribution.

Perhaps I can end where the PAC's 17th report began. It stated:

"One of the key strengths of the Committee of Public Accounts is its ability to examine the way in which public money is used to deliver these services right across Government."

We in the Government and in the House, as well as the public at large and the civil service, owe a debt of gratitude to the Committee for its work. The report went on to say:

"Governments have acted on most of our recommendations and in doing so, in many cases, have secured financial savings, improved the standards of public services and tackled the risks to successful delivery."

With the PAC's advice, we will continue to do just that.

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee, Chair, Public Accounts Committee 7:12 pm, 26th January 2006

With your permission, Mr. Deputy Speaker, I shall say a few words to sum up. May I thank everyone who has contributed to the debate? First, I thank Jon Cruddas, who is valued former member of the Committee. I will raise with the Comptroller and Auditor General the matter of our producing a report on how demographic factors can influence public policy. The hon. Gentleman made his point extremely well.

I also thank Mr. Heath for speaking so eloquently in our debate. He suggested that the National Audit Office should be involved in the debate on identity cards. There is a slight problem there, because the NAO is very keen to stay out of current political issues. However, I agree that that issue is one that we need to keep careful tabs on.

I am very grateful to Helen Goodman for her contribution. She is a highly valued new member of the Committee, and she uses her Treasury experience to good effect. She made a very good point about the problem relating to our reports being produced so long after the event. I sometimes feel that we are kicking a corpse that has been dead for a long time, as happened several times in relation to the dome. I have raised this issue again with the Comptroller and Auditor General and he has promised me that we can try to produce much shorter reports that hon. Members can actually read. If they were about 20 pages long and written in narrative form, they would be easily understood. That would enable us to drive the oversight process forward much more quickly.

I am grateful to my hon. Friend Mr. Bacon for his contribution today and for being a sterling member of the Committee throughout my chairmanship. With Mr. Williams, we alone on the Committee have said that, if someone becomes an Opposition spokesman, they must leave the Committee. We have maintained the purity of the Committee in that regard. My hon. Friend the Member for South Norfolk has chosen to stay on the Committee and not to become an Opposition spokesman, as his abilities merit. I am grateful to him for that.

I thank Sarah McCarthy-Fry for her contribution and for the valuable experience in risk management and project management that she has brought to the Committee. I am also grateful to my hon. Friend Greg Clark for his powerful remarks about our work in controlling the para-state, as he put it, and those parts of the state that are not as accountable as they should be.

I am grateful for what Kitty Ussher said about smart procurement. I say this to my hon. Friend Mrs. Miller: it is true that we view ourselves, in our capacity as allies of the Treasury, as low-paid management consultants—paid much less than those employed by the Financial Secretary—but we do our best.

My hon. Friend Mrs. Villiers experienced her first outing on the Front Bench. Yesterday we had before us a permanent secretary with another 14 years to serve. I have no doubt that my hon. Friend will serve for at least 14 years with great distinction, in and out of Government. She spoke of delivering a 1 per cent. efficiency improvement—£14 billion of gains. That is a lot of money to play with.

Of course I also thank the Financial Secretary for what he said. I am very proud of our work. In an era of rapid increases in public expenditure we do not question what is being done, but I believe that we can make a difference. This is one part of Parliament that is doing a superb job.

I thank all who have contributed to this excellent debate.

Resolved,

That this House takes note of the 17th and the 20th to the 52nd Reports of the Committee of Public Accounts of Session 2003–04, the 1st to the 30th Reports of the Committee of Public Accounts of Session 2004–05, and the 1st to the 3rd, the 5th, 6th, 10th and 11th Reports and the First Special Report of the Committee of Public Accounts of Session 2005–06, and of the Treasury Minutes and the Northern Ireland Department of Finance and Personnel Memoranda on these Reports, Cm 6271, 6282, 6302, 6303, 6304, 6332, 6355, 6416, 6441, 6458, 6468, 6496, 6577, 6578, 6579, 6609, 6667, 6668, 6682, 6689, 6712 and 6724.

Photo of Mike Penning Mike Penning Conservative, Hemel Hempstead 7:15 pm, 26th January 2006

On a point of order, Mr Deputy Speaker. I seek your advice and help for school children in my constituency. I think that there is cross-party support for our encouraging as many young people as possible to visit the Palace, but several schools in my constituency have told me that they will not organise visits any more because they are deterred by the cost of parking and difficulties caused by the anti-terrorism measures that have been adopted outside.

I contacted the office of the Mayor of London, which told me that the matter was not negotiable; the Palace would have to deal with it. I wonder whether you could use your good offices to help students and other children in my constituency to come to the Palace more, and to address the parking issue.

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

It is obviously important for all young people, particularly students, to visit the House of Commons to see how we work, but that is not a matter directly for the Chair. It is, of course, a matter for the House authorities. The hon. Gentleman has put his comments firmly on record; no doubt the House authorities will think about them, and will decide what to do.