Information technology

Commissioners for Revenue and Customs Bill – in a Public Bill Committee at 10:45 am on 18th January 2005.

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'(1) The Treasury shall make a scheme identifying any information technology system owned or operated by the old commissioners which shall, by virtue of section 43, vest in the new commissioners.

(2) A scheme may include consequential and incidental provision.

(3) A scheme shall include provision that any information technology system identified therein shall be managed in accordance with best value.

(4) In this section—

''best value'' means arrangements to secure continuous improvement in the way in which functions are exercised, having regard to a combination of economy, efficiency and effectiveness and

the expressions ''the new commissioners'' and ''the old commissioners'' have the same meaning as in section 43.'.—[Mr. Heathcoat-Amory]

Brought up, and read the First time.

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells

I beg to move, That the clause be read a Second time.

The terms of this new clause are similar to those of the one that we were just discussing. They refer again to any information technology systems owned or operated by the old commissioners, so I hope that you, Sir John, will not judge me out of order if I refer, at least, to recent, if not ancient, history. That is included in the terms of the new clause.

The information technology story is not wholly dissimilar to the one that we have just been discussing in that it is punctuated by a number of procurement problems, and I am talking about the generality of the public estate. We all, as Members of Parliament, suffer as a result of the Child Support Agency computer failure. The problems are not unique to the Revenue department, but they are particularly important there because all of us, in one way or another are either taxpayers or are in receipt of benefits now administered by the Inland Revenue.

I draw the Committee's attention to the comments of the tax faculty of the Institute of Chartered Accounts in England and Wales, which were submitted as evidence to the Treasury Committee, of which I am a member. Perhaps I should declare an interest. I am a chartered accountant but I had nothing to do with that evidence. I also do not practise as an accountant or as a tax adviser, except to my occasionally bemused constituents who have to grapple with such problems.

The evidence referred to information technology problems as they exist. It said that many of the problems of the tax system appear to emanate partly from IT inputting of data and partly from the computer programming, which was categorised as poor. The particular example that was given was of the tax credit system, and it was pointed out that the computer system in the Inland Revenue does not show how the credit has been calculated. The tax faculty of the ICAEW was surprised that no one thought that this was necessary at the time that the computer was set up and installed.

''The result of these types of problems is that few people have much confidence in the Revenue's computer systems.''

That is a harsh criticism, but I think that it is generally fair.

All of us who, in our various ways, have to grapple with the Inland Revenue on behalf of our constituents know that the tax credit system was brought in with inadequate preparation. Indeed, there are continuing problems. The question is whether the merger under the Bill will make those problems better or worse.

Again, the evidence given by the chairman designate of the new department is not altogether reassuring. Mr. Varney referred to 250 major IT systems in the two departments. He said that they ''have 3,000 staff'' working in IT and that they send out 170 million forms a year. He said that

''we run 100 thousand desktops. So it is a big issue for us.''

I think that that was said without fear of exaggeration.

Mr. Varney also commented on the general issue of computer management. He said:

''We also have to get smarter at our pre-risking and big risk minimisation projects, talking through both the IT risk and the operation.''

I am not completely clear what that means. I am afraid that it is a feature of all public servants that they fall into a terrible form of jargon when trying to explain such matters.

It does not get any better, because when Mr. Varney was asked by the Select Committee when an integrated system was due to take place, he said:

''So some of these projects are mission critical for both delivering cost and service objectives. I think we will bring what we want to bring because we bring the management potential and the discipline to the problem of investing in technology.''

I think I know what he means: the body will do its best to make it all much better in future.

Mr. Varney is a very able man, and he is certainly trying to do the right thing, but he is grappling with two very different systems. There is a reference in my new clause to the old commissioners. They have their own information technology systems, administering different taxes with a different culture; we have observed that at various times in our proceedings. There is not only a different culture, but different contractors. Customs and Excise has a contract with Fujitsu, whereas the Inland Revenue has signed the ASPIRE contract with what is called a new strategic partner, Cap Gemini Ernst & Young. So two reasonably recent very big IT contracts have been signed with different suppliers. They seek to do different things and I would imagine that, under the terms of the contracts, it is not possible for one to give way to the other.

What will happen in the new merged department? Will we simply bring together the two different sets of IT facilities; all 250 major systems, as the chairman-designate described them? How are they to be managed for the benefit of the public, particularly   when the departments have to keep their existing duties going? It is not a question of saying, ''Down tools and let's design something different.'' The departments have to continue with their existing collection and payment functions, as well as design an integrated system with the promised economies.

The purpose of the new clause tabled by my hon. Friend the Member for Sevenoaks and me is to produce a plan. There are two plans and two contracts at the minute, as well as myriad different systems. We want a single plan, because we certainly have not seen one. One of the Treasury Committee's criticisms when taking evidence was that although Gus O'Donnell made a report into the reason for the merger—and a way ahead was identified on that—it is not a detailed plan. It certainly does not go into the interstices of the department in trying to discover what systems it is running, and whether it is even possible, under the terms of the contract, to get a uniform or integrated IT management system. Many of the supposed benefits to the public purse and to taxpayers of the merger will be lost unless there is a plan to bring the IT systems together, perhaps not immediately but over time.

What provision was made in the existing contracts for the eventuality of a merger? Does a plan exist to adapt them to the new circumstances envisaged under the Bill, and what savings does she anticipate from that plan? It is entirely appropriate to impose a best value obligation on the new department, and indeed on the Treasury. It is not an adequate response simply to say that the public sector pursued best value anyway. I am afraid that the history of both the property and IT systems is littered with examples of aspirations—but not obligations—to pursue best value, and when the targets are not met, no one suffers apart form the tax-paying public. That is the purpose and reasoning behind my new clause, and I look forward to the Paymaster General's response.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury) 11:00 am, 18th January 2005

The right hon. Gentleman was a Treasury Minister, and I presume he knows the rules with regard to accounting officers. Because the legislation went through this House, he would be familiar with the obligations on Government accounting.

I would absolutely acknowledge—I do not think that there is any individual within Government or business that would not acknowledge—that vast computer systems take a great deal of management and understanding. There are times when those systems do not operate as they should. That was true under the previous Government, with the NIRS contract, which was signed just before the general election in 1997. The right hon. Gentleman referred to some points made about self-assessment, which was entirely commissioned under the previous Government. Then he referred to several computer systems that are not in the new department, and to the tax credit, which is.

I feel duty-bound to say that clearly, because the right hon. Gentleman was excessively harsh on the officials who work in those departments. I would like to put on record how much I and my hon. Friend the Economic Secretary value the staff in the two   departments, and their hard work in delivering for Parliament the demanding and stretching requirements placed on them for the discharge of their duty.

The scale of the IT contracts is important. The idea that those people are cavalier in their attitude to best value for the taxpayer and do not discharge to the best of their ability the requirements dictated by Parliament needs to be rebutted strongly. Regardless of what the right hon. Gentleman may assert in this Committee about the contracts for the department, the best-value reports done during the commissioning of those projects has demonstrated that that is the case.

Now there is an immense task, as the right hon. Gentleman rightly points out, in bringing together the 250 legacy systems in the two departments. There is not one system in one department and one in the other. There are systems that overlap, that do not overlap and that have been merged into the department; for instance, the Contributions Agency and the NIRS2 contract, which was specified under the previous Government. Some of the contracts will stay as they are and others will be able to be integrated. We need to look very carefully at how the department will proceed.

Because people like to quote things that have not gone well, let us first congratulate the department, for instance, on the ASPIRE contract; the change of the IT supplier, after open, fair competition and a well run contract, from EDS to the new Cap Gemini Ernst & Young and its associated partners. The contract involved not only the management of the competition, but the proper transfer of those substantial systems from EDS, the previous contractor, to Cap Gemini Ernst. The transition is complete and has gone well. I would like to put on record what I have said in private as a Minister and what I hope this Committee will endorse; our thanks. Congratulations should be given when something has gone exactly as it should.

In looking at how the ASPIRE contract and the contract of Customs with Fujitsu, the consideration had to be as it was with the property contract. Whether or not the departments merged, modern contracts must have flexibility. The lessons that we learnt from the NIRS2 system, for example, which was commissioned under the previous Government, was that, if we do not have flexibility in the contracts to manage change, we will have increased difficulties in moving those systems forward and getting them to respond to our needs.

Let us consider the general principles that will take us forward. It is clear in the Bill, and has been explained, that a system of benchmarking will be used. It was used in ASPIRE and it is now being used in Fujitsu. What do we mean by that? I shall cite the example of ASPIRE to demonstrate the principles that will take us forward. The benchmarking process will be carried out for the first time two years into the contract. It will be based on comparing prices and services against levels in the industry standards, which external companies will undertake. That mechanism   was carried out also in the beginning to ensure a good contract price. The same process will be undertaken with regard to the Customs systems. The first benchmarking process of the infrastructure services agreement for Customs is being carried out now and, as one would expect, that has an element of market testing.

In all the negotiations on ASPIRE and on the expansion of Customs contracts when needed, the principles are about continuity of service provided to the taxpayer. The negotiations had to be conducted in the knowledge of the O'Donnell review that was underway at the time and that flexibility had to be provided. Both contracts will be transferred to HMRC, subject, of course, to parliamentary approval of the Bill. We are reviewing the best commercial models for the new department to take that forward.

The matter of the IT systems is extremely complex. Parliament, for all sorts of reasons—not only for historical reasons—will want to continue to consider such matters closely. They will be subject to the Treasury Committee, the PAC and the requirements in respect of annual accounting. As I said when discussing new clause 1, all the mechanisms are in place. The new department will have a change management mechanism with a new chief information officer who has been appointed. Interfering with computer systems when that has not been taken into consideration could have dire effects on the revenues collected by the two departments. We do not have to be geniuses to work out that.

While considering integration, part of what the department must do is to make sure that it maintains business as usual and it should not lose its focus on delivering that. The new department will have a change management mechanism with a new chief information officer who has been appointed. Those involved will have to work closely to ensure that the public service agreement targets are met and that a strategic overview of both risk and risk mitigation is maintained. That means understanding the possible risks and managing them to achieve integration.

The department will have in place mechanisms for dealing with such matters, mechanisms that are checked by parliamentary rules and those rules that govern accounting officers. When the right hon. Gentleman spoke to new clause 1, he said that it was proposing the same mechanism, one on property and one on IT. My response to him about IT is the same as my response on property; the mechanisms are in place. The department has a great deal to do. There is no point in duplication and bureaucratic mechanisms in order to copy what has already been done elsewhere. On that basis, if the right hon. Gentleman wishes to press new clause 2 to a Division, I will ask my hon. Friends to oppose it.

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells 11:15 am, 18th January 2005

I think that we have gone as far as we can on this issue. We have had some rather familiar reassurances from the Treasury about how it is all going to be different and well managed in future   and how things are in place to ensure that, but we have not had a plan. The Treasury Committee criticised the fact that we have an aim, aspirations and a destination, but there are no milestones on the road to ensure that we get there in good order with a saving to the public and improved facilities for the tax-paying public.

I am a little bit more optimistic about IT. I do not think that the revenue departments were stitched up in their contract as they were with the Mapeley contract. That is the last time I shall mention that, Sir John. I have the assurance that the chairman-designate and his staff and the Treasury are fully engaged with the importance of IT. We shall be watching carefully in future to ensure that the savings and contract variations are possible and deliver what they promise. However, in the light of what the Paymaster General has said, and with one eye on the clock, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Question proposed, That the Chairman do report the Bill, as amended, to the House.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I am dreadfully sorry, Sir John, but we have moved so speedily today that I had not appreciated that we had reached the end of the Committee proceedings. Before we finally conclude, I should like to put on record my thanks, and that of the Economic Secretary, to you for the expert way in which you have seen us through this complex Bill, which is, none the less, part of the important machinery of Government.

I thank the Clerks, as ever, for their expert advice and for ensuring that all Committee members were not only in order, but able to discuss at the relevant point what was most important to us. I thank the Hansard writers and the office holders, and the police for ensuring that we were able to hold our discussions uninterrupted. I also thank my hon. Friends, who have hung on my every word—and those of the Economic Secretary—and I am grateful for their undying support and encouragement.

I thank the hon. Members for Chichester and for Yeovil (Mr. Laws) for the business-like way in which their colleagues approached the Bill, which showed Parliament at its best in wanting to improve the Bill and understand the objectives.

I am pleased that we will move on to the next stage and, as I have said, I am eternally grateful to you, Sir John, and to Mr. Hurst for chairing these proceedings. I cannot quite bring myself to say that I look forward to seeing you soon on the Finance Bill; not because I do not want to see you in the Chair, but because it is coming faster than I would like. Once again, I thank you and all Committee members.

Photo of Andrew Tyrie Andrew Tyrie Shadow Paymaster General

I thought for a moment, Sir John, that we were going to get a date for the Finance Bill.

I echo the remarks of the Paymaster General. I agree with everything she said so I shall not reiterate it or go through the list of people to whom she referred. I particularly thank you, Sir John, for the cordial way in   which you have handled things, and I should be grateful if you passed my thanks on to your colleague, Mr. Hurst.

I also thank the Clerk, who has put up with a number of questions from me behind the scenes, in order to explain things that I did not fully understand. He also gave me great assistance in drafting the odd amendment and new clause, which would not have been remotely in such good shape were it not for him.

In addition to thanking my colleagues—although only one is here at the moment—and the hon. Member for Yeovil, with whom I have had one or two interesting discussions, I wish to say that, on the whole, I have had some intelligent conversation with Ministers. I am pleased to say that they moved on a couple of points, not least on the oath of allegiance, which we may keep and which will contribute to good quality governance in the Revenue.

We have made some progress, and I look forward to Report. Much more proximately, I look forward to this afternoon, when I shall be debating the Child Benefit Bill, yet another Bill that the Government have decided to impose on us just before, I expect, a general election. Thank you, Sir John, for chairing the Committee so well.

Photo of David Laws David Laws Shadow Chief Secretary to the Treasury

I, too, add my thanks to you, Sir John, and to your co-Chairman Mr. Hurst, for the deft way in which you chaired our proceedings. I also thank the Clerk and all the others who have supported the Committee. I thank the Paymaster General and her colleague the Economic Secretary for the constructive way in which they engaged in the debate. Some useful progress has been made on a couple of points, including those raised by my hon. Friend the Member for Torridge and West Devon (Mr. Burnett). I enjoyed working with the constructive hon. Member for Chichester. I have a few questions for him on other announcements made by the Conservative party this week, so I should be grateful if he stayed on afterwards.

Photo of John Butterfill John Butterfill Conservative, Bournemouth West

I thank right hon. and hon. Members for those kind words, and I shall certainly pass them on to my colleague Mr. Hurst. I enjoyed chairing the Committee. As ever, I shall look forward to the Finance Bill, although starting from next week I shall be chairing the Committee considering the Consumer Credit Bill.

Photo of John Butterfill John Butterfill Conservative, Bournemouth West

I am nothing if not a glutton for punishment.

Question put and agreed to.

Bill, as amended, to be reported.

Committee rose at twenty-three minutes past Eleven o'clock.