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New Clause 1

Planning-gain Supplement (Preparations) Bill – in a Public Bill Committee at 4:34 pm on 30th January 2007.

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Report on computer systems

‘A person who incurs expenditure by virtue of section 1(2) on a computer system must make a report on the progress of that system to the Committee of Public Accounts of the House of Commons six months after the passing of this Act and every six months thereafter.’.—[Mr. Francois.]

Brought up, and read the First time.

Photo of Mark Francois Mark Francois Shadow Paymaster General

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

I welcome you to the Chair, Mr. Hood. We now come to the information-technology related aspects of the Bill. The aim is to establish a reporting system on the progress of any new computer system that might result from the Bill’s provisions and specifically to ensure that the Public Accounts Committee is kept appraised of progress—or otherwise—twice a year. That is important, as the explanatory notes make it plain that one of the Bill’s objectives is to permit expenditure specifically on computer systems to assist with the introduction of the planning gain supplement.

Indeed, under the heading “Financial effects of the Bill”, the notes point out that

“The financial effects of this Bill will be to authorise expenditure principally on designing and building an administrative system to administer the PGS, including the necessary business processes and in particular an IT system.”

The Government estimate the cost at some £40 million. However, their overall record on managing IT programmes, such as the one envisaged in the Bill, is unfortunately far from encouraging. There are myriad examples of IT programmes that have gone badly wrong under the present Administration, but in the interests of time, I shall illustrate the point with only three.

The Department for Work and Pensions’s Child Support Agency famously spent almost £500 million on a new computer system known as CS2. It was eventually launched in April 2003, about two years late and £56 million over budget. The system was unable to migrate the backlog of CSA pages on to its mainframe, and it is generally accepted that the system will never work as originally intended.

I turn briefly to the Home Office’s IT record. Where should one start? I shall pick one example. The new database for the Criminal Records Bureau, which  achieved notoriety for other reasons—I shall not dwell on them now—was introduced in 2004, but the costs had doubled from the original budget of £200 million.

We then have what I might call the mother of all Government IT projects—the new national health service computer system, including the link between GPs and hospitals and incorporating the so-called choose and book system. That massive project was due to be fully installed by 2012, at a total cost of £6.2 billion, but it is running late in many parts of the country. According to the National Audit Office, which reports to the Public Accounts Committee, the cost has now spiralled to about £12.4 billion—double the original estimate.

We might be reassured if the Treasury, which is supposed to be the guardian of public finances, had a better record in IT procurement. However, the Treasury and its agencies are not a great deal better. I remember speaking for the Opposition in the debates on the Commissioners for Revenue and Customs Bill, under which the Inland Revenue and Customs and Excise were merged. That merger involved some 250 IT systems being brought together in one organisation—a major challenge for Her Majesty’s Revenue and Customs.

One example that springs to mind is the tax credits computer system. I shall not dwell at length on the problems, but suffice it to say that the system has suffered a large number of technical problems. One used to be able to file online through the e-portal, but that had to be closed by HMRC because of a systematic attempt to defraud it of millions of pounds. Meanwhile EDS, the IT contractor employed to operate the system on behalf of HMRC—yes, HMRC—made such a hash of it that it had to give up. It was replaced by an alternative IT contractor, Capgemini, but not before the Treasury had sued EDF for £77 million for underperforming. In fact, the Treasury’s record of managing IT programmes is somewhat lamentable. In answer to a series of written questions last year, it was revealed that the Treasury’s IT programmes were running at a combined total of 17 years late.

What is the proposed procurement strategy for the new computer system that the Bill envisages? Specifically, which organisation mentioned in clause 1 or in the accompanying notes will have overall responsibility for the design and introduction of the system? Will it be the Secretary of State, HMRC or the Valuation Office Agency, or will the system in effect be designed by committee? If it is the latter, the warnings of HMRC’s own information officer, Mr. Steve Lamey, at the time of its merger will have been apposite. In 2005, he said of the lack of accountability in Government IT procurement:

“So much decision making is done in committees with huge matrix overlays that accountabilities tend to be very unclear.”

Perhaps that is one reason why the Treasury’s IT programmes, when combined, are running 17 years late.

From what basis is the £40 million estimate derived? The figure seems specific, although the explanatory notes say that there may be wiggle room for it to increase. Nevertheless, we have been given a broad figure of £40 million today, and I should like to know how it was arrived at.

I should like to question the Minister about the proposed system’s security and the related issue of data protection. Much of the information on the system would be commercially confidential among businesses that operate in the property market, and they would want to be reassured when filling in their returns that the information, which is important to them, was held securely and treated appropriately by the Valuation Office Agency and by HMRC.

In another series of written answers that I obtained from the Treasury, it was revealed that some 1,600 Government computers have been lost or stolen since 1997. The worst culprit was the Ministry of Defence, and the second worst was the Home Office. The Treasury—to be fair—was further down that league table of shame, but 53 of its computers have been lost or stolen.

In summary, under new clause 1, given this Administration’s poor record of managing IT programmes—including, specifically and unfortunately, those in the Treasury itself—we seek to establish a regular reporting system that would apply to any planning gain supplement-related IT system, with the report having to be submitted to the Public Accounts Committee twice a year. That would help to concentrate the minds of those involved in the project, thus helping to reduce the risk that the taxpayer would effectively bear if and when such work were commenced. On that basis, I commend our new clause to the Committee.

Photo of Colin Breed Colin Breed Shadow Minister, Treasury

I apologise for not being present this morning, but I was attending a sitting of the Treasury Committee, questioning one of the Minister’s colleagues on, among other things, cost-effectiveness and value for money.

Looking at the Bill, I somehow doubt that the taxpayer has ever been asked to fund so little of substance for so much money with so poor a chance of a positive outcome. Its value for money must be difficult to demonstrate. The Committee has had opportunities to consider the ways in which costs can be mitigated and to try to improve the chances of achieving value for money, but without success.

There are occasions when paving legislation is appropriate, but this is not one of them. Much more information about the exact proposals and their chances of success must be made available to us if we are to consider spending what is a large sum of taxpayers’ money. There are many obvious flaws—some technical, some practical and some political—but it is worth going ahead only if we can set up a tightly controlled, cost-effective and value-for-money system for those of us, or our colleagues, who have to consider whether to go further with it.

The Government have rejected a sensible course of action, so any restriction on how the system will be funded, any way of controlling costs and any way of deciding how to keep a proper eye on how costs, particularly those relating to computer systems, can be controlled over this short period is to be welcomed. The new clause might be the sort of measure on computer system costings that we should include in most Government Bills.

As the hon. Member for Rayleigh has demonstrated, a clear picture has emerged. Although I am sure that the Government undertake computer contracts in good faith and genuinely believe that these things can be achieved in a given time frame and costing, their track record has been poor. We should actively support the idea of a regular report to demonstrate that things are on time and within budget and to show that £40 million-odd is being spent for some real purpose.

Photo of John Healey John Healey The Financial Secretary to the Treasury 4:45 pm, 30th January 2007

May I welcome you and the other members of the Committee back to our proceedings, Mr. Hood?

My reservation about the new clause is simple: it is unnecessary and would bring no advantage, principally because the development of the IT system for a planning gain supplement will be subject to the normal intense scrutiny provided through the usual Government and parliamentary procedures—[Hon. Members: “What?”]—particularly if the Opposition are doing their job on Select Committees. [Interruption.]

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

Thank you, Mr. Hood.

Let me deal with some of the irrelevant comparators that the hon. Member for Rayleigh introduced into the debate: the systems in the Child Support Agency, Home Office and national health service. Those much more complex systems deal with millions of people in a way that a planning gain supplement system, if we were to develop and introduce one, simply would not.

Furthermore, the planning gain supplement is different from tax credits. A much smaller customer base is involved and many fewer interactions will be needed between Her Majesty’s Revenue and Customs and the developers, not least because the proposed planning gain supplement, as we are designing it, will be simple and easy to comply with and to administer.

The hon. Gentleman will know that there were problems in the early stages of the implementation of the tax credit system, and HMRC agreed compensation of more than £70 million with the supplier following the launch of that system. Although he did not mention this, he may also know that, since then, HMRC has changed its IT supplier and implemented exemplary IT programmes, such as the child trust fund and pension simplification programmes.

Photo of Mark Francois Mark Francois Shadow Paymaster General

I do not want to cause a delay on this point. If the Minister reads the Hansard record of our proceedings, he will notice that, while I mentioned that transaction and EDS being sued for £77 million, I also said that Capgemini took over the contract.

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

I do not think that the hon. Gentleman mentioned the implementation of the IT systems for child trust funds or pension simplification, both of which have been smooth, well planned and well implemented.

We and HMRC are clear that it will be HRMC’s responsibility to oversee our approach to procurement. I should be clear with the hon. Gentleman about that. A period of comprehensive testing will be built into  any design for the implementation of a planning gain supplement in the run-up its introduction. One of the reasons for a relatively long lead time between designing and introducing the IT system is to ensure that the systems will work. One of the reasons for seeking the authority under the Bill is that, once the Government make their decision to go ahead with a planning gain supplement, there must be no delay with the necessary work for starting to design and commission the system that will be required.

Photo of Colin Breed Colin Breed Shadow Minister, Treasury

I am grateful to the Minister for explaining the situation prior to the introduction of the planning gain supplement. However, in light of the Government’s experience with other computer contracts, will they monitor the costs of the contract under discussion? If so, why will not they share with us their monitoring and provide us with the figures? There will be no additional costs, because—I hope—they are monitoring the costs, so in the spirit of transparency, I see no reason why they should not provide us with those figures to demonstrate that the contract is being properly managed.

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

Of course the costs will be monitored, and I expect HMRC, through its annual and spring reports, to report regularly on progress with the system’s development and implementation. The House has established procedures: it can, for example, draw heavily on the National Audit Office and its regular reviews of major programmes and departmental activity, and it can draw on the Public Accounts Committee and its ability to consider which NAO reports it wishes to take evidence on and debate. Those are the mechanisms by which regular progress and spending updates can be secured and scrutinised specifically by the House.

I understand and appreciate the concern behind the new clause, but I find it hard to understand its specific purpose, other than to increase the bureaucracy and to create a new and wholly unnecessary paper chase. On that basis, I hope that the hon. Member for Rayleigh will not press the motion on the new clause to a vote.

Photo of Anne Main Anne Main Conservative, St Albans

I would just like some clarification—

Photo of Mark Francois Mark Francois Shadow Paymaster General

If my hon. Friend wants to intervene on me, I shall do my best to answer her question.

Photo of Anne Main Anne Main Conservative, St Albans

I thank my hon. Friend for his courtesy. I should have liked the Minister to clarify how many IT systems will be involved in the provisions. Given the Treasury’s scrutiny, assessment and valuation roles, will the IT role cover all Departments that have an input and that might have to liaise or work with the IT department in charge of the planning gain supplement? Perhaps my hon. Friend can explore that point further.

Photo of Mark Francois Mark Francois Shadow Paymaster General

As I understand the Minister, the Government will nominate HMRC to take the lead in  procuring the computer system. It will be responsible, although I expect that it will liaise with Departments. However, we could get into trouble if we try to design the system by committee, because all previous experience, including that which HMRC’s chief information officer relayed, has shown that, when the Government have tried to do so, the strategy has not worked. That brings me back to my response to the Minister’s speech.

The Minister trotted out the usual platitudes about regular reporting, close scrutiny and keeping a tight eye on how public money is spent, but if the procedures throughout Government are as robust as he would have us believe, how do we explain the fiascos of the CS2 system, the doubling of the cost of the NHS IT programme and the Criminal Records Bureau computer at the Home Office? If those procedures, on which the Minister seeks to rely in lieu of our new clause, are so robust, we must simply ask why on earth they keep going wrong, and why does the taxpayer keep losing billions—not millions—as a result?

It is true that, since computers were invented, Governments of all colours have had problems with information technology. I do not deny that. However, it is also true that, under this Administration, the problems have escalated to an extent never seen before. That is one reason why we are worried about the more modest system under discussion and why we want to know that it will operate effectively, on time and to budget.

The Minister did not quite answer my question about how the estimate of £40 million had been arrived at. If he wants to intervene again, I shall gladly let him. I do not want to misrepresent him, but I do not think that he explained to the Committee how the Government came to a figure of that magnitude. If he feels he answered the question, I shall not get bogged down; however, I do not think I heard him do so.

Photo of Simon Burns Simon Burns Opposition Whip (Commons)

He did not answer the question.

Photo of Mark Francois Mark Francois Shadow Paymaster General

He did not.

I have already established that, because of the merger, there are 250 legacy computer systems within HMRC alone. Could we not have modified one of those? I am sure that it could get by with one of the remaining 249. Could we not have converted one of the existing computer systems to take on the task, thus saving the taxpayer a fair bit of money?

Photo of Kevin Brennan Kevin Brennan Government Whip

Do we need a spare abacus?

Photo of Mark Francois Mark Francois Shadow Paymaster General

I suspect that, if the planning gain supplement goes ahead, we will need something a bit more complicated than a spare abacus. Bearing in mind that a lot of computer systems are knocking around in the Treasury and HMRC, would it be cost-effective to modify one? I do not know the answer, but I should like to know that that option had been explored before the Government ask the House of Commons to commit up to £40 million for a new computer system that, as we heard this morning, we may never need if the tax does not go ahead.

I thank the hon. Member for South-East Cornwall for his kind words of support. Perhaps they will still be forthcoming if we come back to this issue on Report, but as we have explored it in some depth, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.