|Public Accounts Committee debate
This speech was given in the House of Commons on 24 January 2002
Mr. Richard Bacon (South Norfolk): As the hon. Member for Croydon, Central (Geraint Davies) concluded his speech, I thought I heard the hon. Member for Newbury (Mr. Rendel) say that the debate still had three or four hours to run. I read the speech that the hon. Member for Newbury made in the previous debate, and I note that he began his remarks by saying that he was conscious that no one else was seeking to catch Mr. Speaker's eye. I therefore came prepared with lots of documents, not least because I know that my hon. Friend the Member for Tatton (Mr. Osborne) finds it amusing when I quote from documents in the Committee. Of course, I subscribe to the Fidel Castro view that if a speech is less than four hours, it cannot do any good. However, I suspect that I would try your patience, Madam Deputy Speaker, and that of the House were I to go through all the documents that I have brought with me.
My hon. Friend the Member for Tatton and I are at a disadvantage. As new Committee members, we have not witnessed much of the work that is being debated today, so I have decided to restrict myself to a couple of general themes that are of enduring interest to the work of the Committee and the NAO, which I shall illustrate with quotes from Committee and NAO reports.
I begin, however, by joining other hon. Members in paying tribute to the work of the retiring Committee Clerk, Mr. Ken Brown, who has been enormously helpful. I wish his successor, Nicholas Wright, every success in his new job. He has already been very helpful to Committee members. I also pay tribute to the NAO, in particular to the work of its press office under the able stewardship of Gabrielle Cohen and Keith Davis, both of whom have been enormously helpful.
The Committee's work is of central importance. The act of this House of Commons taking money from taxpayers by compulsion and forcing them to pay into the consolidated fund - into the Exchequer - is a cardinal act. It is of central importance that the House has that ability, but it is equally important that having taken money from taxpayers, the way in which it is safeguarded, looked after and spent is transparent, open and accountable.
In the last debate on public accounts, the then Financial Secretary said:
"I conclude from the debate that the Government need to focus on two matters. First we must continue to improve the management of the systems by which public money is collected and deployed. Secondly, we must continue to improve the management of projects to deliver public services." [Official Report, 14 December 2000; Vol. 359, c. 865.]
That sums up the themes that I want to address. The first is that we need good procurement. Central Government - the same applies to other forms of government, such as local authorities and health authorities - have a role in that. The public sector needs to understand procurement and to be a good buyer. That is central to successful government. It is welcome that the Office of Government Commerce is taking a greater role under its new chief executive, Mr. Peter Gershon. He has appeared before the Committee two or three times and is doing an excellent job in persuading Departments of the importance of skill in procurement. I sometimes think that he has an uphill struggle, but he is trying to make it a priority in Departments.
My second theme is that of good project management, which the Financial Secretary also mentioned. I would add good risk management to that, because they go together. Risk has been mentioned by a number of hon. Members. No one on the Committee is opposed to the public sector taking risks. It is, however, a matter of understanding what the risks are and, having identified them, ensuring that they are carefully managed. We all take a risk when we walk out of the front door, but it is knowing that there are risks and properly managing them that matters.
In the document "Working with Suppliers: The Code of Good Customer Practice" the Office of Government Commerce says:
"Central civil government will work to a high standard of professionalism when dealing with suppliers. It will do this by",
among other things,
"effectively managing risks during a procurement process and working with suppliers to reduce risks during the business relationship."
Both of those are central considerations.
In that earlier debate, the hon. Member for Edmonton (Mr. Love), who used to serve on the Committee, referred to information technology projects. He could, however, have been referring to any kind of project when he said:
"We should recognise that they" -
IT projects -
"are not a marginal technical decision but part of the mainstream business activity of departments, and must be treated as such. We need to manage to staff in a way that is appropriate for a project. We must provide training and incentives to keep the staff with the project while it is introduced. The status of staff, especially in the public sector, must be appropriate to their responsibilities. Most important, staff must be accountable, not only for their success, but for any failures." [Official Report, 14 December 2000; Vol. 359, c. 854.]
When Mr. Gershon from the Office of Government Commerce came before the Committee, we discussed civil service culture, the approach to the management of staff and the attitudes of staff. I was interested to know whether he thought that the way in which the civil service moves staff around, which is inherent in its culture although not in that of the private sector, is fundamentally inimical to successful project management. Mr. Gershon agreed. He said:
"In my experience of private sector organisation, yes of course they want to appoint the best people to the job, but they also want the project to be completed successfully . . . and some say, 'No, we need to promote that man in situ because he is critical to the project, we need to keep him in place, but he should not suffer financially or careerwise as a result'".
He had spent 30 years in the private sector, and in his limited experience of the public sector he saw less of that approach in the civil service, for good and understandable reasons.
Mr. Gershon went on, however:
"But as there is an increased focus on the successful delivery agenda, there is a question of whether we need to put in place mechanisms that might help retain key people in key jobs, and something ought to be done about succession planning so that if someone does move for legitimate career reasons, there is someone to backfill in."
That brings me to the point that I raised with the hon. Member for Newbury, which is that the public sector does not seem to have taken that approach on board.
The NAO issued a report on the implementation of the National Probation Service information systems strategy. The project overran its budget by about 70 per cent. and ended up costing £118 million, which was about £50 million more than it should have cost. That project had seven project directors in seven years, which was fundamentally the fault of the project managers, not of the suppliers. As my hon. Friend the Member for Gainsborough (Mr. Leigh) said, project management is central. It is time that that was more widely understood and acted on in Whitehall. Successful project managers need to move to senior leadership and senior management positions in Whitehall to a greater extent.
Some years ago, the Cabinet Office published a report on the use of consultants in the public sector. In a previous incarnation, I used to work for the consulting industry and came to know the report rather well. On page 59, it points out:
"In most effective organisations, management skills are high and they manage consultancy projects very tightly."
Again, just as it was possible to delete the reference to "IT" from my earlier quotation, it is possible to delete the word "consultancy" from this one and still be left with the idea that it is cardinally important to manage projects tightly.
The report went on:
"To maximise ownership and accountability the same individual, where possible, will often see the project through from inception to implementation."
I think that the Government are alive to that approach, but it is a case of promulgating it through the Departments and making sure that people act on it. It is essential that the Government understand the central importance of project management in what they do rather than in what they say.
In the short time that I have been on the Committee, it has dealt with the loss to the Revenue from fraud on alcohol duty, which amounted to £858 million, the loss of £48 million as a result of the project for the National Probation Service and the collection of the benefit payment card cancellation, which cost more than £1 billion. That is nearly £2 billion, equivalent to nearly 1p on income tax. It is right for us as elected representatives to ask how much hard work had to go in to earn the money to pay the £2 billion of tax to the Exchequer which was then wasted.
The subject of risk management is closely tied up with that of project management. Paragraph (iii) of page 1 of the Committee's report, "Managing Risk in Government Departments states:
"Risk management will only become a normal and integral part of the way departments and agencies operate if civil servants have the skills to identify and assess risks and take the action necessary to manage them."
The hon. Member for City of Durham (Mr. Steinberg) pointed out the need to ensure that civil servants have the skills to identify risks.
The recent closure of individual learning accounts, which was alluded to earlier in the debate, raises the question: where was the risk management? We might ask where was the understanding, even, that any risks were involved. I sat through the proceedings of the Education and Skills Committee yesterday morning and listened to the evidence of officials. The Committee was concerned about the apparent absence of any recognition that there were serious risks that needed to be managed. The Audit Commission published a report called "Ghost in the Machine", on the need to watch out for computer fraud in the public sector, and found that, again, the question of risk management appeared to have been completely ignored.
My next point concerns where the Committee should begin to focus its attention in future. According to a newspaper report in December, fraud and waste cost the NHS between £7 billion and £10 billion a year. I asked the chief executive of the NHS about that last week when he came before the Committee to talk about the report on inappropriate adjustments to waiting lists. I recently received the transcript of the proceedings from the Committee Clerks, and the stenographer had typed the figures as £7 million and £10 million. I corrected them to billions, and then I thought that I had better attach a note to say that the figures should be in billions because the sums are so huge that people would think that I was not serious.
Seven to ten thousand million pounds is enough to pay for between 30 and 43 hospitals like the recently completed Norfolk and Norwich hospital. In fact, that hospital is still being built, but patients are moving into it. It is a PFI project on the borders of my constituency. I mention in parentheses that no one bothered to build a road to the hospital, so it is difficult to get to even though it is consuming £229 million of public money. My point is that between £7 billion and £10 billion goes south every year in the NHS, and if that estimate is not correct, we need to get to the bottom of it. Those losses have been happening for years, and the matter needs much closer attention than it currently appears to receive.
The Department for Social Security, now the Department for Work and Pensions, is another area that needs the Committee's steady attention. Indeed, we shall soon be looking at fraud in income support. I have before me the DSS appropriation accounts, and I am looking at the page on which the CAG sets out in a certificate his views on the accounts. Just as the auditors of a private company sign off accounts, the CAG signs off the DSS accounts, in this case to the House of Commons. He has qualified his opinion of these accounts, saying:
"In my opinion, the appropriation account properly presents the expenditure and receipts . . . except for irregular expenditure arising from errors in benefit awards and from fraudulent benefit claims".
I tabled a parliamentary question to the Department for Work and Pensions asking in how many years since 1972 the DSS appropriation accounts had been qualified in that way. I was a little concerned when the Department phoned to ask me what was irregular expenditure, so I pointed to the CAG's certificate and said that that was precisely the term that he had used.
If one looks at the itemisation of that irregular expenditure, one finds that the DSS estimates that losses through error and fraud for income support and jobseeker's allowance in 1999-2000 were £1.32 billion, and in 1998-1999 the CAG noted that the Department had estimated that the combined level of fraud on income support and jobseeker's allowance could have been as high as £1.53 billion. Those are huge sums. If one considers only the health service and the DWP, one finds that huge sums are disappearing without the NAO being able to identify where they have gone because the Government are not managing the situation closely enough.
I share the concern expressed by my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) that in recent years the Committee has spent about 4 per cent. of its time examining the accounts of the royal household. Although it is entirely appropriate that the royal household, which is the subject of great interest, is transparent, open and accountable and that its accounts are examined by the House, we should concentrate on going after the billions before we worry about the £5 million spent by the royal household. In any case, that figure is a reduction because the household is being extremely well managed, as was made clear in the evidence that we heard last week.
The final matter that I want to mention is less significant in macro-financial terms, but it is none the less of huge importance for many people. I refer to the sources of public funding for students. The NAO has recently produced a report on the subject, "Improving Student Achievement in Higher Education", on which we will shortly take evidence from the permanent secretary at the Department for Education and Skills.
The report contains an interesting chart that shows the 23 different sources of public funding from which students may seek support. The system is extraordinarily complex; for example, single parents who want a child care grant go to one source and those who are eligible for school meals grants go to another. One practically needs a PhD simply to understand the method of obtaining student support. I have raised the matter with the NAO, and I continue to encourage it to examine it.
The complexity of the system has direct implications for the economy, effectiveness and efficiency with which public money is deployed for student support. On the two occasions on which tranches of the student loan book were sold, it was at a very large discount to face value. The reason is that the quality of the student loan book is not very high - a lot of the debt is not repaid. As a result, the market requires a high discount before it will buy the debt.
As I said, last year the then Financial Secretary alluded at the end of his speech to the importance of focusing on collection systems as well as on systems for deploying public expenditure. If we could find a more economical, effective and efficient system for collecting the moneys that students owe, and there are many possible models, we would do a great service to the taxpayer but, equally importantly, make it much easier for students from disadvantaged backgrounds to go on to higher education.
Talking to people in my constituency on the doorstep and elsewhere has left me without the slightest doubt - I am sure that hon. Members on both sides of the House have had the same experience - that the extraordinary complexity of the student loan system has a big deterrent effect on a certain stratum of potential students who are on the cusp of deciding whether to go to university. That decision is as important for people from well-off backgrounds, but it is extraordinarily important to those who have not been used to getting into debt or who are from families in which no one has ever been to university. I hope that the NAO will take the issue seriously in future.
In conclusion, I would just like to say what a privilege it is to serve on the Committee. As a new Member I still have a lot to learn, but I have been thoroughly enjoying the Committee's work. I believe that it plays an absolutely central role in ensuring that the money that we take from taxpayers is accounted for in an open and transparent fashion. The House of Commons, in sanctioning the Committee, is doing a very fine job.
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