Previous Section Home Page

Column 951

My final point relates to grant-maintained schools' financial control, which is dealt with in the ninth report of the Public Accounts Committee 1993-94, published on 19 January. Two aspects of the report cause me concern. The evidence received by the PAC shows quite clearly that schools that initially opted out to become grant maintained-- the first tranche only--have received preferential treatment in the way in which they received their maintenance grant. The PAC clearly established, from evidence given by the permanent secretary at the Department for Education, that there was a concept called "double funding".

Paragraph 22 says that the Department for Education

"have not calculated the central services element of annual maintenance grant so as to reflect accurately local education authorities' delegation of central services to schools. Consequently, some double funding has occurred."

The PAC found that the existing arrangements showed that the local authorities involved in those schools had lost out to the tune of £13.6 million. There was a central funding element. Approximately 16 per cent. of the budget was paid to the grant-maintained schools. The school budgets were greatly devolved from the centre, from county hall, and increased to something like 93 per cent. of the overall budget. The existing traditional or historic funding of 16 per cent. remained. That concept was confirmed to the Committee by the then permanent secretary at the Department for Education, Sir Geoffrey Holland. He did not disagree with our findings that double funding had taken place.

The PAC, knowing full well that an immediate removal of that double funding would put schools at a disadvantage, called for it to be removed over two years. I am disappointed at the response from the Treasury minute, which says that it disputes the PAC's view and claims that the central services charges were calculated properly and that there was no double funding. I should like a commitment from the Financial Secretary to the Treasury that the Government are prepared to look again at that aspect of the PAC report on grant-maintained schools.

The second aspect of the report about grant-maintained schools that concerns me relates to the activities of the Grant Maintained School Centre Ltd. That organisation, which is funded by central Government, is there to provide schools that have already achieved

grant-maintained status with information, advice and services. In 1992-93, it received £577,000 in public money.

The centre shares its headquarters in 36 Great Smith street with Choice in Education, which runs the Grant Maintained Schools Foundation. The two organisations are actively involved in the promotion of the concept of grant-maintained schools in advising schools that are considering their approach to the balloting of parents on whether grant-maintained status is right for those schools. They are, therefore, part of a quasi-political organisation that is involved in promoting a particular view.

The PAC was informed in evidence that, in February 1993, the Department for Education undertook an internal evaluation of the centre's activities. That evaluation pointed to a risk that grant money might have financed non- eligible functions. In other words, an internal report clearly indicated that money voted by Parliament was

Column 952

being spent for a purpose not intended in the Vote. The problem was that a single accounting system was being applied to three organisations, from which staff, office and rent costs would have to be found. It was impossible to disaggregate the three budgets. I accept that officials from the Department for Education have visited the Grant Maintained School Centre Ltd. and sorted out the problem; I also accept that, at the time, it was not possible to say that money voted by Parliament had been used for such purposes. However, this is an example of cross-subsidy, in which Government money was used for quasi-political activities. It is important for non-departmental public bodies to have clear guidelines, so that such instances cannot be repeated.

The PAC has pointed out that the Property Services Agency charged itself £65.6 million because it was unable to recover the money from its customers--whom I suspect to have been Government organisations and agencies. It has also found that the Department of Employment made doubtful and incorrect payments to training providers, including training and enterprise councils, amounting to £79.5 million. Wessex regional health authority, we learn, wasted £20 million on an information system that was eventually abandoned. West Midlands regional health authority wasted £10 million of public money; and, as the hon. Member for Bristol, North-West (Mr. Stern) pointed out, the Department of Employment invested £48 million in a redundant Field system.

I suspect that the reason behind that was that the Government had decided that training should be taken away from the regional employment departments and given to agencies and training and enterprise councils. Bureaucrats in the regional offices probably decided that they wanted some control over what was going on in the TECs, and tried to set up a computer system that would involve them in the accounting methods used by TECs; the TECs, however, saw through it and did not use the system. As a result, £48 million was wasted--as was the £11 million spent on consultancy fees, which was strongly criticised.

We are seeing a serious breakdown in financial control at the heart of Government, in Government agencies and in quangos. I hope that the responses from spokesmen on both sides of the House will lead us to a point at which we are able to ensure that the Government take responsibility for what goes on in their Departments, agencies and quangos, and that the conduct of public business is carried out properly, ethically and with the probity that we would all consider right and proper.

Perhaps we could start by saying that members of quangos should be accountable in some way and that when they are found to have wasted public money they should be subject to surcharges similar to those levied on members of local authorities when they lose public money in a similar way. We should also introduce some openness in the way in which members of quangos are appointed.

I was very disappointed by the references made to my late right hon. and learned Friend the Member for Monklands, East, John Smith, who raised the eighth PAC report on the Floor of the House. He asked the Prime Minister for a positive response. I do not think that he tried to make the report into something that it was not. The most disappointing event of that day was the Prime Minister's comment that there had been no breakdown in

Column 953

the way in which public business had been conducted, contrary to the findings of the Committee. He said that the report was merely a useful checklist, which actually justified the Government's approach to the way in which they were running their business.

I do not think that that response was helpful, in the context of trying to improve the public's perception of the way in which those in public life conduct business on their behalf. I hope that today's debate will lead to a massive improvement in the way in which public money is spent.

7.55 pm

Dr. Tony Wright (Cannock and Burntwood): I feel a bit like an intruder: I think that I am the only non-member of the PAC who has spoken so far. That is unfortunate, because the Committee's work is supremely valuable to the House of Commons, and every hon. Member should take an interest in its proceedings.

I pay tribute to the Committee for all its work on behalf of the rest of us. It does an outstanding job; it has done a particularly outstanding job in the past year or so, and will be seen to have contributed greatly to the development and improvement of British public administration. Well done, and thank you; I hope that Committee members will not mind if, for a few minutes, I join what seems to be a private conversation.

As other hon. Members have said, the eighth report is clearly the one that history will remember, although all the reports are memorable. I am sorry to quote a sentence that has already been quoted, but history will of course remember that the Committee stated:

"These failings represent a departure from the standards of public conduct which have mainly been established during the past 140 years."

When the history of the period is written, that sentence will provide at least a footnote--possibly more. It will be seen to encapsulate the history of what was happening to the organisation of public services during a particularly important time.

I have been reading some of the memoranda that Sir Charles Trevelyan was bunging off to Gladstone 140 years ago, on the theme that we must clean up British public services and the civil service and eradicate patronage. The PAC's language is not quite in the same vein--how could it be?--but there is nevertheless a parallel between what was said then and what the PAC has felt obliged to say in the 1990s. It is saying, as Sir Charles Trevelyan said to William Gladstone all those years ago, that a problem exists that must be addressed in the interests of the integrity of British public service.

I note that in recent days the Government have been saying--because of the difficulties that they have run into--that they have, after all, been excessively zealous in monitoring the whole area. As has already been pointed out, however, the story is not quite like that. When the report appeared, the immediate official response was "What problem? There is no problem; do not make a fuss." Now we are told by the Chairman of the Committee--and I take some reassurance from this--that all kinds of things have been happening within Government. In a sense, that makes matters both better and worse. It improves matters in that the Government have clearly been activated by the findings and verdict of the PAC; the bad aspect is that the Government should want publicly

Column 954

to maintain the pretence that there is no problem. There clearly is a problem, as evidenced by the Government's own behaviour. It has been a little misleading of the Government in recent days to claim credit for having introduced the National Audit Act 1983, the foundation of the modern audit system. It was not like that at all. When the Public Accounts Committee produced a special report saying, basically, that wherever public money goes, public audit should go too, the Government did not like it. The previous Chairman of the PAC described the Government's reaction as "almost wholly negative." Vast numbers of hon. Members got very cross during a debate at the time. Almost 300 of them signed an early-day motion and eventually, through the medium of a private Member's Bill and under the auspices of the person who now sails under the illustrious name of Lord St. John of Fawsley, the 1983 Act was passed. For the Government to claim that it was their Act and that they wanted this zealous audit of public bodies is not true. Perhaps obfuscation is the word that we could use to describe the way in which the Government have talked about the matter.

The Select Committee on the Parliamentary Commissioner for Administration, the Public Accounts Committee's sister Committee, published a major report analogous to the PAC's 1981 report. It said that the ombudsman should be able to go wherever public administration goes, that the framework in which the ombudsman operates should be changed and that there should be at least an annual debate on the work of the parliamentary officer.

Again, the Government's response has been wholly negative. They say that those changes do not need to be introduced and that there should not be a debate. This, however, is a House of Commons matter and a parliamentary matter. It should go beyond the normal exchanges between the parties. Parliament is asserting itself against the Executive. That is what the issues are and should be all about. It is impossible to understand that historic sentence from the eighth report without recognising the sort of changes in public services that have produced that verdict. Again, the Government cannot have it both ways. They tell us that they have engineered "a revolution" in public services. They claim that they have transformed the nature of public services. They say how right they are and make claims about increased efficiency and performance. They say that they have brought a particular model to the operation of public services. The Government wanted a revolution in the way in which the state and state services are run. They have been pursuing that policy, but they must accept that it has led to the most acute problems in relation to accountability.

If one fragments public services and disaggregates the state, if one devolves responsibility right down the line, if one sets up a contract culture and magical flexibility on, for instance, pay and patient arrangements, one will see, if one is not careful, the more unpleasant consequences of that flexibility. There will be a lack of control and a lack of accountability. When they make their claims about the revolution in public services, the Government must be serious about the implications for accountability of their actions. In every revolution, whether we like it or not, there are casualties and in a sense we have been hearing about those casualties this afternoon and reading about them in the PAC's reports.

Column 955

My principle is a simple one. In any organisation or reorganisation of public services, accountability must follow. The more one fragments and disaggregates services, the more pressing becomes the problem of accountability. One cannot do it in the old way. One must find new techniques of accountability to match new techniques of organisation. That is the essential principle that the PAC is trying to underline.

Mr. Page: I do not know what experience the hon. Gentleman has of business, but I promise him that a smaller activity that is ring-fenced is much easier to audit and investigate for misdemeanours than a large conglomerate, where things can so easily get lost. That has been shown time and time again in the PAC reports. For years, the Committee has heard those various criticisms. I suggest that, of course, there are dangers, but there are also benefits and those dangers can be quantified and monitored. The chances of getting caught by going through the agency and abusing the agency system are so much greater that that would be a tremendous deterrent.

Dr. Wright: I thank the hon. Gentleman for making that point. I am not sure that he quite understood the point that I was making, which seemed to contain an elementary truth. Hon. Members are required not to pronounce on our liking or disliking for what is being done but to recognise that the more one shifts power around the system--the thrust of what the Government are doing in relation to public service--the more one must ensure that accountability follows. That unifying principle should keep us all on the same side.

Mr. Shersby: There is accountability and there must continue to be accountability, but that will happen only if officials and people monitoring the work of disaggregated bodies do their stuff. They have the skills and ability to monitor what is going on and to watch what is going on. Systems are in place to achieve that but the skills are required.

Dr. Wright: I am grateful to the hon Gentleman for that intervention. If one considers the work on the accountability of these bodies, a rather different picture begins to emerge. I and other people conducted a study recently into the matter. It tried to assemble and to apply an index of accountability in relation to extra-governmental organisations, as we call them. We found that there are 5,000 of these bodies compared with 1,300 executive quangos. We can argue about the figures but it is important to consider how accountable those bodies are because their accountability will be a factor in some of the problems that they will experience.

I shall not give all the results of the study, but let me list some of the accountability criteria involved. Were the members liable to surcharge, as members of local authorities are--an important discipline? Were they subject to an ombudsman's investigation and scrutiny? Was there effective external public audit? Did they have, again like local authorities, monitoring officers to keep an eye on what was going on? Do the public have a right to inspect a register of member's interests? Did the public have the right to attend board or committee meetings, to inspect the minutes of meetings and to see policy papers

Column 956

or documents from meetings? Were bodies required to produce annual reports, to publish annual reports and annual accounts and to meet the public?

I wish there were time to go through the list of extra-governmental organisations in the study and to show how deficient they are in those respects. We heard earlier about the urban development corporation. Under almost all the headings, the answer was no. That is not sensible. It is not democratic. There is a lack of the mechanisms that are liable to produce an avoidance of the sort of problems that we have heard about this afternoon.

Mr. John Plummer, funded by the Joseph Rowntree trust, published a survey on quangos and accountability a matter of days ago. His verdict was as follows:

"In terms of accountability, the quangos are operating with ill-defined, contradictory and opaque principles. Procedures vary widely without obvious reason."

He examined in detail training and enterprise councils, housing associations and national health service trusts and found a complete mess with regard to accountability.

We should remember the Charles Trevelyan warnings about the dangers of patronage when considering the appointment process. It is an elementary truth that if one sets up an appointive state, which is essentially what has happened--for good reasons for bad--one needs appointees, and good ones, to run the various bodies. The fact is that many have not been very good, perhaps because good ones were in short supply. Unless we tackle the nature of the appointments system, we shall have to face the consequences of patronage that were discussed 150 years ago.

Let me cite the example from the west midlands with which I am fairly familiar. A major reason why the west midlands story continued so long and generated so much scandal was that the chairman of the West Midlands regional health authority was the friend of a Minister. He had been appointed as a ministerial placeman and it became impossible to remove him. Indeed, the more he was attacked, the more he was protected. The same is true of Ministers--they cannot be got rid of when they get too awful because it is too embarrassing to get rid of them. That was precisely what happened in the west midlands. Someone whose maladministration was at the root of so many problems could not be removed because he was a ministerial friend, the president of the university Conservative association and various other things. Patronage is bad in democratic terms but also in terms of efficiency. When the scandal was compounded by a pay-off of £10, 000 for having brought the whole region to the point of catastrophe, people rightly ask what on earth is going on.

In response to a point made a few moments ago, I believe that there is a sense in which at bottom much will always depend on the sheer good sense, honesty and probity of the people involved. Here, too, there is a difficulty. There is a good deal of evidence to suggest that the culture within public services has changed considerably as a consequence of the public service revolution brought about by the Government. The strongest defence against corruption of all kinds is honest people with a sense of professional pride and service. If we undermine and corrode that defence we shall be led into the problems of which we have had an inkling today. The Government's actions have caused precisely that erosion. They have destabilised the traditional and

Column 957

professional culture within public services, which was the best guarantee of honest dealings and probity and all that we consider so important.

I add one more element to the picture. Another characteristic of the bodies that we are debating is the lack of external accountability, or certainly the lack of external democratic and local accountability. There has, rightly, been an obsession with upward financial accountability, accountability from the centre. We are now told that the Government are strengthening accountability even more because of the PAC report. However, some of the best discipline arises when people are publicly and democratically accountable to users and electors. In so far as the Government have removed those dimensions of accountability from the services, they have made it all too easy to forget responsibility.

I conclude with an article that I stumbled on the other day. It was written in 1938 by Sir Ivor Jennings, a leading authority in the early part of the century and the leading expert on public administration. Interestingly enough, the article was entitled "Corruption and Public Services". He noted the way in which increasingly, even then, public administration was moving from the old uniform structures to the new structures of boards. He wanted to sound a warning and that warning must be compounded now. He said: "If it is desired to set up commissions for public services or committees for public control of private enterprise, it is essential that they should be co-ordinated with the general system of administration so as to share in the tradition of the civil service and the democratic control that maintains it."

They were wise words 50 or more years ago and they are echoed by those of the PAC report. The tragedy is that in the intervening period, and especially in the past decade and a half, we have not put in place the structures of accountability to match the changes in public administration. We are now paying the price.

8.16 pm

Mr. John Denham (Southampton, Itchen): I shall not detain the House for long. I have followed the Wessex regional health service story almost since I was elected in 1992 when the first and rather bowdlerised version of a district auditor's report on Wessex was published. I have a few final observations to make because this is perhaps the last debate to refer to the sorry Wessex saga and what it can teach us about standards of conduct in public life and the responsibility of Government and Ministers towards public bodies such as health authorities when things start to go wrong.

I shall not repeat the information about the Wessex saga which is already in the public domain, but it is worth noting that, if it had not been for the determination of the Public Accounts Committee, much of that information about Wessex would still be confidential. A major report in two sections by the district auditor would have remained confidential, had it not been obtained in part by journals such as Computer Weekly and The Independent and thus been drawn to the attention of the PAC which, having seen it, insisted on publishing it. The information in the report should have been made public from the outset and the Ministers who had seen it should have moved heaven and earth to make it public. I thank the PAC for doing so.

Column 958

I now develop a theme which was touched on in the PAC report on Wessex but not dealt with in great detail. That is the failure of successive Secretaries of State and the national health service management executive to respond to early warnings about what was happening in Wessex. The PAC concluded:

"It is unacceptable . . . that, although a series of auditors' reports were presented to the Management Executive and the Secretary of State between February 1987 and August 1989 detailing what had gone wrong in the implementation of the project, it was not abandoned by the Regional Health Authority until 1990".

As far as I know, the PAC did not consider the auditors' reports in detail. What was in them and how reasonable was the failure of successive Secretaries of State to act?

The tender for the RISP contract--the regional information systems plan--in Wessex was awarded in August or September 1986. The first audit report was sent to the Secretary of State as early as February 1987. In essence, that report revealed the major issues that were to be at the centre of the Public Accounts Committee investigation when it took place in 1993. The report described for the Secretary of State the role of Arthur Andersen, which was involved both in evaluating the contract and in tendering for the contract--a practice highlighted as wrong in procedure and in practice. That report, dated February 1987, also showed that the contract had been let at an inquorate meeting of the authority.

Having had that information, did the Secretary of State respond to the auditors? The auditors had said that it should be considered whether there was sufficient justification for not accepting a different contract that had been recommended by consultants, and also that the propriety of affording one competitor access to the evaluation data should be examined. The Secretary of State had been asked to consider whether a retendering exercise should be undertaken, and even whether authorisation existed for the letting of the contract. Yet despite those matters having been drawn to the attention of the relevant Minister in 1987, nothing effective happened.

In August 1987 the health service auditor found it necessary to issue a second interim report before the closing of accounts for the year 1986-87. That report, which also went to the Secretary of State, had no fewer than four different sections highlighting concerns about financial management in Wessex.

The first, headed "Financial Control over Regional Information Systems Plan", revealed that the health authority was short of about £8.3 million to carry out the project. The auditor expressed his concern at the "escalating costs" of the project. The arrangements for financial control were examined, and the auditor wrote to the Secretary of State:

"I conclude that I am unable to establish the costs of the RISP development up to April 1986".

The second paper in the same report criticised the recruitment of staff and the use of contract staff in connection with the development of the project. The third report to be sent to the Secretary of State criticised the engagement and control of management consultants. The fourth criticised in some detail the purchase of computers.

If the first interim report was not sufficient to set alarm bells ringing in the Secretary of State's office, surely the second report should have done so. Yet it appears that no effective action was taken. Why not? For all the wrong reasons. For the Government and for IBM, the major

Column 959

computer company, RISP was a flagship project, and it was more important to keep that flagship sailing than to examine the criticisms being received from the auditors. The whole undertaking was driven by an assumption that the project must succeed, no matter what the cost to the public.

It was also unfortunate for Wessex and for the Government that Sir Leonard Peach was head of the national health service management executive at that time. He was a secondee to that post from IBM--but IBM was the major contractor in the Wessex RISP project. I referred to Sir Leonard in an Adjournment debate on the subject and he wrote to me, quite reasonably, saying that as head of the management executive he was required to take no part in any decision-making relating to IBM contracts and had at all times signed the appropriate disclaimers. That should be placed on the record, although there is no independent record of it because when the NHS management executive moved to Leeds all the papers were thrown away; I have been told in writing that there is no record of any disclaimers having been signed and we shall take that at what is said.

Given the failure of the NHS management executive to respond to the audit reports that it was receiving, it was surely unfortunate for the Government that that body must have been disabled by the fact that its chief executive could play no part in examining what had been happening in the major IBM contract in Wessex. He could have nothing to do with it. The person at the top of the organisation, who should have been driving through Wessex's books in 1987 and 1988 to try to stop the waste of money, could play no part in any such attempt. We must recognise that that was a direct consequence of the Government's decision to bring people from the major contracting firms as secondees into that part of the control structure of the national health service.

The accounts were duly qualified again in 1987. The next phase was in 1988, when a further audit report was sent to the Secretary of State. We have to conclude that by that time the auditor had given up sending copies of the reports to the health authority, because it clearly did not intend to do anything about them. The next report was sent to the Secretary of State alone, in November 1988.

That report foreshadowed the major issues involved in the second aspect of the RISP disaster--the privatisation of the in-house computer operation in Wessex to a company called CFM. In 1988 the Secretary of State was told that the procedure adopted by Wessex had serious shortcomings. That must have been so, to justify a one-off confidential report to the Secretary of State. There was no proper work specification and no demonstration that value for money was being obtained; the parameters of the work were vague and non-specific; arrangements regarding the provision of capital funding had not been determined. I could go on to detail a further four or five aspects of what was wrong with the arrangements.

Is there any evidence that the Secretary of State responded to the report? I am afraid not--or at least, the Secretary of State did not respond effectively. Yet it was the privatisation of the in-house computer operation that created the situation in which a private company was in effect writing its own bills to the health authority for work that it was determining itself. That formed the major second plank of the criticism by the PAC.

Column 960

Even in August 1990, two years later, we find that when the contract came to be renegotiated with the privatised computer operation, Wessex failed to negotiate a satisfactory new contract, despite all the apparent attention by the management executive. There is an interesting sidelight on those events. By August 1990--indeed, by the time of the first report in 1988--Sir Robin Buchanan, who is now chair of the NHS supplies authority, was chair of the Wessex regional health authority. I find it significant that the Secretary of State received a report criticising Sir Robin's renegotiation of the second contract before he was appointed as chair of the NHS supplies authority. The PAC took no view on whether Sir Robin was an appropriate person to be the chair of that authority. None the less, it criticised him quite sharply for his failure to get a grip on the RISP project at an early stage. I wonder whether, had the audit reports been made public at that time, Sir Robin would have been appointed to the supplies authority.

It may simply be an unfortunate coincidence that Sir Robin is a prominent member of the Conservative party. Perhaps it is only people of a malicious turn of mind who believe that his political links protected him from proper scrutiny. However, if the Government are criticised in that manner, it is they who have invited such criticism.

Finally, the response of the Treasury to the Wessex report, together with other Government statements, encourage us to believe that throughout the history of the RISP saga the NHS management executive and successive Secretaries of State struggled manfully for control over the errant health authority, but, despite having done their best, regrettably failed. However, the record does not sustain that view: it clearly suggests that Ministers were more than prepared to shelter behind the words of the health authority in concealing the disaster taking place in Wessex.

I shall cite two examples from the parliamentary record. On 15 May 1987 the Minister then responsible, now the Lord President of the Council, answered a question from my hon. Friend the Member for Cynon Valley (Mrs. Clwyd) about the tendering procedure. He said: "I understand from the regional health authority that the tendering companies were selected under the EC- GATT arrangements." By 15 May 1987, the Secretary of State had received an audit report which, in my view, made it crystal clear that EC-GATT arrangements had not been followed. How was it, then, that the Minister told the House that they had been followed? To quote those magic words, "I understand from the regional health authority".--[ Official Report , 15 May 1987; Vol. 116, c. 431 .]

In other words, to give a frankly misleading impression to the House the Minister chose to use assurances of which I am told that there are no written records, but only verbal assurances, to contradict the audit report that he had received.

In January 1988, my hon. Friend the Member for Leyton (Mr. Cohen) asked the Secretary of State:

"if he will indicate the extent and the reasons for the overspend by the Wessex regional health authority on its computer system". The Minister replied:

"I have been assured by officers of Wessex regional health authority"--

Column 961

those wonderful words again--

"that their computer programme is not overspent".--[ Official Report , 6 January 1988; Vol. 124, c. 199.]

Again, that may not have been factually untrue. However, the Secretary of State had received the report of November 1988 telling him that the programme was in great financial difficulties and that a further £8.8 million, which had not yet been identified, would be required to carry out the programme. Ministers have been all too willing to shelter behind the words of the health authority to prevent Parliament or anyone else wishing to ask questions from knowing what was going on.

It is a sorry story. Many of the issues to which hon. Members have referred today have occurred in quangos and in other bodies at arm's length from Government and the audit service has picked up what has gone wrong. Wessex provides a well-documented case in which successive Ministers were regularly informed about what was going on, but failed to act. To my mind, that makes that situation worse than any of the others to which hon. Members have referred today. That failure has led to a great and unnecessary delay in acting to improve the procedures in the health service. The Public Accounts Committee noted with reference to events that took place in 1986: "We are concerned that . . . the Regional Health Authority . . . involved Andersen Consulting in appraising available computer software to run on the preferred bidder's systems. We note that subsequently . . . the contract . . . was awarded to Andersen Consulting at an inquorate meeting of the Authority".

We commented that the management executive accepted the Committee's concerns. The Treasury response stated that a new model of public procurement procedures was available for general use in early 1994. It took the Public Accounts Committee to publish the audit report in 1993 to get the NHS management executive to produce new guidelines for 1994. Ministers knew what had gone wrong in Wessex since February 1987. The fact is that no action was taken for six years to tighten up the procurement of computers until the PAC published its report. That is utterly unacceptable.

The lesson from Wessex is that nothing changes unless the spotlight of publicity is shone on one of the problems. If the spotlight of publicity is not on it, or if misleading answers can be given to perfectly proper questions, nothing will happen. That is the real lesson of Wessex and I have yet to be convinced that that lesson has been learnt.

8.33 pm

Ms Dawn Primarolo (Bristol, South): I thank my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) for his full explanation at the beginning of the debate and I pay tribute to his work and to the work of the members of the Public Accounts Committee. I welcome the Financial Secretary to the debate. I understand that this is his first debate on the PAC reports, as it is mine. He has had three months to consider the reports; I have had but three hours. However, I feel that in sitting through this interesting and educational debate, I have learnt a great deal already about the pathways of public money and about the odd cul-de-sac into which it finds its way.

This afternoon, we heard explanations of what went on in the Welsh Development Agency. We have heard about its rather interesting and obscure redundancy payment schemes, its car leasing schemes and its eight-month

Column 962

gardening leave schemes, which seemed immensely attractive at about 6.30 pm. We heard about the difficulty in getting information from various bodies, about the scandalous state of affairs with the emergence of the Welsh WIZARD and about the disappearance of £800,000 in privatisation discussions.

We heard again about the West Midlands regional health authority and about Wessex regional health authority. My hon. Friend the Member for Southampton, Itchen (Mr. Denham) has done a great deal to bring into the spotlight for consideration the concerns about public money and where it is going. Millions of pounds of patient care money was frittered away in ways that have been wholly condemned by hon. Members of all parties.

The problem speaks volumes about the changes in the national health service, with the development of the new accounting units and the difficulty of keeping track of all those units. The British Medical Journal of 22 January this year drew two conclusions from the Committee's findings. The first was:

"the NHS should review its reliance on outside consultants, the most obvious beneficiaries of the changes"--

in other words, the most obvious people to have gained from the public purse. The second conclusion was:

"management buy outs clearly carry the danger that those participating will give priority to their own interests over those of the NHS. The two points are linked and lead to a more general conclusion. To the extent that the NHS hives off activities by contracting out managerial functions, there is a risk that it may undermine its own esprit de corps."

The public sector ethos is an elusive ethos, which can too easily be damaged and destroyed in the changing system.

We heard about the fraudulent payments in the British Council, about the Pergau dam proposal and spending, about the role of the accounting officers and about the lack of flagging up of the accounting officer's letters to warn that there were problems beyond fraud. I welcome the Government's proposal to change the way in which those letters are interpreted.

We heard about the Development Board for Rural Wales, with the interesting allocation of tenancy rights, the secret hiving off of money and the maladministration. As the hon. Member for Uxbridge (Mr. Shersby) pointed out, the Committee has produced 49 reports, a huge amount of work, detailing time and again the problems being experienced with the accountability of public money.

The hon. Member for Orpington (Mr. Horam) made some interesting and important points about the present and future roles of the PAC in scrutinising the spending of public money. I hope that his points and all the other contributions will be taken up. My right hon. Friend the Member for Swansea, West (Mr. Williams) pointed out the structural problems that now exist in pursuing public money into the places that it funds.

There were the problems of the Scottish Buses experience and the trust ports. My right hon. Friend the Member for Llanelli (Mr. Davies) was right to be fascinated by computers and the apparent obsession with them in all those contracts. I was interested in his interpretation of contract law and to hear that it would appear in many cases that those who broke the contracts were those who received the compensation. My hon. Friend the Member for Warrington, South (Mr. Hall) again returned to the question of public accountability and

Column 963

how we ensure that that money is accountable, a point that was echoed powerfully by my hon. Friend the Member for Cannock and Burntwood (Dr. Wright).

The reports culminate in the excellent proposals in the report "The Proper Conduct of Public Business". Let us not be misled. The report tells us in the first paragraph:

"In recent years we have seen and reported on a number of serious failures in administrative and financial systems and controls within departments and other public bodies, which have led to money being wasted or otherwise improperly spent. These failings represent a departure from the standards of public conduct which have mainly been established during the past 140 years."

The late leader of the Labour party raised those points in the House of Commons and they have been misrepresented in some respects in this debate. The report said:

"These failings represent a departure from the standards of public conduct which have mainly been established during the past 140 years."

That departure has occurred because of the structural changes. It seems that the pursuing and understanding of those changes centre around the expansion of quangos, the next steps agencies and privatisation and contractorisation. I am not going to enter into a debate this evening about whether it is right or wrong that those organisations exist. We have made clear the view of the Labour party. Today's debate is about how the fragmentation of so much of the structure of Government has led to a lack of accountability and how we can continue to ensure that public money is accountable. With the proliferation of accounting units, it is now very difficult for the Public Accounts Committee, for the National Audit Office and for the Comptroller and Auditor General to ensure that that money is always accountable. Parliament needs to address itself to the questions raised in the reports about how we now ensure not only that the Government take note of the proposals but that public money can always be seen and how it is spent can always be known. The hon. Member for Bristol, North-West (Mr. Stern) made some interesting observations about the standards of public accountability and the ability of the public sector to run institutions, and compared public--unfavourably--with private. I was interested in how he could manage that because there are no direct comparisons between the rigorousness of assessments of public and private institutions, considering how private institutions run themselves. Indeed, the PAC does not have the right to follow the spending of public money through the contracting process into private companies. In the spirit of the debate this evening, we need to look again at those proposals and the remit of the Committee.

If public money is to be accountable, the organisations which have that public money need to be accountable and need to be called to account by the House. The Public Accounts Committee reports, 49 of them, demonstrate clearly that that is not the case. The eighth report, "The Proper Conduct of Public Business", shows how we can begin that process. It catalogues inadequate financial controls, failure to comply with rules, inadequate stewardship of public money and assets and failure to provide value for money. That is a catalogue of shame and disaster. I hope that the Government will take on

Next Section

  Home Page