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Mr. Charles Wardle (Bexhill and Battle): One minute, Chairman.
Mr. Davis: The Minister sees the discipline that is exercised in our Committee being applied to the Chairman, for a change.
The Prime Minister announced only recently the development of public service agreements to focus on outcomes, examining the implementation of policy in the round. He rightly pointed out that the public care little about who delivers a service--whether it is delivered by local or national Government--and they do not care at all about interdepartmental wrangles that might occur. They care about the effective delivery of service. The Prime Minister calls that joined-up government. I prefer to call it performance-driven government, because that is what matters.
Performance measurement has the potential to be the great governmental reform of this era. It is not a party political issue. Several Governments around the world, most famously in New Zealand, have undertaken initiatives on performance measurement. It has been a major component of speeches made by the leader of the Liberal Democrats. It was started in this country some years ago by the previous Administration in the "Competing for Quality" White Paper and other initiatives. It will continue under this Government with the introduction of resource accounting, public service agreements and specific initiatives in health and education.
There is wide acceptance of the value of performance measurement, but there are dangers, too. Public performance measurement will be effective only if the information that it delivers is of iron-clad integrity and is seen as such by the public and the public sector managers whose successes and failures are judged by it. The temptation to bias performance measurement for party political interest will be enormous, but must be resisted if the reform is to achieve its potential. The introduction of resource accounting illustrates the point.
Resource accounting is the most important development in public accounting for almost a century and a half. It will introduce commercial-style accrual
accounting for central Government Departments and, most important, it will include analysis of expenditures by aims and objectives, relating them to outputs where possible. It is due to take effect this year and will impact directly on the measurement of performance. Our 67th report on resource accounting and resource-based supply explored in some detail the implications of this.
In our view, if we are to have good, clear accounts for the public sector, we also need a similar system of good, clear performance information to go with it, but Departments must identify the right measures and targets for their performance--measures that will properly serve the needs of the Departments, the Treasury, Parliament and, of course, fundamentally, the public.
The political will seems to be there. There is scope for greater focus on performance in Government policy with more tangible accountabilities. Information technology has developed to provide a new, powerful tool for collecting and evaluating information which can be used to make these accountabilities real and catalyse significant improvements in performance. However, if we are to believe in this, we must ensure that the information we receive is seen and accepted by all as proper performance information, not political propaganda in any sense. This requires independent validation of performance measures. The proper way forward would be for the Comptroller and Auditor General and his staff at the National Audit Office to do this and to report to Parliament regularly.
The National Audit Office is developing an appropriate validation methodology for setting, compiling and presenting the output and performance analysis. The Public Accounts Committee should be looking forward to regular reports from the Comptroller and Auditor General on the validation of performance measures, but we are disappointed that the Treasury has not yet committed to independent validation. At present, validation will be left with the appropriate Minister, and I am afraid that the public will view that with the same scepticism that they might view a school report written in the child's own handwriting.
Parliament should have an input into the debate on performance measures that will be adopted and should have independent confirmation that the targets set are being achieved. The importance of this cannot be overstated. It will affect the service that constituents get for the money they pay. It will be the way of the future for holding the Government to account, and Parliament's rights and responsibilities should be clear from the outset. Done badly, it will corrode the citizen's faith in government; done well, it will materially improve government, and continue to do so far into the future.
Gladstone, the founder of our Committee, once said that it was the duty of government to make it difficult for people to do wrong, and easy for people to do right. Properly executed, properly audited performance measures will make it difficult for the Government to do wrong and easy for them to do right.
I urge the Minister to consider carefully and to accept that all Government performance measures should be subject to independent audit by the Comptroller and Auditor General of this Parliament. It is a crucial part of Parliament's duty to scrutinise the actions of the Executive and to hold the Executive to account. Accordingly, in measuring the delivery of public services
to all our constituents, it should be Parliament, through its instrument--the National Audit Office--which should be the final arbiter of what is a true and fair measure.
Mr. Deputy Speaker (Mr. Michael J. Martin):
I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Act:
European Parliamentary Elections Act 1999.
Mr. Charles Kennedy (Ross, Skye and Inverness, West):
On that happy note--from our point of view, and from that of those who share common interest with us in these matters--I am grateful for the opportunity to contribute to this debate, at not too great length, I hope, and to follow the distinguished Chairman of the Public Accounts Committee whom I congratulate on his speech. More important, I congratulate the right hon. Gentleman, his colleagues, the civil service and all the other staff on the excellent and--as is evident to anyone who has been to the Vote Office to collect the papers--the voluminous outpourings of the Public Accounts Committee.
The motion stands also in the name of my right hon. Friend the Member for Caithness, Sutherland and Easter Ross (Mr. Maclennan), who is a long-serving and senior member of the PAC. On his behalf, I convey his apologies for not being present. Owing to arrangements made before the recess and before the change in the timing of our sittings, it is impossible for him to be present for the debate.
I shall address only the 42nd report, which deals with the Skye bridge in my constituency, and the Treasury memorandum in reply. I thank the Chairman of the Public Accounts Committee, who in the course of his duties has been courteous and concerned to deal directly with my constituents. They have, over many years, raised persistent financial, political and legal concerns about the entire contract.
The protesters welcomed--as I do--the PAC report and its scathing appraisal of the Government of the day and the sad and sorry background to the contract and to the difficulties that have resulted. Although the present Government inherited this mess--it was not of their making--at the end of my remarks I shall put one or two thoughts to the Minister, which I hope she will take on board. If she cannot reply today, perhaps she will explain after the debate what the Government see as the way forward.
The history of the contract goes back a long way. It covers the stewardships of Malcolm Rifkind, Ian Lang and Michael Forsyth as successive Secretaries of State, as well as that of the present incumbent of that office. The Public Accounts Committee rightly inquired into the background. The most telling conclusion of its generally damning report was that the terms on which the bridge was provided, including the real rate of return to equity investors in the project of 18.4 per cent. a year, were not "determined competitively." In a casino, 18.4 per cent. is a pretty good rate of return if it has not been determined competitively.
The Committee felt that it was not possible to be satisfied that the costs of the bridge were reasonable. It questioned whether value for money has been secured for the taxpayers as well as the toll payers who have to foot the bill. Anyone who has visited that part of the United Kingdom will know that it is a short crossing from the mainland at Kyle of Lochalsh to the south end of the Isle of Skye. The single toll fare for an average car with only the driver in it is in excess of £5. An astronomical burden is being placed on a fragile community whose members have low incomes compared with the national average. The bridge is an important gateway to the western isles of Scotland, which have an even more fragile economy. The charges applied to commercial vehicles are quite astronomical. That is the background to this vexed issue.
The Treasury minute was produced by the Scottish Office Development Department--which in this context sounds like a contradiction in terms. I do not believe in shooting the messenger, but I am concerned that the civil servants who advised Ian Lang, Malcolm Rifkind and Michael Forsyth are, in large measure, the same civil servants who are now advising the present Secretary of State. I am not surprised that many of them are not exactly volunteering to come forward with their hands up and admit that they made a complete and utter dog's breakfast of negotiating the contract--at such an advantageous rate to the developer and such a disadvantageous rate to my constituents and the users of the bridge.
The minute that the Scottish Office Development Department produced in response to the PAC report can at best be described as casual in the extreme. It says:
Not only is the question whether the taxpayer has been well served worthy of debate, but we have reason to question the National Audit Office figures on which the PAC report was based. Those figures were based on the developer's financial project model for the contract, yet the financial model differs substantially from the figures in the accounts of Skye Bridge Ltd.
The financial model shows the developer's input for 1991 as £12.3 million, whereas the audited accounts show the developer's contribution for 1991 as £0.6 million. In 1991-96, the financial model, which the NAO accepted, shows the developer's costs as £27.3 million, whereas the audited accounts show the costs for the same period as only £19.3 million. If the model overplays the developer's contribution, equally, it underplays the cost to the taxpayer. The model shows the taxpayers' contribution for 1991-96 as £10.6 million, whereas the actual contribution revealed in the accounts is £11.6 million.
It is not our function to question the accuracy of the NAO's figures. My argument is not with the NAO, but the fact that it has had to accept figures provided by the developer and has not apparently had access to or checked the audited accounts is cause for serious concern. The developer's version of the figures seems to have been seriously inaccurate. It is hardly surprising that all the apparent errors worked in the developer's favour.
The NAO, not surprisingly, is as confused as everyone else by the fog surrounding the funding of the Skye bridge contract. For example, figure 10 on page 45 of the audit report gives the construction costs as £20 million, whereas figure 13 on page 49 of the self-same report gives them as £27.3 million. This issue is riddled with difficulties, complexities, contradictions and confusions, so it is no wonder that the contract has led to the problems that are before the Scottish courts.
For years, I have pursued this issue with four Secretaries of State in the House, in the Scottish Grand Committee and in Adjournment debates. There is a serious case for the Treasury taking the matter by the scruff of the neck before Scottish devolution and before it becomes the remit of the Scottish Parliament, and conducting a properly independent examination of the entire financial background to the Skye bridge contract. The cost to the public purse is a damn disgrace, and this major scandal must be investigated.
I am not satisfied that I am consistently receiving information or the relevant answers to my questions from the institution of the Scottish Office--I am not referring to the Secretary of State personally. Moreover, the Treasury should have a searching look into the effect on the public purse before responsibility for the matter is passed to Edinburgh following devolution.
Skye Bridge Ltd--which is essentially the Bank of America--and its agents are allowed to recover £23.64 million in tolls over the lifetime of the contract. That is not as simple as it would seem--nothing is simple in this world. The toll revenue is counted in constant 1991 prices, discounted at 6 per cent. a year to a 1991 base year. That acts as a sort of negative form of compound interest. In year one--1991--£1,000 in tolls would count as £1,000 off the debt. If it is discounted by 6 per cent. each year, by year 10, the compounding effect would mean that £1,000 in tolls to count as only £573 off the accumulated debt. Therefore, a great deal more than £23.64 million in real terms would need to be taken to clear the debt, which is hanging like an albatross around the community's neck.
It gets worse. The cost of collecting the tolls is running at £750,000 per year. In other words, about £1.40 of the cost of each crossing is used to service the cost of collecting the toll. On present prices, over a 25-year period, that comes to the unbelievable figure of £18.75 million. As I have said, that is just to collect the tolls, not the value of them.
Why does it cost so much? Surely, that figure knocks a huge hole in any repayment of the notional figure of £23.64 million. Can one assume, therefore, that £23.64 million is a net figure after operating costs have been taken into account?
Taking into account both those points, the Minister should ask the Treasury to estimate what will be collected in tolls before the net figure of £23.64 million, counted in constant 1991 terms and discounted at 6 per cent. a year, is cleared. Will it be £60 million or £70 million? We have never been given an accurate figure.
The toll takings should be made public. A few months ago the national Mod, the highlands and islands equivalent of the Eisteddfod in Wales, took place on the Isle of Skye. It is a huge cultural celebration and a major event in the Scottish calendar. As one would expect, there was a huge influx of people for that week. Out of interest, I wrote to the toll company to find out how much more was taken in tolls given the vast influx of people for that event at the end of the summer season. I received a courteous reply saying that the company does not reveal its figures. As the local Member of Parliament I am not allowed to know how much the company made out of that major national event. That is a disgrace. A few days ago, we were debating freedom of information. I look forward to that legislation because private companies such as the toll company, which have signed a deal with the Government of the day at a cost to the public purse, should not be immune from having to declare their profits and takings in the same way as any other company in a public position.
My constituents and the House have a right to know how much has been collected from the public purse and how much has been paid to the private developer. Currently, we only have estimates of how much is being taken in. We have every right to know.
The House will be pleased to know that I have now reached my final point. It concerns matters that are currently before the Court of Session in Scotland. I know that the Clerk to the Public Accounts Committee is concerned that we should not breach the sub judice rule. I can assure you, Mr. Deputy Speaker, and the Chairman of the PAC that I have no intention of doing that.
There is a case before the Court of Session now. It was heard on December 10 and 11. It involves one of my constituents questioning the legality of the toll regime. We are awaiting the final written judgment from the court, which is expected sooner rather than later. It is an interdict that has been brought in a Scottish court and, under Scots law, the sub judice provisions do not apply as it is not a criminal case and it has already been aired publicly in court. The only basis for applying the sub judice rule would be the basis of prejudice against the respondent, my constituent. I can place on record the fact that he has waived any right to such privilege and he is happy for me to discuss one or two aspects of the case.
There has been a civil disobedience campaign associated with the toll regime. My constituents have been subject to criminal prosecution on the basis of a toll order that was never published and an assignation statement that only ever appeared with a draft order and was completely inaccurate by the time the actual order was made. That cannot be right. The Secretary of State gave his written approval. The then Secretary of State wrote to me in December 1997:
I shall now come to the nub of this sorry saga--which represents a ludicrous affront to public finance--to which the Public Accounts Committee draws attention in its report. Huge sums of public money went into the Skye bridge project. My constituents and others are now being forced to pay massive tolls against their wishes. In such circumstances, surely the public and Parliament have a right to know the truth about such vital matters as ownership. The previous Government placed out-of-date documents in the official records of Parliament without any amendment to show the change in ownership details. As a result, I believe that that Administration was guilty of downright deception.
The Scottish Office is continuing to maintain that everything is wholly above board, proper and correct, despite the change in ownership which was never properly notified, the fact that the document was never made available and the fact that the tolls are being collected by a company different from that specified by the Secretary of State at the time. That strikes me as entirely implausible.
2.9 pm
"The Department notes the Committee's comments. Given the low level of traffic, high dependency on tourist traffic and the novelty of the project"--
note that word "novelty"--
"the Department could not have reasonably expected to secure guarantees. Provision had to be made in the contract to cover the possibility of a longer toll period, and tolls which might have exceeded the original target, although the Department was confident at the time of the negotiations that these eventualities would not arise."
That is very reassuring. What the minute is saying in civil service speak is that the Department was making it up as it went along. This project was the forerunner of the private finance initiative programme for the United Kingdom as a whole. It is no wonder that we have ended up with the political and economic fiasco that has been the subject of so much of my in-tray for the past five years.
"The assignation of rights to charge and collect tolls is contained in the Concession Agreement between the Secretary of State and Skye Bridge Tolls Limited, the concessionaire. The Secretary of State was aware of and agreed to the appointment of Miller . . . Joint Venture to collect tolls as part of the management and operation of the bridge."
The tolls are collected by Miller Civil Engineering. That company--I have tabled written questions about this--is apparently registered as dormant at Companies house. It collects the tolls on behalf of MDJV, of which there is apparently no record at Companies house, on behalf of Skye Bridge Tolls Ltd, which is wholly owned
by the Bank of America. Clause 23 of the concession agreement states that there will be no change in the financial arrangements without the written consent of the Secretary of State. No written consent has ever been produced in public at any of the legal hearings that have been taking place in Edinburgh. One can only assume that it does not exist.
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