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4.23 pm
Mr. Alasdair Morgan (Galloway and Upper Nithsdale): I wish to refer to the 42nd report of the Public Accounts Committee, which deals with the Skye bridge. I shall be relatively brief, as many of the issues were covered by the hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy).
The Skye bridge was the first private finance initiative project--the former Tory policy has apparently now become new Labour orthodoxy and been re-branded public-private partnership. The handling of the project was a disaster which the Committee rightly criticises. A few quotes from the report will illustrate that fact. The report states:
"This was a serious omission in their evaluation of the project which leaves a question mark over its value for money . . . Toll payers' interests were insufficiently protected . . . We are not satisfied that the costs of the bridge are reasonable . . . This was contrary to good practice, unfair and imprudent . . . It is highly unsatisfactory . . . A question mark must remain over the extent of value for money obtained."
14 Jan 1999 : Column 501
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The project was a disaster which, thankfully, the Government responsible paid for, together with their other mistakes. One might argue that at least we got a bridge at the end of it. The Public Accounts Committee recognises that fact in its first conclusion, which states:
"The Department achieved their primary objective, the provision of a privately financed tolled crossing to Skye."
- "The Scottish Office Development Department is pleased that the Committee recognises that the bridge brings benefits."
The Labour party in opposition peddled the story in the highlands and islands that it would abolish tolls when it came to power. However, there has been only a reduction in tolls--to which the Committee refers in paragraph 17 of its report--for frequent users of the Skye bridge. If one is prepared to shell out £26, one can get one's tickets at a discount.
Many car owners on Skye, in my constituency and throughout rural Scotland would not own a car if they lived in an urban area. They cannot afford to run their cars: they do so because it is a necessity, as sufficient public transport does not exist. A disproportionate part of their family budgets is devoted to running a car. The annual MOT test can cause a family budget crisis if the car fails to pass. It is claimed that £26 is somehow a concession for those people, but I think that the charge is most unfair as it bears so heavily on those who can least afford to pay. The Government must do more work in order to bring the benefits of a really low toll to the people of Skye and the highlands and islands. Why should the people of Skye and the highlands pay for a defective scheme and for the mistakes of the previous Administration?
In 1997, this Government were prepared to write off £62 million in debt on the bridge across the Humber and to reduce interest payments on the remaining debt. Will the Government explain why the people of Skye are somehow less deserving of having their debt written off? After all, the fee for a return crossing on the Humber bridge is £2.60 and it is £11.20 on the Skye bridge.
Mr. Charles Kennedy:
I have already had my shout, so I am loth to intervene. However, I must raise a point about the Government's concessionary package--which was much less than Labour implied at the time of the election. I know from my own experience that those in the poorest categories, particularly the elderly, might make the crossing only two or three times a year, mostly to travel to Inverness for hospital visits. Forcing such people to purchase a book of 20 tickets for £26 adds to the disadvantage and discrimination that they already suffer.
Mr. Morgan:
I thank the hon. Gentleman for making that valid point. Added to the cost of the crossing is the substantial cost of petrol in rural areas, which has not been helped by some of the Government's policies. It is a
The Government have said that there is no funding available to buy out the concession contract. In light of the Committee's report, do the Government consider that a variation of the windfall tax might be appropriate in the case of the excess profits that are clearly being made by the concessionaire? Would it be appropriate to use such a tax to buy out the contract? The Bank of America now owns 97 per cent. of the bridge and is presumably clawing back 97 per cent. of the profits from its concession. It is currently being sued in the United States to the tune of £1 billion by the city of San Francisco and some 250 other local authorities in that country. There could be no more apt a target for a windfall tax.
The report also says that there is no guarantee that the toll will be removed even once the debt is repaid and the concession ends. Will the Government now give a guarantee in that respect? The Scottish Office's response to the part of the Committee's report that broached that subject was fairly opaque and was included in a series of responses that the hon. Member for Ross, Skye and Inverness, West described as casual.
The hon. Gentleman also mentioned that Professor Robert Black of Edinburgh university said last week that the fact that the assignation statement identifying the authorised concessionaire had not been published along with the toll order was a fatal flaw. The legal basis for collecting tolls now seems to be on shaky ground. Surely the legitimacy of the whole operation urgently needs investigating, as the hon. Member for Ross, Skye and Inverness, West has already suggested. Once the result of the current action before the Court of Session in Edinburgh is known, that investigation must be set up as a matter of urgency.
We need a thorough inquiry into the complex web of financing and contractual obligations. The inquiry must be conducted in a transparent manner because throughout the saga we have lacked any such transparency. As every year goes by, the public and hon. Members become more and more confused about the matter.
I turn finally to another matter that has been mentioned in the debate. The Chairman of the Committee, the right hon. Member for Haltemprice and Howden (Mr. Davis), referred to the nature of scrutiny arrangements under the new Scottish Parliament. I believe that the system will increase the scrutiny of public expenditure in Scotland. No United Kingdom committee, even one with the appetite for work that the Public Accounts Committee seems to have, could hope to give the amount of scrutiny to Scottish expenditure that it will receive from a committee of new Members of the Scottish Parliament, who presumably will be eager to call to account the civil servants in St. Andrew's house. That has too seldom happened in the past.
The hon. Member for South-West Hertfordshire (Mr. Page) followed the same line, but his suggestion that the Public Accounts Committee should continue to investigate activities in the devolved departments in Scotland is a recipe for chaos and conflict and would be
deeply resented in Scotland. My party wants the new Scottish Parliament to work effectively, but it will not be assisted in that if Committees in this House interfere.
Mr. Page:
I made that suggestion only in regard to the extra moneys that will be paid by the English taxpayer to the Scottish taxpayer.
Mr. Morgan:
I do not think, Mr. Deputy Speaker, that you would allow me to rehearse the argument that Scotland is not subsidised by the UK taxpayer and that, if anything, the cash flows in the other direction. I would be willing to have an argument about all kinds of expenditure against all kinds of income which I think we would win, as we have done in the past, but I shall move on.
Mr. Geraint Davies (Croydon, Central):
I, too, thank all those at the National Audit Office, Sir John Bourn, the Committee Chairman and, in particular, my right hon. Friend the Member for Swansea, West (Mr. Williams), whose experience was helpful to all members of the Committee.
I also congratulate the new Financial Secretary on her appointment; I am sure that she will bring a wealth of experience to her new role. Last night, I hosted a forum of 50 businesses in the House, which was attended by her successor, by Lord Clinton-Davis, and by the Minister for Energy and Industry, who all sang her praises. She will bring a businesslike approach to her new role.
It is a great privilege to be a member of the Public Accounts Committee because it is the premier Select Committee. Other Select Committees receive minuscule support in terms of the numbers of staff they have compared with the National Audit Office. That is right, because there is £5,000 of Government expenditure for every man, woman and child in the country. It is of key importance that Governments deliver value for money. The new Government, with their focus on outputs and value and the public service agreements that have been referred to, are in favour of that approach. It is important that we are pushing in the same direction.
My background is in multinational companies, where I managed product development, marketing and advertising for Europe and Britain before starting my own businesses. I was also leader of Croydon council, the largest council in London. I came to the Committee with those perspectives. I was surprised that Departments did not adopt proper accounting techniques and, in particular, that they had no apparent idea of cashflow or asset management. That is now being changed through the introduction of resource accounting, which is welcome. Through more rational asset management in individual Departments, we shall be able to make great savings and create opportunities for the taxpayer.
Local government is often regarded as the poor relation of central Departments, but councils already perform asset and capital management and use performance indicators, which are now being included in public service agreements. Previous speakers have mentioned parliamentary accountability for that expenditure. Councils are audited by the Audit Commission, but there is not a Select Committee considering their expenditure. Perhaps the Environment, Transport and Regional Affairs Committee should do that, as the Chairman of that Committee has suggested. Other hon. Members have mentioned the lack of accountability of the Housing Corporation, housing associations and quangos and the need for more rigour in European expenditure to bring greater confidence as we move towards a new Europe.
Hon. Members have referred to the accountability of those who are meant to be responsible for expenditure--the so-called permanent secretaries, who are in fact semi-permanent because, as career civil servants, they move on from a post as soon as the Public Accounts Committee catches up with them. We need to consider a system of accountability for those individuals. A problem in many of the Departments that we have studied is that many civil servants have not had sufficient financial training. Departments do not have enough accountants and financial or commercial experts to focus on value for money and outputs. There are great people in the civil service, but we need to strike a commercial balance.
The Government are considering more partnerships with the private sector under the private finance initiative, which the Committee has examined. It is crucial that when the public sector engages with the private sector, the former is enabled to get the best deal through commercial negotiation. I look forward to a new era of secondment and switched experiences in which we can ensure that we get the best value for the taxpayer.
Several hon. Members have referred to privatisation, and I shall not dwell on the points that were made so well by my hon. Friends the Members for Tynemouth (Mr. Campbell) and for Shipley (Mr. Leslie). The issues considered by the Committee are not political; they relate to management and to getting the best deal for the public, but there is a grey area about when timing becomes policy.
As has been said, different people have different views on privatisation, but let us assume for a moment that we agree with a given privatisation. If that is so, we have to accept that timing is important in respect of value for money. If rolling stock suddenly has to be sold before a general election, as was the case, what happens to value for money for the taxpayer? There is a false sale, which means a lower price. The rolling stock cannot be sold in stages so the market cannot be tested, and, even more crucial, the people who thought that there might be a Labour Government--wise people knew that there would be--wonder what the commercial value of the privatised rolling stock of a formerly nationalised railway would be under a Labour Government.
Some people might think that a Labour Government would not want to encourage that, but because the previous Government were hastily pushing civil servants into the premature sell-off of railway stock, what happened, among other things, was that the price was deflated but later took off in a real market and was then exaggerated by the political changes. In the interests of the Government and the taxpayer, the sale should have
been delayed for the sake of value for money, instead of being pushed forward for ideological reasons. There is a similar story with the Ministry of Defence property, a scandal that has already been mentioned.
Public service agreements are measurable performance targets that the new Government have introduced and I shall focus on how they fit in with the activities of the NAO and the PAC. The old way of allocating Government expenditure was on a yearly basis. Every year, each Department would tell the Treasury that it wanted a certain amount of money because it had it last year and that it must have it again or there would be problems.
The new way--the third way, as it were--is for expenditure to be output-based. New money is allocated on the basis of what is to be done with it, whether what is to be done is measurable and what it will mean for the public. This involves a three-year planning phase--the comprehensive spending review--and alongside it we are to have resource accounting. It all adds up to a much more professional, strategic approach to the management of public funds.
Obviously, we have all heard about the extra £40 billion that will be spent on health and education, but the watchphrase is "investment for reform". That is what the public service agreements are about: 350 performance targets and 150 efficiency targets. We shall be able to see things coming which the PAC needs to review--for example, truancy needs to be down by one third in three years, car crime needs to be down by 30 per cent. in five years, and there needs to be 3 per cent. efficiency savings a year in the national health service.
Let us not pretend that there will not be debates over the priorities, whether there should be local variations and whether there needs to be a shift in priorities over time. However, the key point is to make it clear that we look for a return on investment in terms of the outputs that the public enjoy.
The right hon. Member for Haltemprice and Howden (Mr. Davis) mentioned in passing independent verification and scrutiny. I am sure that they will be instituted. My understanding of the current position is that they will be overseen by a Cabinet Committee, but clearly the NAO and the PAC are also well placed. The public service agreements will be linked to performance information, which will be part of the resource accounting regime. It is the view of the NAO, the PAC, the Treasury Select Committee and the Procedure Committee that the performance information in resource accounting should be independently validated, preferably by the NAO and the PAC. I hope that the Government will consider that.
Efficiency statements were announced at the same time as the public service agreements by the former Chief Secretary. I mention them especially in relation to fraud, procurement and absenteeism, which were the former Chief Secretary's focus in this instance, and to the work that the PAC has undertaken in the past year or so.
As has been said, the Committee recognised that there was some £900 million of housing benefit fraud, something like 8 per cent. of total spending. It concluded in its report not only that the Government needed to be fair and to ensure that the people who deserved housing benefit and were entitled to it in fact received it, but that they had a robust system to deter fraud.
Benefit interaction and confusion provided the opportunity for benefit fraud. In particular, the Department of Social Security and the Benefits Agency failed to control claims for income support and jobseeker's allowance--people applied for housing benefit at the same time, and the resulting gateway led to enormous benefit fraud. The problem is being tackled, and we should pay tribute to the work of the NAO and our Committee in bringing the problem to the fore. The Government welcomed what the Committee said.
The Government spend something like £20 billion on procurement. That is big money, and it is important that if we can make savings on Government purchases, we do so. In our report on the Ministry of Defence's stores management, we identified that for every £1 million of expenditure, between £30,000 and £100,000 could be saved or, to look at it another way, was lost because stores were not issued directly to the people using them. Again, that is being taken on.
As for NHS supplies, we examined the need for systematic analysis of price differences--the price of items being supplied other than to the NHS--in a bid to drive down supplier costs. Indeed, we are interested in the development of various new procurement techniques, be they linked to the PFI, or be they procurement cards, the streamlined purchase of something like 1,750,000 low-value goods or electronic procurement.
As hon. Members will know, the target is that something like 90 per cent. of routine items should be electronically procured by March 2001, and a model is being devised for procurement excellence. There are also Ministry of Defence smart procurement initiatives and a joint departmental strategy. All these issues are key to the Government's value-for-money strategy and were examined by the NAO and the PAC.
Sickness absence is a problem that the Government need to tackle. The Committee did some work on the Metropolitan police service whose sickness average is 14.4 days a year. One day costs £6.3 million, and the implementation of some of our recommendations has already led to various savings.
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