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4.48 pm
Mr. Geoffrey Clifton-Brown (Cotswold): I congratulate the hon. Lady the Member for Hornsey and Wood Green (Mrs. Roche) on her appointment as Financial Secretary. With the introduction of the euro, she takes over the job at a challenging time. I wish her well in that task, because it will be vital for all of us that she gets it right. Like other members of the Public Accounts Committee, I pay tribute to the Comptroller and Auditor General, Sir John Bourn, for the excellent job that he does
in charge of the National Audit Office. As a member of the Public Accounts Commission, which sets the budget for the NAO, he is in charge of a lean and efficient organisation. He scrutinises every area of public expenditure extremely well.
I should also like to pay tribute to the Committee Clerk, Ken Brown, and his staff, who order our affairs with meticulous efficiency and distribute the paper work on time and in the correct order. Many hon. Members--[Interruption.] Sorry, I forgot to pay tribute to my Chairman for his outstanding efficiency and courtesy. I would have been struck off the Committee if I had not done so. Please, Mr. Chairman, call me early and allow me to speak at great length at the next Committee sitting.
Many hon. Members have referred to the Committee's effectiveness. The ideal would be for the Committee to have no work to do, because that would mean that there was no misappropriation of taxpayers' money. The Government would set their departmental spending priorities and each Department would draw up its budget and present the relevant motion to Parliament, which would approve it or not. Supplementary and excess votes would become an extreme rarity, and retrospective Treasury approval would be non-existent.
Perhaps there is some light at the end of the tunnel. We may be able to achieve something resembling that nirvana by the introduction of resource accounting, which will be introduced in 1999-2000, and will replace the current system of appropriation accounts. Perhaps I am being over-optimistic, but I believe that its introduction is the largest change in the delivery of our public services since the Committee was established more than a century and a half ago, so we should have high expectations of it.
Will the Financial Secretary give the House an idea of when the present system of appropriation accounts will be phased out? I note that the Treasury has not asked the PAC for approval to phase it out, so no date has been set. Will she tell the House what trigger points will have to be reached in the resource accounting process before it will be safe to phase out the existing system, which has been in place for so long?
I hope that the resource accounting system will enable Parliament to obtain financial transparency from and exercise far greater control over every Department of State. Other right hon. and hon. Members have referred to the Ministry of Defence--our 23rd report in 1996-97 shows that it overspent on class I votes 1, 2 and 3 by a staggering £234 million. When the Treasury was questioned by the Committee, I asked for a note on this matter. The MOD was fined £168 million, which came out of its budget for the subsequent year. The Secretary of State for Defence prepared a report, which went to the Chief Secretary. It is a very serious matter when a Department overspends its parliamentary voted money.
Permanent secretaries, who, as accounting officers, are involved in such excesses deserve to have their promotion prospects carefully examined. They should realise that their duty as accounting officers is paramount. The right hon. Baroness Thatcher, when she was Prime Minister in charge of the civil service, instructed her Cabinet Secretary to examine the effectiveness of permanent secretaries before they were promoted. We should return to that practice.
The 23rd report criticised the financial controls at the MOD. As the hon. Member for Liverpool, Garston (Maria Eagle) said, the costs on the Waltham Abbey Royal
Gunpowder Mills project escalated out of control by more than £10 million and retrospective Treasury approval was sought. That is an extremely rare occurrence--it has happened only three times since 1992. Some sanction should have been applied against the responsible MOD officials.
Worst of all, that report highlighted the fact that between 1988 and 1996, a staggering £50 billion was passed through uncontrolled suspense accounts. There were 2,705 suspense accounts, and £40 million had to be written off in 95 of them, including £19.5 million through the Army pay disbursement suspense account. The operation of such financial controls in a major Department of State are a disaster, and the accounting officers should be accountable for such gigantic errors.
I wonder whether the Financial Secretary can tell us whether the resource accounting shadow programme is on track. The programmes were supposed to be completed by 31 December 1998 so that a full shadow financial resource account could be produced by the end of the financial year on 1 April 1999. If the implementation of that process has slipped, for example in the Department of Social Security or the Ministry of Defence, which are the most likely candidates, it will be difficult to produce that first shadow resource account. I should be grateful if the Minister would give us some idea about that.
Other hon. Members have mentioned the fact that devolution will change the role of the PAC. That may be a good thing, but I am concerned that there should be no underlap or overlap between the current PAC functions and the functions that will be carried out in the future by the regional audit offices. We must watch that carefully. I am sure that my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis), the Chairman of the PAC, would be only too pleased, if asked, to give help and advice about how the procedures could be carried out in those auditing bodies.
As has already been mentioned by right hon. and hon. Members, we have carried out some important regional surveys. For example, our 44th report points out the difficulties with the payment of disability allowance in Northern Ireland where as much as £17.8 million out of a total of £250 million, was incorrectly paid out in benefit. Such scams must be brought to the attention of the House and it is important that the Northern Ireland Grand Committee is properly able to examine such matters.
Other hon. Members have mentioned the 32nd report which says that 17 per cent. of NHS bodies in Scotland are not confident that they will be millennium compliant by 31 May 1999. My hon. Friend the Member for Bournemouth, East (Mr. Atkinson) spoke at length on millennium compliance. A total of £56 million will be required to put that problem right. I hope that I am not unlucky enough to be on a life support machine in a Scottish hospital on 31 December this year or, if I am, I hope that it will continue to function.
The 32nd report also deals with cataract surgery, which is a quality-of-life issue. If a cataract operation is not carried out in a timely manner it is possible to go blind. Our report found that of the completion target of 80 per cent. for day cases, only 43 per cent. was achieved. That is a staggering shortfall that should have been rectified much earlier. As a result, the NHS was unable to benefit from various savings of £1.5 million.
Although the bulk of the PAC's work is about ensuring value for money, rooting out fraud is just as important. After examining some of the latest figures today, I have a robust figure for fraud in the Department of Social Security of at least £4 billion. That is a staggering figure. Time after time in Treasury debates in the House the Government chide the Opposition and ask them to say where savings can be made when we say that their budget is unsustainable. The Financial Secretary should look at that figure of £4 billion in fraud. I shall break it down for her so that there is no doubt that it is robust.
In the Benefits Agency, the figure for fraud is reckoned to be about £2.3 billion. In housing benefit, the figure for fraud is reckoned to be £900 million although, in our later report this year, that may be coming down, and I welcome that. Gross errors in income support--that is overpayments less underpayments--account for £424 million and those relating to the jobseeker's allowance account for £167 million. That makes a total of almost £4 billion.
There are some fairly elementary things that could be done quite quickly to reduce that figure. For example, it is estimated that the loss to the national insurance fund account arising from the fraudulent encashment of giro cheques and other order books may be as high as £64 million and is certainly confirmed at £13.2 million. It would be a fairly simple process to have a system of bar codes so that we could be certain that the person cashing the giro cheque is the person entitled to do so.
I pay tribute to the National Audit Office, which last week, for the 12th year running, has qualified the Benefit Agency's accounts, and, for the 10th year running, has qualified the national insurance fund's accounts. It is a very serious matter when accounts have been qualified for such a long time. If I were one of the accounting officers at the Department of Social Security, I would be pretty ashamed of that record.
Hon. Members have already mentioned the NIRS2 computer system, which was dealt with also in the Committee's 46th report, which was produced on 1 July 1998. The NIRS2 is one of the Government's largest computer systems and should be supporting the Contributions Agency in its endeavours to make payments to pensioners. However, even today, six years after the tender was let, the agency is still having to pay out compensation to those who did not receive proper payments into their pension funds. That is an utter disgrace. The Department of Social Security should have got on top of the matter far more quickly than it did. In February, the matter will be brought before the Committee. I hope that, in line with the request of my hon. Friend the Member for South-West Hertfordshire (Mr. Page), we ask for Andersen Consulting to send a senior, answerable partner to tell us why the system has been so delayed.
We should very seriously examine fraud in the Department of Social Security. Time after time--probably four times since 1990--the problem has come before the Committee. We must devise mechanisms to ensure that real and positive action is taken when such matters are dealt with by the Committee.
My right hon. Friend the Member for Haltemprice and Howden has already mentioned the National Audit Office's other remits. When the Public Accounts
Commission set the National Audit Office's budget, the Comptroller and Auditor General made it quite clear to us that he was completely dissatisfied with the fact that the European Court of Auditors, based in Brussels, has greater access to non-departmental government bodies and executive agencies than our own National Audit Office. The Government should rectify that anomaly forthwith.
The standard of our NAO is considerably higher than that of the European Court of Auditors. In our 35th report, which hon. Members have already mentioned, we state that fraud in the Community is a serious matter. I am not surprised that, today, the matter has been subject to a vote in the European Parliament. Paragraph 5 of our 35th report states:
As I am dealing with our 35th report, it is worth highlighting the four major areas in which the European Community is falling short--the very subject of today's vote in the European Parliament. First, the report states that agricultural compensation schemes do not take into account movements in world prices. It is fairly elementary that they should do so. The second problem is the media's oft-quoted example of high tobacco subsidies that have absolutely no effect on improving tobacco quality. The third problem is that the recovery of customs duties are not always collected properly. The final matter, and perhaps financially most important, is the high error level in the payment of structural funds. My right hon. Friend the Member for Haltemprice and Howden has said that total errors amount to £3.5 billion per year. As we are the third largest net contributor, at £1.7 billion, the issue directly affects Parliament and the taxpayers of this country.
We should be very concerned about such matters in Europe. Will the Financial Secretary tell us what action the Government took to rectify the problems when they held the presidency last year? What follow-up has there been? If we are to renegotiate our financial arrangements with the European Commission and our Fontainebleau rebate is to be reduced, the continuing financial irregularities will be of even greater concern to us.
"We are disappointed to find that standards of financial management and accounting across the Community are still too low; and that there is evidence of waste, error and fraud in the Community's expenditure programmes."
It continues:
"we endorse the Comptroller and Auditor General's conclusion that the Commission have some way to go before they attain the quality of financial reporting expected of public sector financial statements, such as government accounts in the United Kingdom".
When our NAO has been so damning about the European Court of Auditors, the latter should consider how the former conducts its work and try to adopt some best practice.
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