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Mr. Graham Brady (Altrincham and Sale, West): The Minister will be aware that, since 1996, when Labour took control of the borough of Trafford, council tax there has repeatedly increased above the rate of inflation. If she does not know that, her hon. Friend the Member for Stretford and Urmston (Ms Hughes) will tell her. What advice would the Minister give to Trafford pensioners, whose income is to be pegged to the rate of inflation? How can they deal with a council tax that continuously rises by more than the rate of inflation?

Ms Armstrong: I wonder why the hon. Gentleman never put that question to the Conservative Government.

Mr. Steve Webb (Northavon): Is the Minister aware that in rapidly growing authorities such as my own, South Gloucestershire, schools have to educate children for free, because the data on which funding is based are so out of date? What progress is she making on using information based on the number of children in our schools now, rather than months, if not years, ago?

Ms Armstrong: We have to use reliable data, collected in a way in which everyone can have confidence. That is as true for authorities that are gaining population as for those that are losing it. The hon. Gentleman will be pleased to know that this year's settlement will reflect changes in data.

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Orders of the Day

Public Accounts

2.27 pm

Mr. David Davis (Haltemprice and Howden): I beg to move,

One hundred and thirty years ago, Gladstone looked beyond the immediate horizon of day to day politicking to set in train a package of public service reform that has been fundamental to the good governance of Britain ever since, and which has provided a model for the rest of the world to follow. That initiative helped to mark out Gladstone as one of the giants of the last century. The most important aspects of the package of reform related to financial accountability and, in particular, to the setting up of the Public Accounts Committee.

On the eve of the 21st century, the Government have the best opportunity since Gladstonian times to show similar vision and to modernise public accountability as they modernise government. In that way, they will be able to meet the ever more demanding needs of the citizen, and to reinforce public confidence in the process of government. That brings me to the centre of my challenge today: to make the House--this packed House [Laughter.]--realise that not only is financial accountability an interesting and positive force for improvement in public service, it is a central plank in our democracy. It will be every bit as important in the next century as it was in the last.

I start by reflecting on the past year. The Public Accounts Committee produced 40 reports, on matters as diverse as financial control in the European Union and the way in which the electricity regulator secured a benefit for the customer.

The number and variety of reports that we are able to produce is a testament to the tripartite structure. First, we rely greatly on the reports produced by the National Audit Office and the Northern Ireland Audit Office. Sir John Bourn, John Dowdall and their staff of experts produce a tremendous range of professional and interesting material from which we choose. The House should be proud of them and grateful to them.

The Committee Clerk, Ken Brown, and his staff cope magnificently with the volume of material that we cover. Ken offers sage counsel to the Chairman, keeps him in line and keeps the Committee's business flowing seamlessly. I offer the thanks of the entire Committee to all of them.

Finally, much is due to the members of the Committee, who co-operate well and work hard with diligence and tenacity. Their contribution, in the face of the Committee's heavy work load, makes a significant demand on their time. I do not expect to be disagreed with by Members in the Chamber today. I offer all of them my personal thanks for making my task easier.

In the past year, we have lost some valuable members. I pay tribute to my hon. Friend the Member for Cotswold (Mr. Clifton-Brown) and to the hon. Members for Reading,

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East (Jane Griffiths) and for Halton (Mr. Twigg); and in particular to the right hon. Member for Caithness, Sutherland and Easter Ross (Mr. Maclennan), who had served on the Committee since 1979. All those Members have made valuable and distinctive contributions and served the House well.

I notice that the hon. Member for Liverpool, Garston (Maria Eagle) is leaving us at the end of the debate, so I offer personal thanks to her for all the very distinctive and distinguished input that she has made to the Committee. Her contribution would augur well for a stellar future career. I shall also miss her advice on chess.

Mr. Charles Wardle (Bexhill and Battle): That is the kiss of death.

Mr. Davis: Yes; I finish off most people that way.

I welcome the hon. Members for Brent, North (Mr. Gardiner) and for Newbury (Mr. Rendel) and my right hon. Friend the Member for Skipton and Ripon (Mr. Curry), who have all joined the Committee since the last PAC debate, and who, I am sure, will be great assets to my team.

It also gives me great pleasure to welcome to the Committee the new Financial Secretary to the Treasury, the hon. Member for East Ham (Mr. Timms). He takes the place of the hon. Member for Hornsey and Wood Green (Mrs. Roche), who has moved on. This is my third PAC debate and my third Financial Secretary. The others have since been promoted, so I hope that the hon. Gentleman's new post will prove, and be viewed as, a blessing rather than a curse for him.

Let me turn to the headline figures for the year. The National Audit Office and the Committee generate substantial savings--some £365 million in the pastyear alone. Examples include improvements in the management of sickness in the Metropolitan police that led to a reduction of £23 million in the cost of sickness absence when compared with the previous year. That is equivalent to about 513 officers available for duty.

Improvements in the conduct of privatisations that have followed from our recommendations saved an estimated £63 million last year. Over three years, savings of £1.2 billion have been achieved equivalent to well in excess of £7 for every pound spent to run the National Audit Office.

Our work also has a qualitative impact. Work on underpayments to public service pensioners prompted the Department of Social Security to clarify and simplify the way in which it communicates with pensioners. Our work on the cervical cancer screening programme caused the National Health Service Executive to change its position on setting a target date by which all screening laboratories must meet the standards expected. That will now be accomplished by March 2000.

In total, some 1,900 significant changes to systems have arisen from the work of the National Audit Office and the PAC. Our work is of practical benefit to Government, as shown by the fact that some 92 per cent. of recommendations that were made in the past year were accepted.

Our reports can be categorised in many ways. I shall confine myself to four broad themes: first, project management, especially in information technology;

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secondly, better service delivery; thirdly, financial irregularity and mismanagement; and fourthly, the private finance initiative. I shall not dwell today on one of the major issues that dominated our work this year--the millennium bug. With just four weeks to go, the country will know soon enough whether the Government have succeeded in protecting vital services.

The first theme to emerge from our work concerns project management, especially information technology. That has been a key feature of the Committee's workin recent years. Failure to manage major projects successfully continues to plague this Administration, as it did the last. Enormous sums of money have been wasted, key public services have been disabled and the lives of citizens have been disrupted.

NIRS2, the new national insurance recording system, affects every adult in the land at one time or another, and we found a clear failure to deliver services to the citizen. It is reasonable to expect the state to be able to calculate correctly the pensions and benefits due to its citizens, but in this case many months elapsed when that could not be done. The failure to get that system working plunged many thousands of people, including those in the greatest need, those recently bereaved and those moving into retirement, into uncertainty and fear: uncertainty about the level of their future income, and fear that they might be running up a debt that they would have to repay, the value of which they do not know.

Even more troubling is the fact that, apparently, lessons are rarely learned. Yesterday, the Committee approved a report, which will be published soon, which summarises the lessons arising from an examination of more than 25 reports about IT projects published by the PAC and the NAO in the past 10 years.

That benchmark report reflects the Committee's concern that the failure to deliver Government IT projects places in jeopardy the success of almost every Government programme or initiative and makes any pledge about IT delivery of Government services look optimistic in the extreme.

Indeed, at one point--when considering the work of the immigration and nationality directorate, on which the Committee has yet to report, and with reference to the Passport Agency, on which we have yet to take evidence--the right hon. Member for Swansea, West (Mr. Williams) was moved to comment about the failure of the IT system that it had led to a situation where

I do not want to pre-empt our report, but some obvious lessons stand out from the work over the years on IT projects.

On the inception and design of projects, the lesson is that it is necessary to analyse and understand fully the implications of the introduction of new IT systems for businesses and customers. There was a spectacular failure in that regard in relation to NIRS2.

On the management of projects, the lesson is that key decisions on IT systems are business decisions as well as technical ones. Senior managers have a crucial role in driving through the successful development of IT systems.

On relationships with suppliers, the lesson is that relationships between Departments and suppliers will have a crucial effect on the success of the project.

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Contracts between Departments and suppliers must therefore be clearly specified. There have been repeated failures in that regard.

On post-implementation issues, organisations must learn lessons from projects undertaken, which can be fed back into the consideration of later projects.

I welcome the Government's commitment in their "Modernising Government" White Paper to a more co-ordinated and strategic approach to IT across Government. I also welcome the recently announced Cabinet Office review of major Government IT projects designed to ensure that future systems run effectively, deliver value for money and apply best practice.

However, poor project management does not stop with IT. Lessons can be replicated elsewhere. For example, our report on the management of the final part of the Guy's hospital rebuilding programme concluded that the project had been allowed to spiral out of control for nine years before any sense of realism was applied. The project was completed over three years late, at a cost to the taxpayer of an extra £98 million. Obviously, that extra funding had to be found from elsewhere in the national health service budget.

Poor project management can spell inconvenience for the citizen and can have disastrous effects for the taxpayer. Headline failures of major projects, such as the problems with NIRS2 and the Passport Agency fiasco, are writ large. The Committee is also increasingly concerned about the quality of service that citizens receive as they interact with Government.

That brings me to my second theme--better service delivery. My starting point is that taxpayers have a right to expect high standards of service from those public bodies that spend their hard-earned cash--most families pay well over £300 a week in taxes, in one form or another. Most important, individuals who are vulnerable or in need have a right to be confident that their interests will be safeguarded by the state. I am sad to say that we have found that that has not always been so.

The Public Trust Office looks after the financial interests of about 22,000 people with mental incapacity. It manages or supervises the investment of some £1.4 billion of patients' money. It charges them about £11.5 million for the privilege.

The Committee first considered the issue in 1994 and, as a consequence, published one of its most critical reports of the decade. Revisiting the subject this year, we found that the improvements that we had been promised had not been delivered and that, worse still, in some important areas performance had deteriorated markedly. That fell far short of what patients have a right to expect. The PTO had failed properly to protect the income and assets of patients. In many cases proper accounts of patients' income had not been received and about 90 per cent. of the accounts that were received were late. The PTO had missed many of its key performance targets, including important ones such as for the numbers of visits to patients. Its financial management, which is typified by its inability to produce accounts that could be audited, was appalling. Patients have been failed at every turn.

Needless to say, our report was strong, and I was delighted to see the response from the Lord Chancellor's Department. Sir Hayden Phillips, the permanent secretary

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of the Department, has not, historically, been a pin-up of the Committee. However, he showed great willingness to accept our findings and to commit to taking firm action. That provides a model for the ideal relationship between the PAC and Whitehall. As a consequence, the service to those that the PTO was supposed to serve will be enhanced considerably. Professional receivers will be appointed to look after the affairs of patients and the PTO will impose sanctions for poor performance. Minimum standards will be set for visits to patients to check on their financial welfare and there will be detailed monitoring of returns from investment fund managers.

The citizen also has a right to expect that the Government, when spending taxpayers' money, will act in a co-ordinated manner and that one Department's spending decisions will take into account the consequences on all others. That point was well illustrated by the Committee's 27th report on the work of Her Majesty's Customs and Excise and its operation of the red channels.

We discovered that decisions had to be taken to reduce the staffing of red channels. Reliance was placed, instead, on declarations--which were frequently made by telephone--of dutiable goods brought into the country. That policy delivered a short-term financial benefit, but I am concerned that such decisions can be taken without consideration of the long-term social costs of increased smuggling, particularly of drugs, that will inevitably arise as a consequence. The Department did not even estimate the cash lost by non-manning of the red channels, let alone consider policing costs and the other social costs that might have gone with the decision.

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