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Mr. David Davis: I am listening to the right hon. Gentleman with fascination. I have worked in business, and one of the misapprehensions of the public sector is that businesses are loose, slack or unethical with the use of money. In truth, the controls in business are often much tighter than in the public sector. I think that that is in part because the public sector rests, quite reasonably, on the integrity and altruism of the people who work in it. Does the right hon. Gentleman accept that when people are taken out of a controlled environment and put into one that assumes a level of integrity and altruism, that of itself creates a problem?

Mr. Williams: Yes, of course. We agree that there is a problem, and we must address it. It may have been before the right hon. Gentleman's time as Chairman, but after a debacle involving a chief executive of a quango I advocated that all new chief executives should be required to attend a civil service college initiation course, so that they were not thrown in at the deep end.

Our dearly beloved colleagues in the Treasury covered their backs by supplying people with a bunch of notes on what they should and should not do, and the relevant Department also covered its back against the Committee and the Treasury by supplying another set of notes. People were pitched into the job and were not given any time to read the notes, and the Department was surprised when they did not observe the rules. We have now tried to address the problem. The key difficulty is not with the personnel, but with the structures that are being considered.

The changes are making the money trail more difficult to follow. It is not just that there are too many of them, but that a trail is often cut off and a fence is put across it. Therefore, accountability is blurred and diminished. It does not matter whether we are for or against privatisation and contractorisation. It is interesting that in local government the Audit Commission is allowed to follow

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public money wherever it goes, but at governmental level where there are much larger budgets, the National Audit Office does not have that power. Every act of privatisation or contractorisation diminishes the area that the NAO can investigate, but it is still the taxpayers' money. In diminishing what the NAO can examine, it diminishes what the PAC and the House of Commons can examine.

Like my friend, the right hon. Member for Haltemprice and Howden--we are personal friends even if we are political adversaries, and our Committee is non-political because it is factual, which is one of the joys of serving on it--I am most concerned about this problem, and I cannot emphasis that too strongly to the Financial Secretary. I know, however, that he has not had a chance to immerse himself in the subject. Richard Crossman used to say that it takes six months to read one's way into a new job, and that is probably about right if it is a subject that a Minister has not dealt with before. The Government should make their changes--that is a policy decision--but they should ensure that the powers of the NAO and the PAC are adequately amended to cope with those changes. It is not just a matter of nut-and-bolt auditing, but about accountability and whether this is a democratic institution.

Mr. Dalyell: May I be forgiven a reminiscence as Richard Crossman's Parliamentary Private Secretary? That formidable and, in my view, excellent permanent secretary at the Ministry of Housing and Local Government, Dame Evelyn Sharp, used the PAC to pursue her own policies against those of the Minister. I am sure that that does not happen these days.

Mr. Williams: Having known the Minister and his determination to get his own way, I can well understand why Dame Evelyn may have been so tempted.

The Chairman gave a list, which I shall not repeat, but I shall touch on two items mentioned. The report of the Select Committee on Public Administration, which was published only yesterday, emphasised that the Comptroller and Auditor General should be given the power to audit all--not just some--executive non-departmental governmental bodies.

The other item concerns an innovative, controversial policy--perhaps it is less controversial to some than it is to others. The body that is to be established to carry on public-private partnership business will be involved with massive sums of public money. It will also commit Government for a long time--a 30-year commitment on the average project. It is imperative that something as new and innovative as PPP, and with so many potential pitfalls--potential opportunities, as Governments would see it--should be monitored properly and thoroughly. That can be done only by the PAC and the National Audit Office, and I am sure that we shall have further discussions with my hon. Friend the Financial Secretary and his ministerial colleagues.

I apologise for speaking for so long, but I want to make another point emphatically. I am increasingly irritated by a factor to which the Chairman of the Committee himself referred. By its very nature, the Committee is retrospective, in that the event involved has to have happened, the National Audit Office has to have

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discovered and investigated it, the NAO has to have reported to us, and we have to have had a hearing. A year or 18 months can pass between an impropriety, or even a minor mistake, and our hearing about it.

One of the most galling consequences for us is that, invariably, the more serious the case, the less likely we are to see before us the accounting officer who was accountable at the time. There is a noticeable incidence of premature retirement as a result of, for instance, the onset of severe backache, which seems to correlate directly with the severity of the NAO report.

The Committee has reached the unanimous view that retirement, or moving to a different Department, does not exonerate a civil servant from his duty to answer for that for which he was paid.

Mr. Richard Page (South-West Hertfordshire): I empathise with the right hon. Gentleman's request. Does he think that it is worth asking the NAO to carry out a statistical audit to establish whether more accounting officers move, or retire, when they are due to appear before the Committee, as against normal movement within the civil service?

Mr. Williams: During the previous Parliament, I engaged in a little experiment. In May, we organised a hearing involving a certain health authority. We decided to call back from retirement the man who had chaired the authority when the problem had arisen. During the hearing, I asked Sir James--the chairman involved--when he had first learned of the date on which the authority would first appear before the PAC. He replied, "Two weeks before Christmas." I then asked, "When did you resign?" He said, "One week before Christmas."

3.33 pm

Mr. David Rendel (Newbury): I am delighted to take part in the debate. Let me begin by apologising to the House. I have already written to Madam Speaker, tothe Committee Chairman and to the Financial Secretary to the Treasury, explaining that unfortunately, owing to a prior engagement, I shall have to leave the Chamber at about 5 pm, and consequently will be unlikely to hear the end of the debate. I am particularly sorry that I shall miss the Financial Secretary's response to the debate--unless all those who wish to speak after me speed up their remarks considerably, in which event I may still have a chance to hear his speech. I hope that I shall.

I am pleased that my name is attached to the motion. It is a great honour, as I am the newest member of the Committee. I have attended only one sitting so far, and have attended none of the sittings to which the reports that we are discussing relate. In a way, therefore, I feel something of a fraud today, but I am, as I said, delighted to speak in the debate. I was particularly pleased by what the Committee Chairman said about the work done by my predecessor as a Liberal Democrat Committee member, my right hon. Friend the Member for Caithness, Sutherland and Easter Ross (Mr. Maclennan). He served on the Committee for a long time, and I am sure that he will enjoy reading the Chairman's comments in Hansard.

Although I was not a member of the Committee during the time to which the reports refer, I have had the opportunity to make use of a number of PAC reports in the past. Some proved excellent and valuable, especially

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those relating to the Child Support Agency and the national insurance recording system. In the last Session, last January, I spoke in the debate equivalent to this about the PAC's first report on NIRS. It is, perhaps, something of a coincidence that the Financial Secretary should, like me, have moved from the issue of social security, with which a number of the reports were so concerned, to his present duties.

Over the past year--since I spoke about NIRS--a number of other major failures in the Government's computer projects have come to light. A series of large-scale projects have come to grief in one way or another, including--importantly--the project to re-computerise the passport system in the Home Office, which had such dramatic results last summer. In the Department of Social Security, there was not just NIRS but the benefit automation project, which was intended to automate the system for benefit transfers and to help local post offices. Both those arrangements went badly wrong.

In both instances, because such large Government computer systems were involved, a large number of people were involved--millions, in some instances. We are talking not just about those who are comparatively well off and can do something about it, but about many of our constituents who are not at all well off. Such people find it difficult to deal with Government bodies at the best of times, and are hopelessly confused and unable to respond appropriately when a major computing system goes badly wrong.

I want to concentrate on NIRS2, because it strikes me as a good example of what has gone wrong, and I feel that it may be possible to draw some conclusions from the Government's failure to deal with it adequately. I refer particularly to the Committee's twenty-second report, produced in the last Session.

The problem is that NIRS2 was allowed to go "live" before it had been thoroughly tested. I appreciate the Government's difficulties: the system was set up under the previous Government, and owing to various changes that had been made, it was inevitable that we should have a new computer system to record national insurance payments. The Government were in a difficult position, in that they had to get the new system going, but the previous Government had failed to appreciate the time scale that would be needed for the introduction of a new system. That meant that NIRS2 had to be introduced before it had been tested and debugged, and before all the necessary corrections had been made. As a result, not unexpectedly--at least, it should not have been unexpected--the system collapsed, and all new and repeat claims for contribution-based retirement pension, job seekers allowance, incapacity benefit and related housing and council tax benefits were for a while paid "blind", on the basis of what the individuals concerned said were their records, rather than what the Government had recorded. That obviously caused many difficulties. It caused the possibility of errors in payments--overpayments as well as underpayments--in the case of people who could ill afford such errors.

The present Government, rather than the previous one, are surely to blame for the fact that, for many months after the story broke in August 1998, DSS Ministers underplayed the scale of the problem. They simply did not realise how big it was. They failed to warn people of the likely effect. They claimed that they would be able to deal with it fairly quickly and easily, but it eventually

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became obvious that that was not the case, and that the delays would have severe effects. When we debatedthe subject in January it was made clear that, even after the publication of the PAC's initial report, the Department had failed to inform the PAC that the situation was not only continuing but had worsened, and the PAC was rightly angry about that.

Had it not been for the PAC's reports, many members of the public and officials might still have been in the dark about the extent of the problem and the difficulties that they might meet, and so might not have been able to help some people to overcome the difficulties that they would face as a result of a systems failure.

In some cases, those difficulties amounted to what might seem to be comparatively small underpayments or overpayments of £1.25 a week, but in other cases, involving SERPS payments or private pension payments, they could have amounted to as much as £100 a week. That is clearly a significant sum, but even the much smaller sums may be significant to those living on a state retirement pension with no other form of benefit, whose income is therefore restricted, and who are living hand to mouth, as, sadly, those who live on the most basic benefits have to do.

As the Chairman said, one of the great difficulties was many people's fear that they had been overpaid. Many who were not overpaid feared that they had been overpaid and so felt unable to use all the benefits that they were given, putting them to one side in case they were later called on to return them to the state.

The Government's difficulty was that, by failing to register the size of the problem and the difficulty that they faced in rectifying it, they led people to believe that the problem would be over by a certain date, but that date changed time and again. As a result, people did not know where they stood.

The most important thing is that the Government should take on board the lessons to be learned from the PAC reports and others. Lessons must be learned from not only the NIRS2 system but all the other IT systems that have gone wrong to ensure that such things do not happen again. We will need massive IT projects, so we must ensure that the Government are running good IT systems. Some of them will be large for the very good reason that there are many millions of people in Britain, all of whom may have different requirements.

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