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Mr. Steinberg: It is also claimed that, because Railtrack was sold in such a hurry, the interim regulation scheme was also overgenerous and excessively costly to the taxpayer. As a consequence, total rail subsidies have doubled compared with the aid received by British Rail, which originally ran the system. To quote from the NAO report, the value of shares also increased because the market realised that Railtrack could
- "secure significant efficiencies on operating costs, particularly infrastructure maintenance expenditure and investment".
Who has made a lot of money out of these privatisations? Certainly not the taxpayer. Investors have achieved huge returns on their investment, all at the expense of the British taxpayer. At the time, Railtrack was also given, on a plate, billions of pounds of investment land, which was hardly noticed--the measure just went through and people did not realise what had happened. To my mind, the two privatisations, which the PAC studied in great detail, were done for no reason other than dogma. Both sales were bad for the taxpayer. They cost the Government billions of pounds and have created severe problems for the future. They have given little benefit to the taxpayer, if any, but investors have done very nicely, thank you.
The previous Government's declared policy was to deepen and widen share ownership, but the sale of Railtrack in particular was aimed at deepening rather than widening. The emphasis of that sale was on those who already owned shares adding Railtrack to their portfolio, rather than trying to persuade people who had never owned shares to buy them. The policy was to sell at all costs--sell and be damned--and that allowed large institutions to get their hands on the huge Railtrack profits.
In both privatisations, the PAC was concerned that the Department chose not to stagger the sale of shares. In both privatisations, believe it or not, the cost of consultants and advisers was absolutely astronomical. The obsessionwith privatising nuclear power generation meant that management and financial consultants alone cost£25 million. In the privatisation of Railtrack, consultants and advisers cost £39 million. Astronomical sums were paid for advice that, on reflection, appears to have been badly wrong and has contributed to a bill for the taxpayers amounting to millions of pounds.
Mr. Charles Wardle (Bexhill and Battle):
I shall not, on this occasion, follow the hon. Member for City of Durham (Mr. Steinberg) and make overtly political comments. I agree with the right hon. Member for Swansea, West (Mr. Williams) that the purpose of the Public Accounts Committee is to measure and assess performance by officials rather than to look at policy, as other Select Committees do.
After making that unkind jibe, I should add that it is a pleasure otherwise to follow the hon. Member for City of Durham, who has in Committee a deceptively avuncular style that lulls witnesses into complacency when he goes for the jugular, as he is able to do very effectively.
The hon. Gentleman was also responsible for the one bright moment on the Committee's recent trip to Brussels and Luxembourg. After a particularly tedious--not to say frustrating, even depressing--day of evidence from people who did not seem to understand what financial controls really meant in the northern European sense, and when the entire Committee was feeling down, the hon. Gentleman announced that it was his birthday. There were, therefore, some very vigorous Euro-celebrations, which I am pleased to tell the House were paid for not by the European Commission, but by Committee members.
I offer an advance apology to you, Mr. Deputy Speaker, to the Minister and to the House for planning not to be in the Chamber for the debate's conclusion. I mean no discourtesy, but well before I knew the date of today's debate, I had made arrangements to attend a function in my constituency. I wrote to Madam Speaker to explain my predicament.
I follow my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) and other hon. Members who have commended the National Audit Office and our excellent Committee Clerk on the quality of the material that provides the basis of the Committee's evidence taking and subsequent reports. I am sure that all hon. Members will agree that the thoroughness and incisiveness of the case load we receive is exemplary.
Before turning to deal with a few specific reports, I repeat the calls that have been rehearsed today, and which I and other hon. Members made last year, for an extension of the Comptroller and Auditor General's remit to give him access--for audit purposes and to measure value-for-money performance--to spheres of public expenditure that he currently cannot examine. Despite the Committee's recommendations in the past year, not enough progress on that front seems yet to have been achieved.
I know that there will be an opportunity to raise those issues when the Government's Resources and Accounts Bill is considered on Second Reading, but I add my voice
now to those pointing out that the CAG should have access to the books of private contractors and voluntary boards when taxpayers' money is spent. He should have access to the accounts of non-departmental public bodies and to the books of limited companies established by central Government bodies, as well as to bodies established to participate in public-private partnership business.
Before dealing with specific reports, I should also like to praise the work done by the National Audit Office, and within the Treasury itself, to enable Whitehall to switch to resource accounting. I have said on many other occasions that resource accounting will provide a framework of management controls that will help to modernise Whitehall and empower not only the middle management ranks of the civil service, but those in senior positions. I wish every Department well with that important challenge.
I should like briefly to draw the House's attention to four reports, the first of which is the sixteenth, "National Savings: Developments in Financial Reporting". Two and a half years ago, the Committee reported that the number and size of discrepancies and unreconciled balances in the National Savings accounting systems was unacceptable, and pointed to a failure to apply basic accounting principles and to a serious risk of fraud. It was clear that the past management of National Savings had very little sense of urgency about financial controls, perhaps because there was always the comfortable, but ultimately irresponsible, assumption that the Government of the day would stand as guarantor for investors if anything went wrong.
In December 1998, the National Savings agency entered into an agreement with Siemens Business Services, which led a year later to all the operations and administration of National Savings being subcontracted to Siemens. There were two dangers in that arrangement.
First, Siemens's track record elsewhere in the public sector has been less than satisfactory. One has only to think of the costly mess at the immigration and nationality directorate to appreciate that Siemens can get things badly wrong.
Secondly, I believe that the decision to transfer the entire administrative organisation out of an agency such as National Savings to a subcontractor, simply because the agency lacks management expertise and information technology skills of its own, is not a sensible, long-term public service solution. It does not create a situation in which the public may participate through share ownership, but merely places a hopeful bet on an outside partner, with no real means of control for the agency if performance does not come up to standard.
It would be better for the agency to set about recruiting and building its own in-house management and IT capabilities. That would leave open for later the option for the agency to be privatised or not, according to policy and demand.
The National Savings agency was 11 months late with its undertaking to complete the investigation into its financial accounting systems. Subsequently, it claimed that the net discrepancy found was just £4.6 million, which management considered insignificant against the total funds under management of £63 billion. However, the net figure of £4.6 million reflected positive and negative adjustments of £40 million and £44 million
respectively. Therefore, the unaccounted errors came to £84 million. Small savers are entitled to better custodianship than that.
The twentieth report was entitled "Home Office: Handgun Surrender and Compensation". In 1997-98, firearms legislation--which I felt at the time, and still feel, was rushed, ill considered, intrusive and likely to have little of the desired effect--led to thousands of responsible and decent people, who either collected firearms or were members of target-shooting clubs, having to surrender to police a total of 162,000 handguns. The legislation did not touch the millions of weapons still held illegally by villains and lawbreakers that are still being brought into the United Kingdom undetected.
In the rush for action, the Home Office had not made an accurate assessment of the number of guns to be handed in, or of the consequent drain on police time. The Home Office also did not have in place an efficient administrative system to compensate owners promptly for handguns. Many owners had to wait more than a year to be paid, and it took the Home Office 15 months of confusion to reach the conclusion that more staff were needed to process claims. The Home Office said at the outset that it would handle 4,000 claims a week, but ultimately, it dealt with 400 claims a week. The innocent collectors and shooters--who suddenly found that, through no fault of theirs, Parliament had banned their hitherto lawful hobbies--deserved better treatment.
The twenty-fifth report, "MAFF: Arable Area Payments Scheme", is an example of what I call the Brussels effect on government. The scheme was introduced in 1983 and is the largest of the common agricultural policy schemes administered by MAFF, paying £1.1 billion per annum to British farmers.
What is worrying is that, over the five years 1993 to 1998, the cost of running the scheme grew by £3 million, which is a 21 per cent. increase. Rather than achieving greater efficiency over the five years of experience, the opposite occurred. MAFF gives as a reason for that the constant stream of rule changes emanating from Brussels.
Bearing in mind what the Committee saw on our visit to Brussels--an utterly cavalier attitude to financial controls and an obsession with bureaucracy--the waste of time and effort and the escalating cost to MAFF are unsurprising, but nevertheless deplorable: and all for what purpose? MAFF says that, in 1996-97, it found 2,700 irregularities that led to administrative penalties, but in the United Kingdom, in five years, there have been only seven prosecutions for fraud on the scheme.
Combating fraud was high on the agenda for the Committee's visit, earlier this year, to Brussels and Luxembourg. The twenty-ninth report, "Financial Management and Control in the European Union", is really misnamed, as it might more accurately have been entitled, "The lack of financial management and control in the European Union". I agreed to the report, but should say that it could justifiably have been worded even more strongly.
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