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4.20 pm

Maria Eagle (Liverpool, Garston): I am grateful for the opportunity to speak in this debate. I wish to start by reiterating the thanks that my right hon. Friend the Member for Swansea, West (Mr. Williams) and the Committee Chairman, the right hon. Member for Haltemprice and Howden (Mr. Davis), gave in respect of the National Audit Office and the Comptroller and Auditor General. While my remarks may be briefer, they are meant no less sincerely. We could not do the job that we do without the NAO and the hard work of its 750 staff.

We could not begin to deal with the NAO papers and two hearings a week without the effort and work of the Committee Clerk, Mr. Ken Brown, and his staff. I wish to place on record my thanks to them. It is often the mundane things, such as having the right report in one's hand, that are an essential prerequisite to scrutiny in this House. One cannot scrutinise the Executive without the right report.

I speak with a tinge of sadness in this, my third such debate as a member of the Public Accounts Committee. As the ever-sharp eyes of the Committee Chairman spotted, the Order Paper shows that this is to be my last day on the Committee, as I am to be discharged as soon as the debate ends. The Committee of Selection works in mysterious and wonderful ways, and I hope that this decision was not an early verdict on my speech.

I will miss being a member of the Committee. It has been a remarkable introduction for a new Member of Parliament to one of the core functions of Back Benchers, and all Members of Parliament--to scrutinise the Executive. I do not mean just the Government or politicians, but Whitehall, as the PAC scrutinises Whitehall more fully than the politicians.

Those who are present today will have seen us lean back in our seats at the mention of politics. That is odd for politicians. However, an essential prerequisite of the effectiveness of the Committee is that party politics and arguments over policy are taken out of its considerations. It is difficult at times to ignore the political situation, and it is difficult for a politician to resist the temptation to resort to looking at a matter in one particular way. However, the Committee is there to scrutinise the Executive, and primarily the accountability of Whitehall and the accounting officers.

The NAO and the Committee have a tough year in front of them, and that is another reason why I am sad to be leaving the Committee. It feels like I am abandoning the Committee at the time of its highest work load--although I am sure that my replacement will be as assiduous and sharp as I could ever have been.

The Committee and the NAO has had to deal this year with the advent of resource accounting, and with issues such as devolution which have marked a huge change in

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the way in which the Committee works, and these changes will continue. It is easy to say "resource accounting and budgeting" but it is not so easy to do. The transition is likely to be more long standing and a little more painful than it might seem.

It will be difficult for the Committee because while resource accounting and budgeting will make budgets more transparent, it will not make understanding them any easier. It will be more difficult for members of the Committee who do not have accountancy training--that is just about all of them--to follow matters with their usual and expected clarity.

The heavy work load of the Committee teaches Members to organise themselves properly, to pick up on the important points and to leave the less important points to one side. My right hon. Friend the Member for Swansea, West made it clear that there was an enormous task of scrutiny in front of the Committee, and it is essential that Members are able to home in on the important points. The NAO does that on behalf of the Committee, but the Committee must take that further--particularly in respect of value-for-money reports. With only 15 minutes of questions per hearing, every Committee member must carefully consider the points that they wish to raise.

My overwhelming impression of the work of the Committee is that it is resisted by Whitehall, although not by politicians. In this, I am speaking about all Governments--not particularly this one or the previous one. However, Whitehall and the senior accounting officers, who are "the scrutinised" in this sense, do not like the scrutiny and seek ways of minimising it. In my first year on the Committee, we had an assurance, via a Treasury minute, that a convention called "not for NAO eyes" would be removed.

Another perennial issue is access. The Committee has constantly asked for extended access at every legislative opportunity, but Whitehall's response has often been that the Committee does not need it. We have made progress, but perhaps what the Comptroller and Auditor General really needs is a financial right to roam Bill. It seems simple to me--if it is taxpayers' money, the Comptroller and Auditor General should have access to it. The difficulty is in putting that into effect. In Treasury minutes, Departments produce reasons why that cannot be done, rather than ways of achieving it. I cannot see a problem with allowing the Comptroller and Auditor General access to taxpayers' money--although more staff may be needed.

Non-politicians in particular do not like scrutiny, although politicians are used to it. My right hon. Friend the Member for Swansea, West referred to the number of times that the accounting officer responsible for the stewardship of the money we are concerned with is not the person who comes before us. It is remarkable how often accounting officers retire, are promoted or disappear one way or another just before a hearing of the Public Accounts Committee.

I do not wish to delude myself, and while the PAC is effective, it is not 100 per cent. effective. It does not achieve 100 per cent. perfect scrutiny, as I have said before in these debates. However, I am almost persuaded to reconsider my view of the effectiveness of the Committee when I see how regularly accounting officers

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who are supposed to appear before it choose to disappear somewhere. Perhaps we are a little more effective than I thought.

The Government should give some thought to the issue of disappearing accounting officers. I would enjoy seeing the figures of my right hon. Friend the Member for Swansea, West for the previous Parliament and comparing them with figures for this one to see how regularly accounting officers move just before Committee hearings.

The right hon. Member for Haltemprice and Howden referred to the way in which accounting officers complain about the evidence sessions and the Committee's confrontational style. I say that they should stop whingeing. They have all year to do their jobs, but I have 15 minutes to do mine while they are front of me. If that leads to some confrontational questioning, I am sorry, but accounting officers are often responsible for billions of pounds of expenditure. They have to realise that they are accountable to the Committee and should stop complaining about how it chooses to do its job in a restricted amount of time.

Whitehall does not always respond positively, and two reports in the past year show how responses from the Executive can differ. The first is the twenty-fourth report on the flotation of Railtrack. I do not intend to go into huge detail about the political background of that flotation, except to say that the then Government's policy was to privatise. Legislation had been enacted to enable the privatisation to take place and the first of the private companies--of the 100 or so formed from what had been British Rail--had been formed in January 1996. Privatisation had finished by March 1997, so that was a speedy timetable.

In other reports, the Committee has considered other aspects of rail privatisation, including the rolling stock operating companies, the train operating companies and the freight operating companies, and it has an overall picture of the transfer of the entire business to the private sector. The Railtrack privatisation was effected speedily, for whatever reason. The Committee suggested that the failure to sell the shares in tranches led to a potentially massive undervaluing of the business. The Committee also concluded that the timing of the flotation was designed to maintain the momentum of the entire privatisation process in the rail industry, and that that appeared to take precedence over bringing in the maximum amount of money. What is not disputed is that the shares were sold for £3.90 each, or for a total of£1.9 billion, and when the Committee took evidence on the flotation of Railtrack the shares were worth £15.51 each, a total of £7.8 billion. That is a measure of the potential undervaluing of the company.

The Treasury minute that forms the departmental response to the report makes interesting reading. Committee members will know, although others may not, that the Committee gives its conclusion and the Department responds in what is called a Treasury minute. The Committee concluded that, in the case of Railtrack, value was not obtained, but the Treasury minute merely noted the Committee's description of its view of the sale. It may be that 92 per cent. of the Committee's recommendations are accepted, but some are not, and in this case there was clear departmental resistance to the Committee's analysis.

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The Committee also concluded that the timing of the sale was more about the need to maintain momentum in the privatisation policy than it was to ensure value for money. The Department confirmed that the timing of the sale was influenced by the need to maintain momentum, but the Treasury minute then attempts to justify that and claims that it was an objective of policy. It makes no attempt to deal with the point that value for money was not obtained.

In Railtrack's case, as in other cases, Committee members trod carefully in the report, because the issue was politically controversial at the time. The Government's policy was diametrically opposed to that of the Opposition, but the Government speeded it through to complete it before the general election. Whatever we may think of that, it is clear that, some time later, the Department is still resisting, not accepting, the Committee's points. There is nothing new about that and, indeed, last year--in our report on procurement in the Ministry of Defence--we made recommendations that had first been made in Gladstone's time and the Ministry had still to deal with the issues. It is not unusual for Departments to accept recommendations but to fail to change the way in which they work.

My second example is the report into the further education sector and alleged irregularities at Halton college, which was mentioned by the right hon. Member for Haltemprice and Howden. The FE sector is responsible for spending some £5.6 billion of public money, and since 1993-94 the Committee has produced a series of reports that have been seriously critical of problems with governance and propriety in the sector, which have led to notorious incidents at, among others, Halton college and Bilston college. No doubt, others with similar problems remain to be investigated.

Halton is one of 435 FE colleges, so if problems are endemic in the system, that is a matter for great public concern. The report into its problems concluded that the college claimed almost £14 million more in grant than it was entitled to and 114 staff lost their jobs as a direct result of the financial problems caused by having to repay that money. That led to a further £1.8 million in redundancy costs and a serious deficit in the educational courses that the college was supposed to be providing. In addition, obvious problems were caused by the fact that the principal and deputy principal spent 12 months of their five-year reign abroad on jollies--not to put too fine a point on it--at a direct cost of £210,000 and an incalculable cost in their credibility in the college.

The irregularities must have been common knowledge in the college a long time before they were brought to the attention of the National Audit Office by a whistleblower.

Eventually, the principal and deputy principal were suspended on full pay, and finally they left--but not before drawing an extra £200,000 in salary before the matter was resolved. I deplore the fact that the college misled the Committee about whether legal costs had been paid to those two. Understandably, they had sought to delay their departure from the college because they were still drawing their full salaries--but to expect the college to pay the legal costs of creating the delay beggars belief. The Committee was originally told that the college had not paid, but later it emerged that it had.

All the governors who allowed that to happen have now resigned, but the college, and the local area, have been left with a serious problem. It is difficult to see how such

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poor governance was not picked up by the Further Education Funding Council. Moreover, at the time of some of the worst excesses, the college's internal and external auditing, which was carried out by the same private sector firm, Deloitte & Touche, did not detect the problems and gave the college a clean bill of health. The FEFC's procedures for picking up problems did not reveal what was going on, either. That shows poor performance by the funding council, which if repeated elsewhere would cause considerable problems wherever there was a governance issue.

I shall now deal with some of the Treasury minutes that have been sent in response to the report. The Committee was struck by a reference in the report to the fact that the Department was willing to act speedily to put the problems right. About time, one might say, in view of the number of FE colleges with problems.

The Treasury minutes in response to all the conclusions start with sentences such as:


and


    "The Department welcomes the Committee's conclusion".

That is in marked contrast with the responses in the same document from the Department of the Environment, Transport and the Regions concerning the flotation of Railtrack.

Two days after our evidence session, the Department for Education and Employment was already issuing new guidelines to the Further Education Funding Council to put right some of the problems, and it has now decided to legislate to abolish the funding council and change the way in which the sector is governed and its governance overseen. That, too, is in marked contrast to the reaction of DETR in connection with Railtrack.

That illustrates Whitehall culture. The Public Accounts Committee teaches all its members about Whitehall Departments. One can soon spot which are profligate, which can and cannot control their expenditure, which do not even try to control it, and which are quite good at doing so. One would not do this publicly, but when individual accounting officers appear before the Committee, one can also make judgments about them, and about their effectiveness and their commitment to carrying out their duties.

That is one of the fascinating things about being a member of that Committee: one can learn a lot about how Government works. It has been an interesting experience, and I apologise to my fellow members of the Committee for giving up on them at this stage. I may be back some time; I do not know. I wish them well for the coming year, when they will be busy with legislation passing through the House, with getting to grips with resource accounting and with all the issues of access that every Member has mentioned.

The FEFC example shows that politicians can listen, and can kick Whitehall until it acts. Whitehall must understand Parliament a little better; Parliament is all about accountability, and politicians are here to ensure

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that there is accountability. They themselves are accountable to the electorate, and I think that accounting officers need to realise the meaning of that word.


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