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29 Jan 2003 : Column 972—continued

Mr. Love: Down the drain already.

Mr. Flight: Correct; there is a bad smell coming out of it.

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The report on the channel tunnel rail link is perhaps the most damning, because the Government ended up guaranteeing £4 billion and more of bonds, with, in essence, a reward to the equity promoter for having failed. That is the reverse of what the transfer of the operating risk should be about.

Others have mentioned the £700 million NHS property deal. Not much was said, but I read into what was said that the Committee thought that the NHS might have done a pretty bad commercial deal.

We have today's NAO report on the mismanagement by the Lord Chancellor's Department of the Libra magistrates court computer-linking project, which, if I understand what is being said, will waste some £300 million.

No one mentioned the report on the millennium dome, the biggest epitaph of incompetence of the lot, but perhaps it has been commented on in many other places.

Mr. Love: It is a tour de force that the hon. Gentleman has managed to cover so many reports, but is the conclusion that he draws from them that it is still possible to cut 20 per cent. from public expenditure?

Mr. Flight: Perhaps the hon. Gentleman should have a little medical attention to his ears. As the Committee must be well aware, there are many areas in which there is very substantial scope for less waste, and in some areas the potential may be as high as 20 per cent., but no one—certainly not I—has ever said that that was across the board. Indeed, in the report to which the hon. Gentleman is implicitly referring, I twice made the point that there really was not the scope to cut expenditure overall in health or education, two of the main spending areas.

However, I find the contents of the reports disappointing, given the Government's professed keenness to get good and fair value, and look at cutting out waste. I hope that the Financial Secretary to the Treasury will have plenty to say about the pile of reports, because they detail more than enough waste to achieve substantial cuts in expenditure.

Public service agreement targets are mentioned in many of the reports, such as those on the health service, the Inland Revenue's progress, the introduction of e-services, higher education, reducing benefit fraud, and many of the other areas in which our £650 billion in taxes is spent. The Government introduced PSA targets in 1998 with the intention that they would demonstrate to the public that the public services were being run more effectively and that the promises of improvement were being kept. Since 1998, three separate sets of agreements and targets, totalling more than 600 and spanning more than 20 Government Departments, have been issued.

So far, almost 40 per cent. of the targets set in 1998, excluding those that have been rolled over, have been failed or are on course to be; similarly, 75 per cent. of the targets set in 2000, again excluding those rolled over, have been failed. No doubt, those percentages will improve substantially once the rolled-over targets have been included. The latest forecasts for performance against PSA targets were due in autumn last year, but as we approach February 2003, five key Departments have

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not reported. They include the Department of Health, the Lord Chancellor's Department, which seems to be most often in the dock of the PAC, the Crown Prosecution Service and the Foreign Office—all of which are responsible for major spending.

Two things strike me about that: first, to be so late in reporting illustrates great sloppiness in the public sector; secondly, a major improvement on the success achieved to date is needed. Of the Departments that have reported, Customs and Excise stated that one of its targets was crude and selective, and other Departments refer to a considerable amount of out-of-date information and a significant number of targets not met.

While the targets regime is first the responsibility of the Select Committee on Public Administration, I hope that the Public Accounts Committee, in pursuing the three key themes that have characterised its work, will examine the targets system. Evidence has emerged to date that the targeting regime has not improved efficiency, economy or standards of delivery, but has tended to pervert the focus of efforts in the public sector to the satisfying of targets rather than to doing the job well and properly satisfying customers. It also produces entrenched hierarchies in which the checked are subservient to the checkers, which is especially disheartening for staff. Brain power is deflected to setting targets rather than to improving delivery, and in the cases referred to by the PAC Chairman, the regime has led to cooking of the books. I hope that we will have a proper appraisal of targets next year.

6.38 pm

The Financial Secretary to the Treasury (Ruth Kelly): I shall speak more briefly than I intended to, in order to allow the Chairman of the Public Accounts Committee a couple of minutes in which to respond to the debate.

This stimulating and wide-ranging debate has confirmed my view that the PAC continues to make a major contribution to our system of parliamentary scrutiny and accountability. The programme of the Committee in each Parliament is always impressive in scope, and in forensic skills the Committee has few equals. The Committee's effectiveness is greatly assisted by the able chairmanship of the hon. Member for Gainsborough (Mr. Leigh), who ensures both that the Committee performs its task rigorously and that hearings are conducted in a fair manner. In doing so, he has helped to maintain the rich tradition of the Committee, which dates back to the Gladstone era.

The Committee is helped in its task by the assistance provided by the Comptroller and Auditor General, Sir John Bourn, and the staff of the National Audit Office. The independent watchdog has an important role to play in holding the Executive to account. Its financial audit work and value for money studies continue to provide high-quality analysis that helps to raise standards of financial stewardship, efficiency and effectiveness in Government Departments.

The Government certainly share a common agenda with the Committee. We both want to see that public money is used wisely, economically, efficiently and effectively. We want high-quality public services to be delivered, Departments to follow best practice in project management and risks to be identified and managed effectively. These are not party political issues, and some

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of the cases that the Committee has studied over the past year are rooted in the actions of previous Governments in the early to mid-1990s.

Much progress has been made by Departments over the past year on these fronts and I will want to come back to those points later in my speech. First, I should like to reflect on the work of the Committee over the past year. The Chairman's speech reminded us of the broad range of topics that the Committee considers. I know that this important work involves a heavy commitment from everyone concerned. It is immensely to the credit of Committee members that the Committee continues to make recommendations that help to raise standards of performance in Departments and to ensure that past experience is applied in implementing the projects and programmes of tomorrow.

The Chairman highlighted several reports by the Committee and reminded us of their key findings and recommendations. His examples illustrate the importance of the issues that the Committee looked at. I am particularly pleased that he mentioned the hearing on the acquisition of the London Heart hospital. It is good to hear praise for a successful venture, as well as criticism for things that have not gone so well.

One comment that cannot be made about the Committee is that it lacks a human touch. Its findings and recommendations very often hit on issues that impinge on the lives of individual citizens. Let me give two examples to illustrate that. The first is crime, an issue that concerns everyone. In its report on prisoner reoffending, the Committee found that nearly six out of every 10 prisoners are convicted of one or more offences within two years of being released. Breaking that cycle of crime requires action to address drug misuse and offending behaviour, and to improve literacy and numeracy.

For those reasons, the Committee recommended that the Prison Service should develop programmes that meet the needs of short-term prisoners, as well as longer-term prisoners, to lower the risk of their becoming repeat offenders. In response, the Prison Service was able to say that it was setting challenging targets to improve its regimes and to expand the provision of skills training, drug treatment and resettlement activities. The Prison Service pointed to its work with the probation service to develop pilot programmes, specifically for short-term prisoners.

A second example is obesity, and I much enjoyed the remarks of my hon. Friend the Member for City of Durham (Mr. Steinberg) on that subject. The Committee found that most adults in England are overweight, and that one in five—around 8 million in total—are obese. Obesity causes much human suffering by contributing to chronic disease and premature mortality, and it entails a substantial cost to the NHS and to the wider economy.

No single Department can tackle the issue on its own. The Committee sensibly noted that a joined-up approach was needed across Departments and local agencies to tackle this problem effectively. The Committee particularly noted the emphasis that needed to be placed on children and young people leading healthy lifestyles.

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The Committee made a range of recommendations, going right across government and addressing a diverse range of issues, including food labelling and advertising, physical exercise by children and the provision of advice on weight control. This case illustrates the Committee's capacity to grapple with complex issues that are highly relevant to the man in the street. I am glad that my hon. Friend the Member for City of Durham took his comments to heart and instituted a change in his regime.

The Government's response highlighted the steps that the Department of Health, the Department for Education and Skills, the Department for Transport and the Department for Culture, Media and Sport were taking with other partners to improve diet and physical activity levels and the significant investment being made to transform physical education and school club links over the next three years.

Several hon. Members, including the hon. Member for Arundel and South Downs (Mr. Flight) and the Chairman of the Committee, mentioned the report on NHS waiting lists. Its findings make sober reading. Not only had some hospital managers and staff made adjustments to their waiting list data to hide the fact that they were missing Government targets, but in some cases those actions had prolonged the suffering of patients. Such serious findings demanded a serious response. NHS trusts have been advised that clinical priority must be the main determinant of when patients are seen, and that any misreporting of figures will be treated as a matter of great importance. Action has been taken to improve data quality and ensure correct reporting. It is unacceptable for data to be manipulated.

Although I accept the kind words of the hon. Member for Tatton (Mr. Osborne) about my re-election prospects in Bolton, West, I do not accept the charge that he made, and I make no apology for setting those targets in the first place. Targets are an essential part of good performance management; they provide a clear focus for all those involved in delivery. Measuring performance enables success to be rewarded and failure to be corrected.

The Chairman repeated the Committee's continuing interest in the efforts being made by Departments to tackle fraud. As he said, we are fortunate in this country to have very few serious cases of fraud, but that does not provide grounds for complacency. Departments are frequently reminded of their responsibilities to reduce the risks of internal and external fraud and, in those cases where it occurs, vigorously to investigate the cause and the culprits. For its part, the Treasury continues to provide advice to Departments on managing the risk of fraud, and alerts them to cases that have lessons with wider application. We wish to entrench a culture of fraud deterrence in each and every Government Department.

The hon. Member for Buckingham (Mr. Bercow), in his usual trenchant fashion, referred to the Government's record on fraud and asked whether attempts had been made to quantify it. The Treasury publishes an annual report on internal fraud and theft in Government Departments, the level of which has been fairly stable for many years at about 600 cases a year, with a value of about £2 million per annum. Of course, we must always to do more to make sure that the figure reduces further.

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The Chairman of the Committee mentioned social security benefit fraud, as did the hon. Member for Arundel and South Downs. The Department for Work and Pensions is working hard to reduce fraud and error in the social security system. I emphasise that not only are the figures very large, involving thousands if not hundreds of thousands or millions of cases, but at present it is impossible to distinguish between fraud and error, so the overall figures capture a rather complex situation. The DWP is working hard to combat fraud and error and is trying to have its accounts accepted in an unqualified way as soon as possible.

The Chairman of the Committee mentioned delivery as one of his key themes. In that context, my hon. Friends the Members for Tamworth (Mr. Jenkins) and for Hemsworth (Jon Trickett) asked whether the skills of senior civil servants were appropriate for delivering public policy. I certainly agree that delivery and the skills of senior civil servants need to be improved. The Government are taking several steps to enhance project and programme skills, and to champion career paths that embrace responsibility for delivery.

Several hon. Members referred to the role of the private finance initiative in improving public services, and I note the close interest that the Committee takes in such deals. The PFI is ensuring that unprecedented new investment in public services is delivered on time and to budget. It has generated £30 billion of investment since 1997. In the right circumstances, the PFI can ensure that the public and private sectors work together to deliver better quality services for the public. Like all innovative projects, some will fail and lessons will be learned.

The Committee's work has been very helpful in that process, but there have also been many very successful projects. I was glad to hear that my hon. Friend the Member for City of Durham had moved from being a sceptic and was starting to warm to the PFI. That is encouraging. Unfortunately, my hon. Friend the Member for Hemsworth is not yet persuaded, but I remind him of the words of an assistant auditor general of the National Audit Office who said:

None the less, the Government's approach to PFIs has developed considerably since early contracts were established and there have been many improvements in the system, some of which were made on the initiative of the National Audit Office and the Public Accounts Committee. However, I also remind the House that traditional projects were, on average, almost 50 per cent. over budget between 1975 and 1995. That is not an enviable record.

We welcome the PAC's continued scrutiny and I hope that it will turn its attention to other issues that have been the subject of considerable interest today, such as the use of the public sector comparator and how it can be improved in assessing future projects.

I note the comments of the hon. Member for South Norfolk (Mr. Bacon) and I am aware of his great interest in the Treasury PFI project. I was extremely pleased to hear his comments about the quality of parliamentary answers from the Treasury. He made many detailed points and I shall certainly not try to address them all now, but I shall study Hansard and provide a full reply to each of them.

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On the Sharman report on audit and accountability, I was pleased to hear the warm words of the Chairman of the Committee about the Government's response. Indeed, I think it is fair to say that, when the response to the report was published, the Committee was pleasantly surprised by the fact that it went further in some respects than Lord Sharman had suggested. I pay tribute to the work of my right hon. Friend the Member for Swansea, West (Mr. Williams) and his colleagues on the Committee, who played their part in ensuring that the Government took on board many of the comments that were made.

To remind us of the situation at the time, let me say that the Government had not been opposed in principle to changes in audit and access arrangements. For instance, we had provided the Comptroller and Auditor General with access where he had required it in the past. The Government's policy had been that he should be the auditor of all new non-departmental public bodies established since 1997. However, we had some genuine concerns about how wider access and audit facilities would be used and the impact that they would have on the affected bodies.

For example, would new statutory powers of access to documents held by private sector bodies and individuals lead to big extra burdens on the private sector? We did not, for example, want access powers to prevent small companies from doing business with government or to introduce unnecessary bureaucracy in arrangements for grants paid to small bodies. We also asked whether the NAO would be able to manage the additional work load involved in auditing more non-departmental public bodies without the quality of service suffering, and whether it would continue to provide the range of assurance and services that private sector auditors provide when they audit such bodies.

To his great credit, Lord Sharman fully recognised the need for protocols and assurances from the auditor if greater powers on audit and access were to be given. Following his recommendations, suitable protocols and other practical arrangements were discussed with the NAO. In the light of those assurances and arrangements about the way in which the Comptroller and Auditor General would use his powers, the Government accepted Lord Sharman's main recommendations and, indeed, went further in some respects.

On the specific points raised by my right hon. Friend the Member for Swansea, West, we have consulted the Comptroller and Auditor General on the necessary orders providing him with statutory powers of audit and access. He has said that he is content, and I believe that the orders will be laid before Parliament next week. So I can confirm that, if Parliament agrees, the new powers will be in place in the coming financial year.

My right hon. Friend also asked about access to non-departmental public bodies that are companies. Department of Trade and Industry officials work closely with NAO officials to ensure that the legal position is understood. The Government support Lord Sharman's recommendations, and we certainly would support any change—if it is possible—to take place through the forthcoming companies legislation.

On the CAG's access to the BBC, I do not want to discuss the matter further today, other than to say that I have taken note of the feelings expressed on the Floor

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of the House. The Government are considering the recommendations of the Public Accounts Committee, and we will respond in due course. I also heard the comments about access to the Financial Services Authority. The Financial Services and Markets Act 2000 empowers the Treasury to institute value-for-money studies of the FSA itself, but my right hon. Friend the Chief Secretary to the Treasury has said that he will consider inviting the CAG to carry out such studies if the subject matter is suitable.

This debate has again demonstrated the enormous value of the Committee's work and its enduring contribution to the process of parliamentary scrutiny. It is in the interests of the House and of the ordinary taxpayer that it continues to maintain this proud tradition.

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