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Mr. Howard Flight (Arundel and South Downs) (Con): May I add my thanks and congratulations to the Chairman of the Committee, my hon. Friend the Member for Gainsborough (Mr. Leigh), the Public Accounts Committee, the National Audit Office and Sir John Bourn for their excellent work? As ever, we have had an excellent debate, and I should like to comment particularly on the contributions of the hon. Member for Dagenham (Jon Cruddas), which went to the heart of why this work is so important, my hon. Friend the Member for South Norfolk (Mr. Bacon), who focused on the area that we are most failing to address and which wastes the most in the public sector, and the hon. Member for Glasgow, Pollok (Mr. Davidson), who made a most witty and incisive thrust into some of the key areas that are so unsatisfactory.

I congratulate the Chairman on his excellent opening speech and wholly agree with his two messages: that greater efficiency is all about achieving better delivery of public services, and that there is a need for far better project management in the public sector, especially in information technology services. For nearly a year, I have been working with some 60 professionals who have been seconded and volunteered to work with David James in 15 teams to examine, on a bottom-up basis, how to achieve greater efficiency in the public sector. To date, at least, that work has been carried out in a great deal more depth than the Gershon report.

I find it depressing that, notwithstanding the response that people are "taking note", so much more could be achieved if the recommendations of the PAC reports were put into practice. Hon. Members mentioned the fact that the NAO makes savings eight times greater than its costs, but they could be massively greater if its findings were listened to and put into effect. The Chairman was right to say that that issue is at the centre of our political life today, given the massive increase in spending by an unreformed public sector that appears unable to deploy the money to adequate effect or to deliver.

The investigations of the PAC are conducted on an issue-by-issue basis. In the United States, according to statute, bodies must regularly audit the operational efficiency of the public sector entities, and perhaps what is missing in this country is an ongoing review of the efficiency and operational structures of much of the public sector.

The reports that we have debated today deal with some £60 billion of public expenditure, which, along with those that we discussed in our debate in February, give a total of £310 billion of expenditure. I shall not repeat the comments made by many who have spoken today, but many issues struck me as I read through the reports. One thing that I particularly value about participating in these debates is the discipline that it imposes on me to find out what is being said in the busy life of this place.

The first report said that the Inland Revenue had got out of date in dealing with tax compliance strategy. It is interesting that, just as the Government are tightening up on avoidance, the report should find that the Inland Revenue has gone soft on evasion.

That is not a particularly good message to send to the public at large, because evasion is a far greater and more difficult problem than avoidance.
 
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The much quoted—understandably so—report on the sheep premiums scheme in Northern Ireland is a classic example of what is wrong with such schemes, what will inevitably happen and what is happening in many different areas all over the EU. The poor delivery by the Forensic Science Service agency, which has missed targets for five years, struck me as a classic case for privatisation, in which a public body has apparently been quite unable to achieve efficiency, whether through an efficiently priced private finance initiative or something greater. Most of the funding for the Warm Front scheme does not help those in most need: only a third of the grants help the fuel poor, and a third of fuel-poor households are not eligible for grants. That is a classic example of an ill-thought-out political gesture, and of tinkering that does not achieve its objectives and wastes taxpayers' money.

The report on expenditure on regional assistance and enterprise grants in England shows that, 14 years on, and £1.4 billion of expenditure later, the economic gap remains just as wide. That suggests not that the principle is wrong, but that the measures deployed have manifestly not succeeded in narrowing the economic gap. On Wembley, to which reference has been made, let us imagine handing over £120 million to another party without any guarantee or contribution from that party—in this case, the Football Association. Although taxpayers ended up paying for a fifth of the funding, they will not receive any benefit if the stadium is financially successful—what a completely uncommercial way of running Wembley and of looking after the interests of taxpayers.

The ninth report focused on the community grant to the National Coalition Of Anti-Deportation Campaigns, which found that the NCADA had used the funding for dubious campaigning that opposed any form of immigration controls whatever. I thought that I was reading a report on the EU budget, because this is another classic example of how public money must not be spent on indulging interest groups.

The 10th report is easily the most important, on which both my hon. Friend the Member for South Norfolk and the hon. Member for Sheffield, Hallam (Mr. Allan) made extremely valuable contributions. Ultimately, the issue is not learning from experience—as I commented last year, there is much to learn from how Italy, of all countries, has achieved far greater efficiency in the implementation of public sector IT investment and, as my hon. Friend the Member for South Norfolk pointed out, from some of the disciplines that have been used in the US.

The 12th report displays no evidence of benefit eligibility decision making having improved at the Department for Work and Pensions, which the Chancellor contradicted at last week's Question Time. Overall, 24 per cent. of decisions contained errors, and 45 per cent. of disability living allowance claims contained errors. Essentially, it is a problem of a benefit system whose complexity is causing problems both for citizens and its administration.

The PFI for the Home Office was quoted. The one issue that was not quoted, which tells us so much, was that the Home Office might reconsider its implausibly high assumption that 1,300 officials and support staff
 
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need regular ministerial access. In relation to moving the civil service out of London, the same principle obtains right across the board.

The 17th report looks at hip replacements and the use of hip prostheses, in respect of which there is inadequate evidence. It also contains the important statistic that hip replacement costs vary from £2,266 in one hospital to £7,456 in another. That is unacceptable if we are to have a much more efficient national health service. One of those hospitals is extremely efficient, while the other is, by implication, extremely inefficient. Much can be learned from such figures about possible ways of improving NHS efficiency.

Mr. Jenkins : The problem is the number of operations performed. A hospital that performs five operations a year is not in the same economic league as one that performs 50 or 60. It is a question of getting the specialism in the right place.

Mr. Flight: It is indeed a question of making the NHS more efficient by helping hospitals to specialise, and to become better at those specialisms.

The reports overall spoke to me of a public sector in need of major structural reform. They tell a sad tale of inadequate management, and many major areas of waste and inefficiency. It is clear that the public sector should be able to deliver better, and to produce better value for the taxpayer. Merely spending more money is not enough; structure and management are in urgent need of reform.

6.41 pm

The Financial Secretary to the Treasury (Ruth Kelly): We have had an excellent debate, which has shown the special contribution that the PAC makes to our system of parliamentary scrutiny of the Executive. It has reminded us of the key role played by the Committee in highlighting ways in which better value can be obtained from public spending. I pay tribute to its work and in particular to its Chairman, the hon. Member for Gainsborough (Mr. Leigh), who has ensured that its work is done in a manner that makes clear the reasons for the success or failure of projects or schemes. That approach ensures that lessons are learnt for the future, and that good practice is promoted.

Before I comment on the relationship between the PAC and the Treasury and respond as fully as I can in the time available to some of the points that have been raised, I too must pay tribute to the assistance that the Committee has received from the Comptroller and Auditor General, Sir John Bourn, and his staff at the National Audit Office. Their role as independent scrutineers of central Government spending is central to the process of ensuring the accountability of the Executive. The NAO's financial audit work and value-for-money studies continue to make an important contribution to efforts to improve the standards of financial stewardship in Departments, and the effectiveness of public spending.

Many Members have singled out the role played by the NAO, particularly my right hon. Friend the Member for Swansea, West (Mr. Williams), who sadly cannot be present—although he gave me notice of that. I commend him on his long service to the Committee. He
 
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made sensible points about the workings of the Committee, and brought his experience to bear. I know that he retains a keen interest in the Committee's access to the civil list. I remind him, and other Committee members, that it has long been the policy of successive Governments that Ministers stand between the royal family and Parliament. That approach has been agreed on both sides of the House.

Other Members also made important points about the workings of the Committee, and I am sure that they will continue to bring their expertise to bear. My hon. Friend the Member for Dagenham (Jon Cruddas) pointed out that the Committee was central to political discourse, and I entirely agree. He challenged not just the Committee but the Government to define the way in which the need for spatial economic analysis was taken into account. That is something that we should reflect on further as we prepare our approach to public spending in future years and as the Committee carries out its scrutiny in years to come.

I note the touch of scepticism brought to the debate by my hon. Friends the Members for Glasgow, Pollok (Mr. Davidson) and for Tamworth (Mr. Jenkins) over how the Government have responded to some of the points made by the Committee, but I assure the House that we take the recommendations extremely seriously. The Committee and the Government have a shared responsibility to ensure that taxpayers' money is used economically, efficiently and effectively, and we want to see the delivery of public services to a high standard, drawing on the skills of the private sector, working together and applying best practice in financial and project management. We have to ensure that the extra investment flowing into public services leads to the significant improvements that the public expect and deserve.

This is probably not the best place to enter into a partisan debate about the role of public spending, as the Committee traditionally has a commendable, non-partisan approach. However, I should like to respond to some of the points of detail raised. The hon. Member for Gainsborough reminded us in his opening remarks of the considerable ground that the Committee has covered since February, and I commend all Members who have contributed to that important work. The Committee has rightly continued to take an interest in the efficiency of the social security system. One report that it considered was entitled "Progress in improving the medical assessment of incapacity and disability benefits". I pay tribute to the work of my hon. Friend the Member for City of Durham (Mr. Steinberg), whose contribution to these debates I always enjoy. He brings to them great insight and passion for his subject, but also good humour. I am sure that Members on both sides welcome that.

It is fair to say that we share my hon. Friend's and the Committee's concern about the complexity of benefit systems, which raises difficult issues about targeting benefits at those who need them. However, the Department for Work and Pensions is committed to trying to make the system easier to understand and improving the accuracy of decisions. Of course, the Committee has made valuable recommendations that the Department has taken into account, and it is only right to point out that the Committee has concluded
 
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that since 2001, performance has improved in many aspects of medical assessment. The DWP has taken action on all the Committee's earlier recommendations. New performance targets have been set out, which either have been met or are on track to being met. The Committee has also recognised the action taken to enhance the training of doctors and to improve the quality of medical reports.

As the hon. Member for Gainsborough pointed out in his opening speech, better services and efficiency savings are two sides of the same coin, and he pointed to the concrete savings that the DWP has achieved, partly as a result of the Committee's recommendations. The backlog of incapacity benefit examinations was fully cleared by March 2004, and the result was a one-off saving to the taxpayer of £10.9 million. The time taken to complete personal capability assessments since 2001 has been reduced, resulting in an updated estimate of annual savings of £21 million. The overall saving to the taxpayer is therefore nearly £32 million. It is only right that we always focus on ways of improving efficiency and at the same time delivering better public services.

A great deal of interest in IT procurement and software has been expressed by members of the Committee on both sides. That is an emotive issue, and I certainly recognise the difficulties with IT procurement, but I merely point out to the Committee that they are not unique to the United Kingdom. Other leading international economies, particularly the United States, have encountered similar issues and difficulties. I believe that in the United States, 23 per cent. of all projects are cancelled before they are completed, and only 28 per cent. are finished on time and budget with the expected functionality. We clearly have common challenges that we need to address.

However, we are committed to learning from the past, to adopting best practice where it exists, and to attempting constantly to improve procurement techniques. For example, we have concluded that private finance initiatives are not suitable vehicles for IT projects. That is a significant example of how we have learned from the past. We do of course still believe it is important to work in partnership with the private sector, partly because of the skills and expertise that it offers to the public sector.

The Office of Government Commerce has played an extremely valuable role in helping Departments to procure IT more sensibly. The OGC introduced new procedures to improve the delivery of all projects and programmes that depend on the implementation of new IT systems. Three features of these new procedures are worth highlighting, the first of which is the establishing of a project-programme management centre of excellence in each Department. These centres report to departmental management boards on progress in key programmes and projects to support effective decision making, to share information and lessons learned elsewhere in government, and to provide internal support to aid delivery.

Secondly, each accounting officer is required to confirm that major IT-enabled projects do not suffer from the common causes of failure identified through OGC and National Audit Office experience. The NAO's contribution in this regard was particularly welcome.
 
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The third feature is the introduction of a requirement that no Government initiative that is dependent on new IT be announced before an analysis of the risks and the implementation options has been undertaken.

These measures will go a long way towards raising procurement performance across government. I acknowledge the contribution and comments of the Chairman of the Public Accounts Committee, who said that it was only reasonable to give the Government a pat on the back for the work of the OGC. The OGC constitutes a very significant development in IT procurement and elsewhere, and it is only right that we should recognise its role, while not being complacent about the issues that will affect us in future.

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