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Rob Marris: Is the hon. Gentleman aware that the Child Support Agency in Australia, on which the UK CSA is based, got its computer system to work only by getting rid of the external supplier and taking the computerisation in-house?
Mr. Allan: The hon. Gentleman makes an interesting point. We have already, quite rightly, done away with the private finance initiative for IT projects, but the level of in-house expertise, which I am coming on to now, is critical to getting these projects right. We have, sadly, developed a culture of tolerating failure in software development, which is simply not necessary. There are voices calling for proper software engineering principles to be applied, as mentioned in a very good report produced by the Royal Academy of Engineering and the British Computer Society. We should listen to what is being said. Correctly engineered software does not have to cost more than buggy software, yet there is a sort of lazy assumption out there that these things simply have to go wrong. That is not true. The engineering principles are there; the problem is that they are not being applied.
Improvements to Government performance could be made by instilling these disciplines in departmental IT centres of excellence. If we are to have IT centres of excellence, let us ensure that they are truly excellent and that they do not adopt some of the lazy practices offered by suppliers over the years. They must secure best practice rather than state of the art. State of the art is terrible; they need something better than that. We should use information architects, which is an important recommendation in the Royal Academy of Engineering report, and we should have requirement specialists to get the designs right from the beginning. We need to ensure that a broader range of companies is able to bid into the public sector market.
The most important, and often the most neglected, element of any IT project is the people. Industry—British Gas, BT and others—has learned to look at such projects as business change projects, rather than as technology projects. They are not about technology but about changing the business, with technology as a large element of that change. An example of how far the public sector is from that attitude is the national programme for NHS IT. The technology procurement appears robust—I am sure that Richard Granger's team will have bought some good technology—but the people have been left so far behind that the technical press, and even the more general press, are full of stories of clinicians in the NHS who are fighting the very programme that is supposed to assist them in their work. The project is getting the people side desperately wrong. If anything brings down the programme and leads to significant wastage of the £6 billion committed to it, it is likely to be on the people side, not the technology side.
We must ensure that the NHS now gives priority to working with its staff to implement the new IT systems and puts money into training. The NHS must ensure
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that it has in-house expertise so that people can use the systems and derive maximum benefit, rather than leaving the matter to external contractors.
The Government can improve their IT procurement, to the benefit of the public purse and, most importantly, the users of the services, if the will is there. The Government can do more to create a climate in which the UK IT sector can flourish to the benefit of the economy as a whole; the pointers to what needs doing are already there. Ofcom should be robust in promoting a competitive telecoms market and can expect a lively year ahead as it grapples with some of the more difficult issues of telecoms competition that have been left to ride over several years. The Government can respond urgently to the e-skills UK report, "IT Insights", which highlights the improvements needed in work force training. Other hon. Members have mentioned our competitiveness with China and India, but the report tells us what problems we will have if we do not address the issue of skills, all the way up to chief executive and ministerial level. We need IT skills across the work force if we are to be able to make correct and informed decisions.
We need to ensure that we continue to review our support for research and development in technology to ensure that it is genuinely additional and efficiently delivered, without the complexity that often makes it inaccessible to the very companies that would most benefit from it. Such companies often say that they cannot make their way through the bureaucracy to access the funds that are supposed to be available to support innovation, or that they have to employ an extra layer of specialists to do so for them.
I am not in the camp of those Jeremiahs who wish to see the Government fail in their objectives. That is especially so in the case of the improvement of public services through new technology. Indeed, I am desperately keen that the Government should succeed in that agenda. It is not in anyone's interests that such projects should continue to fail. It is a high-risk agenda, but not an impossible one. I hope that the Government will continue to learn the lessons. The Liberal Democrats believe that our approach to the issue is credible. We could achieve savings through the use of new technology, but it is incumbent on all parties who put forward a cost-saving agenda for the public sector to demonstrate that they have the credibility, have learned the lessons and will deliver.
4.43 pm
Harry Cohen (Leyton and Wanstead) (Lab): I shall not follow the hon. Member for Sheffield, Hallam (Mr. Allan) on the subject of IT in public services, although he made some good points about greater competition. The Government have to be clear about what they want from such contracts and there should be penalties for failure as well as rich rewards.
I welcome the programme of new legislation for next year that was announced in the Queen's Speech, including the 37 Bills—some of which are complex and important—the Chancellor's financial proposals in his pre-Budget report tomorrow, and the commitments in Labour's election manifesto, when it is published. The
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one thing that cannot be said about this Government is that they have run out of steam. They have plenty of ideas for improving society and the lives of our people.
I want to address one issue that the Government will have to address more fully in the next year—pension reform. I shall indicate some components of such reform that I think would achieve the most favourable outcome for the many, not just the few.
First, I shall give the House two recent examples that show pension schemes in a mess. On 19 November, under the headline, "APW staff furious as loophole threatens pensions", The Independent reported:
"More than 1,000 former and current workers at APW—the UK electronics manufacturer, which announced the winding-up of its pension scheme yesterday—are set to lose up to 80 per cent. of their retirement savings . . . The wind-up is the second such case this week, after Henlys, the bus group, left more than 2,000 workers in jeopardy when it announced that it would be winding up its pension scheme . . . Despite a fortnight of debate over the final structure of the privately funded Pensions Protection Fund and the Government-backed Financial Assistance Scheme, members of the APW and Henlys schemes are still set to fall outside the requirements to qualify for either lifeboat."
That is appalling, although I pay tribute to the Government for bringing in the pension protection fund and the financial assistance scheme.
Another report in the same paper on the same day was headed, "Royal Mail warns it must double pension contributions", and disclosed a scandal that is repeated in many other companies. The report stated that
"for the previous 13 years, Royal Mail had taken a pension holiday, making no contributions at all."
The fact that companies and employers can do that is an enormous flaw in the current system, especially as the report went on to note:
"However, the organisation's top management . . . stand to collect millions of pounds in performance bonuses."
Some people get their bonuses by not putting money into pension funds.
Those are not isolated scandals; they are a flaw in the system, and not least in the Chancellor's approach of maintaining that his responsibility is the prudent management of public finances, which is laudable, while leaving the private sector largely to operate as it wants. Companies hold in trust, but are untrustworthy with, people's savings and workers' pensions.
On pensions, the Chancellor has said:
The examples I gave are among the many that show that the system does not work and that it is time for the Government to look beyond it.
The Tories attacked the Chancellor for abolishing the tax dividend on pension funds. I refer to the "Daily Politics" Tory conference special on 6 October, when the presenter, Andrew Neil, questioned the hon. Member for Havant (Mr. Willetts), the Conservative spokesman on work and pensions. The hon. Gentleman had said in his speech to the conference that Labour's £5 billion per annum take from pension funds, by completing the abolition of the tax dividend—by the way, that process started under the Tories—was
Andrew Neil asked him whether he would restore the money and the hon. Gentleman replied:
The Tory attack is thus somewhat feeble.
The Chancellor is not out of the woods as far as I am concerned, however. On the "Today" programme on 27 September, he said that the £5 billion per annum taken out of pension funds was connected to rewarding investment, to give greater incentive for investment in the economy. He said that corporation tax had been cut by 3p and
That was not picked up at the time, as it was Labour's conference week and news moves fast, but in effect the Chancellor said that he had taken out of workers' pensions to put into company profits. That is not appropriate from a Labour Chancellor and he will have to arrange to put back that money, and a lot more, over the next period.
I believe that there has to be dignity and well-being now for today's pensioners, and I praise the Government on their efforts on that. They were right to tackle the appalling legacy of pensioner poverty that they inherited from the last Tory Government. In 1997, 2.7 million pensioners were in poverty and expected to live on a total of just £69 a week. The poorest pensioners are now £1,800 a year better off and absolute pensioner poverty has been reduced by two thirds.
Savings used to be harshly penalised by a reduction in benefits. The new pension credit has changed that. The setting up of the pension protection board, to help the workers in those firms that go broke and wind up their pension fund, is also a very welcome move by the Government. But there need to be decent pensions for people in the future, and to achieve that reform is needed.
The recent interim report of the Pension Commission, chaired by Adair Turner, formerly of the CBI, said that a sustainable comprehensive approach was required for the long term. There are, it argued, four "unavoidable choices" for policy makers, at least one of which will have to be made. The first is that pensioners become poorer relative to the rest of society. The second is that taxes and/or national insurance contributions devoted to pensions will need to rise, or public spending on other services will need to be reduced, presumably to balance tax and national insurance. The third is that each generation will have to save more and be reliant on the next generation also saving more. The fourth is that retirement ages will have to rise. Without action on this, the report said,
"pensioners will on average suffer about a 30% decline in their incomes relative to average income between now and 2035."
So doing nothing is not an option and the Government will have to start to address the issue in a realistic way from next year.
I oppose raising the retirement age; I also favour a bigger basic state pension for every older person in this country. I would like the pension linked to earnings and to be free from means-testing. The Government's
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minimum income guarantee raised the incomes of the poorest among the elderly, but I have seen figures showing that the basic state pension is now just 15 per cent. of average earnings. In 1980, before Mrs. Thatcher abolished its link to earnings, it was 23 per cent., so in my view the Government have to raise the basic state pension.
I favour a compulsory savings requirement upon all people to individual savings accounts, which cannot be accessed until retirement or, for a spouse, death. There should also be compulsion for employers to contribute at a proper level, higher than now. They should also lose the power to manage and, potentially, to raid their workers' pension fund. The Exchequer should insert an initial sum, like that proposed with the child bond—which I very much favour, although the Liberals opposed it—into the individual savings accounts, and add a state contribution to extra private savings made, say a pound for every pound saved.
There should also be an extra boost from the Exchequer for women's pensions. Many women lose out on their occupational pension because they undertake important but lower paid jobs and miss out for a long while in their working career due to the time that they take out to raise their children.
I am not against Exchequer use of the private sector. It could use the private sector to manage the savings account sum in total, but managers' performances would need to be monitored and their contract terminated if their performance was inadequate.
The Government would also need to address the impact of stock market fluctuations upon savings for retirement, perhaps by adopting a system whereby they inserted extra cash during bad times and took it back at times of stock market rises. It should be possible to do that consistently in this day and age.
Effective robbery from pension savings by fat cat directors of finance companies who take excessive salaries and dividends for themselves, even when the savings that they are managing are underperforming, must be stopped. It is also time that the salaries, dividends and other payments that directors receive from companies, including their pensions, are published in annual accounts and not kept secret, as is often the case. I introduced a Bill to require that in the last Session and I hope that the Government will take up that point.
Those are my basic components for pension reform, which I hope will be taken on board. Over the next year, I hope that the Government will be for the workers, not the bosses, and for the many, not the few.
4.55 pm
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