Commissioners for Revenue and Customs Bill

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Dawn Primarolo: I start by correcting points made by the right hon. Gentleman in his opening remarks on the Mapeley STEPS contract and on how that company successfully secured the contract following a proper procurement process, which followed the Green Book. The right hon. Gentleman said that the company won the contract only because it was offshore, which enabled it to have the cheaper price. That was not the case; the possibility has been considered thoroughly by the NAO. All Government departments are perfectly capable of working out how the property market works, and therefore the relevance of the comparators. Mapeley STEPS was a successful bidder because it offered the best value for money.

The right hon. Gentleman touched on a number of points. There has been a great deal of public discussion about Mapeley STEPS—in particular about its tax arrangements, which I will touch on first. At previous Select Committee hearings—I do not think that the right hon. Gentleman was on the Committee at that point—the accounting officer acknowledged that mistakes were made; not in the procurement process but by the department in not recognising the connection between the procurement guidance and the Government's anti-avoidance agenda.

10.30 am

That was corrected. The new Treasury guidelines are in place to prevent that from happening in future. Indeed, under the Revenue's ASPIRE contract, which is now in place and has been negotiated since the guidelines were changed, a movement offshore is an event that could provoke the termination of the contract. The contract with Mapeley is already designed to ensure that property is managed in accordance with best value. If the Treasury were to issue a scheme or direction that was not covered within the terms of the existing contract, any changes would be subject to negotiation and agreement with Mapeley.

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As I said earlier, it is important when considering best value not to lose sight of the fact that the deal represented very good value for the taxpayer, as confirmed in the NAO report, ''The STEPS Deal'', which is House of Commons paper 530, Session 2003-04, published on 7 May 2004. The report found that the savings would be about £334 million compared with retaining ownership. The NAO said not only that taxpayers benefited from the sale price, but that they will benefit from the ''facilities price'', which includes the rent of the properties occupied by the department and other costs that would have risen unpredictably over the 20 years.

The right hon. Gentleman quoted the figures that I provided to the Select Committee. The £170 million that was given by the NAO is an indicative annual average of the facilities price payment over 20 years for the serviced accommodation element of the contract, as qualified by the NAO itself in the STEPS report. It was never expected that the facilities payment would be a straight-line payment each year. It does not reflect the actual changes to the estate since the contract was started, or the passed-through costs.

The right hon. Gentleman quoted from the letter that I wrote to the hon. Member for Sevenoaks. The figures he used are contained in the letter, which explains the current discussions about the facilities price and the likely costs. I specifically answered in detail the questions raised about the average NAO facilities price, which is currently £170 million per contract year, and why that varies with regard to the current contract and the negotiations that are outstanding. That was written following a letter from the hon. Member for Sevenoaks to me on the 21 October and replied to on 24 November. All that information is in the public domain, and I would be happy to circulate my answers to Committee Members.

There are other savings to the taxpayer. Significant flexibility is built into the contract, so that Mapeley will cover the risk of changes in the department's accommodation requirements—changes that have happened since the contract was signed and that will continue, notwithstanding the merger of the two departments, as the department's accommodation requirements change. If the department decides that it no longer needs to occupy a property, the risk of disposing of the leasehold or freehold transfers to Mapeley.

That flexibility will be vital through the process of change and will serve the departments well within Her Majesty's Revenue and Customs. [Interruption.] I want to continue, then I will give way to the hon. Member for Chichester. It is therefore not clear that the new clause would lead to any savings or improvements in efficiency, economy or effectiveness.

The proposed Treasury scheme seems a rather bureaucratic way of attempting to achieve what the accounting officers are already required to do, which is to administer public money wisely and carefully and to be subject to the scrutiny of Parliament. I cannot
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remember how many times I have been before the Treasury Committee about the contract, as have both the accounting officers—including every year when the annual accounts are submitted, which is another opportunity for that Committee to scrutinise—and the Comptroller and Auditor General.

While I am referring to the Comptroller and Auditor General and the Public Accounts Committee, perhaps it would be helpful to remind hon. Members what the department has done following the PAC's recommendations with regard to the contract. The department has been working closely with Mapeley to normalise service delivery, to deal with some of the legacy issues and to improve the performance management system. That is a reference to where new buildings and different facilities have to come under the contract, or where buildings that we had when the contract was signed were for some reason not included in the contract.

On the settlement of the outstanding legacy issues, the NAO report recommended that the departments and Mapeley should conclude the current legacy negotiations and agree any required contract changes to allow movement towards a partnership approach to contract management. The initial indications from the PAC were that a significant improvement in Mapeley's performance must precede any revised contractual arrangement.

The Chairman: Order. May I tell the right hon. Lady and other hon. Members that this is not an appropriate place for a discussion of the history of the Mapeley contract or an analysis of whether it has been good or bad? That has already been dealt with by the Public Accounts Committee and the National Audit Office. I therefore hope that right hon. and hon. Members will from now on confine their remarks to the desirability or otherwise of the new clause, rather than conduct a further historical analysis of the Mapeley contract, which is not appropriate for this Committee.

Dawn Primarolo: Thank you for that guidance, Sir John. Of course I will immediately stop pursuing the department's response to the requirements to ensure that the contract—

The Chairman: Order. I am perfectly happy for the right hon. Lady to outline what the department may now be doing, in the light of the new clause. What I do not want—and what I will not allow any further—is any backwards and forwards debate about the desirability, efficacy or otherwise of the Mapeley contract.

Dawn Primarolo: Thank you, Sir John. I think that I have made my point with regard to the contract in question or any subsequent contract. The new clause is bureaucratic and unnecessary because the requirements of the accounting officer, Government resource accounting, the obligations on the NAO and on the department to respond, and the requirements for best value will ensure that all contracts are pursued on that basis. Members have disagreements with different aspects of the Mapeley STEPS contract, but there has never been any question of there being any
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loss of value for money or that the Department did not get the best return possible for the taxpayer. In those circumstances, I simply take the view that the new clause is irrelevant.

Mr. Tyrie: I completely agree with you, Sir John; the key question is not about how a contract could have been satisfactorily negotiated, but about what lessons we can learn from that to ensure that the Bill is in such a shape that the same mistakes are not made again. That is the purpose of these new clauses. Can the Paymaster General really give an assurance that without them the legislation will ensure that we do not get a repetition of such failures? Can she assure the Committee that we will get ''best value'' from the estate, to borrow a phrase from new clause 2?

Dawn Primarolo: There is no question about it; this contract has supplied best value. That is made clear in the NAO report. It is also clear that the contract was conducted within all the requirements for procurement. [Interruption.] No; it was made absolutely clear in the reports of both the Treasury Committee and the NAO that all the responsibilities with regard to requirements to procurement, following the Green Book and within Treasury guidelines, were pursued and best value was achieved. The new clause merely duplicates what is already in place. Therefore, it is unnecessary. I cannot let it be asserted in Committee that somehow the contract did not provide best value and was not conducted properly, because the NAO report makes it clear that it was.

Mr. Heathcoat-Amory: My misgivings have been increased rather than diminished by the Paymaster General's remarks. I do not want to trawl back through the Mapeley contract, but it is clear that neither the Treasury nor the Revenue had any real understanding of what they were signing up to. Finding out where the main contractor is actually located must be one of the elementary questions to address, as must whether the contractor is receiving tax advantages from being based in Bermuda, particularly as before Labour was elected to office it was very critical of individuals and companies avoiding tax by placing themselves offshore. However, as you suggested, Sir John, that is history, and the new clause is intended to ensure that things will be different under the new arrangements.

10.45 am

I looked again at the letter sent by the Paymaster General. It seeks to explain why the facility price, which is the bulk of the annual payment, has been substantially higher than was estimated at the time of the contract, and it points out that the NAO expert at the time did not take into account possibilities for new legislation, nor of additional buildings being taken on. I find that slightly strange, because new legislation is not always unexpected. The Bill before us is new, and therefore my initial question was whether the contract fully takes into account the possibility of Revenue department merger. I now understand that the contract has a kind of escalation clause and that additional costs can be taken into account, and
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therefore the Mapeley payment goes out. I want to know whether there is symmetry in this, and if downward costs can also happen.

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