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Mr. Leigh: On the key aspects, this is the only publicity—we are not supposed to mention this—directed at civil servants. None of our reports ever criticise the Labour Government or Labour Ministers. We never get involved in politics. It is important that civil servants know that this public spotlight is on them. That, as the hon. Gentleman says, is a spur to better performance.

Mr. Heath: That is right, and the Committee should not be used for party political purposes. Every Member wants to see good, well performing public services. Irrespective of whether one agrees with the policies pursued by Ministers, the administration of public services must be as efficient and effective as possible. If it is not, there is a waste of public money that could be used for better purposes. That is the crucial importance of the Committee.

The Committee Chairman referred to seven different categories of importance; I have three. I recognise that a lot of the work of the Government is good and is recognised as such by the Committee and the NAO. A lot of programmes are properly administered. However, there is certainly a need to examine where there is mismanagement, as was reflected in the comments of the Chairman, when there is the misguided application of policy, which is different from mismanagement, and when there is fraud.

Mismanagement can cover a great deal but the particular point that stuck in my mind after reading the reports concerned procurement, which is a huge expenditure on the part of Departments. Procurement is a specialised activity and I know, from my experience as leader of a county council, that the capacity for making mistakes in large scale procurement projects in the public sector is enormous. At times, the public sector does not have some of the tools that are available to the private sector to do its work.

We have more than enough examples of major errors in procurement, particularly in IT. That lesson still needs to be learned by the public sector and one has only to look at the Home Office to see a catalogue of disasters. That makes all the more important the amendment passed in another place recently that suggested that the NAO should break with tradition and pre-empt the passage of a Bill in order to look at the IT consequences of the identity card scheme.

One area in which I am particularly interested is the tax credits system, which was referred to in the reports. Clearly there has been a breakdown of the tax credit IT systems, largely as a result of rushed procurement in the first instance, with Ministers demanding a system before it was ready. There were serious consequences for the Exchequer as a result.

Defence is another area of concern. I was staggered by the findings of the Committee, which show that there is an overspend on the 20 large-scale defence projects of £5.9 billion, which, when coupled with the cumulative delay of 206 months revealed by the Committee, is a
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serious problem; not just in terms of value for money or the finances of the country, but in terms of the finances of the Department. That money should be spent on protecting our troops in theatres of war. That can and should be improved. I know that there has been progress as a result of smart procurement, but it is still not good enough.

On the misguided application of policy, it concerns me that when we have significant divestment of Government assets, we get best value for them. The most immediate worry is in the MOD with QinetiQ. No one should be sanguine about the fact that if this company sells its shares at the top of the price range, it will give its chairman £26 million in profit, its chief executive £22 million and, if that were not bad enough—at least those people were working within the company—an American finance company, Carlyle, which chooses to direct its finances through Guernsey for tax purposes, will receive £623 million. Does that not suggest that, somewhere along the line, a national asset was sold at too cheap a price? I believe that it was, and that the Committee should examine that.

Another aspect of misguided application of policy is in the area of health. Investment in the health service is unprecedented, which is very good news that we all welcome. The outcome, however, is that hospitals are still closing their wards to operations until the new financial year. Something is going seriously wrong when that is the case. The sooner that we get to the bottom of that, in terms of the application of policy, the better.

My last point is on the broad area of fraud. Fraud is simply a form of theft. When it is fraud against public bodies or the Government, however, it is our money, corporately, that is being stolen. I want to return to the tax credit system. Clearly, there has been organised fraud against the tax credit system, through identity theft from within, it seems, the Treasury. We know that officials knew about it a year ago. We know that the Paymaster General was told about it six months ago. Yet nothing was done until recently to address the issue. I hope that the Committee will take up that issue, because millions and millions of pounds have been lost from the Exchequer through this fraud. We must know why appropriate action was not taken earlier.

The Committee has addressed benefit fraud, and it is right to do so. VAT fraud stands at £11 billion, and we need to know from the Government what they are doing to address that.

Mr. Richard Bacon (South Norfolk) (Con): On tax credits, we are familiar with the fact that the accounts of the European Union and the Department for Work and Pensions are qualified. But is it not a scandal, although less well known, that because of the problems with tax credits, the trust accounts of the Inland Revenue have been qualified by the Comptroller and Auditor General?

Mr. Heath: I think that it is. Her Majesty's Revenue and Customs, as it now is, should be beyond reproach in this area. Because such fraud has been allowed to develop and devour public funds, however, that department has a serious problem. I want to be assured not only that the Committee is aware of that and examining it, but that the Government recognise that they have a serious problem, which needs to be addressed as a matter of urgency.
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The intervention of the hon. Member for South Norfolk (Mr. Bacon) brings me to my last point, which is on the Committee's opportune report on fraud in the European Union. How long have we talked about the potential for fraud within the European Union? How long has the European Commission simply sat on its hands rather than take the appropriate actions? We have the European fraud office, l'Office Européen de Lutte Anti-Fraude—OLAF—but there is no direct link between OLAF and national audit offices of the member states. There is no common methodology, or even, as has been mentioned, a common definition of what comprises fraud rather than irregularities. We need to get this right, and I echo the call for clarity from the Government as to exactly what they achieved during the UK presidency. If they did not achieve the necessary breakthrough in dealing effectively with fraud, I hope that they will pursue the issue as a member state through the next presidency and the presidency after that, and for as long as it takes to get to the point at which European Union accounts are no longer qualified because it is impossible to account for fraud.

The issues that the Committee takes up on our behalf are enormously important for the country. We should not run away with the idea that all Government functions are in chaos and that mismanagement is the rule of the day. Where that does occur, however, it is important that we identify it, and even more importantly, that we address it, deal with it and improve in future.

5.14 pm

Helen Goodman (Bishop Auckland) (Lab): I am sure that it will not surprise hon. Members to hear that I was rather a swot at school. I always remember listening to the radio and hearing about the all-powerful Public Accounts Committee, so I am particularly glad to take part in the debate. I want to offer some thoughts on the way in which the PAC works and on how we may improve what we do.

I pay tribute to the great support that we have received from our Clerks, Nick Wright, Emma Sawyer and the other people in the office, and to Sir John Bourn and all the civil servants at the NAO.

The evidence for all the reports on the list for the debate was taken before the general election. Some of them have been approved since the election but all the real work was done before the election. Obviously, that raises the question of how timely the work of the Committee is and what we could do to improve the timeliness of the work of the NAO and the Committee itself.

Mr. Khan: Does my hon. Friend agree that, by the time the report of the PAC is eventually published, those who prepared the first NAO report and those who gave evidence have forgotten what the original grievances were?

Helen Goodman: I am sure that there is a lot in what my hon. Friend says, although since I have not yet been in that situation, I would not like to be too firm on the matter. However, I agree that there is that risk. When new Members arrived on the Committee, there seemed to be uncertainty about what we were approving. I raise
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the matter because it would be good if the Committee could do the work more speedily. Of course, we need to maintain the standards of the NAO reports and not put it under ridiculous pressure, but slightly shorter and quicker reports would improve its work.

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