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Kitty Ussher: I agree with what my hon. Friend says and it mirrors my experience as a new Member. Does she agree that, when there is a big delay between the initial NAO report and the publication of our deliberations, often as much as six or nine months later, or even longer, in many cases, the problem that the NAO identified has already been fixed?

Helen Goodman: I am grateful to my hon. Friend for making that point. With regard to specific issues, what she says is true, but one of the most noticeable things is that there are recurrent themes in the reports. I want to refer to some of those, which the Committee has to look at repeatedly. That suggests that some work is intrinsically difficult for Government to do and we need to concentrate on improving Government's capability to do those things.

First, Members have talked about the big IT programmes. The 25th report on congestion and the 27th report on IT projects dealt with those. The continuing and probably necessary reliance of all Governments, whatever their complexion, on large IT projects is a triumph of hope over experience.

Secondly, another recurrent problem is the tendency for large capital projects to overrun, hence the difficulty in controlling their costs. A third problem, which comes out in the report on tax credits, the benefit system and asylum, is the great difficulty in running systems that of necessity are large and bureaucratic, because they deal with large case loads, and in personalising them to individuals. It is especially difficult to run such systems because, by definition, they are run by the state. They are not areas where choice and competition are possible, or even imaginable. The question is how to improve the efficiency of such systems. Another issue, which arises continually in the papers before us and in evidence from officials is the problematic interface between the public and private sectors, such as the shortages of key skills in the public sector and the question of salary relativities. Again that comes through in lots of areas.

That said, there are many virtues in the way in which the Committee works. A key virtue is the specificity of the reports. It means that we avoid the rather generalised management discussion about outcomes, outputs and targets and look at what is happening in a particular case to particular people. I know that officials sometimes feel that we are rather harsh on them and that we use our constituency cases to back up a criticism. I suggest to officials who might read the record of this debate that senior officials get an over-rosy picture of how well systems are operating. When they visit local offices they are shown exactly what is going best, what is new and what is innovative. Somewhere between us lies what is really going on in the public services.

There is the issue of the way the Committee works. Is it too confrontational? Does that reduce the quality of the information that we retrieve? Currently it is fashionable to decry Punch and Judy politics and to look for something more consensual. There is also the
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question of whether the arrival of more female members on the Committee will feminise the working and make it more consensual.

Kitty Ussher: Did my hon. Friend notice the comments of the newest member of the PAC in this week's The House Magazine when he said after his very first meeting that he feared he was far too nice for the Public Accounts Committee?

Helen Goodman: I had not noticed that. While I started off by believing that a consensual approach was appropriate, after only a few months I can already see that unless the Committee is tough on people giving evidence, there is vast scope for evasion. As a comfort to witnesses who may have to face the PAC, during the Christmas recess I had a recurring nightmare that I was being grilled by the PAC. I would wake at 3 am to the even more terrifying realisation that I was the one who was meant to be doing the grilling.

That of course is related to the question of who takes responsibility for decisions when things go wrong. Colleagues who are long-standing members of the Committee have expressed frustration that it sometimes seems as if in Whitehall no one ever takes final responsibility. A mess is made and people are moved on. Being capable of giving an elegant defence is more important for the careers of officials than the reality of whether they are good at delivering. There is something that we need to address for that reason, and that is the advent of boards and non-executive directors in Whitehall, and their impact on accountability.

Traditionally, Ministers are responsible for policy, and accounting officers, the permanent secretary of the Department, for the way the money is spent. A few weeks ago we attended a seminar in the Treasury. It was explained to us that Ministers retained responsibility for, for example, the content of the Budget, but that the boards would share responsibility for the way in which Departments are run. In a policy Department such as the Treasury or Foreign Office, that distinction makes sense, but in other Departments, such as the Department for Work and Pensions or Her Majesty's Revenue and Customs, where half the issue is the way in which individual civil servants are treating members of the public, that is not a realistic distinction. We need to look at this area, possibly in conjunction with the Public Administration Committee. Clearly there are overlaps between their responsibilities and ours for examining these structures.

Finally, I want to say something about propriety, by which I mean, is public money being spent on the purpose for which it was voted? So few people will be listening to this debate that I shall risk a diplomatic incident by calling this the "Why we are not Italian" problem. There is a story—I am not sure whether it is apocryphal—concerning two cities in Italy. Two motorways connect them because different people in the Italian ministry of transport were on the take from different parts of the Mafia. We in this country do not traditionally suffer from such problems, and the 18th report on financial management is clearly relevant in this regard.
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However, maintaining high standards of propriety is very important to the state of our democracy. We must avoid corruption. Decisions must be transparent and those in public office must be accountable to the people who elect them for the decisions that are finally taken, and not to some other group. Of course, maintaining high standards is also important economically: it promotes efficient markets, rational choices and value for money. I fear that, once lost, the culture of the proper use of public money would be very hard to restore. We only have that culture because of the great work of our predecessors, particularly in the 19th century. We need to renew our focus on this issue.

There is a proliferation of complex financing schemes such as private finance initiatives, public-private partnerships and local improvement finance trusts. I am not saying that such schemes are not useful in themselves in leveraging in more capital and new skills, but the risks associated with people moving rapidly between the public and private sectors—between being the customer, and being the person granting the contract—are clear. We would be foolish to close our eyes to this issue, as even the briefest look at the back of "Private Eye" every fortnight will tell us. I hope that we can address it in the forthcoming Session.

5.27 pm

Mr. Richard Bacon (South Norfolk) (Con): It is a great pleasure to follow the hon. Member for Bishop Auckland (Helen Goodman), who provided the House with a penetrating analysis of the Committee's work, and of some of the issues and problems with which it has to deal. I agree with a great deal of what she said. She certainly does not sound like a new member of the Committee, but of course, she was a Treasury official for a while. We also know—I am not sure that she knows that we know—that she was the original teenage scribbler. She has now been promoted from scribbling to offering penetrating analysis, and we welcome her and the other new members of the Committee to their positions.

Helen Goodman: I should point out that I was not a scribbler; I was the original teenage kid.

Mr. Bacon: The hon. Lady was a deputy scribbler, perhaps.

Like the hon. Lady, I want to pay tribute to Nick Wright, Chris Randall, Emma Sawyer and Ronnie Jefferson, who run the Committee's office; to the press office of the National Audit Office, which is headed by Barry Lester, with able support from Mark Strathdene and others; and to the office of Sir John Bourn himself. I should point out by way of correction that members of the NAO are not civil servants and that in fact, the Comptroller and Auditor General is an Officer of the House of Commons. That is of incalculable importance. Even if it is a constitutional nicety, it says something very important about the way in which the system is structured.

I want to focus on private finance initiatives, particularly those relating to hospitals. The Committee has examined a wide range of PFI projects and a wide range of hospitals. We have looked at the Darent Valley hospital and the Dartford and Gravesham hospital. We
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visited the UCL hospitals and recently examined the Norfolk and Norwich hospital, which is in my own area. The issues associated with hospital procurement illustrate some important themes that merit further scrutiny and discussion not only by the Committee, but by the Treasury.

We are all familiar with the standard PFI model as it has developed. It started out as a design, build, finance and operate model, whereby the Government said to operators, "Go off and do it, and tell us when you've done it." There have been many successes; indeed, not even critics of PFI would deny that an increasing number of buildings have been delivered on time and on budget, with substantially reduced, if not completely eliminated, cost overruns.

The NAO's figures show that, in 2001, 76 per cent. of projects were delivered on time and 79 per cent. to budget. That compares with 30 per cent. on time and 27 per cent. to budget for conventional procurement. More recent Treasury figures tell an even better story, with 88 per cent. of projects delivered on time and 79 per cent. to budget.

We all know examples of conventional procurements that have gone horribly wrong—the Jubilee line extension, the British Library, the Scottish Parliament building, and even Portcullis house. In the latter case, all kinds of problems were encountered. The wrong kind of bronze was used on the roof, and the windows cost £23 million more than they were supposed to. The president of the Royal Institute of British Architects told me recently that it would have been cheaper to clad the exterior of Portcullis house with 7-series BMWs. That shows the scale of the problems that conventional procurement can encounter, and that PFI has offered a successful alternative in many cases.

There is no doubt that PFI has led to significant improvements, or that it is here to stay. The question is whether we are getting the best possible value from the way that PFI procurement is conducted. There is growing evidence that we are not, a conclusion that is especially well illustrated by PFI hospital procurement.

Many of the problems have to do with design, and they could be avoided with more thought and a better assessment of requirements in the early phase of procurement. For example, the Cumberland infirmary in Carlisle was a 45-year contract costing £65 million. The contract called for a 474-bed hospital, but the new infirmary has a capacity of 444 beds. Floor capacity in the old sites that it replaced amounted to 57,000 sq ft, but the new site has only 42,000 sq ft. The infirmary has been criticised for having cheap components that need refitting at short intervals. The maintenance costs are 50 per cent. over projections, there is poor drainage and plumbing, and limited signage. Patients exiting cardiology have to go through five sets of swing doors, even though most of them are in wheelchairs.

The new 450-bed district general hospital in Durham was built on the Dryburn site to rationalise services provided previously at Shotley Bridge and the old Dryburn hospital. There, the pathology lab flooded three times in the first 18 months, twice with raw sewage. There is poor ventilation and air filtration and the fixtures and fittings are of poor quality. Some of the lightweight storage cupboards are unable to take the weight of routine equipment.
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The opening of the hospital in Bishop Aukland, in the constituency of the hon. Member for Bishop Auckland, was delayed by two months for modifications. The generator and the core electrical systems had to be redesigned immediately after the hospital opened.

The Norfolk and Norwich university hospital is on the border of my constituency. Most of my constituents go there for medical treatment, and many work there. The negative pressure rooms were not properly operational for two years. A nurse lifted ceiling tiles in third-floor ward areas and found air ducting lying in unconnected lengths. The job simply had not been finished. I am pleased to say that the hospital has since spent some money on modifying those rooms and they are fully operational, but other problems remain. For example, there is no ventilation in the kitchens: 30° C working conditions are common, and a temperature of 44° C has been recorded. In addition, delivery loading bays are inefficient, and there are numerous reports of health and safety problems due to layout and the poor materials used in construction.

When it is published, the separate PAC report on refinancing will reveal some startling facts about the financial engineering used, not to increase the number of beds or to build a new wing, but solely to accelerate the rate of financial return, from 18 per cent. to over 60 per cent.

The new Hereford hospital has 354 beds. The boiler house opened with no water treatment plant. There were materials defects, doors were too heavy for the opening restraints. Engineering workshops designed for five staff regularly have 13 people working in them, and three lifts had to be refitted within the first 12 months.

I turn now to Worcestershire, a county for which I have a particular affection, as I had my appendix taken out in a hospital there some years ago. In the Worcestershire acute hospitals NHS trust's modern, 452-bed facility, the back office conditions are too cramped. Corridors are too narrow to pass two beds side by side. There is also an inefficient and unused one-way system.

It is worth saying that these are not just snagging issues that occur with any new building. They are design problems. It is not normal to refit three lifts in the first 12 months. One does not redesign the generator and the core electrical systems immediately after opening a new hospital and call it snagging. Corridors that are too narrow to pass two beds side by side are not a snagging problem. A pathology lab that floods three times in 18 months, including with raw sewage, is not a snagging problem. They are fundamental signs of poor specification and design. The current PFI procurement process makes such design more likely, not less.

As well as inadequate quality, we are also seeing spiralling costs. The average cost of bidding for a PFI hospital has risen from £7.5 million two years ago—itself an extraordinary figure—to more than £11.5 million now. RIBA believes that a conservative estimate of the cost of abortive bids is about £500 million per annum across the sector. As part of the company's operational profitability, that inevitably gets rolled into the cost of the losing consortium's next bid. Even the winning consortium is likely to have factored in the cost of its previous unsuccessful bids.
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The process is simply making the whole industry more expensive. It is also excluding many capable medium-sized contractors. In effect, it is a Government-sponsored oligopoly. It is wasteful. Parallel teams work up designs that require a considerable amount of professional time and skill at a time when, as the hon. Member for Bishop Auckland said, there is an acute skills shortage. It is worse than that, because the most expert clients are the ones who can recruit the best designers, who then compete with each other while the other bids have less experienced designers, leading to lower overall quality of design.

Once a consortium has won, another key question arises that, in some ways, is even worse in terms of its consequences, namely, who, then, is the client? The client is not who one would think it would be. It is not the hospital trust; the designer's client is the consortium. So there will be pressures. A marked degradation has been seen on many occasions in the design quality after financial close.

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