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If I have a criticism of the National Audit Office, it is one that I have voiced repeatedly when it has produced reports. I do not think that it pays enough attention to the social class impact of Government policies. It does not carry out a “social class health check” of policies and their implementation. I am continually disappointed by the way in which it allows many Departments not to make any assessment of the different impacts that their policies have on people of different social classes, and the lack of take-up among
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those with lower incomes and the like. I feel that we should try to incorporate that.

Helen Goodman: Was my hon. Friend particularly reminded of that recently when we took evidence from the Duke of Westminster, who had broken through every barrier to become the first major-general in the Territorial Army since 1945?

Mr. Davidson: That is a useful point. It proves that we are an open society. Any old jerk can become the first major-general in the Territorial Army. To be fair to him, he did very much resent any suggestion that he had got there other than on merit. The subtext was that any member of the aristocracy could have become one of the Territorial Army’s high heid yins.

It was interesting that when I asked whether any proles or plebs had reached such a level in the TA, not only was I told that the TA did not keep the figures, but the witnesses resented the suggestion that anything of that sort should be monitored. I think the National Audit Office often overlooks the unconscious assumption that we live in an open society, and that there are no barriers. If I have the Chairman’s support, I want to continue to be able to impress such points on the NAO, and to raise them in Committee reports. I think it is up to us, as well as pursuing questions of value for money, to try to ensure that those citizens who are in the least fortunate positions in our society have just as much access to the resources provided by taxation as the Duke of Westminster.

I particularly want to make another point. I have brought my box of reports along with me, but colleagues will be pleased to hear that I am not going to read out the highlights of speeches. Rather, I want to demonstrate the scale of work that we undertake. I wonder whether the time has come for us to consider splitting the Committee in some way in order to allow Members to specialise rather more. It is impossible for us all to make meaningful contributions based on personal experience on every matter that comes before us.

We all want to discuss issues with the witnesses in front of us, but in my experience, some of the most constructive and positive contributions to questioning have come from those who can cast some light based on their personal experience, their constituency activities, or some expertise that they have gained elsewhere. It is not possible to have that degree of specialisation across the whole range of governmental activities. If we were to split the Committee to allow a degree of specialisation, it would reduce the burden on individual Members. None of us could adequately prepare for every Committee that goes on every week. We have to pick and choose, so some are missed out. We might be able to make better contributions if we were to revise our methods of operation.

Finally, Madam Deputy Speaker—you will be aware that when an MP says “finally”, it usually means that he or she is only about 40 per cent. of the way through, but wants to give the audience some hope; on this occasion, however, I mean finally—I view serving on the Public Accounts Committee as one of the most constructive roles that an MP can have. I am in the fortunate position
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of having spent almost all my time in the PAC under a Conservative Chairman. I say that because it means that Conservative Members are in opposition and we are in government, which has been a pleasure and long may it continue. I look forward to serving, hopefully, under several other Conservatives. I am conscious that each member of a Select Committee can serve for only eight years. When one of my colleagues said that change might come in 12 and a half years, I thought that it was going to be much longer than that before the Conservatives got into power. I look forward further to serving on the Committee and hope that, under the inspired chairmanship of the hon. Member for Gainsborough—or perhaps the hon. Member for Tunbridge Wells (Greg Clark) or the hon. Member for South Norfolk (Mr. Bacon) in due course—we will continue to hold the Government to account, as we have up to now.

11.7 pm

Mrs. Theresa Villiers (Chipping Barnet) (Con): The hon. Member for Glasgow, South-West (Mr. Davidson) is always a tough act to follow. In winding up what has been a very interesting debate this evening, I would like to pay tribute to the work done by the Public Accounts Committee and its Chairman, my hon. Friend the Member for Gainsborough (Mr. Leigh). I would also like to congratulate and thank Sir John Bourn and his staff at the NAO on the vital work that they do.

The PAC and the National Audit Office carry out vital work in safeguarding taxpayers’ money and rooting out inefficiency, incompetence and waste in the administration of government and the public services. Their work has been, as we have heard this evening, wide ranging and uncompromising over recent months. In his wide-ranging speech, my hon. Friend the Member for Gainsborough covered the Committee’s work, going back as far as 1690. He covered military readiness, consular services, adult literacy—and I was particularly pleased that he highlighted the Committee’s important work on cancer treatment.

On cancer, we have an example of both good and bad news. The PAC took note of the work of the cancer networks and improvements in cancer care, but it also felt that better co-ordination between those networks and the primary care trusts that actually spend the money was desirable. It signalled that simpler, clearer and more easily accessible guidance on how to detect the early-stage symptoms of cancer could do much to help remedy the deeply worrying disparities between cancer outcomes in affluent and more deprived communities. I have no doubt that the Government will act on that wise advice of the PAC.

The hon. Members for Portsmouth, North (Sarah McCarthy-Fry) and for Bishop Auckland (Helen Goodman) both focused on the Committee’s excellent report on value for money in the public services and on enhancing better project management. They also mentioned the vital importance of pilot projects and of ensuring that lessons learned in one Department can be spread across other Departments as well. They both looked at tackling complexity, especially in the benefits system, and acknowledged the challenge of the difficult tasks of simplification and of reconciling and balancing the needs of flexibility and simplification.

My hon. Friend the Member for South Norfolk (Mr. Bacon) expressed grave concern that the Home
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Office’s accounts were published with a complete disclaimer by the Comptroller and Auditor General. In effect, they were presented to Parliament unaudited, which is unprecedented for a major spending Department. My hon. Friend also outlined ways to prevent the NHS Connecting for Health scheme from turning into the sort of IT disaster that the PAC has all too often encountered. My hon. Friend the Member for Tunbridge Wells (Greg Clark) again had some good news and some bad news. He praised the impact of the PAC’s report on the Office of Fair Trading and noted the constructive response to the PAC’s criticisms and the increase in activity that they triggered, but he— like the hon. Member for Somerton and Frome (Mr. Heath) and others—expressed concern about the crisis in the tax credits system. He noted the Committee’s hard-hitting report on that subject, which was also mentioned by the hon. Member for Tooting (Mr. Khan).

As the Chief Secretary to the Treasury acknowledged in the debate on 7 June, there is now a consensus across the House in support of the principle of tax credits, but the PAC’s April report is just one of a succession setting outthe continuing and severe difficulties in their administration. It highlighted the fact that HMRC overpaid £2.2 billion in tax credits to 1.9 million families in 2003-04, much of it due to the design of the scheme, which bases provisional awards on income and circumstances from the previous year. The House has of course heard countless examples of the hardship that overpayment causes to millions of families landed with bills for repayment that they find it hard to meet. The latest figures show that of the 6 million families who receive tax credits, around 2 million were overpaid and 1 million underpaid, meaning that nearly half the payments in the system were incorrect.

The Committee noted that by March 2005, HMRC had set aside some £1 billion to cover debts that it was not confident that it could recover. And the loss to the taxpayer does not end there. Increasing the level of income disregarded for the purposes of calculating the final award has a significant cost. It has the same effect as formally writing off overpayments that cannot be recovered. The increase in the disregard is a key part of the package in the pre-Budget report designed to tackle problems in the tax credits systems, but—as my hon. Friend the Member for Tunbridge Wells said—when officials were challenged by the PAC about the cost of that change, they were unable to provide a figure. Paul Gray of HMRC indicated that such a figure could be supplied, but, regrettably, none has yet been disclosed to the Committee or the House.

The report revealed the continuing and grave problems with the tax credit computer system, which was responsible for at least £184 million in overpayments in 2003-04 and 2004-05. Amazingly, of the £71.25 million of compensation that the Government agreed with EDS, which supplied the defective computer systems, some £26.5 million depended on EDS winning further work from the Government. As my hon. Friend the Member for Tatton (Mr. Osborne) put it, in his characteristically forthright way:


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The Committee concluded that HMRC did not have reliable or up-to-date information on levels of claimant error and fraud in tax credits, and that was seriously impairing its management of the scheme and its ability to safeguard taxpayers’ money. As we have heard, an organised assault on the tax credits website led to its closure in December 2004. We also know that at least £1.2 billion was lost to fraud and error in 2003-04, and possibly a great deal more. Again, the Treasury faces the acute embarrassment that the Comptroller and Auditor General has qualified his opinion of the Inland Revenue’s trust statement because of fraud and error in the tax credit system.

The significant sums lost to the Exchequer as a result of tax credit overpayments need to be viewed alongside the PAC’s reports on £3 billion lost in benefit fraud and error and nearly £13 billion lost in fuel duty and VAT fraud, the latter now so large as to undermine the accuracy of Britain’s trade figures.

A continuing challenge for the Public Accounts Committee is to ensure that the public sector acts in a commercially hard-headed manner when negotiating to buy goods and services from the private sector. That is one of the key factors highlighted in the Committee’s report on “Achieving value for money in the delivery of public services”, about which we have heard much this evening. Too often, the Committee has seen examples of manifest failure to achieve a good deal for the taxpayer.

For example, two years after the new Norfolk and Norwich university hospital opened, Octagon, the private finance initiative company that built it, refinanced the transaction, trebling the rate of return that it had predicted for its investors, from 19 per cent. to a staggering 60 per cent. The hospital trust received only 29 per cent. of the refinancing gains, despite taking on new risks and increasing the duration of the contract. Octagon kept £82 million. The Committee concluded that that refinancing produced, in its words,

The gross imbalance resulted from a failure to include a clause in the original contract to allow the benefits of refinancing to be shared between the public and private sectors. The Committee condemned that failing and noted that such clauses are now expected to be included in PFI contracts. The Committee famously described the deal as

but the report highlights failings in government as well. That is a bipartisan point, because the start of the negotiations took place under a Conservative Government, although the negotiations were concluded under Labour.

The evidence given to the Committee indicates that the Treasury and the Department of Health actively discouraged the trust from seeking a better deal. George Monbiot put the point with devastating clarity in The Guardian:


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Mr. Davidson: I would be grateful if the hon. Lady told us when was the last time a Conservative Finance spokesman favourably quoted George Monbiot and The Guardian in one sentence.

Mrs. Villiers: I suspect that it is unprecedented. It just demonstrates how the Conservative party is changing. George Monbiot said:

He continues:

The PAC is, of course, presented year in year out with examples of projects that go over budget and out of control. For example, the Diana, Princess of Wales memorial fountain had to be closed for major alterations three weeks after it opened owing to design flaws which caused repeated accidents and flooding. The cost rose from £3 million to £5.2 million as a result of what the Committee described as “basic project management failures”. It wisely advocated that lessons be learned in planning the memorial for the Queen Mother and suggested that water-based features were probably best avoided.

Another project that caught the Committee’s attention was the BBC’s White City 2 development. The BBC made 300 variations to the contract and had to pay an extra £60.9 million above the price originally authorised by its governors. However, as we have heard, perhaps the key point to take away from that report is that it was produced as part of a voluntary agreement with the BBC governors to allow the NAO to undertake certain limited studies of BBC activity. The voluntary agreement ends in 2006 and the BBC wishes to retain the final say over what subjects the NAO can and cannot investigate in relation to the BBC’s activities. The BBC spends very significant sums of taxpayers’ money. In the coming years, as we have heard from my hon. Friend the Member for Tunbridge Wells, we will face many difficult decisions on matters such as the interrelationship of the BBC’s commercial and public sector activities, its role in new digital services and its internet presence, not to mention its significant taxi and hospitality bills. As the Chairman of the Committee said in his appeal, surely it is now time for the BBC to receive the same scrutiny as Departments, which are also entrusted with taxpayers’ money. I urge the Government to give the Comptroller and Auditor General full access and scrutiny powers over the BBC.

As the time gets ever later, I turn lastly to the PAC’s damning report on the deportation of failed asylum applicants, to which several hon. Members referred. In its report of March this year, the PAC concluded that the UK’s asylum policy had been undermined by the inability of the immigration and nationality directorate to deal promptly with asylum applicants whose request to stay in the UK had failed. The IND admitted that it did not know how many failed asylum applicants remained in the UK. The Committee concluded that it would take a staggering 10 to 18 years to clear the ever-increasing backlog of removals. The IND also admitted that more than 400 foreign criminals had
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been released from prison into the community. We now know, of course, that the numbers released were actually considerably higher and that many of those people had committed serious crimes.

In its understated way, the PAC dealt a devastating blow by concluding:

Its report set in train a series of events that led to the admission by successive Home Secretaries that their Department was “dysfunctional” and “not fit for purpose”, and to the sacking of one of the most senior members of the Cabinet. That is a classic example of the hugely important work performed by the Committee.

I commend the pivotal role that the Committee played in revealing the true extent of the crisis in the Home Office. I also commend the vital work that it does to safeguard taxpayers’ money and protect and cement our democracy. I commend its reports to the House.

11.21 pm

The Financial Secretary to the Treasury (John Healey): It is a privilege to respond to the debate, and to the Chairman of the Public Accounts Committee and his colleagues. We have had a good and wide-ranging debate, which was led in an exemplary way by the hon. Member for Gainsborough (Mr. Leigh), who chairs the Committee. I was interested by the research that he had clearly done on the institution of the Public Accounts Committee. He traces the Committee back to the 17th century, which means that the Committee is not of a dissimilar age to the post of Financial Secretary to the Treasury, which I am privileged to occupy at present. The hon. Gentleman said that the characteristic of the Committee and its work was rightly objectivity over partisanship. Our debate has been conducted in such a tone.

Although this might not be obvious to some, the Government share many common aims with the Public Accounts Committee. They also appreciate the way in which the Committee helps them to deliver better value for money in public services, even if the Committee quite rightly makes the process rather uncomfortable at times for those involved.

I pay tribute to the work of the Committee and the Chairman of the Committee. The work load of the Committee is such that it meets twice a week and addresses a different issue each time. Anyone who has served on a Select Committee knows that that represents a formidable undertaking, and the Committee members carry out their work with great diligence and assiduousness.

I also formally recognise and pay tribute to the work of the Comptroller and Auditor General and the National Audit Office. They play an important role in supporting the work of the Public Accounts Committee, which, crucially for us all, is the principal way in which Parliament holds the Executive to account. The Committee is Parliament’s leading voice in the cross-examination of the Executive.


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