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Reliable performance information is especially important when it comes to Government efficiency. We have had two hearings on the Government’s efficiency programme in the past year, both of which highlighted how crucial it is to measure progress accurately. Our first hearing highlighted the important point that there is a lack of agreed baselines against which to compare progress, and there are weak systems of measurement and validation. Our second hearing identified the progress that the Government have made in improving the robustness of how gains are measured, but even so, over two thirds of reported efficiency gains still carry a significant risk of inaccuracy.
There remain big opportunities to improve public sector efficiency. We are in a new era of politics. As the parties draw closer together, more scrutiny will shift from issues of ideology to the terrain of whether particular Departments are efficient, and to how much can be saved. The sums that can be saved are staggering. First, the public sector must aim to redirect resources to the front line. Hacking away at the complexity in the benefits system is one way to achieve that. My personal opinion is that we are far too reliant on means-tested benefits, which makes it impossible, year after year, for a Department to ensure that its accounts are accepted by the Comptroller and Auditor General.
Secondly, as the Government are increasingly commissioning services, they must become a lot more commercially astute—we have already mentioned the OGC—and that will require a much better ability to manage contracts. Thirdly, we need to examine more closely how the Government estate is managed. That might sound a boring issue—how many debates are there on the Floor of the House about how the Government estate is managed? However, the potential savings are, again, enormous. We must include in any such study the potential for moving more civil servants to lower-cost locations beyond the Westminster village. We are often told that an agency or Department cannot move because it has to be close to Ministers, but how many civil servants ever actually meet Ministers? How many of them have to be in Westminster in central London, one of the most expensive places to locate in the world?
Fourthly, there is a tendency for Government to become more complex. To combat that tendency, Government must work to rationalise functions that have been duplicated and to eliminate entirely those functions and bodies that are unnecessary. I have been encouraged by a number of developments since the Committee’s hearings. The Government have promised that, in future, before they claim efficiency improvements—this is an important point—they will take into account how much they have spent to achieve those improvements. One might think that that is an obvious point, but it is now on the record. The Chief Secretary—and I welcome what he has done in this area—agreed to publish a breakdown of departmental performance, again, after we applied some pressure. I am sure that he was going to do it anyway, but we applied that pressure. That agreement will provide welcome transparency which, as we all know, is essential in measuring and analysing performance. We have a great deal to learn from the way in which the Office of Management and Budget and the Executive
Office of the President in the United States ensure that there is complete transparency in all those areas to improve efficiency.
Reliable information, too, is a prerequisite for sound financial management. The effective management of public money is the bedrock, as we know, of successful policy delivery. It is at the very core, too, of the Committee’s work. That is another key theme: sound financial management should be straightforward, but many parts of Government simply cannot get it right. For instance, Government must collect the tax which is owed to them—a simple point—but due to financial mismanagement lots of revenue is not collected by HM Revenue and Customs. We found that not all information on VAT debt recorded on the main VAT computer system had been transferred to the so-called trader register. That may appear to be an obscure point, but it meant that some £900 million of debt failed to appear on the debt case management system. That is hardly a first-rate example of financial management by a department that should be at the forefront of such matters.
We have discussed weak financial management, but “weak” is too kind a description of financial management in the Home Office, which somehow failed to reconcile its cash records with its bank statements. The manager of even the smallest corner shop knows that it is crucial to carry out such a basic reconciliation. At one point, the Home Office appeared to value the sum of all transactions going through it at £27 trillion—more than every single transaction in the world in the past year. That was the result of confusing the value of an invoice with an account code. Those people are entrusted with public money, but they apparently thought that the value of transactions going through the Home Office was £27 trillion. We are told that splitting the mismanaged Department into two is the answer—we will have to wait for the proof of that particular pudding.
It is good news that the Government have acted to tackle weaknesses in EU financial management, and I pay tribute, again, to what the Chief Secretary is trying to achieve. Almost a year has passed since the Comptroller and Auditor General called on each member state to produce a consolidated account for all EU funds spent in that state. One would think that that was an absolutely basic point: why on earth should we not know how an EU state is spending EU money? I urged the Government to set an example by preparing such an account for the UK, as we had not done so before. The Government agreed, and they are developing that with the National Audit Office. I congratulate the Government on being at the forefront of that initiative, and we will watch the outcome with interest, as it may be the beginning of an era of much better management of EU money.
I remain convinced that Government Departments and other public bodies must urgently improve their financial and commercial expertise. Thankfully, there has been progress in appointing commercial directors and professionally qualified finance directors, as recommended by the Committee on many occasions. Only yesterday, for instance, we looked at further education colleges, and we found that there was a worrying tendency for governing bodies not to be interested in procurement and for their business members not to be consulted.
That is common, and virtually without drawing breath we could save £75 million that could go back into education. Audit committee members with business experience are increasingly involved in the work of Departments, but are those business members encouraged to influence the main areas of projects, programmes and measures? Despite the unarguable experience of many audit committee members in dealing with the strategic financial management issues with which some Departments are unable to come to terms, the extent to which those expert outsiders are welcomed to the hearth varies. The attitude that people with private sector experience should not be in the highest reaches of government is still too prevalent in Whitehall. That may be unfair, but we have encountered that tendency.
Across the board, the Government appear to have introduced more initiatives, projects and programmes than they can effectively finance and implement at any given point in time. No doubt all Governments have been guilty of that, but we see it especially in the defence and health sectors, as well as in our road-building programme. In our last look at major projects in defence procurement, we were concerned about what was happening in that area. Yesterday, in his inimitable way, the Comptroller and Auditor General told me that to get quarts into pint pots individual projects are drip-fed with resources—again, I presume that has always been Whitehall’s way—time frames are stretched; and specifications are changed. The first consequence is often delay but, as night follows day, cost increases follow project delays. Those are the findings of a man who has a lifetime of experience at the highest reaches of Whitehall. That creates a vicious spiral: overruns cost more; budgets run dry and projects can progress only when extra funds can be freed up; time lines are further stretched; and specifications are subject to revision and reduction. In the end, as the Committee sees again and again, Departments pay more for something; they get it later than they wanted; and it does not do all the things that they need it to do. That worrying picture, I am afraid, is frequently seen in Whitehall.
The Government claim that efficiency savings will free up cash to spend on a host of valuable projects, and they produce anecdotes of isolated successes to cover up huge systemic failures. As we have made clear, however, they have massively overstated the savings that they have made to date. They still fall short of resources, and they continue to drip-feed and delay projects, winnow down their specifications and supply defective services to the citizens of this country. It is right for Departments to be ambitious in seeking to serve the taxpayer, but those ambitions, if they are to come to fruition, cannot but defy the iron constraints of Whitehall’s defective capacity to deliver. I absolve Ministers of blame in many cases—they come, they go—but I repeat, if those ambitions are to come to fruition they cannot but defy the iron constraints of Whitehall’s defective capacity to deliver and the Government’s inability to fund all the programmes that they claim to be implementing.
The Committee seeks to be a strong force for good by taking a balanced look at what is going wrong and identifying where improvements need to be made. We do criticise, but we also advise and commend. These observations are, I hope, valuable and constructive. I am able to make them only as the result of a great deal
of hard work by members of the Committee. I should like to thank everyone who has left the Committee since the last debate: the hon. Members for Burnley (Kitty Ussher) and for Portsmouth, North (Sarah McCarthy-Fry), as well as my hon. Friend the Member for Tiverton and Honiton (Angela Browning). In their place, we welcome the hon. Members for Hartlepool (Mr. Wright) and for Sittingbourne and Sheppey (Derek Wyatt), as well as my hon. Friend the Member for Ludlow (Mr. Dunne) I pay tribute, too, to the Committee staff, including those who have departed or joined since the last debate. Mr. Nick Wright was an excellent committee Clerk, and we greatly enjoyed working with him. We welcome from the Foreign Office—we forgive him that—Mr. Mark Etherton. I thank, too, Chris Randall, the Committee assistant, for all her support, and I welcome her replacement, Phil Jones.
Of course, we thank Sir John Bourn and the National Audit Office, whose continuing support to the Committee is invaluable. Unbelievably, on average, the NAO publishes a value-for-money report every six days for us to consider, and its support above and beyond that greatly enhances the Committee’s effectiveness. During the period of direct rule, the Committee dealt with the reports of the Comptroller and Auditor General for Northern Ireland, but luckily that responsibility, thank God, is now about to be taken away. It is not that we did not enjoy it, but we always thought that it should be done locally in Belfast by people on the ground.
Our achievements were affected by other developments. In particular, I welcome the passage of the Companies Act 2006, which gives the Comptroller and Auditor General access rights to audit Government-owned companies. The Act was a long time in the making, but it is an important step. I should also highlight the Chancellor’s request that the NAO work alongside the Better Regulation Executive to develop a process of external review.
Unlike the Chancellor on another occasion, I shall resist making a final dramatic announcement—I am not sure that I have any power to do so, anyway. I shall therefore conclude my speech by saying simply that, with the coming comprehensive spending review, we face the probability of the Government’s tightening their money belt; we know that. True efficiency and sound financial management will be ever more vital in those changing circumstances. As we approach our 150th birthday, I can confidently state that the Committee on Public Accounts will continue to approach our scrutiny of public spending with the unbending commitment that Mr. Gladstone would have expected of us. The Committee is more than strong enough to take on the challenge, and I commend its work to the House.
12.50 pm
Mr. Alan Williams (Swansea, West) (Lab):
I agree with our Chairman in welcoming the monitoring role being undertaken in relation to the NHS contract and the Olympics. Those are areas in which the Public Accounts Committee and the Public Accounts Commission could get together to devise a longer-term,
more systematic way of ensuring that we identify individual cases that need to be reviewed, as well as a review procedure.
Like the hon. Member for Gainsborough (Mr. Leigh) and all hon. Members, I congratulate the National Audit Office on its work and thank it for the support that it provides. In fact, it is more than support, because without the NAO we would not be able to do our job; we would merely scratch at the surface of problems. We depend utterly on the reports that the NAO produces. Producing a report can take up to six months; the detail of the reports—albeit not necessarily the value judgments they contain—is agreed with the Departments concerned; and they can cost more than £100,000 each to produce. That sounds expensive when one considers that we get two a week to deal with, but when we look at the other side of the picture we see that the NAO is one of the best investments in the public sector because the return it gives to Government is eight times its total expenditure. The money it receives from the Treasury is, in effect, recycled back into the system via the measures that the NAO recommends, and so efficient has the NAO become that, as a result of a request from the Chairman of the Committee and myself as Chairman of the Public Accounts Commission, it aims next year to increase the rate of return from eight times expenditure to nine times—a remarkable achievement.
With my Liaison Committee hat on, I want to thank the NAO for its increasing participation in the work of the Select Committees. In the 17 years since I came back to the Public Accounts Committee—I was a member before I became a Minister in the ‘60s—I have noticed the other Committees’ understandable envy of the qualify of back-up that we receive. I am delighted that, increasingly, the NAO is providing support to the other Select Committees. I hope that the Chairman and I can discuss further with Sir John Bourn methods by which we can expand the NAO’s work into new areas in which it can help Parliament.
In that context—I hope you will forgive me for straying from the subject of the PAC reports, Mr. Deputy Speaker—I want to take this opportunity to remind hon. Members that the NAO is Parliament’s watchdog, not just the PAC’s watchdog. It is a watchdog for individuals Members of Parliament, who can take problems to the NAO. They should not go on fishing expeditions or question matters of policy; the NAO deals with value for money, probity and similar matters. If an MP presents sufficient evidence to start an investigation, the NAO will burrow into the case for them.
Many years ago, I had representations from UK shipping interests worried that, in the first Gulf war, Britain had received only five of the masses of contracts for shipping to the middle east. I delved for a while, but could not get very far, so I spoke to a member of the lobby with whom I had worked on matters royal. He—David Henke—got permission from The Guardian to make inquiries elsewhere in the country and we built up a dossier that we took to Sir John Bourn. He set up an inquiry, which led to a change in the contracting procedures of the Department involved. In the Turkish university case, impropriety was alleged against the institution. No impropriety was found, but inefficiency was, and although the inquiry had cost £80,000, the
NAO said that the Department saved more than that through the changes made as a result of the NAO getting involved.
I could cite various other examples of the way in which the NAO’s help is available. It is not to be abused or pushed into the political arena, because that will undermine its standing, but it is there to be used effectively and wants to be used effectively. Sir John often says that he welcomes inquiries from Members of Parliament. Last year, he dealt with almost 100 inquiries from our parliamentary colleagues. It is good to know that they are beginning to realise that that asset is available to them.
I shall not talk today about matters of great importance such as the Gershon inquiry. I have made my views on that subject well known to the Financial Secretary, who has had to suffer my irreverence in the past. Instead, I shall speak about two reports that I think will not be dealt with in any great depth—indeed, I do not intend to go into them in detail—but which are important because of the long-term benefit to be gained from them.
The first is the report on child obesity. We were aware in general that there was a problem of obesity, but I was surprised to learn from the NAO that it costs the NHS £1 billion a year and the economy between £2.3 billion and £3.6 billion a year, and that those costs will have increased by a further £1 billion by 2010. Child obesity is therefore a financial problem but, more important, it is a life problem for our constituents, leading to high blood pressure, heart disease, type 2 diabetes and reduction of life expectancy by up to nine years.
I told the Committee that almost 10 years ago I attended a conference in the United States. At one session, we were told that brand preference had been identified in children as young as two, because of the use in advertising of toys and cartoon images, which created not an awareness of what the product being advertised was, but an awareness that the product gave access to something else that was desirable. Two-year-olds were being corrupted into nagging or wailing at their parents to get the product in question, which was probably grossly unhealthy. At that time—a fair while ago—the Americans were anticipating seeing in the near future heart attacks in patients as young as 14. The problem was that severe. We have a chance to act before the problem becomes that severe in the UK.
The incidence of child obesity has increased in this country. Between 1995 and 2004, the percentage of two to 10-year-olds who were obese increased from 9.9 per cent. to 13.4 per cent. The relevant Departments have been set a public service agreement target—it might not sound dramatic but will be difficult to achieve—of stopping the annual rate of increase in obesity between now and 2010. If they achieve that, they are to be congratulated. It is a little worrying that they did not have up-to-date statistics—they were at least two years old—but they have only relatively recently become conscious of the seriousness of the impending problem.
During our hearing, we were told that Ofcom planned to introduce restrictions on the advertising of foods high in fat, salt and sugar. Since then, it has done so, but those restrictions came under attack for their inadequacy. Which?—in my days as a Consumer Affairs Minister it used to be called the Consumers Association—is singularly
critical of them and points out that the method used to define which television programmes are to be subject to restrictions does not cover those that are watched by the highest number of children. Those advertising restrictions relate to those programmes that are designed for children and fail to recognise that children watch programmes other than those designed for them. Indeed, the top 27 programmes most popular with children are all excluded from those restrictions because they are not children’s programmes. The relevant index used shows that the majority of those programmes’ viewers are adults, so, regardless of how many youngsters watch them, they are not covered by the restrictions.
Ofcom’s self-assessment of its proposals claims that exposure to such advertising will reduce by 41 per cent. for 10 to 15-year-olds and by 51 per cent. for four to nine-year-olds. Which? carried out a survey in which 86 per cent. of its members said that that they want restrictions based on the time of broadcast, which would be more logical. It argues that the times when children are most likely to be watching television should be advertisement-free as regards particular products, and estimates that the introduction of such a watershed would reduce by 81 per cent. children’s exposure to advertisements for foods that are damaging to them. I should like Ministers to ask Ofcom to look at the matter again, from the consumer and health point of view, and not so strongly from the financial point of view of the industry. I understand that financial considerations must be taken into account, but the case for profit as against child deaths, heart attacks and illness is not a difficult one for me to assess—I know which side I would be on.
I was a Consumer Affairs Minister many years ago. In fact, it was I who persuaded Harold Wilson to set up a Department for consumers. Having said that it would be better value for money if we gave more money to further education than to universities, I was discreetly moved to a competition remit. When I looked at it, my heart sank and thoughts of my political future disappeared. Then I saw that the last words were, “and consumer affairs”, at which I thought, “This is promising.” Since then, Departments for consumers have become stronger and stronger.
I welcome the revelation that primary care trusts have been asked to weigh schoolchildren annually. However, when I asked what information was given to parents, I was amazed to be told, “Oh no, we don’t give information to parents, but we do feed it back to schools”—presumably in terms of broad statistics rather than individual instances.
Mr. Khan: Is not that lack of information one of the reasons why parents and carers wrongly thought that this was an example of Big Brother rather than the good thing that my right hon. Friend suggests?
It seemed anomalous that information would be fed back to schools, PCTs, children’s centres, local authorities and Government offices, but not to parents. When I asked for an explanation, the Department of Health provided a supplementary memorandum, which said, at paragraph 2(a):
“It is unethical to screen children (ie take children who do not know that they have a health problem and tell them that they do)
and inform their parents, when services to treat overweight and obesity are not uniformly available”.
Frankly, that is one of the most unethical comments I have ever heard, yet it was the unanimous decision of the expert advisory group. It is unethical not to be able to tell parents that their children are at risk, when the local trust knows that. Later on, the memorandum says:
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