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In my constituency, Friends of Newbridge Memo are seeking to restore a wonderful building which was built after the first world war. Miners and their families paid a penny a week to provide that facility for the community, with a library, a ballroom and meeting rooms. The Celynen Collieries band practises there, and indeed was founded there. The building was erected in memory of the boys from Newbridge who went to the great war
and did not come back. It was runner-up in the BBC’s “Restoration Village” competition. Friends of Newbridge Memo need £4.9 million to begin putting the building back into shape. Their application to the Heritage Lottery Fund was turned down, and I am sure that they would have welcomed just a small portion of the £46 million by which the Rural Payments Agency has gone over budget.
My area also desperately needs a rail link from the Ebbw valley to Newport. The line currently goes to Cardiff. It will be completed eventually, but it could be completed next year with a fraction of the money that is being wasted on projects like that. Cancercareline in my constituency provides wonderful support, mainly for women suffering from cancer. Home-Start helps families who are struggling with the difficulties of bringing up young children. The money that is being wasted here could provide them with funding for decades, so that they could do more wonderful work in the community. That makes me very angry and frustrated.
It gets worse. According to the latest report, the agency has estimated that there were overpayments for the single payment scheme amounting to more than £20 million in 2005 and £17 million in 2006, and it has still not resolved the problem of how to get the money back.
The most extraordinary aspect of all this is that no one takes responsibility for what happens. The culture has to change. The hon. Member for Gainsborough referred to the present economic situation. Nowadays, even bankers cannot be certain that their gold-plated jobs, massive salaries and generous bonuses will continue if things go wrong. Why, then, should those who are responsible for the failure to deliver public services that are vital to our constituents be immune from the consequences of failure?
Mr. Richard Bacon (South Norfolk) (Con): I agree with the right hon. Gentleman about the BBC’s “Restoration Village” programme. Pulham St Mary, the village in Norfolk where I live, made it to the last 12. I am pleased to say that it has just received a lottery grant.
As for the Rural Payments Agency, one person did take responsibility. When Johnston McNeill finally appeared before the Committee, he gave a surprisingly good account of what he had done. However, we gained the clear impression that, as chief executive, he had not only taken the rap but been hung out to dry, and that others in DEFRA and the agency, far from taking responsibility for what had happened, got away scot-free and prospered elsewhere.
Mr. Touhig: I am grateful to the hon. Gentleman for reminding me about that session. That gentleman did come before us. He was very frank, and he did take responsibility. I agree that he was hung out to dry, and I think that the heads of many others should have been on the chopping block for the awful waste in the agency.
The reason for many of the problems and failures in managing complex projects comes down to the fact that many civil servants are ill-prepared to run the commercial-type projects their Departments are now engaged in. Central Government now manage more financial resources than ever before, and according to a National Audit Office report published in February that sum will grow
to £678 billion a year by 2010-11. That report also stated that six Departments, accounting for more than £45 billion of Government expenditure, still did not have a professionally qualified finance director on their main board. The Chairman, the hon. Member for Gainsborough, has updated us, and that is now down to two Departments, so some progress has been made. However, it is almost unbelievable that such massive organisations should not have a finance director on their board.
The report highlighted the difficulties and dangers of not having properly qualified staff. Almost 70 per cent. of Departments cited the level of skills of non-finance staff as one of the three most significant barriers to improving financial resource management across Government. One has to wonder whether this may be the reason why there have been so many commercial blunders. The Home Office spent £29.1 million planning and designing the purpose-built accommodation centre for asylum seekers at Bicester, only for it to be cancelled. The enormous problems delivering the national programme for IT in the NHS, which will cost £12.7 billion, arose because officials did not actually understand the limitations of the technology. This is basic stuff for those involved in such massive undertakings.
For all these mistakes and such waste of public money, there seems to me to be no real incentive to get things right first time. No one is ultimately responsible for any decision. Ministers may come and go and civil servants may move on, and the ownership of a project can change hands several times. Therefore, the NAO and the Public Accounts Committee will frequently only provide objective scrutiny of a project years after it started, when it is too late to influence the final outcomes.
I referred at the beginning of my speech to the lessons that I have learned while serving on the Committee. Perhaps the biggest challenge is that Departments must be far better at monitoring how projects are managed. They need regular reports on how major projects are being managed, and internal audits so that we can see what is going wrong and what is going right, and learn lessons from that. Senior staff have to take ownership of major projects and should bear the consequences if they go wrong. In that way, we will begin to reduce this awful waste of taxpayers’ money. The hon. Member for Gainsborough said that we must stretch every pound and squander none. I entirely agree. If that happens, perhaps future PAC hearings will be less of a blood sport.
2.31 pm
Dr. John Pugh (Southport) (LD):
In listening carefully to our revered Chairman of the Public Accounts Committee, the hon. Member for Gainsborough (Mr. Leigh)—and I always listen to our revered Chairman carefully—I noted that he made at least two important points. First, he laid out the systematic failures of public expenditure programmes. Secondly, he highlighted the huge new task that confronts us—because, after all, we are now in a situation in which public expenditure is ballooning and Government expenditure is encompassing bailing out the whole financial system almost across the globe, and there is also a continued roll-out of private finance initiative projects, which will increasingly be the
way in which Government spend money. Tax revenues are, therefore, ever more precious, and effective targeting of public expenditure has never been more important, and waste has never been more unforgivable.
The Chairman has put forward sensible, important and strategic proposals for Government consideration, and he has done so in a wholly constructive spirit. I think we are a wholly constructive Committee. To be fair, at times the PAC has an attack-dog reputation, as was alluded to in the previous speech; it has a reputation for gratuitously roughing up senior civil servants, and especially those on large bonuses. However, the arrival of the hon. Members for Sedgefield (Phil Wilson) and Edinburgh, South (Nigel Griffiths) and the right hon. Member for Streatham (Keith Hill) has changed that just a tad. We have possibly been a little slower to condemn key Government spending programmes—or, possibly, they have—or the way Governments deploy resources when they embark on spending programmes. However, this is not a battle between critics and defenders of programmes, or between optimists and pessimists, or at least that is not how I see it. Instead, the Committee is essentially evidence-led; we are interacting all the time with a massive resource, the National Audit Office, to which we are deeply indebted.
I am not going to embark on a Cook’s tour of all our reports in the past Session, but I would like to alight on some that have brought back many memories for me, and to highlight those that contain important messages. First, we had a raft of reports on taxation—the evasion of vehicle excise duty and on tax credits and tax form reports. Significantly, they underline how much could be gained through an efficient tax system and how much could be lost through a grossly inefficient system, and therefore what great gain is to be had simply in getting it right.
One interesting report, although not directly about taxation, was on managing risk in overseas territories. It turned over a stone that covered the vast and murky world of tax avoidance and tax evasion, which is a whole industry in places such as Bermuda, where I think there are about 80 per cent. of all hedge funds. We found that huge amounts of money were being moved around the world by companies that had connections with this country. Surely it is unacceptable that those corporate pirates—the hedge funds—can hide out there, free like the old-time pirates, to create havoc on the financial markets and to account to no one. Surely that must be tackled.
Another set of reports were about Government efficiency, and we examined Government property. We have recently heard, and moaned, about the culling of tax offices, which has certainly been an issue in my constituency and something about which I have strong views. When surveying it, I felt that we were unable to judge the real gains, and we are unable to do so now as the programme unfolds. I am not sure whether anybody is in a position to judge the real gains in property, because so much has already been leased under commercially confidential private finance initiative arrangements. We simply do not know what those are worth or the result of surrendering the leases.
We examined the NHS. We will all recall the issue that arose a year or so ago concerning the NHS being overdrawn or in the red. We examined its return to balance and agreed that it was a wholly good thing, and
we awarded congratulations where they were due. I must say that I personally baulked at the spectacle of the north-west subsidising London, as it appeared to do according to the accounts that I looked at, and at times I found it hard to distinguish true efficiency gains from creative accountancy or simply the same money being accounted for in different ways.
Most poignantly, we examined the plight of neonatal babies and the variations in their fortunes across the nation. We all had to accept that that was not directly a function of NHS spending but due to wider intractable problems, public health issues and so on. It is an incredibly difficult problem to tackle but modest progress is being made, and we were all grateful to see that.
Something that stuck in my mind, and about which I was reminded by the question that the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) asked at Prime Minister’s questions yesterday, was our report on people leaving the services. We concentrated particularly on the less qualified individual—not the lieutenant but the private, the squaddie leaving the services. It seems to me there is a problem that demands immediate attention but that genuinely can be rectified.
We established that too many young men who join the infantry, often as a path to personal salvation and often with problems and a relatively deficient educational background, pass through the Army and eventually end up on the streets, sometimes unhoused, usually untrained for civilian life and certainly woefully unprepared. That was vividly illustrated in the hon. Gentleman’s question yesterday, when he pointed out that 10 per cent. of the prison population have been through the services. There must surely be something that the Army, the services or somebody can do about that. We cannot let that situation continue. We have to do more for those people when they join, when they serve and when they leave.
I close my remarks by suggesting where the PAC and the NAO may wish to go next, following the progress that we have made over the past term. Following our inquiry into pathfinders and housing regeneration, there is a genuine need to look into the targeting and efficiency of the whole regeneration budget and the various budgets that constitute regeneration. We have to challenge the assumption that the process is always meritorious and that all the money is well spent. My belief is that much is, in fact, being wasted.
Following the QinetiQ inquiry, we need to look into the whole issue of remuneration in the higher reaches of the civil service, the bonus culture that has grown almost without our noticing, and the transfer of top people to and from Whitehall and the conflicts that that might involve. Such an inquiry would be deeply unpopular in many circles, but I believe that it has to be done and is long overdue. Also, probably, in the overdue category is the need to remove the bad odour hanging over defence contracting and commissioning with overseas states, including, dare I say it, Saudi Arabia. We perhaps need to take a close look at recent contracts, rather than raking over the past.
Finally, I turn to a point that we have not dealt with at all in the two previous Sessions. We need to examine public value in our railways: the stewardship of Network Rail, which is a bone of contention in this House; the quasi-monopolies of the rolling stock leasing companies, or ROSCOs; and the Department for Tranport’s role in the whole kaleidoscope of interactions that make up
the railway system. As thousands of people make their way home tonight, no inquiry could have more resonance with the general public than one into overcrowded trains that cost premium prices.
2.40 pm
Mr. Richard Bacon (South Norfolk) (Con): It is a great pleasure to follow the hon. Member for Southport (Dr. Pugh), who is a forensic member of the Public Accounts Committee; his contributions are always appreciated by its members, of whichever party.
I endorse the Chairman of the Committee’s comments about public expenditure, and the recent bank recapitalisation, in particular. It is entirely appropriate for the Comptroller and Auditor General to examine the huge sum involved on behalf of taxpayers, and I very much hope that the Treasury agrees with that and will assist the National Audit Office in every way.
Secondly, I wish to comment on the issue of financial management, which has been to the fore in many of the Committee’s reports. When I first starting asking what proportion of principal finance officers—finance directors, as they are now called—in Departments have an accountancy qualification, the answer was 23 per cent. The Treasury recently told us that the answer is now 91 per cent, and although that figure excludes the big exception of the Ministry of Defence’s finance director, who is in charge of £32 billion of expenditure, enormous progress has been made. I congratulate the Treasury and other Departments on starting to realise that the topic is important and that they have to do something about it. The progress should not go unremarked; the Treasury has understood the importance of the matter.
That makes it all the more important for the Treasury to give a sensible account of tax credits, the subject of the Committee’s eighth report. It stated that
“there is little evidence the Department has the scheme”—
“under control. Many claimants continue to struggle to understand tax credits and why they are overpaid. There have been many complaints about the process for recovering overpayments and the Ombudsman continues to receive and to uphold a large number of complaints...This level of error led the C&AG to qualify his opinion on the HMRC Trust Statement for the fifth year running. The Department still has no targets for reducing error and fraud.”
If we think that financial management is important, and if the Treasury thinks it is important enough to ensure that qualified finance directors are in place across Whitehall, surely it is important enough to ensure that the department that comes directly under the Treasury’s own control—Her Majesty’s Revenue and Customs, which has the task of collecting the money that we then spend on various public expenditure programmes—is itself under sufficiently tight financial management that it can account for how it spends its money. At the moment, it is unable to do so—it has not been able to do so for several years. I hope that we will be told when the Treasury expects the Comptroller and Auditor General to be able to sign off HMRC’s accounts as clean, because it is only right that what is good for other Departments should be good for the Treasury and its subsidiary departments.
I wish to make another quick point about tax credits. A settlement was reached between EDS and HMRC concerning the tax credits fiasco. The Treasury originally
claimed that EDS should pay it £209 million, but that was later cut to an agreed settlement figure of £71 million. Only about £44 million of that was paid in cash or near cash; the remainder, £26.5 million, was to come from future revenues on contracts that EDS had not yet won with government. In other words, it is to come from future business. Apart from the fact that that gave Government Departments a rather strong incentive to award EDS further business despite, rather than because of, its track record, it has been clear that over the past two and half to three years since the agreement was reached hardly any money has been paid. Most of the £26.5 million is still unpaid; a few hundreds of thousands have been paid and there was one payment of £20,000. The chairman of HMRC for the time being knows that every time he comes before the Committee—unfortunately, I was abroad when he came before us last time, in early October—I shall ask him how much money he has had. He always comes prepared with the answer. Indeed, his distinguished predecessor Paul Gray, who honourably resigned over the issue of the missing discs, said that he would have been most disappointed had the question not been asked. I will continue to ask the question.
Dr. Pugh: I am sorry that the hon. Gentleman missed the last occasion, but the question was asked in one form or another and litigation was threatened by the chief executive of HMRC. I do not think that we believed him, but the hon. Gentleman might be interested in that observation.
Mr. Bacon: I am grateful to the hon. Gentleman, who brings me to the point that I was about to make, which is that the various representatives of HMRC have made it very clear that they have been documenting millions of pages of material relating to the case so that they can, if necessary, litigate. But they really ought not to have to. It is in the nature of large-scale computer contracts that they hardly ever go to litigation because, at the end of the day, the only people who win are the lawyers. It is much better to avoid litigation. However, EDS should recognise its responsibilities in this area.
If one goes to the Vote Office and asks for the PAC bundle, one is given all this material I have beside me. My hon. Friend the Member for Tiverton and Honiton (Angela Browning) said that she was rather intimidated by it; after all, it was Fidel Castro who said that any speech of less than four hours cannot be doing any good. I was tempted to be a little more expansive, but the Chairman reminded me that it is impolite to speak for longer than the Chairman himself. He only spoke for 20 minutes, so I will have to restrain myself.
I wanted to comment briefly on QinetiQ, which seems to have displayed some unwelcome tendencies among civil servants. Lord Gilbert, the former Labour Defence Minister, said on the “Today” programme about Sir John Chisholm, the boss of QinetiQ:
“Never once in my presence did Sir John Chisholm indicate that he might have a conflict of interest or he was going privately to be enriched by what was going on.”
In the Defence Committee, the hon. Member for Crawley (Laura Moffatt) also quizzed Sir John Chisholm at great length about whether or not there was a financial gain for him and whether he was likely to get shares.
The transcript can be seen on page 19 of the evidence. It was absolutely clear that he evaded telling anyone that he was going to benefit financially or through shares. The Chairman of the Defence Committee said:
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