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Mr. Mitchell:
That is good to hear, and it is right that we should do it. However, it is a little late. It is closing the stable door after several big horses have bolted—and
they are now wandering around the countryside, putting money into contracting firms and kicking people. Until now, the role of the OGC has been that of a marriage bureau, lining up Departments with IT firms and consultancies, rather than looking at the projects themselves and asking, “Are they too big? Are they trying to do too much?” That is the usual tendency, but we should ask whether those projects are going to produce a palpable gain, and what the position of the heritage system is while the new system is installed. That is never thought through, and I do not know why. I do not know whether Ministers are pushing the virtues of big computer contracts on the civil service, hoping that once everything is mobilised in such a fashion, government will be more efficient and cheaper to run and they can fire all the civil servants. I do not know whether it is a question of fashion in the Departments. I do not know whether every Department must have such a contract and the bigger it is the better, or whether there has been zealous salesmanship on the part of the companies. Who is to tell? Certainly, the projects are oversold, and the civil servants do not seem competent at cutting down to reasonable dimensions the brochures and vision that they are given by the salesmen and asking, “Is this really going to work?”
There is a problem, and I am delighted to hear that something is being done about it, but at such a stage it is too late in our experience. We are left with several big projects that will be very difficult and very draining financially before they are working. There should be a degree of pre-testing, which does not seem to have occurred. Yesterday we were looking at the information system in the Ministry of Defence. When the computers were to be installed, it was found that they could not work in the existing buildings without serious modifications. They were never pre-tested. Again, some general review should require that and should require Departments to justify these big projects before they are authorised.
Some means of central authorisation is necessary, and some degree of sanction against the firms that oversell the projects in the first place. On the tax credits issue, EDS had to pay compensation because of the inadequacy of the systems that it had installed, but that compensation was geared to EDS getting more Government contracts from which it could pay the compensation for the mess that it had made on the first Government contract. What an insane situation. If a firm screws up one contract, it gets other contracts to help it pay for the compensation on the contract that it screwed up. I have never heard anything like it.
I do not know much about banking, but I can say that there is insufficient disciplining, control and sanctioning of companies if they fail. I should like to see the same procedure as for Gershon-style economies—the grinding Gershon wheel that is supposed to squeeze fat out of the Departments all the time, as they go along. That goes on remorselessly, even at a time when Departments are trying to carry on some major function. The Rural Payments Agency is a classic example. Because of the Gershon economies, people are being fired at the same time as the agency is embarking on one of the biggest tests of its efficiency and payments system that it is possible to imagine. The result is that it is understaffed, the people who know the work have gone, and the agency must hire them back again to make up deficiencies.
Such economies must be co-ordinated. There is another example coming along in the Department for Work and Pensions, which is proposing to fire a large number of civil servants just as we all know that the coming recession will increase the number of unemployed, create more work for the Department and make its life more difficult. Nevertheless, it is proposing substantial reductions in personnel. The functions, personnel and computer systems of a Department need to be co-ordinated.
I turn from such general preoccupations to a few specific points about some of the reports that we are discussing today. I was somewhat worried by the tax credit system, which we dealt with a week ago. It was implemented in too inflexible a form, which has resulted in large sums of money having to be clawed back from the poorest sections of society. Mainly because of the inflexibilities of the system, the people whom it was meant to help must repay large sums that they cannot afford and which, in fact, will never be recovered.
The suspicion crosses my mind that Her Majesty’s Revenue and Customs, which does not want that burden—it is used to taking money from people, not giving it to them—is embarrassed by the situation and has therefore implemented the giving back or credit system in such a ham-handed fashion that the system is discredited. That is too malign a thought for our civil servants, but things have been cumbersome and the HMRC has been far too slow in bringing them into line. The testing has been inadequate. The system itself is good, but its implementation has been clumsy.
The treatment of those who are being and have been asked to pay back large sums—they are particularly so for them—is in total contrast to what we saw in another of our reports on HMRC, about the management of large business corporation tax. According to Private Eye and evidence given to us, the businesses that pay large sums in corporation tax are wined and dined by HMRC. Their representatives are taken out to expensive restaurants and asked how HMRC can be nicer to them, what would oil the wheels, and how the companies can be made to cough up voluntarily—a proposition that must be extraordinary to the large corporations. All that is in great contrast to the treatment of the poor, whose faces are ground in the debt and who are pursued in the most cruel fashion. They are taken to court and forced to repay.
The report on the taxation of large corporations was very worrying. The position taken towards such corporations was, on the whole, one of trust—“We trust the chaps to fulfil their obligations.” But we all know that a culture of tax avoidance, and in some cases tax evasion, permeates the whole of business. Companies, particularly big companies, are not paying the social rent that they owe this society for profits generated in this country. News Corporation Ltd is the classic example: it has very profitable investments in this country, but its tax affairs are fiddled through a whole plethora of tax havens and it does not make anything like the contribution that it should to this country, given the revenues and profits that it generates here. That is the culture, yet those are the chaps whom we are asked to trust to pay their tax obligations.
The TUC has estimated that tax avoidance by companies and the wealthy costs everyone at work £1,000 a year. In other words, a total of £13 billion is lost through tax avoidance. We try to get to grips with the issue, but our effectiveness is nothing like that of the American committees. They have been dealing with the same culture as ours: big firms sell tax avoidance—and tax evasion—schemes to the companies in the knowledge that it will be profitable to implement them until the Internal Revenue Service catches up with them, as it eventually does.
Interestingly, following a US Senate committee inquiry into the design, marketing and implementation of abusive tax avoidance schemes, KPMG, a firm of which I have heard, admitted criminal wrongdoing and was fined $456 million. That involved shuffling money around the world. The Committee found that major banks such as Deutsche Bank, HVB Bank, UBS and NatWest provided purported loans and credit lines for the purposes of tax avoidance. Those schemes were sold by KPMG and there is the same system here; it is just less publicised and more covert, because we never get to hear of the details.
The US Senate report showed that from 2000 to 2007 Morgan Stanley helped clients to dodge payments of US dividend taxes of more than $300 million. The late lamented Lehman Brothers indulged in the same scheme. When e-mails from within Lehman Brothers were produced before the Senate committee, they showed one executive telling another that
“the cash register is opening!!!!”
“Outstanding...Let’s drain every last penny out of this”
Those were the American investigations. We do not have the power and effectiveness of those committees—I wish that we did. We need to go into this area because it directly affects this country’s finances on a massive scale, shifting the burden of taxation on to individual taxpayers in favour of a big industry of tax avoidance and evasion in which companies are not paying their way. Our recommendations were very good, but we encountered the disadvantage of their not being publicised enough and not becoming part of a major debate.
We pointed out that whereas the Americans have an estimate of the tax gap—in other words, the tax that corporations should be paying as compared to what they do pay—we found that HMRC had no measure of that tax gap and appeared reluctant to develop such a measure. Unless we have a knowledge of the sums at issue and how the matter is being dealt with, we cannot possibly deal with it. An outstanding recommendation of ours was that it should develop such a measure and it should be publicised. We need to know what the tax gap is, how much has been avoided and how much has been evaded. We found that as HMRC has reduced the use of generic avoidance schemes, tax advisers have developed bespoke schemes that are now flogged to help business.
We found, too, that HMRC would find difficulty as regards its staffing in coping with the clever, highly paid boys who devote their whole lives to devising schemes that can be sold on to the banks and other businesses to avoid taxation. There is clearly a problem in terms of the amount that HMRC can pay its staff compared with the amount paid by the institutions—the big
accountancy houses and others—in developing these schemes. The two areas are totally unmatched. HMRC’s large business service faces a loss of skills and industry knowledge as more experienced staff are due to retire. It will have to recruit people with the skills and ability and at the pay level necessary to cope with this issue.
This is an excellent report on our part, but it has fallen with a dull thud and without the public reaction that it should have generated and deserves. We are dealing with a major political issue—one of a whole series that we come across in our work. We need to be able to promote it further, push into the political forum and get it discussed instead of seeing it falling mutely like a feather on the waters; I was about to say a tomb of silence, but I am mixing my metaphors too much. We are doing important and valuable work—frightening work in the sense that there is so little sanction and so little discussion at the end of the day. Apart from that, more power to our elbow.
3.29 pm
Angela Browning (Tiverton and Honiton) (Con): It is a great pleasure to follow the hon. Member for Great Grimsby (Mr. Mitchell); he is never a feather to fall silently on water.
I begin by apologising to the House for not being here at the beginning of the debate as I had a prior engagement. I gave my personal apologies to my hon. Friend the Member for Gainsborough (Mr. Leigh), and I pay tribute to his chairmanship of our Committee. I would like to put on record how much we on the Public Accounts Committee owe to the National Audit Office for the calibre of report that it puts before us. The reports are always of such high quality that it is a pleasure to work to them, although I sometimes find it rather challenging to have to read up on two separate subjects a week.
I would like to touch on some common themes, not just in the reports that are before the House today which have recently been considered by the Public Accounts Committee, but in what happens once the NAO report has been published and we are yet to take evidence. One cannot help but feel that the moment an NAO report arrives in the public domain the Department it refers to goes into frenzied activity in order to try to mitigate some of the recommendations or criticisms before the permanent secretary and other officials are required to attend an evidence session. I am sure that it is just hearsay that there is a special training course for permanent secretaries who may have to appear before the Committee.
During the time I have served on the Committee, I have not found any discourtesy in the treatment of civil servants, although probing questions are asked. However, there are times when the subject matter that we are dealing with reflects not so much the role of the accounting officer but the policy behind it, and often one wishes that not just civil servants but the Ministers responsible for the policy were appearing before us. Unfortunately, as the accounting officer, the permanent secretary has to account for the public expenditure. One cannot help feeling that, given the number of times in evidence we are told, “Since the NAO report was published, we have made huge improvements”, the reports are seen as a trigger for improvement.
That picks up on what Members from all parties have referred to during this debate: the need to look at how the civil service and Departments work—individually and collectively, because often there are cross-departmental issues. If the NAO has picked up on difficulties, discrepancies and lack of good use of public money, surely there should be a better mechanism in individual ministries so that they can identify much of that for themselves and address it before the NAO trigger is reached, valuable though it is—although we would not wish the Committee to be decommissioned because it was no longer seen as necessary. Ministries are reactive to the reports, and one wonders what is lacking in their structure that means that they do not pick up on such issues earlier.
I would like to make some suggestions that pick up on what others have said today. Like many Members, I am occasionally invited to speak to the National School of Government, formerly known as the Civil Service College, and as a former Minister I hold the training of civil servants in our country in high esteem. I know that it is fair game to criticise the civil service, but we have one of the best civil services in the world, and its training is very good. However, somehow it has lagged behind the commercial sector in integrating core management skills into the workings of the organisation—or in this case the Department. I shall come on to the IT skills and commissioning that has been mentioned. As a member of an institute that is interested in management, I feel that Departments should improve their skills in two core areas.
The first area is management information systems. It is key that such systems are considered, whether for an individual project or a strategic overview of a Ministry in carrying out its duties. People should be properly trained to ensure that information is both timely and relevant to ensuring that the Ministry works efficiently. My hon. Friend the Member for South Norfolk (Mr. Bacon) said that he had identified a lack of accounting skills in key positions. One would have thought that that was pretty basic. If one has a work force who lack skills, one should adjust one’s recruiting programme and in-service training to ensure that the skills are obtained or recruited in. As time goes by, one gets the impression that that work is not done quickly enough to tackle some of the problems that we consider in the Public Accounts Committee.
The second area is project management. Outwith the IT side of things, project management should be integrated more, and the skills associated with it should be integrated into Departments. Lack of continuity has been mentioned. A long-term project is difficult to achieve when there is no continuity among the people who have to oversee it. Sometimes that cannot be avoided, but if a project has been set up properly, with a proper management system, one should be able to replace key people as it progresses without causing detriment to it. The reports from the NAO and the PAC suggest that the civil service should completely review its training and recruitment for and management of those two core functions.
Some of the problems that the reports identify are persistent. Even when they are identified, it is often difficult to ensure that they are corrected in a timely manner. Although there are several examples, I shall refer to the single payment scheme, about which our report states that, although most farmers are being paid
earlier than they were in 2005, “errors persist”, and that the Government run the risk of being fined hundreds of millions of pounds. One would think that every warning bell in the Ministry would ring at that. Apart from the practicalities of getting the scheme right, the Ministry was heading down a road that would leave the British taxpayer culpable for such a fine. That should have been picked up early. If proper project management had been applied to the scheme, the problems might have been avoided. The does not apply only to the single payment scheme—there have been persistent problems with tax credits and pay-as-you-earn.
Mr. Bacon: Before my hon. Friend moves on from the single payment scheme, let me point out that, although there might not have been adequate project management, a series of Office of Government Commerce reviews was published in the back of one of the NAO reports on the Rural Payments Agency. They showed that, time and again, the OGC gateway process produced red traffic lights, but nothing happened. At no point did anyone at the centre say, “Stop.” Things simply carried on.
Angela Browning: Indeed. That is why I believe that such projects need to be properly managed, and key people need to take responsibility for them. If there is a properly drafted project management scheme, those responsible should be easily identifiable. As my hon. Friend said, that did not happen and, as he pointed out in his speech, the appalling record keeping compounded the single payment scheme’s problems. As I said earlier, I believe that the political imperative was sometimes to blame. Sometimes it would be helpful to have a Minister rather than a civil servant present. I recall that when the right hon. Member for Derby, South (Margaret Beckett) as Secretary of State for Environment, Food and Rural Affairs announced the single payment scheme to the House, it was done in a very hurried way.
Let me come on to information technology commissioning and the overseeing of IT, which lie at the heart of many of the problems brought before the Public Accounts Committee and covered in its reports. It seems to me that the single payment scheme is a classic example of a policy being introduced hastily—possibly against the advice of civil servants at the time, although how would we know for sure? If more time were taken and more trialling done before a policy was rolled out as a national scheme, the Government and relevant Departments would hopefully pick up more of the many problems caused by complex IT schemes—problems for our constituents and, more particularly for the PAC, problems that lead to a huge waste of taxpayers’ money.
I say again that I am not an IT expert, so I am nervous of venturing down the path of making recommendations on IT to the Government, but it seems to me that the commissioning of software is a particular problem and that the people who draw up the specifications in the first place often do not have the necessary qualifications or knowledge. That brings me back to having proper management information systems—all these issues feed into each other—that are necessary in order to commission correctly.
There are always going to be glitches with major IT projects—there are bound to be; it is never going to be perfect the first time round—but by trialling and sorting
out the glitches before a programme is rolled out, the Government and Departments could avoid many of the difficulties. That applies not just to DEFRA—or EFRA as it is now often called—but across the board. Perhaps one of the worst examples was the commissioning of projects in the Ministry of Defence, but problems have been evident in the NHS and the Department for Work and Pensions, as well as in the Department for Environment, Food and Rural Affairs and the Ministry of Defence.
I hope that as a result of today’s debate the Minister will take forward some of the overall concerns that have been expressed. We have heard specific complaints about individual reports, but I am referring to overall concerns about recurring problems and common themes that the PAC all too often picks up in its reports.
I conclude by noting the opportunity presented to the PAC to come back to its reports more frequently than at present. It is very difficult to decide which of the National Audit Office reports should be considered in an evidence sitting—ideally, we would like to consider them all. Two a week when the House is sitting is a lot of reading, but, equally, the power of the PAC in comparison with other Select Committees is that it has the opportunity to call the permanent secretary and other officials back in order to monitor progress after the previous report. We already do that to a degree, but in my opinion, not enough. If we could bring reports back more frequently, where appropriate, we could make more of a difference to some ongoing and persistent problems.
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