Select Committee on Liaison Third Report

Appendix 2: Letter from the Chairman of the Committee of Public Accounts

Work of the Committee of Public Accounts in 2007

Because of the nature of its work, the Committee of Public Accounts does not agree an Annual Report on the lines of those agreed by Departmental Select Committees. Members of the Committee—together with other Members of the House—have instead been able to consider the work of the Committee in biennial debates in the Chamber, the last of which took place on 23 October 2007. Nonetheless I see value in a more formal contribution to the Liaison Committee's Annual Report and am therefore writing to you to outline some main themes of the work of the Committee of Public Accounts in 2007.

The Government's Comprehensive Spending Review was published in October. If its aims are translated into action, departments will need to improve their performance to ensure that more limited increases in Government spending translate into better public services for all. Initiatives to cut waste, slash red tape and make better use of existing resources are essential.

The Government reported that it was on track to realise its efficiency target of £21.5 billion a year savings by this March. The Efficiency Programme is the centrepiece of the Government's efforts to get more for less. The Treasury has claimed at the beginning of the year that it had already achieved an annual £13.3 billion of efficiency savings. However our second review of the Efficiency Programme cast doubt over the reliability of £10 billion of the savings then claimed.[146]

It should be crystal clear whether or not any programme has met its goal. Efficiency gains must be real and demonstrable. They must be deliverable year after year. Remarkably, claims could be calculated without taking into account associated increases in costs elsewhere. And efficiency is not genuine if, as we have found in a number of cases, it is achieved at the expense of the quality of the service provided. There is an important role here for the PAC. It was therefore encouraging that the Government announced in the CSR that there may be a role for the National Audit Office in reviewing claimed savings on a department by department basis.

The scale of savings required is significant: the scale of projects that the Committee considered last year is, to put it mildly, substantial. For example, the budget for the Olympics is £9 billion,[147] while IT in the health service is estimated to cost £12.5 billion.[148] Other projects on which the Committee is likely to report in the future, such as Trident and Crossrail, are on a similar scale.

The PAC published 65 reports last year, far more than any other Select Committee. I clearly cannot give you details of all of them, but there a number of themes that arise from them. These are not confined to the Committee's work in 2007—they continue throughout the Committee's work over the years.

Good Project Management

The Committee has seen too many projects that have been burdened by weak management and implementation. With some 100 mission critical or high risk IT-enabled programmes and projects, the risks are high. Given the history of past failures, government needs structures and management processes that will secure greater success.

A glaring example of what to avoid was the implementation of the Single Payment Scheme for farmers. This was inept, and my Committee said so in its report on the issue.[149] The timetable was near-impossible, the planning poor and testing of the IT systems incomplete. Responsibility was confused, management information scant and top managers failed to face up to the crisis. Farmers were hit emotionally and financially, and the taxpayer has had to face up to a potential liability approaching £500 million.

But the Government can get things right. The Committee's report on the introduction of the first generation of e-passports praised the Identity and Passport Service, which had showed that the public sector can successfully deliver to time, cost and quality.[150] We were encouraged that the Service had taken on board the recommendations made by our predecessors. Planning from the outset for a cautious, low risk project with substantial testing, and sufficient time for a progressive rollout rather than a big bang switch did the job here. They are lessons that could be learned elsewhere.

The Committee's report on "Delivering successful IT enabled business change" identified other essential ingredients that help projects avoid disaster.[151] Clear and resolute leadership is critical, as is strong budget management, and having the internal experience and expertise to get the best from contractors. Above all, there has to be a crystal clear sense of goal of the project, and an equally clear map of how to get there.

Clear and resolute leadership

Clear and resolute leadership requires senior decision makers to ensure clear lines of accountability and strong progress and risk management arrangements. They must challenge if they are to ensure that plans are realistic.

The Single Farm Payments scheme and the travails of the unlamented Child Support Agency both provide examples of very complex and overly ambitious projects that suffered from a blurring of accountabilities.[152]

Gripping Budgets

It sounds simple, but management must also keep a tight grip on budgets. The original Olympic bid seriously underestimated the costs of the Games and was far too optimistic about the extent of private sector funding. The Budget now stands at some £9 billion. But no one individual has overall responsibility for delivering the Games, and the range of bodies involved presents significant risks to timely decision-taking amongst other things. Strong progress monitoring and risk management arrangements are essential, but are not yet in place. The Committee, with the support of the NAO, will continue to keep a close eye on progress.

It is of course true that the public sector does face some unique challenges. Its projects are every bit as complex as and often larger than those in the private sector. Some progress is being made: PAC reports show it is possible for the public sector to bring tight management disciplines to big projects and the Committee offers due recognition in the cases that do. For example, the Department for Transport themselves admit that the programme to modernise the West Coast Main Line was originally "naively based". That naivety had enormous financial consequences, but the Strategic Rail Authority and Network Rail stepped in, strengthened project management and now passenger numbers are up, journey times are down and trains are more likely to run on time.[153] But more recent failures in the service provided show that public sector bodies should not rest on their laurels.

Getting the best from contractors

Only if departments can act as intelligent clients can they be sure of getting the best value for money from external suppliers. Of course, departments need to understand the process being changed and have clear design requirements. But having the right staff and skills in place to engage effectively with suppliers can be the difference between success and failure. The Child Support Agency did not have the in-house technical expertise it needed to challenge its supplier.[154] The Government must keep an iron grip on the new Child Maintenance and Enforcement Commission.

Understanding & Communicating the benefits of programmes

Active management and the right mix of staff will go a long way in helping departments achieve the third success factor: having absolute clarity about the benefits they are trying to achieve.

Not only do departments need to have clarity themselves, but they need to sell the benefits to users, win wider support for the change, and ultimately assess whether the programme or project has achieved what it set out to do. Most palpably, one of the main question marks hanging over the NHS IT programme is that there is still much to do to win hearts and minds in the NHS, where scepticism is rife. This is a subject to which the Committee will return. By contrast, on the West Coast Mainline the SRA successfully engaged stakeholders in support of the programme to clear effect.

Better procurement

It cannot be said too many times that government needs a more commercial approach to procurement. Central civil government organisations spend approximately £20 billion on goods and services annually. About one third, nearly £8 billion, of the Government's efficiency savings are expected to come from more efficient procurement. The scope is certainly there: in just four Committee reports, we identified potential savings of some £1.3 billion per year.

We found that potentially £500 million a year could be saved in departments' use of Consultants by making more use of in-house staff, negotiating better contracting terms, and getting improved results for the money they spend.[155] We are pleased that the Cabinet Secretary is taking action.

Another £500 million a year could be realised if were to improve their performance and increase coordination.[156] We were pleased to see that the OGC agreed and were set a target to achieve £1 billion a year in savings by 2010-11.

Often, the best of practice, if transferred elsewhere, can make a real difference. There are potential savings of over £220 million from the £2 billion spent on food in four key areas of public services.[157] Similarly more than £75 million a year could be saved if Further Education colleges adopt really modern procurement practice.[158]

Wherever possible, procurement must be open and competitive. The backroom deal pursued by the Department of Health with Dr Foster Intelligence was a failure in government's duties to Parliament and the taxpayer.[159] The sums involved were relatively small but fundamental principles were at stake. The choice of company and the haste with which the deal was concluded gave the Committee real cause for concern.

We were also concerned by the Highways Agency's record of forecasting the costs of road schemes.[160] It speaks for itself that the 36 completed schemes in the Agency's Targeted Programme of Improvement cost 40% more than original estimates. The Agency also depended far too much on external consultants and we emphasised that it had to recruit and retain its won staff with appropriate project management expertise and commercial skills.

And of course there is the Ministry of Defence. We remain concerned by the mismanagement of technical and commercial risks on the Astute submarine programme highlighted in the Major Projects Report,[161] and will be watching progress on the Trident replacement carefully.

Interests of the consumer

We can only truly judge whether all the expenditure announced in the CSR is effectively used by assessing its impact on the end user, who is very often the taxpayer him or her self.

The government's theme of Transformational Government calls for public services to be designed around the needs of the consumer not the provider. Unfortunately this was not the case with the introduction of the new out of hours care system.[162] We found that the preparations for the switch, used by 9 million patients a year, left much to be desired: the needs of patients were not best served by the ending of Saturday morning surgeries; access to advice and treatment has been difficult and slow; and there was little clarity over whether the new service is meant for urgent cases only or for any requests for help. The new service is getting better, but it is costing around £70 million more than expected—the very last thing primary care trusts wanted.

On a more positive note, we returned in this period to the issue of tackling pensioner poverty by encouraging take-up of entitlements. We were pleased to note that the DWP are making good progress in encouraging pensioners to claim the Pension Credit to which they are entitled.[163] But there are still billions of pounds lying unclaimed in the Treasury, rather than being distributed to pensioners. Shared targets for the different agencies involved might help; allowing pensioners to claim linked benefits through a single transaction could help; focusing effort where we know take-up is poorer would also help.

The Committee's Recommendations

A particular strength of the PAC is that more than 90% of its Recommendations are accepted by the Government departments concerned. There are a number of reasons for this. We do not cover policy issues; we work on the basis of reports from the NAO that have already been agreed with the Department; and most of our Recommendations are simply commons sense. Perhaps even more significant is that work by the NAO demonstrates that more than 90% of Recommendations accepted are indeed implemented by departments. Members of the Committee are rightly concerned when we come across cases where departments have failed to put into practice improvements we have pointed out. We frequently revisit cases we have examined to see what progress is being made. Examples from last year which we shall follow up in 2008 are the NHS IT system and the Rural Payments Agency.

The National Audit Office

The National Audit Office remains at the heart of the Committee's work. We continue to have an excellent and highly productive relationship with the Comptroller and Auditor General and his staff, and we welcome the NAO's efforts to expand the range of its work for other Select Committees.

The Committee's 150th anniversary

On 6 December, the Committee held an international conference to mark the 150th anniversary of the report from Committee on Public Monies which led to the creation of the PAC.

The aim of the conference was to celebrate the longevity and achievements of the Committee and to provide an opportunity to discuss its role, and that of similar parliamentary bodies in other countries, in securing effective Parliamentary scrutiny of public funds. It also focused on shared and contrasting experiences of Parliamentary scrutiny and state audit. Invitations were sent out to representatives from the Westminster, Scottish, Welsh and Northern Irish legislatures and the UK audit bodies; Parliamentary and state audit representatives from countries which follow the 'Westminster model' of accountability and from countries which have developed different approaches; and other interested parties such as the Audit Commission and senior UK government officials. In the event there were some 80 delegates at the conference, from the UK and abroad.

The conference took the form of key-note speeches and panels. Speeches were given by the Chancellor of the Exchequer, the Shadow Chancellor and the Comptroller and Auditor General. HRH the Prince of Wales also made a video address. Panels covered the following issues:

  • strengthening governance: the role of Parliament and state audit bodies in promoting good practice in governance and risk management;
  • sustainability and accountability: the role of Parliament and state audit bodies in holding Government to account with regard to sustainability; and
  • working together to achieve a greater impact: exploring ways in which Parliament and state audit bodies can maximise the potential for partnership in the future.

Panellists included the acting leader of the Liberal Democrats, the Head of the Government Finance Profession, HM Treasury, and heads of State Audit Institutions and PAC-equivalents from a number of EU and Commonwealth states.

After the formal end of the conference there was a short round table discussion about the way forward on the audit of National Statements on European Union funds, intended for delegates representing EU Parliamentary Committees and state audit bodies.

The conference was agreed to have been a success and there are discussions on how best to follow it up, both internationally and within the UK.

International work

The Committee's work inspires considerable interest abroad. During the year our evidence sessions were observed by visitors from parliaments and audit institutions in Croatia, the Czech Republic, Guyana, India, Mozambique, Namibia, Nigeria, Portugal, Spain, Tanzania, Turks and Caicos and Uganda, as well as by groups on study programmes organised by RIPA International and others. In addition Members and staff of the Committee have met other visitors, such as the Mexican and Jordanian PAC-equivalents. I visited Bosnia, as a guest of the IMF, to talk about the work of the PAC.

I believe that Finance and Value for Money Committees in Europe should work together and exchange ideas, perhaps in a regular biennial conference. I had a particularly useful visit to the European Parliament where I was well received when I argued for more Member State accountability by each Member State producing a consolidated account of all EU money spent in that State. I also visited Lisbon during the Portuguese Presidency of the EU for very productive discussions on this issue.

Mr Edward Leigh MP

22 January 2008

146   Committee of Public Accounts, Forty-eighth Report of Session 2006-07, The Efficiency Programme: A Second Review of Progress, HC 349 Back

147   Committee of Public Accounts, Thirty-ninth Report of Session 2006-07, Preparation fro the London Olympic and Paralympic Games-risk assessment and management, HC 377 Back

148   Committee of Public Accounts, Twentieth Report of Session 2006-07, Department of Health: The National programme for IT in the NHS, HC 390 Back

149   Committee of Public Accounts, Fifty-fifth Report of Session 2006-07, The Delays in Administering the 2005 Single Payment Scheme in England, HC 893 Back

150   Committee of Public Accounts, Forty-ninth Report of Session 2006-07, Introduction of e-Passports, HC 362 Back

151   Committee of Public Accounts, Twenty-seventh Report of Session 2006-07, Delivering successful IT-enabled business change, HC 113 Back

152   Committee of Public Accounts, The delays in administering the 2005 Single Payment Scheme in England, and Committee of Public Accounts, Thirty-seventh Report of Session 2006-07, Child Support Agency: Implementation of the Child Support Reforms, HC 812 Back

153   Committee of Public Accounts, Thirtieth Report of Session 2006-07, The Modernisation of the West Coast Main Line, HC 189 Back

154   Committee of Public Accounts, Child Support Agency: Implementation of the Child Support Reforms Back

155   Committee of Public Accounts, Central Government's use of consultants Back

156   Committee of Public Accounts, Thirty-third Report of Session 2006-07, Assessing the value for money of, HC 275 Back

157   Committee of Public Accounts, Thirteenth Report of Session 2006-07, Smarter Food Procurement in the Public Sector, HC 357 Back

158   Committee of Public Accounts, Forty-first Report of Session 2006-07, Improving procurement in further education colleges in England, HC 477 Back

159   Committee of Public Accounts, Fortieth Report of Session 2006-07, Dr Foster Intelligence: A joint venture between the Information Centre and Dr Foster LLP, HC 368 Back

160   Committee of Public Accounts, Fifty-eighth Report of Session 2006-07, Estimating and monitoring the costs of building roads in England, HC 321 Back

161   Committee of Public Accounts, Forty-sixth Report of Session 2006-07, Ministry of Defence: Major Projects Report 2006, HC 295 Back

162   Committee of Public Accounts, Sixteenth Report of Session 2006-07, The Provision of Out-of-hours Care in England, HC 360 Back

163   Committee of Public Accounts, Twenty-sixth Report of Session 2006-07, Department for Work and Pensions: Progress in tackling pensioner poverty-encouraging take-up of entitlements, HC 169 Back

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