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 OGCbuying.solutions 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 OCGbuying.solutions, 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
| 
