Public Accounts

HC Deb 24 January 2002 vol 378 cc1029-86 1.30 pm

Mr. Edward Leigh (Gainsborough)

I beg to move, That this House takes note of the 38th to 47th Reports of the Committee of Public Accounts of Session 1999–2000, of the 1st to 16th Reports of Session 2000–01, and of the Treasury Minutes on these Reports (Cm 5021, 5071, 5078, 5127, 5201 and 5261). I feel very privileged to be Chairman of the Public Accounts Committee. Dating from Gladstone, the office has been held by some very distinguished Members, some of whom went on to even better things. Harold Wilson, for example, held the post before becoming Prime Minister, and my immediate predecessor, my right hon. Friend the Member for Haltemprice and Howden (David Davis), held the post before becoming chairman of the Conservative party.

I pay tribute to my immediate predecessor. He asked me to pass on his good wishes to the Committee, but, ever scrupulous about our impartiality, he thought it better for the chairman of the Conservative party not to attend today.

My right hon. Friend often said that his challenge as Chairman of the Committee was to make audit exciting. Did he succeed? He certainly raised the Committee's profile during his four years as its Chairman, and it was—almost to coin a phrase—a profile with a purpose. That higher profile caused the Committee's work to be taken more seriously and resulted in it having a greater impact. His drive and intellect were matched by an appreciation of the Committee's impartiality, and he was quick to condemn failure in our public services, regardless of political sensitivities. Even in his first two years as Chairman he was prepared to put his name to reports that were very critical of the previous Conservative Government. He was utterly impartial. He had a very clear agenda as the Committee's Chairman and understood that its work could make a real difference to the quality of people's lives across the spectrum of Government policy.

My right hon. Friend took a particular interest in the Committee's work on hospital-acquired infection, which affects thousands of people each year at a staggering cost that is measurable financially and in lives lost. The Committee's work raised the profile of that issue and led to the first concerted programme of action to make hospitals cleaner and safer places.

My right hon. Friend became increasingly frustrated by the fact that the Committee would see the same errors repeated time and again, so he commissioned three reports—on privatisations, the private finance initiative and information technology projects—that identified those recurring themes and made practical suggestions for improvement. The IT report that he commissioned has had a particular impact. It drew on 25 reports, spanning 10 years, and contained a wealth of experience gained from studying IT projects. Its objective was to look forward and to identify lessons from the past that would be relevant to future IT projects. The Government's response to it was positive, and I hope that its impact will continue to be felt for many years to come.

My right hon. Friend was a very keen advocate of the need for Parliament to have the power and the information to hold the Government properly to account. He intervened on numerous occasions to ensure that the powers of the Comptroller and Auditor General were strengthened. In particular, he played a leading part in the debate on the Government Resources and Accounts Act 2000, as well as in the ensuing review, led by Lord Sharman, of audit and central Government accountability arrangements. That review recommended a significant extension of the CAG's powers, on which I hope the Treasury will respond in the very near future.

My right hon. Friend inherited a Committee steeped in a long tradition, spanning 140 years of thorough and worthwhile work. During his chairmanship, he raised the profile of the Committee's work and focused its energies more rigorously on issues of importance to people's day-to-day lives. I am sure that the House will join me in commending his contribution to the Committee's work, and we wish him well in his new role. [HON. MEMBERS: "Hear, hear."]

Other significant changes have been made. In the past year, the Committee has lost a number of valuable members. I pay tribute to my hon. Friend the Member for West Chelmsford (Mr. Burns) and to the hon. Members for Tynemouth (Mr. Campbell), for Edmonton (Mr. Love) and for Eastwood (Mr. Murphy). It gives me great pleasure, however, to welcome to the Committee the hon. Members for Tamworth (Mr. Jenkins) and for Hemsworth (Jon Trickett), my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) and—two new additions to the House—my hon. Friends the Members for South Norfolk (Mr. Bacon) and for Tatton (Mr. Osborne).

Membership of the Committee is not an easy ride. The subject matter varies widely across the range of government and it is often very technical and difficult to master. Members have to work hard in preparing to dissect two entirely different topics every week that Parliament sits. No other Select Committee has anything like our work load. Members of the Committee work with energy, commitment and enthusiasm and I am indebted to them for their support. I pay tribute to them, and I am sure that some of them will wish to catch your eye later in the debate, Mr. Deputy Speaker.

I also pay tribute to the former Committee Clerk, Mr. Ken Brown OBE. He retired in December after serving the Committee for six gruelling years and after 40 years' service to the House. Ken will be known to many Members, and he will be remembered for his good humour, sound advice and his ability to get things done. He served three successive Chairmen of the Committee and we all came to rely on his sure-footed approach. He understood perfectly the dynamics of the Committee and was able to find appropriate ways to push at the boundaries of the conventions within which we operate, of which there are many, but he was careful never to breach them. I thank the other Committee staff for the sterling service that they provide and welcome Mr. Nick Wright, our new Clerk, to his work.

I look forward to working closely with the new Financial Secretary, the right hon. Member for Brent, South (Mr. Boateng). We have always had a very good working relationship in the past and he is, uniquely, a member of the Committee. I understand that the convention is that he makes a formal appearance, and we look forward to seeing him at some time in the near future.

The Committee's work would be pointless if it did not have an impact. Much of its impact is the result of the expertise of the Comptroller and Auditor General and his staff at the National Audit Office. The Committee is so strong because it is serviced by the NAO, which employs 700 people. Between us, we have generated savings of £1.4 billion over the past three years. We have produced 30 reports over the past year alone on matters as diverse as the National Blood Service and the refinancing of the Fazakerley private finance initiative prison contract. We have ranged right across government.

Those considering possible reforms of the Select Committee system should look at the Public Accounts Committee—at the way in which it is so expertly serviced, at the care with which the reports on which we base our deliberations are prepared and at the impact that they have every week of the year.

We cover many issues, but when we first considered taking evidence about obesity—just one of the subjects that caused contention—some members questioned whether the issue was within the locus of a financial scrutiny Committee. It was suggested that, surely, people had a right to choose to be fat. One of my Committee, the hon. Member for City of Durham (Mr. Steinberg)—who is in his place—said that the vast majority of people eat too much, they indulge, they do not do any exercise and basically it is their own fault. That is typical of his valuable contributions to our Committee.

Our evidence session revealed that obesity is very much a public policy issue; the public purse, in the form of NHS care and benefit payments, certainly picks up much of the cost. Obesity contributes to 30,000 premature deaths each year and costs the economy £2.5 billion a year.

Before our deliberations, the NAO helpfully provided a body mass index dial, which the hon. Member for City of Durham viewed with incredulity. How could it be that he—a finely honed athlete—should be uncomfortably close to the obese category? Indeed, so strongly did he feel that he stood up before witnesses—permanent secretaries from five Departments—and gave them full sight of his muscular physique, toned by many years actively gracing these Benches. "Could you describe me as obese?", he challenged. The assembled mandarins flinched or blanched and, with an aplomb of which Sir Humphrey would have been proud, they ducked the question. The issues that surfaced, however, were real, and the costs, in terms of cash and human lives, enormous. I mention the subject because it was the first time that the PAC considered a subject that involved so many Departments, and it was a good and useful exercise.

Our work encompasses all central Government spending. It covers a staggering breadth of activity, with a level of complexity to match. Hard-pressed public servants in our hospitals, schools and armed forces, to name just a few, work to deliver ever-more complicated services against a backdrop of rising public expectation. All their work is carried out in the glare of publicity in a media often interested only in failure. It is true that some public servants might see my Committee in the same light—interested only in failure. That is not true, and to do so would be to misunderstand our purpose and approach. I want dwell for a moment or two on what I believe to be the central purpose of the Committee. At the start of this Parliament, it is right that we should ask ourselves why we are here and what we are going do with the powers given to us for the next four or five years.

In brief, the members of my Committee—I think that I speak for them when I say this—represent the interests of the taxpayer. That is why we are here as Members of Parliament, and our priorities reflect those of our constituents. We want to be sure that taxpayers' money is spent properly on what Parliament has approved, and we want to be sure that the services delivered to the public are of good quality and achieve the outcome intended. By bringing our constituency and personal perspectives to the issues that we consider, we speak for the layman—indeed, we are laymen—but we do so with much more authority because our deliberations are informed by the detailed work and expert analysis provided by the NAO. We, with our experience, can speak for our constituents.

It is well known that we do not interrogate Ministers. We normally interrogate permanent secretaries and are unique in that respect. As a Committee and the mouthpiece of Parliament, we have a unique relationship with the British civil service. It is renowned for its honesty and integrity. I believe, however, that my Committee has a role to play in ensuring that it also develops a reputation for successfully delivering public services. It is no longer good enough to have a worldwide reputation for honesty and integrity.

The British civil service has to deliver successful public services. We have an important part to play in understanding why projects and programmes have not delivered what was expected, but we seek also to identify the elements of success when we find them and to suggest solutions. We do not want to be negative all the time. We do not want to be just an undertaker. We do, however, want to be a practical force for good, trying to suggest how things can be done better.

We do not get involved in policy, which is our key to success. It is why we are a united Committee and why we hunt as a pack. No one can put a piece of paper between any member of the Committee because we focus our attention on the civil service, not on policy, and on trying to get things done.

Our task is to ensure that the learning points from our work are not lost, but crystallised and acted on. The fact that more than 90 per cent. of our recommendations are accepted by the Government clearly shows that our concerns are well founded and our suggestions well grounded. If anyone says that Parliament means nothing, that Back Benchers have no power and that Select Committees mean nothing, here is one Select Committee—meeting twice a week, producing up to 50 reports a year—that has 90 per cent. of its recommendations accepted by the Government. That is not a bad track record.

We are also sometimes criticised for focusing on relatively small bodies that spend relatively little. My response to such criticism is that if we constantly target very large spending Departments, there is a danger that those in the smaller bodies will feel free from the discipline that parliamentary scrutiny provides. In our experience, the smaller spending areas are most vulnerable to fraud, mismanagement and impropriety because often there are fewer controls. We believe that each public pound is as important as the next, and we take an interest in them all.

In summarising our work for the past year there are four themes of particular interest: the quality of financial management, improving public service, innovation and risk, and accountability. First, monitoring the quality of financial management is central to our role and it is a fundamental part of our work. The past year has seen a major change in the way in which the Government account for public expenditure. After 140 years, the wholly cash-based system by which Parliament approved Government expenditure has been replaced with one in which Parliament votes on expenditure in terms of resources, reflecting when liabilities are entered into, rather than when cash is paid out. For Departments, the challenge of changing systems has been immense, and I pay tribute to Sir Andrew Likierman and his team in the Treasury and their personal contributions in driving through this very difficult work. It has often been a uphill struggle.

What next? As a result of the shift to resource accounting, we have a wealth of information that was not available to us before. We need now to play our part, and we owe it to the taxpayer to devote more of our time to understanding and interpreting the information that is now available. That in itself is a massive task for Parliament and a huge challenge for us if we are to hold the Government to account day by day. We intend to do our best.

Reliable and timely accounts are essential if we are to grasp the potential of resource accounts. We can make progress only if those accounts are delivered well and on time and they are accurate. Last November, we reviewed the progress that Departments have made as they move from the old system to the new. I accept that the transition to the new commercial-style accounts, which are complicated, has caused many Departments headaches and difficulties, but it has been largely successful, with many Departments making substantial efforts to improve the quality of their resource accounts.

We were disappointed, however, that far too many Departments had qualified opinions on their accounts. That position must improve. Departments must also address the widespread and persistent lack of timeliness in delivering their accounts to the Comptroller and Auditor General. Delays in submitting accounts suggest a more disturbing malaise, and we must ask whether senior staff in Departments, including permanent secretaries, are sufficiently engaged in the process, although I am sure they understand it. It is essential that senior staff in public bodies take seriously their personal responsibility for the public funds with which they are entrusted.

As I said, the propriety of the British civil service is not in doubt. My concerns, and the three examples that I shall briefly give, are about the need for sound systems of control and early warning signs before things go badly wrong. The first example in which my Committee recently played an part, and acted particularly strongly, concerns the Public Trust Office, which existed to protect the financial interests of the mentally incapacitated and was therefore responsible for one of the most vulnerable sections of the community. The Committee first reported on the very poor service provided in 1994, and we were dismayed to find in 1999 that the improvements we had been promised had still not materialised—indeed, performance had declined.

A further dimension to the PTO's problems emerged when we considered the management of unclaimed balances in court funds, weaknesses in its financial reporting and bonus arrangements for the agency's former chief executive. The Lord Chancellor's Department had responsibility for the PTO, but its approach was woefully hands off. It had ignored the warning signs so clearly heralded in our earlier report. For example, despite the PTO's worsening performance, the Department allowed its chief executive to continue to receive her full performance bonus. In the course of our subsequent work, the Department acknowledged that its oversight should have been a lot better; supervision should have been more rigorous and greater leadership should have been shown to help the agency think more imaginatively about its operations. In accepting our recommendations, the Lord Chancellor's Department took the radical step of closing the PTO and creating a new system to protect the interests of those vulnerable people. Clearly, we have to keep a close eye on that in future, but it is an example of the PAC's work and the way in which we have acted.

Failure to act on warning signs was a factor in our report on the corruption case involving Focus housing association. Two former Focus employees and a property dealer were convicted after the two employees took bribes from the dealer in connection with a purchase by Focus of 47 houses between 1991 and 1995, many at inflated prices. The case illustrated the failure of the Housing Corporation, which oversees housing associations, to act with sufficient urgency and improve their regulation of them. The Housing Corporation acknowledged to the Committee that there were inadequacies in its regulation of housing associations in the early 1990s, particularly in assessing their internal controls; those weaknesses may have made it easier for the corruption to occur. While the corporation began to improve its regulation, following a PAC report in 1994, it took until 1998, long after the discovery of corruption at Focus, to complete those improvements, which was far too slow.

Suspected impropriety at whatever level in government should be investigated properly and thoroughly to protect public funds. The corruption was discovered as a result of an investigation prompted by allegations received by Focus, but only after it and the Housing Corporation had received between them no fewer than six earlier warnings of possible impropriety. The case reinforces the need for allegations of impropriety to be swiftly and fully investigated.

It is outrageous that the Comptroller and Auditor General did not have the right of automatic access to the housing association, but had to negotiate with it for six months before gaining access to the information that he needed to bring the matter to our attention. Parliament has had a central role in such matters throughout history, but in that clear case of impropriety it took six months for the CAG to gain access, which is not good enough. We shall soon have the Government's response to Lord Sharman; I hope that they accept his recommendation that the CAG should have automatic access so that people working in that sector are aware that they are answerable to Parliament for the way in which they use public money.

Further education is another sector with which there are problems. It is a large sector and receives about £3 billion a year. Most colleges manage their financial affairs successfully, but our ninth report found that 72 FE colleges—some 17 per cent. of the total—were in financial difficulty. Financial problems on that scale give rise to serious questions about the funding, organisation, governance and management of the sector, and unnecessarily divert management from its primary role of delivering quality and successful education. We found that the Further Education Funding Council focused too much on trying to help colleges once they had got into difficulty, rather than spotting the warning signs and taking early preventive action.

We urge the Learning and Skills Council, which now has responsibility for the sector, to take a more pro-active approach than its predecessor. It must identify problems earlier and take preventive measures sooner if the sector is to meet the targets for widening participation and improving quality. That illustrates a wider problem that has vexed other committees. There is a danger that bodies with responsibility for oversight of a sector confuse their support and regulatory functions. Instead of policing a sector, they are captured by it. We recently looked at the Charity Commissioners; they are a notable example in which there is confusion about the role that they play.

I shall say a bit about better public service delivery, which is now at the heart of the political agenda. That reflects the genuine concern and belief across the political divide that there is enormous scope for improvement. The issue must, therefore, be central to the Committee's remit.

I want to focus on one element of public service delivery that has become something of a recurring theme for the Committee—equity. I hope that we can emphasise equity in our work in the next few years. It is the principle that access to and quality of the services that a citizen receives should not vary according to one's postcode.

For example, in the Committee's 43rd report of 1999–2000, we considered hip replacements. Total hip replacement is a highly effective procedure that reduces pain and increases mobility in almost all cases. In England, the NHS performs more than 30,000 replacements each year, at a cost of about £140 million. Most patients who have a hip operation receive an excellent service, but we expressed concern about variations in access to treatment and the quality of care that people were receiving. Believe it or not, patients can wait for an operation for anything between two and 16 months, although the average is eight months. Clearly, waiting 16 months for a hip operation is completely unacceptable. Integrated pathways for hip patients reduce their length of stay in hospital and improve outcomes, but what do phrases such as "integrated care pathways", which are used by the bureaucracy, mean? This particular term means people talking to each other in the NHS. Less than a third of trusts use pathways for all hip replacements. We hear much about joined-up government, but our role in the Committee in this matter and indeed all others is to ensure that we have joined-up management as well as joined-up government. There is no point in all the Ministers in the world ensuring that we have joined-up government—if they can do such a thing—if we still do not have joined-up management.

Sticking with health, I mentioned the terrible blight that hospital-acquired infection represents for patients. It kills about 5,000 people a year and costs the NHS about £1 billion a year. I am pleased that, since the Committee worked on it, the issue's profile has been raised considerably, but I still remember being staggered by the differences in how trusts were handling the problem. Again, there were enormous differences throughout the country. Infection control nurses have been shown to be vital in reducing the level of hospital-acquired infections. At the time of the National Audit Office investigation, the number of beds that one of these crucial nurses had to cover varied from about 150 in some trusts, which is fine, to an impossible-to-manage 1,800 in the very worst cases. Such a difference may mean that a patient's chances of picking up an infection and dying—that is what we are talking about—depends on which hospital they are lucky or unlucky enough to end up in.

More recently, and again on health, the Committee took evidence on another example of poor-quality service following our recent investigation of NHS waiting lists. Drawing on the CAG's report, we noted that there were sharp disparities in patient waiting times across the country. For example, 37 per cent. of people in west Sussex wait more than six months for admission, but in Dorset, less than 1 per cent. wait six months. That is a huge disparity on a central issue of political concern. It is also a concern for our constituents and it simply cannot be right. Indeed, these wide variations can occur in adjacent areas. I know that that is the case. They occur between Lincolnshire and Humberside in my constituency.

Variations in patient care are not confined to waiting lists and hip replacements. The Committee found the same problem in the previous Parliament when we examined cataract surgery and cervical screening. Although politicians spend a lot of time arguing party political points about health, there is a huge amount of detailed management work to be done that makes a real difference to people's lives, irrespective of views on the future of the NHS. We intend to pursue those problems. Almost 6 million people a year are admitted to hospital in England for at least one night, so good information systems that provide real information on current and planned uses of resources are essential.

We highlighted the Royal Shrewsbury hospitals NHS trust because it has a good system, which has dramatically reduced the number of operations cancelled for non-medical reasons. Sadly, that is rare.

Too many trusts continue to have inadequate information systems. In the 21st century, bed managers in 90 per cent. of hospitals can find out whether beds are vacant only by physically inspecting them or telephoning wards. It is disappointing that the NHS executive has not done more to build on the success of systems such as those developed in Shrewsbury. Although the new NHS information technology strategy aims to tackle that, many trusts will continue to operate without the information that they need until new systems are available nationwide. That is a simple matter, but it could make so much difference to people's lives.

I have already considered some of the disparities in waiting times. Why should patients, who may have waited many months for an operation, face the disappointment of a last-minute cancellation simply because the trust in their area—they have no choice about where they are being sent—does not adopt the good practice that already exists in other parts of the country?

I am pleased to say that our criticism has not fallen on deaf ears. When questioned, the Department of Health acknowledged that such variations need to be tackled, and is taking action. Distributing resources more fairly and targeting them to remove variations is an important first step. Setting national standards through the National Institute for Clinical Excellence and a national service framework, and testing compliance with the Commission for Health Improvement, are also crucial. We shall keep an eye on all those matters. We were told that differences in management processes were a factor in the variations. It is therefore imperative that best practice is quickly rolled out to ensure consistency of service.

The autumn of 2000 provided a grim reminder of the misery that serious flooding can cause.

Geraint Davies (Croydon, Central)

Does the hon. Gentleman agree that the Committee's work is valuable because it does not simply isolate opportunities for improvements but provokes them? He mentioned hip replacements, consistency, hospital-acquired infection and the regulation of waiting lists. There have been significant responses to our work, such as improvements in the NHS from which people have benefited.

Mr. Leigh

I am happy to accept that. The value of our Committee is that we do not try make party political points and we can therefore focus attention on issues, sometimes through pretty hard questioning and embarrassing the civil service. Most of the time, the Government respond. I pay tribute to those who respond and take our Committee's work seriously.

I was about to consider flooding, a serious matter that came to the fore in the autumn of 2000 when approximately 10,000 properties were hit by floods. Up to 5 million people and 2 million homes, businesses and other buildings in England are at risk from flooding. Yet the protection that homes and families might receive and whether flood warnings are issued depends on where one lives. That is remarkable. I did not know that before I began to study the Committee's work. When we took evidence on that serious issue, we learned that fewer than half those at risk of flooding live in areas covered by the Environment Agency's flood warning systems.

The Environment Agency needs to examine why different regions use different warning systems. It must satisfy itself that the methods used are the most effective in the circumstances and that they do not simply reflect local attitudes or the willingness to make funds available for warning systems. We were appalled to discover the poor condition of flood defence assets.

Nearly half the flood defence structures and a third of the barriers were categorised as fair, poor or very poor. We found that 165 km of flood defences are derelict. When someone is unfortunate enough to experience flooding, they can sometimes only use sandbags. However, in 2000, not everyone who wanted them could get them. Members of the public whose properties are at risk should not have to live with uncertainty about whether they will receive warnings or whether sandbags will be available.

Of course we welcome the extra investment for flood protection, but it will take years to take effect. A country-wide strategy is now required to deliver appropriate flood defence measures to the public, where similar flood risks exist regardless of where they live. This reflects our belief in equity. The current organisational responsibility and funding arrangements for inland flood defences are extremely complex. They involve a significant number of bodies—as I know, representing a low-lying area. They are confusing to the public, and possibly a hindrance to a consistent level of service.

To take a completely different example—one can range over the whole of government; I am just going to pick up one or two examples—there is also disparity in the treatment of benefit claimants across the country. For example, when we considered those who undergo medical assessments to determine their eligibility for disability and incapacity benefit, we heard another tale of large regional variations. The money involved is significant: more than £19 billion is paid each year in such benefits. Timely assessment is vital to avoid unnecessary delays for the prospective claimant, which could cause them worry or hardship. It is also important to protect the public purse by ensuring that people are paid only what they are entitled to.

The Committee heard that the time taken to process cases due for review varied across the country from 90 days—quite good—to 170 days. For example, those living in the west of Scotland have to wait nearly twice as long to hear the decision on their case as those living in the west country. The simple question that we want to ask is why they should have to do so. The Department for Work and Pensions needs to step up its efforts to ensure that claims are processed quickly, so that claimants across the whole country get their benefit without delay, and people who are ineligible are speedily removed from the system.

Equal access to public services and consistency in the quality of those services are essential. People across the land pay the same levels of tax, and we believe—this is a central part of our work—that they rightly expect to, and should, receive the same levels of service. My Committee will, I hope, continue to highlight cases of inconsistency. We will continue to define the elements of success where services work well, and provide a pointer so that the quality of services across the country can be brought up to the level of the best. There is no doubt that so much in our public services is of the best, but so much lags far behind. If our Committee can focus a spotlight on the worst services, and drag those responsible—including civil servants and officials—before us, we will have done our work.

If someone in the private sector fails, they may lose their job. In the public sector, perhaps the worst that can happen is that they come before the hon. Member for City of Durham, or my hon. Friend the Member for Bognor Regis and Littlehampton, but we will give them a hard time. We will not flinch from doing so because it is their job to provide the best public services throughout the nation.

Mr. Gerry Steinberg (City of Durham)

Does the hon. Gentleman agree that the NHS seems to be the only organisation in the country in which someone who fails can get a £95,000 bonus?

Mr. Leigh

The Committee has studied that case recently, and will produce a report to which the Government will have to reply. I cannot go into too much detail until that has happened, but we were horrified by the case, and held a very hard-hitting hearing on it. It is simply not acceptable that people who fail in the public sector can be shuffled off—even into another job, in the NHS—so that those who are trying to investigate them cannot do that. We have to sort that out. We must ensure that people do not have a job for life just because they are in the public sector. Those who use the NHS have paid for their health care, and they deserve the best. If people are fiddling the waiting lists, they will have to go, and they will have to pay the price.

I turn to the theme of innovation and risk management. Innovation is essential if public services are to improve, and it entails risk. We are not against risks. They are not something to be avoided, but they must be carefully identified, evaluated and managed. That is so easy to say. One might think that those are just words, but how often have those words been taken into account over the past decades?

Numerous reports by the Committee have focused on the issue of risk. Two, in particular, demonstrate the flexibility of our approach to the issue. In December, we reported on the debacle—there is no other word to describe it—surrounding the benefit payment card, which was a vast and complex project that failed at vast expense. Estimates vary, but the figure involved could be up to £1 billion. Some clear learning points surfaced in our inquiry.

The other report was published in November. It considered risk management across government and identified important gaps in risk management systems. If risks are not managed, enormous sums may be paid out. The benefit payment card is a classic example, although we acknowledge that the project was innovative and that it had special features that added to the risk, notably its status as a pioneering private finance initiative project and the need to join up the systems of two purchasers with different business objectives. While the various parties identified many risks at various stages, they underestimated the difficulty of tackling a huge and complex project at the heart of achieving benefit delivery and post office automation, all in one go.

We also investigated many basic management failures. When projects go wrong, which they inevitably do, management must face up to the prospect of failure and take prompt action to avoid abortive costs. Time and again in our work, we witness management's failure to get a grip. We might use fine words—the jargon and the long phrases in National Audit Office reports—but everything comes down to getting a grip. It took the former Department of Social Security a laboured 18 months to put the project out of its misery. The Government have set up better IT project management arrangements and I am sure that they take on board many of the lessons of good practice highlighted in our reports.

Our first report this Session considered what has been done to encourage Departments to improve risk management. For risk management to become a standard feature of how they carry out their activities, the benefits that it brings to service delivery and safeguarding public money need to be understood and accepted by all staff. One would have thought that obvious and clear, but if it is so obvious and clear why has it not been done? For example, we found that only 25 per cent. of Departments set clear risk management objectives. The initial Cabinet Office assessment of departmental risk frameworks shows that some are much more developed than others.

I hope that the report puts an end to the myth going round Whitehall that the Committee is a barrier to innovation and risk. Some permanent secretaries criticised my predecessor—in private, of course, not in public. The myth is, "If people in the civil service innovate and take risks, they might end up in the hot seat before the Committee." We will criticise Departments if they fail to identify and manage foreseeable risk, but we support greater innovation and we are prepared to accept that, on occasion, something unforeseeable will scupper even the best-planned project. One can at least plan for the future, but that is often not done. That was particularly the case with the former Department of Social Security's IT systems.

Mr. Brian Jenkins (Tamworth)

Is the hon. Gentleman saying that we often find not a lack of understanding, but a lack of skill to implement risk assessment and risk management across the Departments? We do not oppose risk, but we do oppose the inability to carry out a proper risk assessment and put in place adequate management strategies at the start of a project.

Mr. Leigh

That is absolutely clear and we shall continue our work on it. We believe that risk taking and innovation are wholly consistent with careful and proper control of public money. To follow on from that intervention, if Departments have sound control systems they are more likely to have the confidence to innovate, because they will be able to take account of adverse circumstances. In the game of politics, we all know that policies, Ministers and requirements change all the time. Risk management will become an integral part of how Departments operate. Their civil servants have the skills to identify and assess risks and take the action to manage them. Having the right skills to manage risky projects is a salient issue.

I want to make as an individual a point that I put to the Treasury permanent secretary. It is worth reminding the House that those in the highest echelons of the civil service have, without exception, a background in policy rather than project management. Perhaps for that reason, those people of honesty and integrity, who have brilliant minds, sometimes fail to get a grip on major projects. Time and again, they are called to our Committee to explain themselves.

No project director—no one who has ever attempted to run a Government project—has ever become a permanent secretary in the history of the civil service. That says something about the culture, which needs to change. There is now a culture of delivery and the public expect first-rate public services across the nation. We expect our senior civil servants to have hands-on experience of how to deliver a successful project. We found that one project was run by seven people over its lifetime. Some lasted just a few months before being shuffled off to another part of the management structure.

Geraint Davies

Many people might find it unbelievable that no permanent secretary has run a project in his entire career. Can the hon. Gentleman explain what he means? Do not those who join the civil service run projects and work their way up or is he suggesting that all such people are parachuted in at senior level?

Mr. Leigh

No. Project director is a term of art and no person responsible over months and years for delivering a major IT project such as the benefit payment card—the one in the hot seat—has risen to the top of the civil service. I put that to Sir Andrew Turnbull, the Treasury permanent secretary, and he could not deny it. To be fair to him, and as he said, permanent secretaries need many other skills. They have to advise Ministers, which may require a particular ability that does not arise from running projects, but the civil service culture is changing and many people will expect a different type of person to rise to the top.

We welcome the Cabinet Office and Treasury initiatives to improve risk management by Departments, but they need to monitor how Departments implement their plans to ensure that they are underpinned by effective action to manage risks. I also welcome the decision that the public sector should apply the Turnbull requirements on corporate governance being adopted in the private sector. The Government must get to grips with finding ways to reward, encourage, promote and retain good project managers.

My final theme is accountability, which is vital. Last February, Lord Sharman published a valuable review of audit and accountability in central Government and the momentum behind his recommendations must not be lost. Opportunities for Parliament to consider and legislate on issues of financial accountability are few and far between. Believe it or not, the Government Resources and Accounts Act 2000 represents one of the few opportunities to do so since Gladstone's time. My predecessor and the Committee were disappointed that the Government did not take the opportunity to iron out anomalies in the financial accountability arrangements, although they were pleased to contribute to the Sharman review, which they established in response to our concerns.

The Sharman report made a series of welcome recommendations designed to strengthen central Government audit and accountability arrangements. The Committee endorsed that report in our sixth report in 2000–01. It recommended that, as a matter of principle, the Comptroller and Auditor General should audit all executive, non-departmental public bodies, that his access rights should be on a statutory basis, and that if a Department has a substantial stake or influence or if a company has a public interest role, he should be eligible for appointment as auditor of companies.

The report went on to recommend that external validation of performance information for central Government should be progressively developed. It also made a number of recommendations to bring central Government corporate governance arrangements into line with best practice in the private sector to address issues of audit burden and the effect of audit or risk taking, and to ensure that best use is made of audit work.

We are still waiting for the Government's response. The report was produced almost a year ago, and the Government have still to respond, but I think that they will fairly soon. The report covers important matters of direct concern to Members of the House, and further delay would be unacceptable. I know that the Treasury has been in close contact with the CAG and his team on the practical issues of implementation, and encouraging progress has been made. If—I use the word advisedly—the Sharman recommendations are implemented in full, that will be a significant step forward for accountability to Parliament.

Two issues may cause difficulty. In our report on the Sharman review, the Committee raised the issue of access to the civil list, which is the one area of royal spending outside our remit. Since 1988, the National Audit Office has had access to relevant information held by the royal household relating to the use made of the grants paid by Departments to meet the costs of royal travel and the royal palaces. The Comptroller has produced reports on both those grants, which the Committee has examined. Indeed, we considered his report on royal travel only last week. Both reports provided an opportunity for the palace to show that it has taken seriously issues of costs and efficiency. It has done pretty well, and I think it has proved the case for greater transparency. I urge the Government—I mean this sincerely—to reconsider the question of the CAG having similar access rights to the civil list.

Two other bodies are currently outside the scope of our remit, the first of which is the BBC. It is essential and right that there should be improved accountability to Parliament for the funds spent by the BBC. The sums are large: some £2 billion each year. Believe it or not, Gavyn Davies, now the chairman of the BBC, recommended when he chaired the review on the future funding of the corporation that the CAG should have access to the BBC. That was before he became chairman. That is the same man who recommended that Parliament should have some access to the BBC. That view was supported by the Select Committee on Culture, Media and Sport and by Lord Sharman.

All those parties failed to be convinced by the corporation's line—in my view, it is a line—that parliamentary accountability would impair editorial independence. Examinations of the value that the BBC gets from the way in which it uses our money could be completely separate from editorial decisions. We would not get involved in who should be on programmes and who should run the corporation. We, on behalf of the people, merely want some idea of what the BBC is doing with £2 billion each year.

I should be pleased to hear from the Chief Secretary whether he has consulted the chairman of the BBC on this point. I know that the Financial Secretary will reply to the debate, but the Chief Secretary will be writing to me on this matter. Has Gavyn Davies changed his mind? Why should he change his mind?

A similar point was made in the 1960s about the CAG's access to universities. It was said that there would be difficulties with academic freedom and independence, but no one would now suggest that his involvement in that sector has compromised academic freedom. The NAO spends its time examining implementation of policy across government without the need to question the policies in the first instance.

If every family in the country is compelled to pay the licence fee—they are not compelled, but we all know that they do so—it is a poll tax by another name. I believe that that large sum of money should be subject to the same scrutiny as all other taxes, and we will pursue that point.

Mr. Richard Bacon (South Norfolk)

rose—

Geraint Davies

On a point of order, Mr. Deputy Speaker. Is a discussion of the BBC's finances in order? I would welcome a report on the BBC, but we have not had one, and I do not think that we should discuss the matter. I bow to your wider wisdom, Mr. Deputy Speaker.

Mr. Deputy Speaker (Sir Alan Haselhurst)

We are hearing a report from the Chairman of the Select Committee. He is alluding to something that might be, so I do not think that he is straying from the reasonable terms of the debate. I am prepared to hear what he has to say on that matter.

Mr. Leigh

I shall give way to my hon. Friend the Member for South Norfolk (Mr. Bacon).

Mr. Bacon

I was interested in what my hon. Friend said about academic freedom. Does he agree that, far from compromising the BBC's editorial independence, scrutiny of its finances by the CAG could enhance its independence? Since the CAG has had oversight of the finances of universities, there has been a growth in academic freedom. There are now joint honours degrees in basket weaving and sociology and a professor of in-flight catering. By analogy, surely the BBC should welcome the chance of greater independence that scrutiny brings.

Mr. Deputy Speaker

Order. That was an overlong intervention.

Mr. Leigh

My hon. Friend has made an interesting and worthwhile point, and I look forward to hearing him develop his arguments.

Similar arguments apply to whether the CAG should have access to the Financial Services Authority, which was established as a company limited by guarantee with many of the attributes of a public body. Its purpose is to protect the public's interests. It is funded by a compulsory levy on the 34,000 firms in the financial services sector.

I was shocked to discover that the CAG, Parliament's watchdog, has no access to the FSA. As the Equitable Life saga showed, the citizen has a direct interest in the authority's work. It is crucial that there is some accountability to Parliament for the way in which it discharges its functions. Parliament has no power to obtain independent evidence on its activities. That is a matter of some urgency, and I look forward to hearing what the Chief Secretary has to say about it. Greater transparency would bring benefits, so that another Equitable Life fiasco could be avoided.

Mr. George Osborne (Tatton)

Is it not striking that, of all the issues on which I have received correspondence from my constituents, the Equitable Life case is the one on which I have received the most, yet as a Member of Parliament I am not able directly to examine the FSA's work? That concerns many of my constituents. I fully support what my hon. Friend has suggested.

Mr. Leigh

I am grateful to my hon. Friend for his support. We look forward to hearing what the Government intend to do about these sensitive issues that are of huge importance to many people.

We have a clear agenda for the future. We shall focus on issues that directly affect the public, and shall ask the questions that they want to ask on topical issues. We are shortly to consider access to and quality of higher education. We have work in hand on the millennium dome and the inappropriate adjustments to NHS waiting lists.

We will be asking how the foot-and-mouth crisis was handled, about the financial implications for the taxpayer of the events at Railtrack, about the lessons that can be learned for the future management of and investment in the railways, whether the way forward for London Underground—when it is eventually decided—provides the best value for money, and what lay behind the suspension of individual learning accounts. We will aim to get to the bottom of those matters, and offer recommendations for improvement.

I am glad to stand here today as Chairman of such a distinguished Committee. Our Committee has a long history, but the careful stewardship of my predecessors has ensured that it has remained relevant. We have a serious role to play in improving the administration of government, and I am delighted that my colleagues on the Committee are so adept at what they do. By holding to account those responsible for delivering public services, the Committee aims to ensure that there is a vital check from which the general public can take much confidence. It is a great privilege to chair the Committee.

Several hon. Members

rose—

Mr. Deputy Speaker

Order. The Chairman of the Committee has been given a certain licence in introducing his first report, but I will not necessarily apply it as widely to other Members.

2.29 pm

Mr. Gerry Steinberg (City of Durham)

I do not present as sleek a figure as I had hoped following the obesity report. Obviously the recommendations are not working.

I greatly enjoy serving on the Committee. The work is the most interesting that I have experienced in nearly 15 years as an MP. The Committee does a genuinely worthwhile job. I must admit that I have served on other Select Committees that I felt were a waste of time, because Governments—Labour as well as Conservative—never seemed to listen. This Committee's work seems very relevant, and we receive positive responses, which makes our work worth doing. I become cynical as I grow older, but serving on the PAC strikes me as an excellent way of spending my time.

I thank all the Committee's staff for doing a tremendous job, and for being so helpful and obliging. Sometimes people who are getting old, as I am, forget what they have done. They forget that they already have their papers, and ask for them again. We never have any problem on such occasions, because our staff are so helpful. I also thank the National Audit Office for its help and expert advice. Its outstanding professionalism goes without saying, and it makes life a lot easier.

Yesterday we received a delegation from the South African Public Accounts Committee, which asked, among other things, whether we were given any secretarial support. I said that we were not, but I should have said that we can call on 750 auditors at any time. We could be described as the most-briefed Committee in the House, with the best possible support.

Let me join the Committee's Chairman, the hon. Member for Gainsborough (Mr. Leigh), in extending my thanks and good wishes to Ken Brown, the Clerk, who retired earlier this year. His influence and personality will remain with the Committee for many years. He is greatly missed, and I wish him a long and happy retirement. He was a genuinely nice man, and there are not many people of whom that can be said. I thought a great deal of him.

I wish good luck to our previous Chairman, the right hon. Member for Haltemprice and Howden (David Davis), who has taken what must now be an almost impossible job. Did I say that I wished him luck? I am not sure that I wish him too much luck—a little bit of luck, perhaps.

I also congratulate our new Chairman on his recent appointment following the general election. We are monitoring him carefully to see that he does his job well. So far we have given him 9½ out of 10, so he is okay.

Unlike the Chairman, I do not want to trawl through all that we have done. I want to concentrate on three reports on the national health service and some of the issues in them that we have identified as giving cause for concern. Many of those issues were discussed at a valedictory hearing with Sir Alan Langlands, the departing chief executive of the NHS.

It is clear to me that the NHS executive has experienced great difficulties in overseeing and monitoring the activities of many NHS bodies. Consequently, management failings have caused serious problems in the service, resulting in the wasting of billions of pounds over the last 10 years or more. In, I think, 1996, the previous Government introduced regional executives, but I do not believe that they ever succeeded in doing the job that they were meant to do. In my view, their purpose was to link the centre with those working at local level; but they were unaccountable, and often failed to pass on authoritative guidance from the NHS executive to trusts. In many instances, the priorities of both this Government and the last were not apparent locally.

One example of the executive's lack of success in preventing management failings is the control of hospital-acquired infection in acute NHS trusts. Our Chairman mentioned that. A hospital-acquired infection may result in prolonged or permanent disability, and a small proportion of patients die. Such infections add to patients' discomfort and to the length of their stay in hospital, which itself causes problems.

Hospital-acquired infection was the subject of a PAC report entitled "Inpatient Admission, Bed Management and Patient Discharge in NHS Acute Hospitals", about which I shall say more shortly. It was a damning report, which severely criticised the management at all levels. As the Chairman said, the cost to the taxpayer is some £1 billion a year—an incredible amount. In view of that, and in view of the suffering experienced by about 100,000 patients each year, one would have thought that trust managers would make the problem a priority. According to a National Audit Office report, however, in a number of NHS Trusts Chief Executives may have a low level of awareness of infection control issues and … may be unaware of the extent and cost of hospital acquired infection and how it is being addressed in their NHS Trust One trust allocated the measly sum of £500 or so to its infection control team in 1998, while another allocated £1 million. That illustrates the discrepancy mentioned by the Chairman.

In many NHS trusts, hospital-acquired infection has generally had a low profile. Although the Department of Health has launched initiatives, particularly in the past two years, we found that a quarter of trusts' service agreements with health authorities did not cover infection control services, and that when they were covered they were often inadequate. We found that, contrary to guidelines issued by the Department in 1995, direct involvement of chief executives in strategic management and supervision was very low. We also found that 21 per cent. of trusts had no infection-control programme, and that only 11 per cent. of the programmes that did exist had been approved by chief executives.

That is a perfect illustration of the NHS executive's failure to convey the seriousness of some NHS problems. We noted that there was scope for savings of some £150 million a year if infection rates could be reduced by a mere 15 per cent., but that the issue was not taken seriously by senior managers of trusts. Not only is this costing the taxpayer huge amounts; tragically, people are losing their lives.

Last Thursday, going home in the train, I was making some notes in preparation for my speech. Incredibly, when I opened the Evening Standard I was confronted by an article on this very subject. It was headed: Doctor's campaign against 'filthy' wards and, below that, GP takes action after hospital superbug kills his wife". I shall quote extensively from the article, because it sums up the tragedy and the fact that not enough is being done about it, although we have taken up the issue.

The article says: A retired GP has launched a campaign to improve hygiene in hospitals after his wife died from a superbug she picked up on a 'filthy' ward while recovering from a routine operation. The retired GP in question was Dr. Roger Arthur. The article continues: His wife Patricia, 73, died in St Helier Hospital in Carshalton last month from the superbug methicillin-resistant streptococcus aureus, or MRSA, an infection which kills 5,000 hospital patients a year and is a factor in the deaths of 15,000 more. Dr Arthur says the real figure may be much higher. The scale of the problem is highlighted in the fact that, at the time of Mrs Arthur's death, St Helier had a dedicated MRSA ward, designed to keep affected patients in isolation—but it was full. She had gone to St Helier for surgery to remove a benign obstruction in her bowel. Her husband said: 'The operation was a success and she was discharged after eight or nine days. I noticed she had a bit of a cough but she seemed fine. However, when we got home she seemed to become ill and within 10 hours I could see she was going downhill fast. We went back to the hospital and they did some tests. The doctor came back and told us that it was MRSA.' Mrs Arthur died from the infection four days later. Dr Arthur, from New Malden, has little doubt how his wife became infected. He said: 'The ward she was on was absolutely filthy. There were sweet papers, fluff, old bits of Elastoplast and the tops of disposable syringes behind the bed when we came in, and still there when we came out. I ran my finger along the windowsill by my wife's bed. There was a thick layer of dust and a vase with dead flowers. There were cleaners around but they seemed to be cleaning the middle of the floor and not bother anywhere else. I was told there was a ward for MRSA patients but that was full, so people with the infection were remaining in normal wards and infecting other patients.' St Helier Hospital was the subject of a damning report last August by the Commission for Health Improvement, which said levels of cleanliness were 'seriously compromised', with wards smelling of urine and mortality rates significantly higher than the national average. A Department of Health spokesman said: 'The Government takes the issue of hospital-acquired infections very seriously and believes infection control and basic hygiene should be at the heart of good management and clinical practice in the NHS. A compulsory national surveillance service is being developed and a first phase, focusing on MRSA, was launched in April 2001.' That Department of Health spokesman may well be right. However, the PAC met Sir Alan Langlands and Liam Donaldson, chief medical officer, to discuss the report on 6 March 2000. Two years later, the problems are still occurring and that is not good enough. The Government's response was quite encouraging, but it is clear that there is much to be done. When we read about such a case, it is obvious that something must be done pretty quickly.

Everything that Dr. Arthur says was borne out in our report. Over the past eight years, isolation facilities have been significantly reduced, which must have contributed to the problem quite significantly. The majority of hospital-acquired infections are caused by bacteria. Some infections spread from person to person. Antibiotics have been used successfully for more than 50 years to control and to overcome bacterial infections. That has led to the emergence of highly resistant strains of bacteria. They are commonest in hospitals where high antibiotic usage allows organisms to evolve. The close concentration of people with increased susceptibility to infections allows the organism to spread.

MRSA poses one of the biggest threats to infection control in hospitals. In some, it is endemic. Cleanliness is paramount but I was staggered to read in the report—I could not believe it—that effective hand washing or hygiene was very poor in hospitals. It says: A number of studies have generated data that confirm that Doctors who decontaminate their hands between seeing patients reduce hospital infection rates. Yet many observational studies, mainly conducted in intensive care units, show low rates of hand washing especially among Doctors. Insufficient washbasins, supplies of liquid soap and paper towels, are some of the reasons that have been given for this. I have no reason to believe that the NAO report is not correct. If even the doctors cannot do that, and they know the problems that it will cause, that is outrageous. For many years I was a head teacher at a nursery school. One of the first things we taught the children about hygiene was that they must wash their hands very carefully. Goodness gracious me: if we are teaching young children of four and five to do that, it is a shame that doctors themselves cannot do it. It is incredible that doctors are contributing to that horrific scenario. However, new clinical governance arrangements are being introduced. I hope that that appalling situation will be addressed vigorously.

As I have said, the PAC has commented on the need for better co-ordination within and between NHS organisations. In our report on in-patient admissions and bed management, we were concerned at the delay in many hospitals in discharging patients owing to poor co-ordination within hospitals and with outside agencies, which meant that some hospital beds were occupied virtually unnecessarily.

The NAO report highlighted 20 areas where performance at many trusts could be improved to match the lead of others. That would result in fewer cancelled operations and shorter waiting times for emergency patients, and reduce delays in discharging patients from hospital, which in turn would yield significant savings and free up resources for improving other aspects of patient care.

Often patients are brought into hospital far too early. Incredibly the report showed that if there were a 10 per cent. increase in same-day admissions, it would release about 180,000 bed days for alternative use. Few hospitals had effective systems for monitoring and co-ordinating key resources such as beds and theatre time.

In particular, the Committee was concerned that in more than 90 per cent. of trusts bed managers obtained their information on bed availability only through physical inspection and telephoning wards throughout the day. That seems archaic in a Modern NHS. On any given day, around 6,000 over-75s who are ready to be discharged from hospital are blocking beds and costing the NHS £1 million.

In fairness, the Government have recognised the scale of the problem and are taking action. For example, only last week, my local social services department was informed that it had been allocated £1.886 million to ease bed blocking in the next financial year. There is a severe problem. The Government are doing something about it but we must ensure that even more is done.

Mr. George Osborne

The hon. Gentleman is right that efforts are being made to improve the discharge of patients from hospitals, but does he agree that we need a joined-up approach, to use the jargon? We need to look at the closure of care homes and of places in care homes in wider society, because that provides less opportunity for discharging people from hospitals.

Mr. Steinberg

The hon. Gentleman is right. I do not intend to get into a political battle with him over the issue, but he should remember that the Conservative Government encouraged the increase in the number of private care homes, which are now being sold off for property development, reducing the number of care places. I will not go into that. Let us try to keep it non-political this afternoon but I agree that there must be a joined-up approach and much more co-ordination between the NHS and local social services departments. More care places must be found.

The real problem is clearly outlined in the report, which informs us that the number of general and acute beds fell from 200,000 in 1986 to 138,000 in 1997, a loss of 62,000 beds. For years I was warned by health authority officials that efficiency gains of 3 per cent. a year that had been demanded since the 1980s would eventually have a detrimental effect on local health services. As a result, beds have been lost and there has been an increase in bed occupancy and reductions in staff. The efficiency savings became cost-cutting exercises. The cumulative effect of those efficiency savings has been an increase in bed occupancy from about 70 per cent. to over 90 per cent., which leaves little capacity to cope with peak demand.

I shall now be a little controversial. I do not think that matters have been made any better—in fact, they may have been made a lot worse—by the new private finance initiative projects, which appear to result in the loss of further beds. We are told that bed numbers in those projects are agreed by health managers and independent experts. I have had a lot of experience—I am not being arrogant, because one of the first PFI hospitals in the country was at Durham.

It is not the so-called experts who make the decisions about bed numbers, but the financial consortiums. I know that from my own experience. The new university hospital in Durham opened recently and, for the six or seven years since the building of the hospital became a possibility, I was told that it would have enough beds. However, within a week of the hospital's opening, it was clear that it did not have enough beds, and that there was a severe shortage. That is not surprising. The number of NHS beds has fallen by around 2 per cent. a year since 1980, but admissions have risen by some 3.5 per cent. in the period. Given those statistics, it is no wonder that there is a bed shortage.

The NHS is under constant scrutiny by the PAC. As a consequence, there has been a significant improvement in management over the years. There is no doubt that, during the past few years, there has been a significant strengthening in accountability and performance monitoring in the NHS. That is partly due to the excellent reports that we receive from the National Audit Office, and the work that the Committee does. That may sound arrogant, but I believe that the PAC's work has helped encourage the improvements.

Government spending is not as straightforward as it was years ago. It used to be that only Government Departments spent millions or billions of pounds on services, but now executive agencies and quangos spend billions of pounds of public money every year. For the sake of continued accountability, efficiency and best value, the NAO and the PAC must scrutinise all public spending.

In the previous Parliament, we failed to persuade the Government to legislate to ensure that. However, Lord Sharman, who was commissioned by the Government to carry out a review of Government audit and accountability, has recommended that the NAO should be appointed automatically as the auditor of all newly created executive non-departmental public bodies—in other words, quangos. I was pleased with that recommendation, and I hope that the Government accept it.

That has already been happening in practice. For example, the NAO was given the job of auditing the new Learning and Skills Council and the Postal Services Commission. However, I believe that that appointment should have been automatic. In that way, Parliament would be able to ensure that all such organisations were accountable to it, and therefore that all public expenditure was accountable to Parliament.

2.52 pm

Mr. David Rendel (Newbury)

When I rose in the equivalent debate in December 2000, I noted that there were so few hon. Members in the Chamber that I would have to speak for an awfully long time if the debate was to continue until 7 o'clock. On that occasion, I did not fill all that time, and you will be pleased to hear, Mr. Deputy Speaker, that I do not intend to continue today until half past six, or whatever time the winding-up speeches might be expected to begin.

It is perhaps a pity that so few hon. Members want to take part in this annual debate. After all, it covers a huge range of Government affairs, and it offers Members an opportunity to speak about a large number of specialist interests. I am sorry that more do not choose to do so. I am equally sorry that the debate does not seem to attract an enormous amount of attention from the press. However, perhaps that is just the way of things.

Like the Committee's new Chairman, the hon. Member for Gainsborough (Mr. Leigh), and the hon. Member for City of Durham (Mr. Steinberg), I shall begin by paying tribute to Ken Brown, the PAC's former Clerk, who retired at Christmas. As the hon. Member for City of Durham said, he was an enormously nice man, but he was also extremely helpful. I probably bothered him with my questions about the workings of the PAC as much as anyone, with the possible exception of the Committee's previous Chairman, the right hon. Member for Haltemprice and Howden (David Davis). He always took the time to explain to me everything that I had to have explained, however idiotic my questions must sometimes have seemed.

It was great proof of the esteem in which Ken Brown was held in the House, and the respect that was felt for him, that so many hon. Members and others attended a farewell party for him on the Terrace. They had known him during his long service in the House, and valued the work that he had done. Not only that, but some who attended were aware that his father and grandfather had both acted as Clerks in the House. I hope that he has begun what will be a long and happy retirement, with many happy memories of this place as a result of the tributes that were paid to him on that day.

I also pay tribute to the PAC's previous Chairman, with whom I like to think I worked effectively during his period of office. I hope that I shall continue to work effectively with the new Chairman as well, but the right hon. Member for Haltemprice and Howden made a name for himself as a good Chairman, raising the Committee's prestige and increasing its influence in parliamentary and national affairs. It is to his credit that the PAC should continue to be held in the respect that has been its due for a long time. The Committee is an all-party body, and always reports unanimously. That is what gives it its strength.

I am pleased to be on the Committee, and the hon. Member for City of Durham made it clear that he felt the same. It is a good Committee, and I recommend membership to any Back-Bench Member, in government or opposition. Membership probably amounts to one of the most powerful positions available to people who are not in the Government, and I hope that other hon. Members will seek to become members of the Committee. I understand that some parties have not always found it especially easy to fill all the places on the Committee. Sadly, my party does not as yet have so many places to fill, so the difficulty is not so great. However, that may change in the near future.

I think that it is a great pity that we should have found it difficult sometimes to find members for the Committee. The PAC is a very interesting and powerful Committee to belong to. It is one of the few Select Committees in which Back-Bench or Opposition Members can make a real difference to the way in which things work, by influencing Committee recommendations that are then implemented by the Government. Normally, only Ministers can do that, but the PAC gives Back-Bench Members that power. That is why I recommend membership of the PAC heartily to those hon. Members who have not taken up the option so far.

As is true of all Committees, however, changes perhaps need to be made to the PAC. The Committee has been in place since Gladstone's day, and it may be time for us to rethink our way of working. I am delighted that the new Chairman has decided that we should all go on an away day to try to work out whether changes need to be made.

I suggested a number of changes in my equivalent speech a year and a bit ago, when we last had this debate in the House. Since then, more matters worthy of consideration have come up; among the issues then raised was the question of whether we need a second PAC.

As has been mentioned, the PAC is a very hard working Committee, which takes up an enormous amount of its members' time. It is possible that we should distinguish between bigger cases and smaller ones, with the second Committee discussing the smaller cases, and the main Committee discussing only those cases of really major importance.

I am sure that that proposal will be welcomed by the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb). He is one of the critics of the Committee to whom the new Chairman referred in his speech. When the hon. Member for Gainsborough talked about this particular criticism, I was sorely tempted to pretend that I was in some pantomime, and to shout, "He's behind you!" However, I resisted that temptation.

One criticism that I did not mention in 2000 is the sheer length of time that it takes for reports to come before us. Today, the House is discussing reports that appeared before the PAC a long time ago. The initial incentive for the NAO to draw up a report will have made itself apparent even before that, and we are talking about difficulties with Government policies that first arose two or three years ago. Those issues may well have been clarified and dealt with properly many months or even years before this debate began.

It is a pity that the process should take so long. A matter has to be pulled before the NAO, then the NAO has to investigate it and publish a report. That report then has to be the subject of a Committee hearing, then the Committee must look at the transcript of that hearing and prepare a draft report of its recommendations. That draft report has to be approved and sent off to the Treasury for its response. Finally, the Treasury's response is discussed in this annual debate.

It is a lengthy process. If we could find some way to speed it up, we could deal with some matters rather more quickly than we do at present.

Mr. Bacon

The Government closed down individual learning accounts on 23 November. The National Audit Office is investigating the matter and hopes to publish a report later this summer, perhaps by May, so that it can be discussed by the Committee before the summer recess. Does the hon. Gentleman agree that that is a model of how we should do things in the future?

Mr. Rendel

The hon. Gentleman makes a good point. Perhaps he will back me on this point when we come to our away day—it certainly sounds like it.

Another matter that we might want to discuss in changing the structure of the Committee is a way of asking a further set of questions. We each have a quarter of an hour in which to ask our questions and although the Chairman is very good about sometimes allowing us back in at the end of the session, it would be useful to have a second go. We may think of something that has come up as a result of other members' questions to the witnesses.

Occasionally we may need a second hearing. There was one occasion recently, which I shall refer to later, when we had a second hearing on the same subject. Recently we were discussing whether we might need another second hearing when it seemed that a witness had been a bit misleading and needed to be called back. There may be a case for having occasional second hearings as well.

We might need to think more about whether members should have a chance to discuss the recommendations that come out of the hearing. At present, we have our hearing and the NAO drafts a report with the Chairman as to what recommendations they think should come out of the hearing. The recommendations come before us as a draft and are often passed more or less on the nod. When it comes to making recommendations, the influence of individual members is not that great.

I should like to talk about the powers of the NAO. This comes out of one of the reports that we were discussing on the Government Resources and Accounts Act 2000 and the Government report on the investigation into audit arrangements by Lord Sharman. I hope, Mr. Deputy Speaker, that you will allow me, in discussing this, to talk a little about the BBC, as the sixth report of the 2000–2001 session gives its response to the Sharman report which covered the BBC. There is a good case for increasing the powers of the NAO, as the Sharman report proposed. I hope that the Government will take due account of the Sharman report—after all, they set it up. Sometimes, sadly, Governments set up reports and then pigeonhole them and forget about them for a long time. I hope that that will not happen with the Sharman report, because there are strong arguments for increasing the powers of the NAO to investigate all areas of Government spending of taxpayers' money, not least the areas mentioned by the Chairman—the civil list, the Financial Services Authority and the BBC. I find it extraordinary that the BBC's accounts are not audited by the NAO. There is every reason for that to happen.

Some people have argued, in response to Sharman, that many private sector auditors are at least as good and effective as the NAO and that we can trust them. I have no doubt that many private sector auditors are extremely good at their job. However, it is worth remembering what happened at Enron. At least one very well known private sector auditor seems to have gone way off the rails not only in failing to audit Enron properly in the first instance but then, when things turned out to have gone badly wrong and the audits were found to have been a failure, in apparently starting to shred some of the papers to hide the evidence. If that can be done by an audit company of the quality and prestige of Andersens, I hate to think about what goes on in the private sector audit world. There are better arguments than ever for saying that when taxpayers' money is at risk, we ought to have our parliamentary auditors, the NAO, in charge of the audit.

Mr. George Osborne

Is it not also a case of democratic accountability? We are talking about public money, and Parliament, which is the representative of the people, should be able to hold the BBC to account for the way it spends its money so that we can see whether BBC News 24, for example, which costs tens of millions of pounds, is money well spent.

Mr. Rendel

I entirely agree with the hon. Gentleman. I am sure that that is the first principle—where public money is involved, it should be audited by the NAO, which is Parliament's auditor. The NAO acts on behalf of us all; it acts on behalf of the taxpayer. It is not the Government's auditor, but the auditor for Parliament and the public. That is why it should, on the whole, audit public money. I was trying to argue that the only possible counter-argument might be that a private sector auditor might do a better job. For the reasons that I have given, that is no longer arguable, if ever it was.

I should like to go through a few of the reports and highlight some of our most important findings. Unless I was not listening hard enough, I do not think that either of the two previous speakers mentioned the sheep annual premium report. A very interesting point came out of that report. We heard that some of our farmers tried to flout the rules on the sheep annual premium. In some cases, for example, they reported to the Government that sheep had been stolen and tried to claim for them. It later turned out that they did not report the theft of these sheep to the police. They had simply disappeared, for some reason. That raised queries as to the real status of the sheep.

In other cases, farmers had their sheep counted on one side of the hillside, knowing very well that those doing the counting would have to drive the long way round to get to the other side. Meanwhile, the sheep went over the top of the hill and were duly counted on the other side as well. I am not suggesting that that sort of thing was widespread, but it was going on.

The witnesses made the interesting point that we are inclined to believe that we are the only ones who obey the rules coming out of Brussels and the European Union. We believe that those rules are purely for our benefit, because we obey them and everybody else ignores them. In fact, it was clear from what we heard that every country in the EU believes that it alone obeys the rules and that every other country ignores them. Some of those who inveigh against the rules coming out of Brussels and like to pretend that ours is the only country that always obeys them might like to consider that every other country in the EU holds that belief.

The important report on hospital-acquired infection has already been mentioned. The potential saving of £150 million has also been mentioned. That shows how much we need to do something about the problem. I do not think that the two previous speakers mentioned that recently there have been reports of whole wards, if not hospitals, being closed down by viruses that have taken hold. That indicates that the problem that we highlighted some time ago is still with us, and that savings can still be made.

We asked the chief executive why we were not spending money on better cleansing of hospital wards so that we could save this huge sum of money. He replied that the notion of spending to save is not one that people always latch on to immediately in a system where short-term affordability is often a barrier. That important point has wide significance. Sadly, the Government often control their finances on a short-term cash basis. That is not always the case, given the move towards resource accounting, but there is nevertheless still close cash control on many organisations such as the health service. That often leads to greater long-term expenditure. This case in point illustrates my wider point.

The interesting point to come out of the report on hip replacements was, as the Chairman said, the lack of co-ordination between the various trusts. The PAC has been saying that we do not have joined-up government, nor do we have joined-up hospitals and trusts. We found that some hospitals discovered that a particular type of hip replacement material worked better than others, yet that information had not been sufficiently spread around the whole health service. As a result, some hospitals continued to use old implants and materials which had been proved less successful. That shows the need for a joined-up health service.

The Government response to the Chinook report came out this year. We now know that this is a topical issue because on 5 February we expect the report from the House of Lords Committee which was set up partly in response to our PAC work on the issue. We do not yet know what it will say, but from the types of witnesses it has called and recalled at least some indications are that it will take a rather different view from the Government's. I hope very much that it does.

The Government have always argued that they cannot possibly change the decision of the initial inquiry because there is no new evidence. That inquiry itself changed its conclusion between the initial decision taken at the bottom level by the people who did the work, who decided the pilots could not be blamed, and the air commodore at the top who decided that the pilots were to blame. Yet there was no new evidence between the initial decision at the bottom level and the top level decision. Already, the Ministry of Defence has changed its decision without new evidence. For the Government to pretend that they cannot override that decision and reach a different conclusion without new evidence is thus contradictory.

I hope that the Lords report will give the Government a face-saving way of withdrawing from the obdurate way in which they have faced the issue until now. I strongly believe that whether the pilots were to blame or not, there is no proof that they were to blame, and that is the issue. The tenor of these reports is that in such cases the pilots should never be blamed unless there is absolute proof that they were undoubtedly to blame.

There are a number of different possible causes of the Chinook accident, including the malfunction of the full authority digital electronic control, or FADEC, system. Another possible cause, raised by one of my constituents, could be the late change of weather conditions in the area around the Mull of Kintyre. My constituent, who used to be involved in these things himself, pointed out that in the old days pilots taking off on this sort of mission would have a face-to-face meeting with the meteorologists so that they could be told not just what the overall weather pattern was, but in more detail what likely changes they might meet during their flight. That no longer happens. There may be a case for saying that it should have happened and that if it had happened, the accident would never have taken place. If that is so, this is another case of a Government cut leading to a disastrous consequence. That point, too, weighs against any suggestion that there is absolute proof that the pilots were to blame.

Sadly, I was not at the hearing for the in-patient administration, bed management and discharge report, so I hesitate to say too much about it, but I attended the meeting at which the report was discussed. Clearly, major costs are involved. The major lesson from this is that if we are to reduce the costs of so-called bed blocking, we need to put more money into the social services functions of local authorities. That is how we can get or keep patients out of hospitals if that is the best thing to do. The hon. Member for City of Durham pointed out that the private finance initiative has sometimes cut the number of hospital beds and that clearly is happening. It is not the major worry, but it is a worry.

One of the difficulties with this whole issue is that funding for social services comes from local authorities while funding for the health service comes from the Government, although local authorities get a lot of their funding from Government too, so the position is not quite so clear cut as one might think. The difficulty of two sources of funding going in two different ways demonstrates once again a lack of joined-up government. It is good news that this Government have put such emphasis on the need for joined-up government, but in this case at least they have not yet properly resolved that problem.

It might be odd for me, as an instigator of the NAO report on SERPS, to allow the debate to pass without commenting on that report. I doubt whether a PAC report has ever led to such a large-scale change of Government policy in financial terms. We are talking about a policy change worth some £12 billion—a huge sum. The PAC can be proud of its efforts, first, to highlight the scandal of SERPS for widows, and secondly to refuse to accept the Government's first attempt to redress the balance. The fact that we hammered away at it and insisted on a better solution to the problem is to our credit. Many people throughout the country will benefit from the way in which we forced the Government to change their plan.

The report on parole is also particularly interesting in the light of more recent events. At the time I put it to Mr. Narey that the fact of the matter is that almost certainly some of them"— that is to say, some prisoners— will be innocent, even though the court has found them guilty. In those circumstances it does seem to me less likely that they will get parole. Mr. Narey replied, quite simply: I would agree with that. A few weeks ago we heard of the case of Stephen Downing, who spent some 27 years in prison for murder—a far longer term than most murderers spend in prison. Why? Because he was innocent and refused to say that he was guilty. In the terms of the Prison Service, because he was not facing up to his guilt he was not eligible for parole. The injustice done to that man was vastly exacerbated because of the policy, which as far as I know is still in place, that if prisoners insist that they are innocent, in practice they will not get parole. That can lead to a huge injustice, as in Mr. Downing's case. I hope that the lesson from our hearing will now be taken on board, strengthened by Mr. Downing's case.

It would also be unusual for me to allow this debate to pass without mentioning the English Heritage report. We had a double hearing on it. Although the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) might think this is a minor matter, the hearing was fascinating, perhaps because it was the sleaziest subject of all that we came up against. We discovered that Sir Jocelyn Stevens, who had been chairman of English Heritage, had persuaded his board to allow Kenwood House, a public asset, to be leased to the ex-King of Greece for his daughter's wedding and, extraordinary as it may seem, the terms of that agreement were such that although the ex-King would cover all the expenses of the function, the only extra profit money to English Heritage was to be by way of a donation, the size of which would be decided by the ex-King of Greece. I hope there has been no other case in which a public asset has been rented to a private individual in return for money, the amount of which that individual decides. It is extraordinary that anyone could deal with a public asset in that way.

What was worse was that when the chief executive of English Heritage was asked whether the donation had been made and said that it had, on the first occasion she failed to reveal, first, that it had only just been made, and then only in response to a letter from her to the—by then—ex-chairman, pointing out that the donation had not yet been made and asking whether it was not about time that it was made, since the PAC hearing was about to take place. Secondly, she failed to reveal that although the donation had been made, it had been made not by the ex-King but by the ex-chairman of English Heritage—an extraordinary story. Rightly, the PAC decided to bring the chief executive back for a second hearing when the story became clear. Perhaps not entirely surprisingly, the former chief executive of English Heritage is no longer its chief executive.

We also had a hearing on the blood service. It became clear that volunteers who gave blood were not being properly treated by the blood service, and that some were inevitably being put off as a result. We cannot afford to put off volunteers who give their time and their blood to the national health service. There has been a failure to care for them, in that they often queue for a long time. They sometimes have to wait around for so long that their cars exceed car parking times, but they receive no help to pay any parking fine, although I understand that such help is given in some other parts of the health service. So if volunteers are kept waiting too long they have to pay fines in addition to giving their blood voluntarily.

Although the recommendation that something be done was fully accepted, people are still being kept waiting for long periods. I know of a young man who recently went to give blood for the first time. On arrival he told the assistant, in answer to a question, that he had recently been on holiday in Mexico, among other places. The assistants failed to tell him straight away, "I am sorry, but because of the malarial problem you cannot give blood now; we would love to have you back in six months." He waited two hours to reach the front of the queue, at which point he was sent home because his blood could not be taken. That is not the way to treat volunteers if you want to encourage people to give of their own blood freely for the sake of the wider community. The fact that that was still happening a week or so ago shows that, despite our recommendation, we have not yet been able to cure the original problem.

That is enough from me on the individual reports. I shall end with a few more general comments about general themes that have emerged from our reports.

Repeatedly, very large computer projects have gone wrong. We should draw from that experience two lessons, which we have discussed in the PAC. The first lesson is that in a massive computer project, the chance that somewhere in the project something will go wrong that will affect the whole project is much greater. If the project can be split into more manageable modules, so that each module is to some extent self-standing, and perhaps even usable on its own even if other modules are not yet ready and working, it may be possible to save some of the costs involved in searching through one massive computer system to locate an error.

The second lesson is that the bigger a computer project is, the harder it is to transfer the risk to the private sector if it is being run as a PFI project. If, two years down the track, with a year to go before the policy must be implemented according to the law that is introducing the new scheme of social services, tax or whatever, one suddenly discovers that the major computer project simply does not work, what can one do—pass it over to a new computer firm? Of course not. A new firm would not have nearly enough time to write a new computer programme to implement the policy. The only thing that can be done is to pour more and more money and resources into the firm that has already shown that it is not running a good project, to help it get that project up and running in time. So, far from the risk's being passed to the private sector, the risk often remains with the Government. The bigger the computer project, the greater the likelihood that that will happen.

I appeal to the Government—I hope that they will listen—to try to modularise their computer projects into smaller, bite-sized chunks, although "bite-sized" is probably the wrong word to use when talking about computers. I hope that that approach will enable the Government to overcome some of the problems that arise when one failure in a massive project causes the entire project to go wrong, as has happened in one case that the Committee Chairman mentioned, or when, as has happened in other cases, a lot more money has to be poured in to ensure that the problem is overcome entirely.

Mr. Bacon

The hon. Gentleman has given way very generously. Does he agree that although the issue of computer consultancy firms not providing an adequate service to the public sector is very serious, the issue of project management by the public sector, which has been alluded to, is crucial? The example comes to mind of the National Audit Office report on the implementation of the National Probation Service information systems strategy, which had seven programme directors in seven years. That is a fault of the public sector management, not of the firm.

Mr. Rendel

Yes; there is undoubtedly a problem there, and I am grateful to the hon. Gentleman for drawing attention to it, although it is a slightly different problem from the one I was highlighting. I am sure that the PAC will want to examine it.

There are problems with the private finance initiative in relation to large computer projects. There are also problems in relation to the transfer of risk in other areas, such as hospital-building projects, which the PAC has highlighted. Given that all parties are currently to some extent reviewing PFI—what it means to pass things across from the public to the private sector—and given that, approaching from different angles, we are all perhaps forming views different from the ones that we started with, I hope that all parties will, during their review of the PFI, recognise the following important truths about risk transfer.

There is a genuine difficulty with transferring risk. It is never possible to transfer the whole risk. If the public sector needs something, it can never manage to transfer the whole risk in a project, and to pay for the whole risk to be transferred when one is not actually transferring the whole risk is a waste of money. PFI projects, by their nature, are bound to be more expensive, partly because one is paying for the risk factor and partly because one is probably paying for higher interest rates, because it is well known that, on the whole, the private sector cannot borrow as cheaply as the public sector can. The complexity of PFI contracts is such that, very often, PFI projects take longer to manage. We have seen that particularly in the hospital sector; we have read recent reports of the length of time that some PFI projects are taking.

I am not arguing that PFI is never the right answer, but we need to answer many questions about it if we are to expect it to be the solution for many major Government projects in future, particularly because we are now adopting resource accounting. If resource accounting means one thing, it should surely mean that it is easier for the Government to justify putting public capital into major assets than it has been. Because we are no longer doing cash accounting, we no longer expect the whole value to be paid for up front. The way in which assets are accounted for is changing and it should be easier for capital to be spent in the public sector in future.

The second general theme that emerges from many of the reports is that of interdepartmental working and the issue of joined-up government, which I have mentioned already once or twice. As a member of a local authority, I used to worry about interdepartmental working, even within the local authority. Very often in a local authority you find, as I am sure that you are aware, Mr. Deputy Speaker, that the individual departments are very much segmented. A housing officer in a local authority, may never end up having anything to do with planning, finance or recreation.

In the private sector, people are often deliberately moved between different parts of the company to give them wider experience and enable them to take senior management posts. That does not tend to happen in local authorities and it certainly does not tend to happen in Government. I hope that among the themes that emerge from some of the reports that the Government will take notice of is the need to ensure that there is interdepartmental working and cross-Government working and experience, so that civil servants can move more easily between Departments. Many of our witnesses have said that they would like that to happen, but in practice there does not seem to be much effort going into it. I hope that the Government can do something to help that process.

We do useful work, and I believe that it is valuable work—the taxpayer benefits a great deal from the PAC's efforts—and it is also very interesting work. I am delighted to have had the chance to serve on the Committee for just over two years now, and I hope that I may be allowed to do so for some time to come.

3.30 pm

Geraint Davies (Croydon, Central)

It is my privilege to speak—like last year, the press literally could not wait for this debate.

It is crucial that we all emphasise, as the Chairman of the Committee and others have, the importance of the NAO and the PAC to good governance in Britain. We have a dynamic whereby an auditor-supported Select Committee scrutinises value for money, management, efficiency and effectiveness, with a Chairman from the Opposition, and enables feedback from the Government to produce change in the interests of the taxpayer and public service.

It is a great privilege to serve on the primary Select Committee, which was, of course, established by Gladstone to scrutinise all Departments. The Chairman of the Committee referred to other areas of public expenditure, and there is a good argument to extend the remits of the PAC and the NAO to chase virtually all public money and ensure parliamentary accountability. I say that to ensure that my position is clear.

I, too, pay tribute to the former Clerk, Ken Brown—a very effective Clerk and a very nice man, as has been said—and to the Committee's previous Chairman, the right hon. Member for Haltemprice and Howden (David Davis), who did sterling work. I also welcome the new Chairman.

I shall not deal with the generalities for too long, but I want to refer to risk, which has been mentioned. I believe that, increasingly, the highest risk is to take no risk, because we end up with no innovation, and the civil service culture is gradually changing in that way. However, when all is said and done, we have the best civil service in the world, and our role is to try to make it even better.

I shall allude to the reports that refer to some of the less contentious issues on which we concentrate—the NHS, the PFI and the railways. [Interruption.] I was just checking that hon. Members were awake. Hon. Members will know that the NHS is the biggest employer not only in Britain but in Europe, with some 990,000 employees in a business that delivers approximately 5.5 million operations every year. Given that massive bulk of work, it is no surprise that we can find opportunities to encourage improvements in value for money and effectiveness in delivering high-quality public services.

In commenting on the Committee's reports on the NHS, I should like to focus on patient care, variations in performance and co-ordination between the NHS and other agencies. Hon. Members have already referred to the report on hospital-acquired infection, in which it was noted that about 15 per cent. of such infection could be eliminated, saving approximately £150 million. Indeed, as my hon. Friend the Member for City of Durham (Mr. Steinberg) said, our report highlighted the fact that more hand washing would significantly reduce the incidence of infection in the NHS.

Despite the appalling case that my hon. Friend mentioned involving St. Helier hospital, Carshalton, I am pleased to say that the Government have responded with improved education and hygiene training, by spreading best practice, including on prescribing antibiotics, and by introducing a new surveillance system for hygiene. There is a new traffic light rating system, under which red is the worst, then amber and green. I understand that no hospital has a red rating for cleanliness, but I am keen to discover St. Helier hospital's current status. The point is that, once more, the PAC has focused attention on an area of public concern, which then agitated change in the public interest.

We found a massive variation in the effectiveness and cost of hip replacement operations throughout the country; people waited for different times and costs differed. I am glad to say that we are beginning to see progress, with the establishment of the National Institute for Clinical Excellence making recommendations on which type of hip is most effective. Indeed, we are making progress in shortening the time people wait for their hip replacements; I understand that in some areas waiting times have been reduced by between 20 and 40 per cent. That is another example of our being an agitating force and of our information provoking improvements in public service.

Sir Alan Langlands, who oversaw the management of the NHS, stressed in his valedictory report the need to produce national improvement standards and to introduce benchmarks and performance targets. He welcomed the establishment of NICE and the Commission for Health Improvement as quality and standards watchdogs. We shall continue to ensure that standards continue to rise, and we shall focus on those areas where that does not happen.

Patient management and waiting lists are hot, contentious issues. In a recent report we revealed that about 6,000 patients may have been affected by the fiddling of waiting lists, but in the wider context of 5.5 million operations the figure represents less than 0.1 per cent and the problem is now being sorted out. I am pleased to say that, in response to some of our recommendations, the NHS is beginning to introduce better scheduling systems and a new so-called national booked admissions programme. We are agitating for positive change, rather than moaning about isolated problems.

The hon. Member for Newbury (Mr. Rendel) mentioned the difficulty that we face because of bed blocking. The simple fact is that NHS activity is increasing. About 6 per cent. more funding is going into the NHS each year, whereas social services funding is increasing by 3 per cent. a year. That creates an imbalance, with insufficient places on the outside to take the number of people coming through the NHS. The situation is better than it might otherwise be because of the new focus on rehabilitation, whereby people return to their homes rather than having to be institutionalised in care homes.

The biggest growth in NHS operations is in the number of day cases, which have increased from 1 million to 3.4 million a year over the past 10 years. Contrary to what my hon. Friend the Member for City of Durham said, people do not necessarily occupy beds for a long time; they go home, which is obviously a good thing. During the valedictory hearing, the point was made that, if the totality of care beds were to move from acute or intermediate care perhaps to short stay or institutional stay provision, we could more rationally invest our money in the right proportion of different types of bed.

Those involved in private nursing care have talked to me about the difference between the marginal costs of providing beds inside and outside hospitals. Of course, one of the driving forces for the NHS is the need to deliver an extra 5,000 intermediate-care beds, with an extra £900 million of investment, and another 1,000 extra beds in NHS hospitals, with another £300 million. So there is a response, and there is a new move towards care trusts, in which social services and health services are managed together to provide an integrated service.

There has been much debate about who manages the health service, but mismanagement occurs in only a small minority of cases. I have been a local authority leader, I have run my own business and have worked for a multinational company, and I believe that local authorities that deliver services efficiently should assume responsibility for running social services when they are next to a hospital trust that is not delivering them properly. That is part of a larger debate, but the simple point is that there must be joined-up government. The report that considered bad management focused on an issue that, no doubt, will be the subject of much more discussion.

Private finance initiatives also have a bearing on the NHS. As we always do, the Committee produced a number of reports. In particular, we considered the Fazakerley prison PFI, which involved Group 4 and Tarmac. The interesting point related to refinancing and the way in which money was reborrowed. Group 4 and Tarmac were set to make a windfall of £10.7 million, and clawback had not been negotiated in the contract. However, Group 4 and Tarmac kindly returned £1 million. They probably realised how much they were going to make and did not want to make too much of a fuss.

Since then, reports have considered the effectiveness of 121 PFI contracts that will be responsible for about £100 billion of public expenditure over the next 20 years. We found that 80 per cent. of managers thought that the PFI deals were very good, which suggests that there was a good response to them. However, when we dug under the surface, we found that only 55 per cent. of them kept open-book accounting, that only 49 per cent. were involved in benchmarking their prices and that only 43 per cent. knew what profit the private contractor would make. Only 15 per cent. had refinancing gains.

I mention those figures as a pointer for the future. The Committee should closely monitor the requirements in reorchestrated PFI deals to ensure that we deliver value for money and that we do not simply rely on the testimony of the managers who look after the PFI deals. They simply say that the contracts are good value for money. However, when we asked them whether they had refinancing deals or how much had been made by the private sector, I wondered whether they were capable of making the necessary judgments. Clearly, the question about PFIs should not be who is right, but what is right. What is right is a matter for us and we must ensure that we obtain value for money.

For more politically sensitive issues such as the tube, the Government should, and will, make their decision according to the acid test of value for money. They should not decide on the basis of what people think but on the basis of what is the most cost-effective way of delivering a quality public service.

The Committee's duty is not to consider PFIs in generic terms. Some say that they do not like PFIs and others say that they do. The evidence that the Committee has obtained testifies to the fact that some PFIs clearly work while others do not. However, the information that we have before us will help us to provide advice on how the ones that fail could have done better and the ones for the future could do better still.

The relatively uncontentious report entitled "National Savings: Public-Private Partnership with Siemens Business Services" has not received much press publicity because it simply said that it was a PFI done well. The objectives were clear, provisions were made for clawback, risk management and risk transfer and—without going into too much detail—National Savings renegotiated to reduce its exposure to fraud from £250,000. Provisions for clawback, compensation and penalties would appear on a checklist of best practice, and one finds such provisions in this case. That might explain why many people do not find the report interesting, but it should be read by other managers involved in PFI negotiations to ensure that best practice is benchmarked, as it is in the NHS with the National Institute for Clinical Excellence and the Commission for Health Improvement. We can learn lessons from failure and from success and those lessons should be taken on board in a world of joined-up government.

Another contentious issue in the public arena is the railways. The Committee's report, "Strategic Railway Authority: Action to Improve Passenger Rail Services", found that significant problems existed, in particular with Railtrack. As we know from a previous report, it had been privatised for £1.9 billion when it was worth £8 million, which represented a loss to the public purse of £6 billion. It was not only handed over cheaply, but it failed to keep a proper asset register on the condition of its assets. That fact came to light as a result of the events that have been in the public eye. It did not know the state of its assets and our evidence was confirmed by the testimony of Tom Winsor, who told the Transport Sub-Committee that the trouble with Railtrack was that it was incompetent and ineffective in the management of its assets and in the treatment of customers.

The Committee found that Railtrack had made no real attempt to gain information on the assets making up the network, and that was one of the key reasons why customer needs were not being met. We produced our report and asked questions about punctuality, reliability, passenger satisfaction, cleanliness, late-running trains and so on. We discovered that the rail authorities did not have sufficient information or an incentive to provide the service that people naturally expect.

I remember vividly that we discussed the fact that Connex was considering—it still is—taking out seats so that people could stand on trains. That is supposed to provide more capacity. Our hearings on the rail regulations produced some unfortunate findings. The Committee stressed that the problems were not just with delivery, but with the overall structure. I am glad that, following the hearings and the Committee's insistence that it consider corporate governance and delivery, changes in Railtrack have occurred. We are moving towards requiring it to produce an asset register in the near future. We will therefore be able to build the 10-year plan on a more solid base.

I have kept my comments to a minimum given the generous amount of time that others Members have taken. Under new leadership, the Committee will have an increasingly important bearing on the delivery of public services. I am glad that its dynamics mean that it will not simply take potshots at the Government but will generate positive recommendations for change. In 95 per cent. of cases, such recommendations lead to improvements in public services. It has been a pleasure to share my thoughts with the House.

3.49 pm

Mr. Richard Bacon (South Norfolk)

As the hon. Member for Croydon, Central (Geraint Davies) concluded his speech, I thought I heard the hon. Member for Newbury (Mr. Rendel) say that the debate still had three or four hours to run. I read the speech that the hon. Member for Newbury made in the previous debate, and I note that he began his remarks by saying that he was conscious that no one else was seeking to catch Mr. Speaker's eye. I therefore came prepared with lots of documents, not least because I know that my hon. Friend the Member for Tatton (Mr. Osborne) finds it amusing when I quote from documents in the Committee. Of course, I subscribe to the Fidel Castro view that if a speech is less than four hours, it cannot do any good. However, I suspect that I would try your patience, Madam Deputy Speaker, and that of the House were I to go through all the documents that I have brought with me.

My hon. Friend the Member for Tatton and I are at a disadvantage. As new Committee members, we have not witnessed much of the work that is being debated today, so I have decided to restrict myself to a couple of general themes that are of enduring interest to the work of the Committee and the NAO, which I shall illustrate with quotes from Committee and NAO reports.

I begin, however, by joining other hon. Members in paying tribute to the work of the retiring Committee Clerk, Mr. Ken Brown, who has been enormously helpful. I wish his successor, Nicholas Wright, every success in his new job. He has already been very helpful to Committee members. I also pay tribute to the NAO, in particular to the work of its press office under the able stewardship of Gabrielle Cohen and Keith Davis, both of whom have been enormously helpful.

The Committee's work is of central importance. The act of this House of Commons taking money from taxpayers by compulsion and forcing them to pay into the consolidated fund—into the Exchequer—is a cardinal act. It is of central importance that the House has that ability, but it is equally important that having taken money from taxpayers, the way in which it is safeguarded, looked after and spent is transparent, open and accountable.

In the last debate on public accounts, the then Financial Secretary said: I conclude from the debate that the Government need to focus on two matters. First we must continue to improve the management of the systems by which public money is collected and deployed. Secondly, we must continue to improve the management of projects to deliver public services."—[Official Report, 14 December 2000; Vol. 359, c. 8651 That sums up the themes that I want to address. The first is that we need good procurement. Central Government—the same applies to other forms of government, such as local authorities and health authorities—have a role in that. The public sector needs to understand procurement and to be a good buyer. That is central to successful government. It is welcome that the Office of Government Commerce is taking a greater role under its new chief executive, Mr. Peter Gershon. He has appeared before the Committee two or three times and is doing an excellent job in persuading Departments of the importance of skill in procurement. I sometimes think that he has an uphill struggle, but he is trying to make it a priority in Departments.

My second theme is that of good project management, which the Financial Secretary also mentioned. I would add good risk management to that, because they go together. Risk has been mentioned by a number of hon. Members. No one on the Committee is opposed to the public sector taking risks. It is, however, a matter of understanding what the risks are and, having identified them, ensuring that they are carefully managed. We all take a risk when we walk out of the front door, but it is knowing that there are risks and properly managing them that matters.

In the document "Working with Suppliers: The Code of Good Customer Practice" the Office of Government Commerce says: Central civil government will work to a high standard of professionalism when dealing with suppliers. It will do this by", among other things, effectively managing risks during a procurement process and working with suppliers to reduce risks during the business relationship. Both of those are central considerations.

In that earlier debate, the hon. Member for Edmonton (Mr. Love), who used to serve on the Committee, referred to information technology projects. He could, however, have been referring to any kind of project when he said: We should recognise that they"— IT projects— are not a marginal technical decision but part of the mainstream business activity of departments, and must be treated as such. We need to manage to staff in a way that is appropriate for a project. We must provide training and incentives to keep the staff with the project while it is introduced. The status of staff, especially in the public sector, must be appropriate to their responsibilities. Most important, staff must be accountable, not only for their success, but for any failures."—[Official Report, 14 December 2000; Vol. 359, c. 854.] When Mr. Gershon from the Office of Government Commerce came before the Committee, we discussed civil service culture, the approach to the management of staff and the attitudes of staff. I was interested to know whether he thought that the way in which the civil service moves staff around, which is inherent in its culture although not in that of the private sector, is fundamentally inimical to successful project management. Mr. Gershon agreed. He said: In my experience of private sector organisation, yes of course they want to appoint the best people to the job, but they also want the project to be completed successfully … and some say, 'No, we need to promote that man in situ because he is critical to the project, we need to keep him in place, but he should not suffer financially or careerwise as a result'". He had spent 30 years in the private sector, and in his limited experience of the public sector he saw less of that approach in the civil service, for good and understandable reasons.

Mr. Gershon went on, however: But as there is an increased focus on the successful delivery agenda, there is a question of whether we need to put in place mechanisms that might help retain key people in key jobs, and something ought to be done about succession planning so that if someone does move for legitimate career reasons, there is someone to backfill in. That brings me to the point that I raised with the hon. Member for Newbury, which is that the public sector does not seem to have taken that approach on board.

The NAO issued a report on the implementation of the National Probation Service information systems strategy. The project overran its budget by about 70 per cent. and ended up costing £118 million, which was about £50 million more than it should have cost. That project had seven project directors in seven years, which was fundamentally the fault of the project managers, not of the suppliers. As my hon. Friend the Member for Gainsborough (Mr. Leigh) said, project management is central. It is time that that was more widely understood and acted on in Whitehall. Successful project managers need to move to senior leadership and senior management positions in Whitehall to a greater extent.

Some years ago, the Cabinet Office published a report on the use of consultants in the public sector. In a previous incarnation, I used to work for the consulting industry and came to know the report rather well. On page 59, it points out: In most effective organisations, management skills are high and they manage consultancy projects very tightly. Again, just as it was possible to delete the reference to "IT" from my earlier quotation, it is possible to delete the word "consultancy" from this one and still be left with the idea that it is cardinally important to manage projects tightly.

The report went on: To maximise ownership and accountability the same individual, where possible, will often see the project through from inception to implementation. I think that the Government are alive to that approach, but it is a case of promulgating it through the Departments and making sure that people act on it. It is essential that the Government understand the central importance of project management in what they do rather than in what they say.

In the short time that I have been on the Committee, it has dealt with the loss to the Revenue from fraud on alcohol duty, which amounted to £858 million, the loss of £48 million as a result of the project for the National Probation Service and the collection of the benefit payment card cancellation, which cost more than £1 billion. That is nearly £2 billion, equivalent to nearly 1p on income tax. It is right for us as elected representatives to ask how much hard work had to go in to earn the money to pay the £2 billion of tax to the Exchequer which was then wasted.

The subject of risk management is closely tied up with that of project management. Paragraph (iii) of page 1 of the Committee's report, "Managing Risk in Government Departments states: Risk management will only become a normal and integral part of the way departments and agencies operate if civil servants have the skills to identify and assess risks and take the action necessary to manage them. The hon. Member for City of Durham (Mr. Steinberg) pointed out the need to ensure that civil servants have the skills to identify risks.

The recent closure of individual learning accounts, which was alluded to earlier in the debate, raises the question: where was the risk management? We might ask where was the understanding, even, that any risks were involved. I sat through the proceedings of the Education and Skills Committee yesterday morning and listened to the evidence of officials. The Committee was concerned about the apparent absence of any recognition that there were serious risks that needed to be managed. The Audit Commission published a report called "Ghost in the Machine", on the need to watch out for computer fraud in the public sector, and found that, again, the question of risk management appeared to have been completely ignored.

My next point concerns where the Committee should begin to focus its attention in future. According to a newspaper report in December, fraud and waste cost the NHS between £7 billion and £10 billion a year. I asked the chief executive of the NHS about that last week when he came before the Committee to talk about the report on inappropriate adjustments to waiting lists. I recently received the transcript of the proceedings from the Committee Clerks, and the stenographer had typed the figures as £7 million and £10 million. I corrected them to billions, and then I thought that I had better attach a note to say that the figures should be in billions because the sums are so huge that people would think that I was not serious.

Seven to ten thousand million pounds is enough to pay for between 30 and 43 hospitals like the recently completed Norfolk and Norwich hospital. In fact, that hospital is still being built, but patients are moving into it. It is a PFI project on the borders of my constituency. I mention in parentheses that no one bothered to build a road to the hospital, so it is difficult to get to even though it is consuming £229 million of public money. My point is that between £7 billion and £10 billion goes south every year in the NHS, and if that estimate is not correct, we need to get to the bottom of it. Those losses have been happening for years, and the matter needs much closer attention than it currently appears to receive.

The Department for Social Security, now the Department for Work and Pensions, is another area that needs the Committee's steady attention. Indeed, we shall soon be looking at fraud in income support. I have before me the DSS appropriation accounts, and I am looking at the page on which the CAG sets out in a certificate his views on the accounts. Just as the auditors of a private company sign off accounts, the CAG signs off the DSS accounts, in this case to the House of Commons. He has qualified his opinion of these accounts, saying: In my opinion, the appropriation account properly presents the expenditure and receipts … except for irregular expenditure arising from errors in benefit awards and from fraudulent benefit claims". I tabled a parliamentary question to the Department for Work and Pensions asking in how many years since 1972 the DSS appropriation accounts had been qualified in that way. I was a little concerned when the Department phoned to ask me what was irregular expenditure, so I pointed to the CAG's certificate and said that that was precisely the term that he had used.

If one looks at the itemisation of that irregular expenditure, one finds that the DSS estimates that losses through error and fraud for income support and jobseeker's allowance in 1999–2000 were £1.32 billion, and in 1998–1999 the CAG noted that the Department had estimated that the combined level of fraud on income support and jobseeker's allowance could have been as high as £1.53 billion. Those are huge sums. If one considers only the health service and the DWP, one finds that huge sums are disappearing without the NAO being able to identify where they have gone because the Government are not managing the situation closely enough.

I share the concern expressed by my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) that in recent years the Committee has spent about 4 per cent. of its time examining the accounts of the royal household. Although it is entirely appropriate that the royal household, which is the subject of great interest, is transparent, open and accountable and that its accounts are examined by the House, we should concentrate on going after the billions before we worry about the £5 million spent by the royal household. In any case, that figure is a reduction because the household is being extremely well managed, as was made clear in the evidence that we heard last week.

The final matter that I want to mention is less significant in macro-financial terms, but it is none the less of huge importance for many people. I refer to the sources of public funding for students. The NAO has recently produced a report on the subject, "Improving Student Achievement in Higher Education", on which we will shortly take evidence from the permanent secretary at the Department for Education and Skills.

The report contains an interesting chart that shows the 23 different sources of public funding from which students may seek support. The system is extraordinarily complex; for example, single parents who want a child care grant go to one source and those who are eligible for school meals grants go to another. One practically needs a PhD simply to understand the method of obtaining student support. I have raised the matter with the NAO, and I continue to encourage it to examine it.

The complexity of the system has direct implications for the economy, effectiveness and efficiency with which public money is deployed for student support. On the two occasions on which tranches of the student loan book were sold, it was at a very large discount to face value. The reason is that the quality of the student loan book is not very high—a lot of the debt is not repaid. As a result, the market requires a high discount before it will buy the debt.

As I said, last year the then Financial Secretary alluded at the end of his speech to the importance of focusing on collection systems as well as on systems for deploying public expenditure. If we could find a more economical, effective and efficient system for collecting the moneys that students owe, and there are many possible models, we would do a great service to the taxpayer but, equally importantly, make it much easier for students from disadvantaged backgrounds to go on to higher education.

Talking to people in my constituency on the doorstep and elsewhere has left me without the slightest doubt—I am sure that hon. Members on both sides of the House have had the same experience—that the extraordinary complexity of the student loan system has a big deterrent effect on a certain stratum of potential students who are on the cusp of deciding whether to go to university. That decision is as important for people from well-off backgrounds, but it is extraordinarily important to those who have not been used to getting into debt or who are from families in which no one has ever been to university. I hope that the NAO will take the issue seriously in future.

In conclusion, I would just like to say what a privilege it is to serve on the Committee. As a new Member I still have a lot to learn, but I have been thoroughly enjoying the Committee's work. I believe that it plays an absolutely central role in ensuring that the money that we take from taxpayers is accounted for in an open and transparent fashion. The House of Commons, in sanctioning the Committee, is doing a very fine job.

4.8 pm

Mr. George Osborne (Tatton)

I congratulate my hon. Friend the Member for South Norfolk (Mr. Bacon) on his speech and, in particular, on yet again mentioning his local hospital. He is truly adept at getting his local hospital into almost any speech and Committee sitting, and as a result he will no doubt get good coverage in the Eastern Daily Press tomorrow morning.

Like my hon. Friend and other Members who have spoken, I am extremely honoured to be a member of the Public Accounts Committee and to take part in this debate. I was a Government special adviser at the late lamented Ministry of Agriculture, Fisheries and Food in the days when "special" and "adviser" were not dirty words, which my hon. Friend the Member for Aylesbury (Mr. Lidington) will remember. I remember discussing with Ministers the introduction of multi-billion-pound BSE compensation schemes. I remember the permanent secretary telling the Ministers, "It's all right for you; you just have to go before the departmental Select Committees. I'm the one who has to appear before the PAC." It was at that moment that I decided that, should I get into Parliament, I would try to become a member of the PAC, as it seemed like the right place to be. I was delighted when, by the mysterious powers of selection that the House uses to choose members on Select Committees, I found myself serving on the PAC.

I genuinely feel that serving on the PAC has been about the most rewarding aspect of my work at Westminster since being elected. It is not only I, a Member for just seven months, who thinks so; refreshingly, the hon. Member for City of Durham (Mr. Steinberg), who has been a Member for 15 years, takes the same view. That shows what interesting and valuable work the PAC does. Like other Committee members who have spoken, I pay tribute to the people who support our work including, obviously, the National Audit Office, the Comptroller and Auditor General and their large staff, but also the people who service the Committee directly. Everyone has paid tribute to Ken Brown, but I also thank Nicholas Wright, who has stepped into his shoes. The Committee Clerk has an important function in servicing our work, and I pay tribute to both men.

I thank Committee members, a couple of whom are still in the Chamber, for their friendly and generous welcome of new Committee members, The bipartisan—tripartisan, I should say, since the hon. Member for Newbury is here—nature of the Committee is its greatest strength. In our party-political world, the fact that all parties are represented on the Committee and that we agree reports together gives us enormous authority. Serving on the Committee is even more pleasant now that we are under the chairmanship of my hon. Friend the Member for Gainsborough (Mr. Leigh). He had a hard act to follow, it is fair to say, but he has done so with great aplomb and humour; I wholly approve of his relaxed and sceptical approach. I fully support people who, in seeking to reform Parliament, say that the Chairman of the PAC should be paid the same as Cabinet Ministers and get a Government car. I very much hope that my hon. Friend bears that in mind when he is deciding whom to call in the next meeting.

Finally, I pay tribute to my right hon. Friend the Member for Haltemprice and Howden (David Davis) for raising the profile of the PAC. He has gone from the difficult job of sorting out the civil service to the almost impossible job of sorting out my party, in which I wish him every success, since the future of Conservative Members depends on it. When I was thinking of applying to become a Committee member, he told me that it would be a crash course in government. He was right; even though I have previously worked as a Government adviser, it is fascinating to see different aspects of Government work in Committee.

In the seven months in which I have served on the Committee, we have examined the intricacies of air pollution policy and what it is like in the royal train, and we have witnessed some major successes. Despite problems with the hearing itself, the introduction of income tax self-assessment was an example of a massive project that was delivered on time and to budget, with savings in advance of those that were originally planned. I am afraid that we have also witnessed woeful failures, as Members have already mentioned. Most Committee members would probably agree that the most shocking and alarming hearing in recent months was the one last week on inappropriate adjustments to NHS waiting lists. That is a soft description of a shocking report on a gross abuse in the NHS.

From what I have seen as a Committee member—I hasten to add that I have served as one for only seven months—the PAC works best when it fulfils what, I imagine, was its primary function when it was established by Gladstone, and operates as a forensic watchdog on behalf of the taxpayer, with a deterrent effect on the misuse and waste of public money. Returning to my anecdote about my days as a special adviser, when accounting officers are forced to approve an item of Government expenditure, somewhere in the back of their mind they should ask whether they could justify it to the PAC if they had to. That is our primary function. When Customs and Excise allowed hundreds of millions of pounds to be lost in alcohol duty fraud in a period of just three years because of lax enforcement and inadequate controls, its chairman must account for its failure before the PAC.

We also looked at the NIRS2 information technology project and the cost of that overhaul. Tens of millions of pounds were spent because the people in charge did not anticipate changes to the welfare system; the project was not flexible enough to allow those changes to be built in without a massive sum being spent. As the hon. Member for Newbury said, by the time those people finally realised that that was problem, they had only one option, which was to stay with the existing contractor.

Those are examples of the primary function of the PAC. At the risk of creating more disunity in the Conservative party, I disagree with my hon. Friends the Member for South Norfolk and for Bognor Regis and Littlehampton (Mr. Gibb) about looking at relatively small items of Government expenditure, as well as large items. Whatever the size of the budget that accounting officers manage, the fact that they may have to appear before the PAC has a great deterrent effect.

Mr. Bacon

I do not believe that we should not look at small items. On the contrary, important lessons about openness, transparency, accountability and the right way to go about procurement and risk management can be learned from small cases just as much as large ones. I was merely pointing out that there are huge gaping holes in government which are not getting enough attention.

Mr. Osborne

I am grateful to my hon. Friend. I fully support what other Members have said about Lord Sharman's recommendations. One gaping hole is the BBC; another is the Financial Services Authority. It will be interesting to see if the Financial Secretary to the Treasury says something about the Sharman report in his reply, but perhaps we shall have wait even more months for a response. However, my hon. Friend made a good point.

The PAC is less successful when we try to get to grips with broad and nebulous issues, when there are not hard facts and figures, and there is not someone who is clearly accountable. I enjoyed our recent hearing on Modern policy making in government—I enjoyed cross-examining the permanent secretary at the Cabinet Office about how many strategy units were looking at transport policy—but, nevertheless, we were not dealing with hard facts and a proper accounting officer. That was a less successful hearing. Perhaps we can look at that when we are sipping champagne and eating caviar on our away day; I hope that that away day does not come before the PAC, as we would have a bit of a constitutional crisis if it did.

There is a genuine issue at stake: how do the PAC and the National Audit Office stay on top of the Whitehall landscape, which is undoubtedly changing, with a profusion of targets, initiatives, such as the private finance initiative, strategy units, aspirations, agencies and so on? As someone said to me, it has more units than the British Army and more tsars than the Russian empire. The PAC must get to grips with that and do what we do best—concentrate ruthlessly on a certain target or agency, examine the facts and see whether the benefits outweigh the costs. We should get behind the rhetoric, find out whether public money is being well spent and pore over the accounts. We should draw general lessons from the particular, rather than trying to do it the other way round. We should bear that general point in mind when considering the future of our work.

The general lesson that has struck me most in the work of the PAC concerns the danger of arbitrary targets; I shall concentrate on that for the rest of my speech. There is a tendency in government—this is not a party political point, as this happened under previous Conservative Governments—to pluck arbitrary targets from the air and impose them on the civil service. Such targets often sound very nice—the obvious example is cutting waiting lists—but the result is often huge distortion in the way in which public services are delivered, as perverse incentives can emerge through attempts to meet them.

The Committee saw such effects during our recent consideration of air quality. The Government have a reasonable aspiration to reduce pollution in the atmosphere. No one could disagree with that aim, but in seeking to achieve it, they have produced nine arbitrary targets. They want to reduce carbon dioxide by X amount, particles by Y amount and so on. When one considers how the targets were arrived at, one sees that, in this particular case, those who were responsible for them used pretty uncertain emissions forecasts that depended on unreliable factors such as projected economic and transport growth and all sorts of things that people find difficult to predict. Using that information, they produced a forecast of emissions and fed it into a computer model that was in itself extremely complicated and prone to error.

Using that model, those involved formulated targets for air quality that depended in turn on variables such as the state of the weather. They then mish-mashed those targets with evidence of the health effects of pollution on individuals—more information that was pretty uncertain and unreliable—and suddenly produced nine targets. When they were doing that work, they had no idea about the targets' impact on society, the economy, public services, industry and so on. The one study that they carried out, which considered the cost of trying to achieve one of the targets in London alone, found that it would cost £100 million—and even then, the target would not be achieved.

That is the danger of picking arbitrary targets. As I said, we saw it most powerfully in terms of NHS waiting lists. As we all know, the waiting lists initiative imposed the arbitrary target of reducing in-patient waiting lists by 100,000. I shall not get into a party-political argument about whether that was the right thing to do. None the less, I should like to mention an anecdote of the right hon. Member for Swansea, West (Mr. Williams), who is a wily dog in the Committee and a great source of entertainment. He said that Tony Crosland had told him that Governments spend four years trying to cover up the mistakes that they make in the first six months in office.

It is tempting to apply that principle to the waiting list initiative, but I shall stick to the simple issue of its administration and deal with how it affected hospital admissions. The National Audit Office took a detailed look at the matter, on which the Committee has already had two hearings. The relevant report has been mentioned today. It is clear that immense pressure was exerted from the centre to ensure that the targets were met. It was probably political pressure. The targets gave rise to a range of very perverse incentives. Out-patient lists mushroomed. These so-called waiting lists for the waiting lists almost doubled to 450,000 people. Obviously, that happened because the pressure to produce the in-patient lists meant that people were pushed on to out-patient lists.

Even more seriously, the National Audit Office found that there had been a significant distortion of clinical priorities. In producing its report, it surveyed more than 550 consultants. It found that 52 per cent.—more than half of all those who were sampled—said that working to meet the NHS waiting list targets meant that they had to treat patients in a different order from that which their clinical condition properly indicated. Some 20 per cent. of consultants said that they gave such treatment regularly. Indeed, when the NAO report was published, one orthopaedic surgeon, Dr. Gordon McLellan, from Oldchurch hospital in Essex, said: I'm very pleased that the NAO has confirmed what consultants and patients have known for a very long time", which was that clinical distortion was occurring.

Distortion was also evident at GP level. We considered in a hearing the effect of the North Staffordshire NHS trust giving £1,000 incentives for GPs to meet out-patient referral targets. In other words, there were incentives for GPs to stop referring people to hospitals so that those hospitals would have a better chance of meeting their waiting list targets. As is widely known, in at least nine trusts, that abuse went far beyond the distortion of clinical priorities and involved deliberate fraud and manipulation of waiting lists. Patients' records were altered and patients were inappropriately suspended. Some were not added to the list until the month of their appointment. Most scandalously, people were deliberately offered admission dates when it was known that holidays had been scheduled. The NAO found that at least 6,000 patients in nine trusts had been affected.

When the chief executive of the trust came before the Committee, I did not find his answers very satisfactory. Frankly, I did not find convincing his assurance that the practice that I have described was not widespread, but was limited to the nine trusts that the NAO happened to investigate. Indeed, when I tabled a written question to the Health Secretary asking about the number of trusts in which more than 10 per cent. of patients were suspended from the in-patient list at any one time, I was told that there were 35 such trusts, including my own, the East Cheshire NHS trust. In one trust in Walsall, more than 30 per cent. of patients are suspended from the list at any one time. Although the Health Secretary says that on-the-spot inspections will now take place, I think that the Department of Health should adopt the NAO report's recommendation and conduct a proper investigation into trusts where evidence—on, for example, suspension percentages—suggests that there is a likelihood that some distortion might have taken place.

Mr. Rendel

The hon. Gentleman mentioned one of the unsatisfactory answers that we received in the hearing. Does he agree that we received another unsatisfactory answer when we asked the chief executive whether there were any cases in which clinical authority was put behind management authority in priority in order to meet the targets? The chief executive said that he thought that no such case ever arose, but it seems entirely illogical to suggest that one can try to meet a management target of shortening waiting lists without making it more important than the clinical target.

Mr. Osborne

The hon. Gentleman is absolutely right. Of course, that is exactly what happened in many hospitals and with many consultants, as they freely admit. The examples are legion.

In conclusion, the setting of arbitrary targets and the creation of arbitrary incentives in the civil service will give rise to a range of perverse incentives, manipulations and distortions. That is human behaviour. It is very bad for public administration and can cause a gross breach of public trust, as the NAO found in terms of waiting lists. That has been one of the most valuable lessons that I have learned while serving on the Committee. We should continue to focus on the proliferation of Government targets. We must see how they are working in practice, how they were arrived at and the cost of trying to meet them. I look forward to doing that work and much other work on the Committee.

4.28 pm

Mr. David Lidington (Aylesbury)

It is a great pleasure to respond to the debate on behalf of the Opposition and to congratulate the Committee. In particular, I congratulate its Chairman, my hon. Friend the Member for Gainsborough (Mr. Leigh). I also congratulate those who have spoken: the hon. Members for City of Durham (Mr. Steinberg), for Croydon, Central (Geraint Davies) and for Newbury (Mr. Rendel), and my hon. Friends the Members for South Norfolk (Mr. Bacon) and for Tatton (Mr. Osborne). I want to begin by reassuring them, as some of them expressed concern about whether they might have been speaking for too long. We must remember that it was the late Mr. Gladstone himself who founded the Public Accounts Committee. He would have regarded even the 60-minute speech of my hon. Friend the Member for Gainsborough as a mere oratorical morsel and an introduction to some great speech that would have flown from his lips in the days when he stood in the Chamber.

I want to add to the plaudits that many hon. Members have given my right hon. Friend the Member for Haltemprice and Howden (David Davis), the former Chairman of the PAC, and to the Committee staff, its former Clerk, and the Comptroller and Auditor General and his staff—the 750 accountants whom the hon. Member for City of Durham mentioned. Their expertise and skill enable members of the Committee, as they will be the first to acknowledge, to place senior civil servants under intense and searching scrutiny in open session.

The PAC's work could be summed up as demonstrating the true ethic of public service. The speeches that we have heard from all parts of the Chamber show a commitment to search for examples of success, but also of failure, in order to seek remedies so that the people who send us here to represent them receive better quality public services in future.

The debate revealed some interesting lessons from the PAC's experience that are relevant to the development of the Select Committee system. As several hon. Members have pointed out, the PAC is bipartisan or, indeed, tripartisan. Since taking on my current Front-Bench responsibilities, I have attended several PAC sessions. However, unlike the Financial Secretary, I have to be content with a seat in the one-and-nines at the rear. I have noticed that questions from Committee members are always courteous, but also insistent, relentless and thorough.

The reports of the Committee and of the National Audit Office are written in lucid English, and render even the most abstruse topics of public administration comprehensible to inexpert minds such as mine. Fashionable jargon, such as "synergy" and "roll-out", is thankfully absent. The Committee is always well briefed. As the hon. Member for City of Durham said, the PAC has clout because it has resources, back-up and expertise that are not available to the departmental Select Committees. Perhaps hon. Members might like to reflect on that.

The need for a partnership between the PAC and the departmental Select Committees is a theme of the Sharman report, to which several PAC members have alluded. That message was implicit in several speeches. My hon. Friend the Member for Tatton spoke of the enormous variety of inquiries that the NAO and the PAC carried out. The hon. Member for Newbury also drew attention to that. When I was asked to respond to the debate and went to pick up the relevant papers from the Vote Office, I was aghast to receive a pile of about 20 different reports. However, as my hon. Friend said, they provide a crash course in the workings of government.

The PAC cannot be expected to do everything, however, despite the undoubted importance and wide-ranging nature of its work. That suggests that there should be a method of bringing together the work of the PAC, the departmental Select Committees and, for example, the Environmental Audit Committee. When my hon. Friend the Member for Tatton mentioned arbitrary environmental targets, it occurred to me that that was being considered not only by the PAC but by the Environmental Audit Committee, albeit from a slightly different perspective.

Several hon. Members referred to the PAC's report on discharging patients from hospitals. That is standard PAC territory; good management makes a genuine difference to handling such discharges.

Geraint Davies

The NAO has a remit that covers almost everything, whereas that of the PAC is to focus on specific items that we believe to be problematic. Hence we are able to cope with a vast amount of work without support.

Mr. Lidington

The hon. Gentleman makes a reasonable point. I am the last to argue that the PAC should try to narrow its interest or inquiries. In the previous Parliament, I served with the hon. Member for City of Durham on the Education and Employment Committee, and I share some of his frustration about the way in which members of a departmental Select Committee could labour for a long time on a report but feel that the effort was, if not worthless, then ignored by the Government of the day, of whichever political colour. I contrast the Government's approach to departmental Select Committee reports with that to PAC interrogations and reports. By "Government", I do not simply mean Ministers.

Bed management can make a big difference to hospital discharging. My hon. Friends have pointed out other aspects, and the availability of care beds was the most telling example. Such considerations inevitably lead to policy; they are not confined to management. There are therefore roles for different Committees in trying to get to grips with complicated problems.

I want to tackle two or three themes that have emerged from the debate. My hon. Friend the Member for Gainsborough drew attention to the PAC's prime duty of trying to monitor and improve the quality of financial management throughout the public sector. I agree with the importance that he placed on that task and his strictures on the need for timeliness in providing accounts. Unless that is done, no adequate scrutiny or check can be carried out on the quality of the financial management.

Several hon. Members spoke about their belief that the civil service does not always rate project management experience as highly as policy experience. My days as a special adviser go back a few years. Then, the highest fliers in a department tended to be given jobs in policy-making, not management divisions. I hope that the Financial Secretary can say that that is no longer the case and that a mix of policy and management roles is regarded as a desirable part of the most talented civil servants' career paths.

Good management can make a real difference to the quality of service, as we have seen in the Committee's reports on hospital admissions and bed management, on hip replacements, on managing the reduction in the number of vacant family quarters in the armed services and on the administration of the Siemens partnership with the Government.

This raises a difficult question, however. When I was listening to the comments of the hon. Member for Croydon, Central about hygiene in hospitals, and the need to crack down on the problem of hospital-acquired infection, I felt—though I may have interpreted him wrongly—that he was placing a great deal of faith in central direction and centrally imposed targets. There clearly need to be proper scrutiny and audit, but any Government will need to strike the difficult balance between trying to impose targets and standards with the noble aim of driving up the quality of service that the public experience, and avoiding the risk of sapping the ability or willingness of those who manage the services locally to take initiatives to innovate and to develop a culture of responsibility down at the sharp end. There is always a risk of eroding a sense of local ownership of those responsibilities for the highest possible quality of service delivery.

Geraint Davies

I was simply trying to make the point that minimum standards of hygiene are essential to avoid a massive outbreak of infection that could kill many people. We found substantial variation in those standards, and we need to raise them. That being said, there are clearly grounds for local enterprise and innovation to push forward the best practice benchmark.

Mr. Lidington

I am all in favour of disseminating best practice. The problem is that it is not enough simply to announce national targets or standards, if people do not have the commitment and sense of ownership at local level to drive up those standards and to take pride in delivering them to those whom they are responsible for serving.

That leads me on to the way in which the Committee follows up the reports that it produces. We have heard good examples of marked improvements in the quality of public services as a result of what the Committee has said in its reports. One example was the Committee's report on hip replacement, which helped to persuade the Government to set up a national joint registry. The Government should be given credit for responding in that way.

There have, however, been other examples in which a long time has elapsed between the problems being identified and action being taken. My hon. Friend the Member for Gainsborough referred to the Public Trust Office, in which problems were identified in 1994, and to the fact that no effective action had been taken five years later. The same criticism could be made of the inaction of the Housing Corporation after problems with the Focus housing association were identified in the early 1990s.

I hope that the Government—or, perhaps, the Committee, if it chooses to do so—will follow up issues such as the management of finances in further education colleges, and the efficiency of management in the National Blood Service. In the latter case, the crisis in the service happened in 1997, and the PAC reported in April 2001. The Government response in October last year said that the National Blood Service had, at last, agreed a time scale for negotiations with its staff on changing terms and conditions, to bring about the improvements to the standards of service that donors deserved and which the PAC had supported; but that it would take up to two years—even after agreement had been reached—to bring those changes into effect. That means that perhaps seven years will have elapsed between the crisis arising and the changes being put into effect to tackle the shortcomings identified in 1997.

I want to say a few words about the Sharman report, which is relevant to the sixth report of the Committee for 2000–01. I hope that the Financial Secretary will say something about this when he winds up the debate. It is nearly two years since the Government commissioned Lord Sharman to carry out his review, and nearly a year since he delivered the report. It is not unfair to ask the Government how much longer they intend to keep us waiting for their response. That response will be a big test of the Government's commitment to striking a fairer balance between the Executive and Parliament. At the risk of introducing a note of partisanship, I think that they have so far failed that test on issues such as the selection of members of parliamentary Select Committees, their failure to accept the report of the Liaison Committee, and the reform of the second Chamber. I hope that their response to Sharman will give them the opportunity to pull back some of the ground that they have lost.

I support the call from my hon. Friend the Member for Gainsborough for the National Audit Office and the Public Accounts Committee to have access, as of right, to non-departmental public bodies. That would sit well with the suggestion made by my right hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) a few days ago, when he called for the heads of major NDPBs to be subject to interrogation and confirmation hearings by parliamentary Select Committees before taking up their appointments.

I also agree with the comments of my hon. Friend the Member for Gainsborough about bringing the BBC within the scope of NAO and PAC inquiries. It seems logical that, so long as licence fee payers continue to pay what amounts to a form of poll tax, the BBC should be subject to parliamentary scrutiny in the way that my hon. Friend advocated.

I hope that the Minister shows us that, on this issue at least, the Government are on the side of greater accountability and greater openness. That is the right way to go and the way to secure the qualitative improvement in public services that we all want to achieve.

4.48 pm

The Financial Secretary to the Treasury (Mr. Paul Boateng)

This excellent and wide-ranging debate does credit to the breadth, depth and quality that one associates with the Committee and its reports. The Committee has a proud tradition, and Gladstone has been mentioned. He often is when the traditions of the House are discussed—and with good cause, as the Public Accounts Committee is one of his great creations.

Those traditions were undoubtedly embellished by two Members who have chaired the Committee during my membership of the House: Lord Sheldon, one of my predecessors as Financial Secretary, and the right hon. Member for Haltemprice and Howden (David Davis). Both gave distinguished service. The task of chairing the Committee now falls to the hon. Member for Gainsborough (Mr. Leigh), who is, if I may say so, ably suited for the responsibility.

I say that having had considerable experience of the hon. Gentleman over a long period. In the 1980s and 1990s, he and I spent many hours in Committee with my hon. Friend the Member for City of Durham (Mr. Steinberg), who sends his apologies for being absent. He must attend an urgent constituency function, so he has left for Durham. We have all had the opportunity to observe each other at close quarters and, having listened to the hon. Gentleman's speech, I am bound to say that it did not disappoint in any way.

Membership of the Committee, and certainly its chairmanship, requires an acute, sceptical, inquiring and independent mind, which the hon. Member for Gainsborough has always had. He has a further quality that is important when considering such subjects as those dealt with by the Committee—a sense of humour. Without that, one simply could not get through.

This afternoon has been an eye opener in a number of ways. I have been exposed to two of the new boys on the Committee—the hon. Members for South Norfolk (Mr. Bacon) and for Tatton (Mr. Osborne). Both show the qualities that I have described as being essential to Committee membership. The hon. Member for South Norfolk showed his skills as a wordsmith. Indeed, I note from "Dod's" that he founded a company dedicated to words, so his threat to detain us long was taken seriously.

The hon. Member for Tatton has hopes for the fare at the away day. Although a member of the Committee, I do not seem to have been invited. Perhaps the fare will be too rich for my taste, but not rich enough for the hon. Gentleman, as I note, again from "Dod's", that he is related to a delicatessen on his mother' s side. That might explain the nature of his appetites. By the sound of the Chairman's pre-emptive strike in terms of extending the Committee's scope to the Financial Services Authority, the royal household and the BBC, it will be an interesting away day and we look forward to the outcome of the discussions.

On a serious note, Treasury Ministers and civil servants owe the Committee and those who serve it a debt of gratitude. On behalf of my Department, I associate myself with the gratitude and respect offered to the Clerk and the staff, particularly the outgoing Clerk, who gave a great deal of service over many years to the Committee and the wider public. Liaison between the Committee, its staff and various Departments of State is vital to the success of its work.

The Committee benefits from the assistance of the Comptroller and Auditor General, Sir John Bourn, and his staff at the National Audit Office. Their financial audit work and value for money studies are key aspects of the structure of accountability that we are all concerned to promote. Their professional approach is welcomed by all.

The Government are committed to improving the management of Departments. The Committee and the hon. Member for Gainsborough have been receptive to working with us to raise standards, and we look forward to a continuing and positive dialogue in the future. The Chairman and members of the Committee came to the Treasury a few months ago. It was an enormously helpful exercise, and I hope that we will be able to repeat it. The Government welcome opportunities to engage the Committee. We have a common agenda on public services, and a common interest in ensuring that the public get value for money, in promoting best practice and in encouraging improvements in departmental management processes and information.

This year, the Committee has inquired into a wide range of areas, which has resulted in many valuable recommendations. Its recommendations have undoubtedly helped to improve the delivery of public services, and stand as a record of the efforts of members of the Committee.

I shall deal in some detail with the report on "The Management and Control of Hospital Acquired Infection in Acute NHS Trusts in England", which is of particular importance and a tribute to the Committee's work. I was interested in the remarks of my hon. Friend the Member for Croydon, Central (Geraint Davies) in that regard. His speech added to our understanding of the thought processes behind that report, and cast a searching light on some of the challenges for the health service.

The Committee tellingly observed: Hospital hygiene is crucial to preventing hospital acquired infection, including basic practice such as handwashing. We find it inexcusable that compliance with guidance on handwashing is so poor. Listening to my hon. Friends the Members for Croydon, Central and for City of Durham, I was struck by the fact that, over the years, with the decline of the Nightingale approach—the strict, disciplinarian, nurse-led approach to ward management—there has been growing concern about the increasing number of outbreaks of infection due to something as simple as whether nurses have washed their hands. Nurses believed that they had a disciplinary role in relation to everyone on the ward, whether they were a visitor, a patient, a doctor or a consultant. I cannot help but feel that the absence of that mindset has contributed to the failures that the Committee has vividly highlighted. It is important that the questions and analysis that the Committee asked and delivered continue to be applied to such problems.

The Committee has reported on the NHS no fewer than five times in the period covered by these reports. That is a telling indication of how far the Committee shares with the Government a concern to improve that key public service.

I was particularly struck by the Committee's report following the valedictory appearance of Sir Alan Langlands, the former NHS chief executive. I had the pleasure of serving in the Department of Health as an Under-Secretary of State during his tenure. He was a dedicated public servant and, in many respects, an inspirational leader. The report strikes an excellent balance between recognition of the progress being made to improve the NHS—it is undoubtedly being made, and we should pay tribute to it, as Members have indeed been good enough to do—and the need to identify, clearly and frankly, areas that still need attention.

It goes without saying, although in fact it needs to be said, that all the Committee's recommendations are considered fully and almost all of them are implemented. As the Committee would expect, however, Departments and other public bodies do not and should not wait for its recommendations before acting, as many options for improvement will already have been identified by the preceding NAO report. A case in point is the 41st report, entitled "The Gaming Board: Better Regulation". The Gaming Board took full account of the NAO's report as soon as it was published in June 2000, and set in hand appropriate measures.

The particular power of the Committee's own hearings and subsequent reports lies in the fact that they serve as a real stimulus to Departments and other public bodies to consider and, where desirable, implement the options for improvement identified by the NAO—which has been rightly dubbed Parliament's financial watchdog. Members in all parts of the House, particularly the hon. Member for Newbury (Mr. Rendel), emphasised that the NAO was an instrument of Parliament. That is an important point, which ought to give the wider public a sense of the significance of the Committee's work.

The wider public will not, of course, see reports of today's debate that reflect its importance, because the press are simply not interested in debates of this kind. Both press and public, however, are interested in the Committee reports themselves, and in what the Committee's Chairman and members say while they are being published.

Mr. Bacon

I was interested in what the Financial Secretary said about the NAO being responsible to Parliament. According to the front page of the NAO's website, the NAO is totally independent of Government, and reports to Parliament. I therefore find it odd that the web address is "nao.gov.uk". That may seem a small point, but would not "nao.parliament.uk" make more sense? Will the Financial Secretary suggest the change to the CAG?

Mr. Boateng

That is an interesting point. Given the NAO's independence and its accountability to Parliament, I am not sure that it is for me to make the suggestion, but no doubt the NAO will take account of it. I must confess that I have not looked at the website; I must do so. The hon. Gentleman's point is perfectly reasonable, and will appeal to the techies and anoraks among us—not that I disparage in any way the hon. Gentleman's close attention to the details of websites.

The challenge is to ensure that the public recognise the impact of the work of the NAO and the Committee on the minds of public servants and Ministers.

We have had an interesting insight—I look forward to more—from the hon. Member for Tatton, who at the tender age of 24 had such wisdom and insight into the ways of the world that he was able to be a special adviser to a Conservative Minister. That may explain rather a lot, but he gave an insight from a political adviser's perspective of how the anticipation of an appearance before the Committee concentrated the minds of senior civil servants wonderfully. As a Minister with a rather different perspective, I share his view that the anticipation of an appearance does just that. Importantly, it gives the Department and Ministers an opportunity to think again and where necessary to make changes when it is clear that things are not going as they should.

References have been made to the probation service and to information technology. I was prisons Minister in the latter part of that period. I well recall that, in some ways, the Committee's work and the NAO report came as a great relief, because they broke what had tended to become a rather internalised cycle of denial at the Department: that things were not as bad as some outside who had to do the work on the ground—probation officers—said it was. The NAO report and the work of the Committee played an enormously important part in ensuring that the changes were made that now enable us to deliver to the probation service the sort of IT back-up that it needs. It is important that we help the public to understand that, and I put on the record my gratitude as a Minister for the work that the Committee does.

I commend the way in which the Committee comes back to check on progress in various areas where it has had concerns. That was particularly important in relation to the 13th report, entitled "The Refinancing of the Fazakerley PFI Prison Contract", in which I had particular reason to be interested as prisons Minister. I am a great believer—I make no apology for it, although I know that this view is not held by everyone—in the role that the private sector can play in the delivery of effective and humane prison services. The Committee's concern over the refinancing operation contributed to the drawing up of guidance for a more equal sharing of the gains of refinancing between the public and the private sector partners. That was to the benefit of the sort of partnership between the public and private sectors that we want.

It was recognised that a problem needed addressing. It was addressed, and as a result the credibility of those partnerships has been enhanced. That was because the Committee worked in the way that it did. Its work and the public accountability that it enhances are rightly admired across the world. Indeed, that has been reflected in the speeches this afternoon.

The role of accounting officer is pivotal to our structure of accountability and ensures that the head of each organisational hierarchy is personally accountable for its activities. This year, a number of officers have appeared before the Committee on a variety of issues. The Committee's reports have helped accounting officers to identify failings and gaps in departmental control systems. That is important, and it acts as a continuing driver for improvement. We must ensure that we learn the lessons of the past and improve the way in which the Government do business.

For example, recommendations from the Committee have contributed significantly to changes in procurement practice and guidance. Those hon. Members of all parties who spoke about procurement and its importance were absolutely spot on. I know that procurement is of particular interest to the hon. Member for South Norfolk. I agree with him that, when we look back at the past decade or so, it will be clear that Governments have had to improve their procurement strategies. It has been a learning process, and the Committee has contributed to that.

Several hon. Members referred to procurement in relation to the private finance initiative. I believe that the PH has a real role to play, but I suspect—in fact I know—that my hon. Friend the Member for City of Durham is more sceptical. However, it is clear that the number of NHS beds that is delivered is entirely unrelated to the method of procurement. Whatever form of decision is taken with regard to the delivery of a new hospital or facility, it is clear that there has always been a debate and a tension about the number of beds that should be provided.

That calculation can be got wrong under the PFI, but also under the old methods by which public investment was delivered. The important thing is to improve the procurement process, as a robust analysis will ensure that what is needed is delivered. We are still on a learning curve, but I am happy to say that the Government are getting better at procurement. That will benefit the public, and is likely to lead to the achievement of even greater value for money.

Mr. Bacon

The Financial Secretary spoke of the robust analysis of PFI projects. In the December 2000 debate, the right hon. Member for Swansea, West (Mr. Williams) said that he was in favour of mortgaging assets in certain circumstances. He said that that had enabled many people to own their homes who otherwise would not have been able to. However, does the Financial Secretary agree that, when complex financial engineering is involved, a robust analysis must ensure that matters such as the discount rate are chosen correctly? For example, the Treasury is about to reoccupy a building that has been refurbished. The discount rate for that project was ludicrously high at 6 per cent. That had a fundamental effect on the apparent public sector comparator.

Mr. Boateng

I am afraid that I am unable to agree with the hon. Gentleman. I fear that he may have shattered the happy mood of consensus that we were seeking to develop in the debate. However, there will always be a discussion, both post and ad hoc, about whether one has got it right. Time will tell. I think that the new Treasury building is great value for money. If the hon. Gentleman comes along to the opening, he will see for himself. Indeed, the whole Committee should come, but I fear that the fare will be much too simple for the hon. Member for Tatton.

I should like to say a few words about resource accounting and budgeting. In December 2000, following the commencement of the Government Resources and Accounts Act 2000, the system of planning, controlling, monitoring and accounting public expenditure has moved on to a resource basis. That was the basis of some of the discussion when the Committee visited us in the Treasury building.

From the outset, the Committee has supported and encouraged the more commercial approach brought about by the implementation of RAB, acknowledging that it should lead to improvements in the clarity and quality of financial information available to Parliament and assist with departmental management. As we reach the end of this financial year, we are seeing an increase in the number of ways in which the benefits of RAB are starting to be realised. In particular, improvements have been seen in departmental asset management, including disposals of surplus items—a massive task that would never have been achieved without the requirements of RAB, including the need to account for assets held.

Resource budgeting is being expanded for the coming spending review—SR2002—representing a step change in the management of some £240 billion of Government- owned assets, better incentives for managers at all levels and a better measure of the full cost of providing public services.

Mr. Rendel

Since the Minister has got on to the subject of disposing of assets, I wonder whether he knows whether the Passport Office has yet disposed of the 300 umbrellas that it purchased to protect those who were having to wait outside in long queues. When we asked why it was keeping them, the reply was, "You never know, there might one day be a power cut and everyone would have to go outside and wait in the rain—if there happened to be a storm at the same time as a power cut." That seemed a slightly dubious reason for keeping the umbrellas.

Mr. Boateng

I must admit that the fate of the immigration and nationality directorate's umbrellas has not been brought to my attention. However, I promise to write to the hon. Gentleman about it—even as I speak, urgent inquiries are doubtless being made as to their whereabouts. I was in an office on the opposite side of the road at the time, and I recall that they came in very handy. One hopes and believes that they will never be needed again for that purpose, but who knows? In the scenario painted by the hon. Gentleman, they might be. We will certainly write to him about that.

There is more to do in taking resource budgeting forward. It will place the UK among world leaders in public finance reform. There is a great deal of interest, not least among our European partners, in the progress that we are making in this area. I want to pay tribute to the permanent secretary and Treasury staff who have been engaged in this process, and to the front-line staff who are delivering it.

The hon. Member for Rochford and Southend, East (Sir T. Taylor) and I recently visited the Customs and Excise facility at Southend. I saw the area where mail is received and the envelopes opened for VAT cheques. It was fascinating to talk to the dedicated and committed staff. Many of them had worked there for many years, man and boy—and, indeed, young woman and pensioner, because some had come back after retiring. They shared with me the complete revolution that had resulted from the introduction of a measure to deal with incoming envelopes. They were sorting out cheques that needed to be accelerated and banked immediately because of their size.

There was great attention to the imperative of getting that money into the bank as quickly as possible. So when one listens to complex and technically challenging expositions as to what resource accounts and budgeting is, one should never forget that people are doing the business on the ground to deliver the benefits that it is so demonstrably delivering.

Mr. George Osborne

I am interested in the Minister's experience in Southend. During the months that I have served on our Committee I have long felt that it would be useful to have not just the permanent secretary of the Health Department, but also a doctor and a nurse to check what was going on, or not just the permanent secretary of the Ministry of Defence, but also a soldier. Perhaps we could look at that in the away day.

Mr. Boateng

This away day gets more and more interesting. Quite how the top brass will take to a squaddie being dragged along with them to a Committee is a different matter. Joking apart, there is a serious point about following through the changes that occur at that level to their logical consequence on the ground.

There is, of course, more to do. The resource accounts for 2001–02 will be qualified for a small number of Departments and we need to work hard to achieve the timeliness of accounting information that is routine in the private sector. The remaining problems arising are being resolved and we are confident that all of the benefits of RAB will be realised. I look forward to that and to seeing the impact of increased and improved information on the work of the Committee in due course. For perhaps the first time it will be possible to hold Departments to account for items such as their management of assets and working capital movements. We are beginning to see the fruits of that, as was made clear in the course of my exchange with the hon. Member for Newbury.

I just want to say a few words about whole of Government accounts. Building on the principles adopted for resource accounts, the Government are moving rapidly towards the production of whole of Government accounts. Akin to commercial group accounts, whole of Government accounts will bring together all areas of Government work in a single account. The intention is to present a true and fair view of the Government's activities, providing a complete overview of the public finances for the first time. That will further improve accountability to Parliament and taxpayers.

The Government are introducing whole of Government accounts in two stages. Accounts bringing together the activities of central Government bodies will be published in 2003–04, following dry run presentations in this financial year and 2002–03. Whole of Government accounts with full public sector coverage are to be published from 2005–06. We look forward to the continuing contribution of the PAC and NAO to the development of whole of Government accounts and to working with them on these matters.

I shall say a few words on performance reporting. The Government have introduced significant developments in the provision of information about departmental performance. Tough, outcome-focused targets are set for each Department and are published in departmental public service agreements. The targets need to be met by Departments in return for additional investment. We had some interesting exchanges about targets this afternoon. The next spending review will build on the approach, setting targets focused on the Government's key priorities, linked to a prudent allocation of resources. We need to make sure that the information that underpins reporting on targets is reliable. We think that the introduction of independent validation would help to provide assurance on the quality and integrity of data systems. That is the importance of the working group established by my right hon. Friend the Chief Secretary to consider arrangements for improvements in the validation of PSA data systems. The National Audit Office, the Office for National Statistics and the Audit Commission have made valuable contributions to the group and the conclusions of the work will be announced in the Government response to Lord Sharman's recommendations in his report, "Holding to Account", about which I shall say more in a moment.

Mr. Rendel

Does the Minister accept, in line with earlier remarks, that the law of unintended effect, which hits Government so often in all sorts of ways, is particularly likely to have a deleterious effect when the Government are setting targets? The Government set a target for one thing and almost invariably in order to meet that target create another problem.

Mr. Boateng

I would not say "almost invariably". There is that danger and it must be guarded against in the setting of the targets. That is why information and analysis before the targets are set is so important. That danger is there, and one would be foolish to deny it. However, I would question the suggestion that targets are plucked out of blue air—or blue sky.

Mr. Nick Ainger (West Carmarthen and South Pembrokeshire)

Thin air.

Mr. Boateng

Thin air; I am much obliged to my hon. Friend. I have been present in the course of the conception, gestation and birth of targets and sometimes it is a prettier sight than others, but they are never plucked out of thin air. They never just appear out of the blue skies. They are the products of a laboured exercise. The important thing is to ensure that we get the mechanics of that exercise right—that we feed in the right information, conduct the right analysis and ensure that the evidence that underpins the targets is fit for the purpose. That is not always the case, and it is sometimes necessary to revisit them. However, the hon. Gentleman makes a fair point of principle and it is important to have regard to it.

I said that I would say something about Lord Sharman's report and hon. Members on both sides would be disappointed if I did not. As my predecessor—now the Minister for School Standards—and colleagues explained in debate in the House and the other place during the passage of what became the Government Resources and Accounts Act 2000, the Government have never objected in principle to extensions to the statutory powers of the Comptroller and Auditor General in relation to audit and access. The importance of independent audit is well recognised as a key accountability tool, and access to information associated with an audit is essential for the Comptroller and Auditor General. Our concerns focused on the practicalities of change, particularly how to avoid undue burdens for the private sector if non-statutory access rights became statutory, and the need for assurances about the quality of audit if competitive influences were removed.

The Government welcome Lord Sharman's recognition of those concerns and the need for them to be addressed through protocols between the Government and the Comptroller and Auditor General. Following publication of the report, my officials have had productive discussions with the Comptroller and Auditor General's officials on the content of those protocols. I am enormously grateful for the constructive way in which the NAO has approached those discussions. In the light of the assurances that we have received, I hope that it will be possible to make a positive response to the recommendations.

We are grateful to Lord Sharman for considering audit and access, and for his views on accountability more widely. We have taken time to consider Lord Sharman's recommendations, as they do relate to issues that were for a long time a source of intense and stimulating debate.

The hon. Member for Gainsborough (Mr. Leigh) will be glad to hear that our consideration of the recommendations is now nearing completion and my right hon. Friend the Chief Secretary hopes to publish the Government's response to Lord Sharman's report shortly. We hope to respond positively.

Mr. Bacon

Will the right hon. Gentleman give way?

Mr. Boateng

I think that I have given way sufficiently.

I do hope that I have given hon. Members, particularly the sceptics among them—they are members of the Committee so, by definition, they are all sceptics—the sense that we do intend to respond positively. I trust that our response will signal the end to long-running disagreements over many years, during the terms of office of many Governments of all political persuasions, between Government and Parliament.

It has been an important debate. It has not been possible in my response to cover all the arguments that hon. Members made. They made some very important points about risk management. We are glad that the Committee continues to welcome the improvement that has been made in risk management processes in Government. We are continuing to improve the management of risk and to develop statements of internal control.

A progress monitoring exercise is being planned for the spring to assess progress in developing internal control systems and to identify issues on which Departments will need further support and guidance to help them to complete the effective implementation of that policy. The Committee's role has been enormously important. It has brought to light valuable evidence of strengths and weaknesses, and it has played a similar role in the promotion of innovation. Risk management is crucial if we are to promote innovation in the delivery of public services. If everyone is risk averse, necessary improvements are not likely to occur.

Our long-term goal is to deliver world-class public services through investment and reforms that ensure that taxpayers receive good value for money. The work of the Committee and the contribution of its Chairman, members, advisers, staff and Clerk—with the NAO—is crucial to achieve those goals and, indeed, to the very purposes of Parliament. Scrutiny is absolutely central to Parliament's role; it drives improvement and helps to ensure that regard to regularity, propriety and value for money is given in all aspects of Government projects and operations.

We are enormously grateful not only to hon. Members for the contributions that they have made today and to those hon. Members who have taken the time to attend for all or part of the debate, but to the Committee for its on-going work. We look forward to continuing to work closely with the Committee, to being challenged by its scrutiny and to the public receiving an improved service as a result.

5.32 pm

Mr. Leigh

With the leave of the House, may I briefly thank, on behalf of the members of the Committee, my hon. Friend the Member for Aylesbury (Mr. Lidington) and the Financial Secretary, who has shown his characteristic skill and humour, for summing up this debate? I apologise to the Financial Secretary for the fact that he has not been invited to our away day. I will certainly issue an invitation if he can promise to turn from gamekeeper to poacher for a day.

I am reminded of a recent conversation that I had with an NAO official. I was double checking that none of the illustrative questions prepared for Members are ever given to permanent secretaries or their staff. Of course, the members of the Committee are independent; they ask their own questions. The NAO official, who used to work for the Treasury, told me with great glee that the Clerk of the Committee once made a mistake and sent the illustrative questions to the Financial Secretary, and that they were then promptly distributed all around Whitehall. Although the Financial Secretary is a member of the Committee, we have an interesting relationship with him. We have a very good dialogue.

I do not think that any hon. Member has thanked those who are currently sitting in the place to which no reference must be made. They always attend PAC meetings. Sometimes, after perhaps an hour or two when they have not had to say anything, a Member will fix an eagle eye on them and ask a question, and they immediately come up with a good response.

I thank the Financial Secretary, my hon. Friend the Member for Aylesbury—the Opposition spokesman—and the hon. Members who have spoken in the debate. I thank the hon. Member for City of Durham (Mr. Steinberg), who feels so strongly about the NHS, and the hon. Member for Croydon, Central (Geraint Davies), who dealt so expertly with the PFI, the NHS and the railways.

I thank my two new colleagues—my hon. Friends the Members for South Norfolk (Mr. Bacon) and for Tatton (Mr. Osborne)—who have been so keen and determined to get to the nitty-gritty. As my hon. Friend the Member for Tatton said, they have led the way in the charge against arbitrary targets. My hon. Friend the Member for South Norfolk is, of course, a management consultant, so he is ideally placed in this Committee.

I also thank those hon. Members who have not spoken today—my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb), who listened carefully to the debate, and the hon. Member for Tamworth (Mr. Jenkins), who attended the earlier part of the debate. I particularly thank my right hon. Friend the Member for Swansea, West (Mr. Williams)—he really is a friend. His work is a tremendous tribute to the House. He has given a generation of service to what is not a bipartisan but tripartisan Committee, as shown by the welcome presence of the hon. Member for Newbury (Mr. Rendel) in the debate. Without the work of the right hon. Member for Swansea, West, the Committee would not work in the way that it does.

I read a report in a national newspaper that is usually sceptical—indeed, downright rude—about Parliament. It said that the Committee was one part of Parliament that was deeply impressive. I hope that, in the time that I am the Committee's Chairman, I can maintain that fine tradition.

Question put and agreed to.

Resolved,

That this House takes note of the 38th to 47th Reports of the Committee of Public Accounts of Session 1999–2000, of the 1st to 16th Reports of Session 2000–01, and of the Treasury Minutes on these Reports (Cm 5021, 5071, 5078, 5127.5201 and 5261).