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Health and Education

It is true that, at certain times, people make policy decisions and have to spend more, which may indeed achieve their policy objective. Of course, I accept that, which is why I do not want to talk about policy differences in a lot of my speech. I want to try to bring the Government and, indeed, Conservative Front Benchers with me as far as possible. I do not believe that it is the duty of an Opposition—certainly, not an Opposition Back Bencher—to oppose everything and propose nothing. So I hope to make some practical suggestions about how we can improve efficiency. The Chancellor recently raised the bar on efficiency savings by another £5 billion, which is quite a difficult task. My call might not be strictly within the rules of poker, but I see his £5 billion and want to try to help him raise another £5 billion. Let me give some ideas, not for cutting services, but for encouraging all the major Departments to match the greatest progress made by their most efficient colleagues in five core categories of efficiency. Let us look at all the Departments and at who does things most efficiently to try to bring the rest up to that level of efficiency. Item 1 on that five-point agenda for efficiency is the civil service pay bill. It is true that the Government have made some progress in reducing numbers in some Departments, but not in reducing staff costs. A reduction in numbers running to tens of thousands—I agree that it has been achieved—has been accompanied by a real-terms increase in the pay bill of more than £1 billion. If all Departments matched the greatest staff reductions achieved in Whitehall, the saving to the public purse could be a massive £1.7 billion. Of course—I will mention this now—the new contract for general practitioners is an example of a Department implementing new arrangements that have increased, rather than reduced, inefficiency. Partners in GP practices are now putting in less time and their productivity has decreased; only their pay is burgeoning, having increased on average by 58 per cent. since 2003. I think that we all recognise that major mistakes were made in that contract, which we never want to see made again. On the subject of staff costs, are the tasks of Whitehall Departments really so different that, apparently—what the NAO tells me is extraordinary—the average civil servant in one Department can cost almost 60 per cent. more than the average employee in another? I know that Departments perform different tasks, but it seems extraordinary to me that we have such a range. If we could bring the most costly and the least efficient up to the level of the least costly and the most efficient, we could save another staggering £800 million. Outsourcing and consultancy form my second item. Consultancy is often discussed. It seems to me scarcely credible that any part of Government could have consultancy expenditure equivalent to even half its staff costs, let alone the 87 per cent. of staff costs spent by one Department, but that is apparent by analysing last year's accounts. The average central Government body spends five times more on consultants per employee than the private sector—a whopping £10,000 for every civil servant employed. Is that necessary? Do we need all those consultants? We have very good civil servants—they are there in the Box. Although we are not allowed even to refer to them, they are fantastic people doing a great job. When the NAO reported on the use of consultants, it concluded that efficiency gains of up to 30 per cent. could be achieved without reducing the underlying value of the work purchased. The NHS spent £600 million on consultants last year, when the public sector as a whole spent £2.8 billion, so the saving could be as much as £800 million a year. Let us take a long look at other running costs, such as the costs of accommodation, leases and IT, which provide the third item on the agenda. I offer the Government and the Opposition a further £900 million saving. I hope that my hon. Friend the shadow Chief Secretary to the Treasury reads my remarks today—I am happy to help anybody, Government or Opposition, with these ideas. The startling variation in accommodation costs for each individual civil servant provides clear scope for improvement. When the NAO examined this matter in 2006, it found that the Department of Health—I mention that Department, because we are talking about it today—spent nearly three times as much per person as the then Department for Education and Skills. Today, the Secretaries of State for Children, Schools and Families and for Health have been sitting side by side in the Chamber, so perhaps we should ask them to explain the difference between their Departments' spending. I do not understand it. Perhaps the Government should consider extending their shared ownership schemes to their Departments, so that they learn lessons from each other. London property prices may not be what they were, but all of us here represent provincial constituencies, do we not? Are we sure that every civil servant currently based in the capital would not be better employed at less cost in our own communities—in Huddersfield, Gainsborough or, indeed, North Norfolk? Why are so many still based in the capital? The House may need to bear with me as I go through the next item on my list—comparisons of asset values. As an accountant, the hon. Member for North-West Leicestershire (David Taylor) will be interested in this subject, but the eyes of other Members present may glaze over, but it is a fantastically important subject. The Government aim to dispose of £30 billion of assets, but even though last year their main Departments got rid of approximately £1.5 billion of assets—well done—they managed to add a hefty £10 billion of assets. That so often happens in public debate: we hear the good news, but not the bad. I salute the Ministry of Defence, which achieved the highest level of disposals in Whitehall, and the Department of Health did pretty well, too. If others had marched forwards as far, another £850 million would have been captured by all of us. According to my rough calculations, so far we have identified savings of £4.8 billion and counting. In search of the final big push that would enable me to keep my promise to try to save the Chancellor £5 billion—no small sum—I considered those Departments that make grants. The Departments that are the subject of today's debate figure heavily among them. A recent National Audit Office report made recommendations to help grant-makers better manage the demand and flow of applications, and streamline their processes. A saving of 10 per cent. as a result of greater efficiency in grant administration across the public sector could plough £220 million back to the Treasury. I have now achieved, just in one short speech, savings of £5 billion. I freely accept that efficiencies are not certain; there are problems with information, challenges in delivery, and variations in circumstances, so we could undershoot, or indeed overshoot, on all those five items. However, surely that is not an argument for the abandonment of the agenda; it is an argument for adding to it. To try but fail is honourable; to fail to try would be criminal. That is why I think that efficiency should be a central part of what we try to do. My challenge to the Government is to take inspiration from Mr. Micawber. It may not be fashionable in these ““Buy now, pay later”” times, but the Government's accounts book should be reviewed, entry by entry, in a concerted effort to alleviate the misery of spiralling borrowing. In debate after debate on the work of the Public Accounts Committee, I have emphasised three broad themes of which the Government should take note in their forensic self-analysis. I start with unnecessary administration. The private sector has long focused on minimising the proportion of resources that it invests in administrative functions, so that it can focus on what delivers value for the customer. It is essential that the public sector takes that approach. That can be achieved both by cutting down the complexity of administration and by sharing the management of administrative services. We hear a great deal about that problem in the NHS. Every time that we talk to our doctors and consultants, and people whom we know in the NHS, they harp on at us about the cost of administration—a vital point. We should listen to them all the time. My second theme is commercial skills and astuteness. The role of the Government is changing from one in which they delivered most public services themselves to one in which they manage other organisations that deliver services on their behalf. No matter who wins the next general election, the process will go on and on. The Government will withdraw more and more from the front line and will use other people to manage their services. Government will become ever more commercial. In those circumstances, the delivery of services is underpinned by commercial arrangements, so the Government need to improve their ability to manage contracts. We have to employ the best people and pay them the right price. We should bring them in from the City and the merchant banks to work for us. When it comes to private finance initiatives, new contracts or hospital running costs, we have to get the best people working for us and pay them the best price, which pays in the long run. Frankly, the public sector still lacks the commercial nous to derive maximum benefits from its suppliers. Take one well-known example in the education field. The interest of celebrity chefs in school dinners has helped to draw attention to one, small, specific area of procurement. We looked at the issue and showed that there was scope to realise over £200 million of efficiency savings in food procurement in just one year by 2010-11. More than half of those savings could be achieved in schools and hospitals without affecting quality. Ultimately, actions such as joint purchasing could help to avoid situations such as those that we found at the time of our investigations. For instance, we found that one public body pays 32p and another £1.10 for the same loaf of bread. I come to my final theme, making better use of resources. The Government do not always manage the vast array of resources in their control, including office buildings, service delivery and agents, as efficiently as they should. Earlier this year, the National Audit Office published a report on managing financial resources. It found that since 2003 Departments have indeed improved their management of finances, but, incredibly, that 40 per cent. of them invariably provided decision makers with a full analysis of the financial implications of policy proposals. It is amazing that in only 40 per cent. of cases in which Ministers make difficult policy decisions they were told about the financial implications of those decisions. The message must be driven home that the management of financial resources is the responsibility of everyone in the Department, from the Secretary of State down, and not just the central finance team. The Government need to know what is being spent, where and on what, and I hope that there is a central emphasis on everything that Ministers and their top civil servants do. They need to know whether one Department pays more for the same service than another, and they must embrace, not avoid, comparisons of cost and performance across the public sector. Departments must benchmark all the time with other Departments, and they must look at what is going on abroad. They must always seek to do the most efficient thing, and pay people to work for the public sector and Ministers to get the best results. All those disciplines should apply to the Government's proposed programme. The aim of government is not to legislate at any cost—the Government are clearly not doing so, as we are not overloaded with legislation, on which I congratulate them—but when the costs and benefits are totted up, how many of the proposed Bills would help the fastidious Mr. Micawber to obtain happiness by balancing his affairs? We should look at all those Bills and ask how they will achieve happiness by balancing our financial affairs. If the House will allow me, I shall propose one final test to be applied to all the Government's proposed legislation. It is simple: does the proposal reduce the overall burden on the public purse, and is it efficient? That legislative impact assessment should be policed, perhaps by the House, with more rigour than the Government have put into their own regulatory impact assessments. If the answer to the question is yes, the Bill should be allowed to proceed to further debate. If the answer is no, it should be allowed to go forward only if accompanied by an equal saving elsewhere. Now is not the time for either the cost or the burden of government to grow, because we simply cannot afford it. I urge all public bodies to keep at the forefront of their thoughts the fact that taxpayers and all those who use public services rely on them to get this right. Given the storm-tossed state of the public finances, the success or failure of programmes to achieve true efficiency in the public services will have a major impact on all our lives. If the House will forgive me, before I conclude may I make one or two policy points? In everything that I have said so far, I have spoken as Chairman of the Public Accounts Committee. I hope that what I have said is not politically sensitive and that Members on both sides of the House agree with it. However, from my own personal perspective as a Back Bencher, may I make one or two points? This is where I fear that I may lose Government Members, but the debate offers an opportunity to express one's point of view, so why should I not do so? Yesterday, the Prime Minister, without telling me in advance—fair enough; all is fair in the House—attacked me on the Floor of the House, so I could not pop up and put the record straight. May I now make clear my point of view that the Government have made a major error in seeking to solve our economic problems by cutting VAT at a time at which prices in the shops are falling through the floor? The point that I made, not as Chairman of the PAC but from my own personal perspective, was that the best way to help the poor is by raising tax thresholds to get people out of paying tax altogether and to attack the poverty and unemployment trap.