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Public Accounts

It may be that we should pursue that matter further. I suspect the consequences are that promotion for those individuals has been less accelerated than it might have been otherwise. As my hon. Friend the Member for Tiverton and Honiton (Angela Browning) said, that is usually the way of the civil service—people are never sacked, but sidelined. Traditionally, the deal in the civil service has been that people do not get bonuses, but they do not get sacked. It is a job for life, but people do not get paid terribly well. As a House, we have to think about the matter much more than we do. The financial rewards at the top of central and local government are very high. Permanent secretaries earn a minimum of £140,000 a year and their salaries can go up to £220,000 a year, and many civil servants earn far more than that because they are on bonus-related schemes. The whole culture of Whitehall is changing, and perhaps the traditional way of doing things—that civil servants are never sacked—has to be thought about again by the Government, but it is for them to make up their minds on that. We looked at a project run by the Department for Culture, Media and Sport, and the nine grant-making organisations it sponsors. We found that it spent a hefty £200 million to administer and pay out just £1.8 billion in grants without efforts to benchmark the grant makers' way of doing things against each other, or against other ways of working elsewhere, which we might have expected. The Department could have no idea of how other grant-giving organisations operate or of what the costs were. Ordinary times would require greater focus on efficiency than is evident from those examples, but today we face extraordinary times. I am concerned that, far from driving true efficiency in the everyday business of Departments, circumstances may be leading us to institutionalised inefficiency. Spending taxpayers' money is what Governments do, but we know that spending money is the easiest thing in the world; getting something practical for it is much harder. We have seen before that it is easy to increase spending rapidly on a service. We saw that as we drew up numerous PAC reports into the NHS and the Rural Payments Agency. We make no comment on or complaint about the increase in spending—that is not our job. Too often, the rush to spend has been unaccompanied by any insistence on improved efficiency. When new money is put in, the taxpayer is entitled to expect identifiable improvements in productivity on the front line. As the Government bring forward spending plans to try to counter the recession—the Department for Transport is one of the bodies most involved—we must be vigilant in guarding against waste, and we should try to ensure that the efficiency gains we have achieved so far are protected as spending increases rapidly. There should be a forensic efficiency assessment of every proposal to buy now what was expected later. Accounting officers should be certain of the costs and benefits of moving money around, and we expect to see evidence that they have adopted the most efficient solution, not leapt at the most convenient spending opportunity. With so many pressures threatening efficiency, the public must be able to have faith in the savings claimed. The Committee has had to express scepticism over claimed efficiency gains in the past—I put that point to the Prime Minister myself, in the Liaison Committee. Our 2007 report cast doubt on the reliability of 74 per cent. of the savings claimed. I am not going to go into that again, and I have welcomed the fact that Departments' claims will now be subject to the independent scrutiny of the National Audit Office, which is very good news. I am pleased to say that the Treasury has already promised to take into account associated increases in costs elsewhere before proclaiming efficiency gains. That is becoming more and more important. As well as external scrutiny, the civil service needs far more internal challenge to how things are done—a point emphasised by the recent National Audit Office report "Helping Government Learn". In Departments' thinking, the question "Is this the best way to do it?" seems only to arise late. One of the challenges for my Committee is to help to shake Whitehall free from the mentality, wherever it remains, of, "This is the way we work because this is the way we've always worked". True efficiency will not be achieved without an ongoing revolution in financial management in the public sector. We have seen some improvements in that area, too. I welcome the increase in the number of qualified finance directors sitting on the boards of Departments. Today, I note at last that that includes the Department with the biggest asset base: the Ministry of Defence, which now has a qualified finance director—we have campaigned for that for years. However, that should be set in the context of a general lack of financial know-how among staff, who are not finance specialists. It simply cannot add up that the financial skills of the people who spend public money are not up to scratch. The Committee's report on managing financial resources highlighted the disturbing truth that only 20 per cent. of Departments base their policy decisions on a thorough assessment of the financial implications of their proposed actions. Departments will not get true efficiency unless they know the true cost of what they propose, and factor that into their decisions. It is all too easy to predict the results of that gap in financial skills. Things are better now, but in two successive years the Department for Environment, Food and Rural Affairs budgeted to spend more than it had been given by the Treasury. Anyone with experience of managing a household's weekly account knows that that would lead to disaster. If, halfway through the year, a Department has to invest creative energies in juggling funds to try to stretch its budget, or to make cuts to its planned programme of work, that can only be counter-productive and harm the delivery of public services. I am sure that the Minister will agree that it is not for the Treasury to pull Departments out of the mire of their own making. My final theme reflects an environment in which revolution is already upon us, whether we like it or not. The days when the public sector designed, developed and delivered public services in splendid isolation are gone. Engaging with the private sector requires different skills and brings different risks. Public sector officials must have their eyes wide open to profiteering, and their commercial acumen honed by experience, especially in today's environment. It is not only in setting out the terms of a contract that we have seen problems. The Committee's report on changes to operational private finance initiative contracts showed that whether a PFI contract represents value for money for the taxpayer depends not just on the terms of the original deal, which is what we may have put emphasis on before, but on how the contract is managed over the next 20 to 30 years. Unfortunately, we found that many public sector authorities are not doing well enough in managing PFI deals once they are up and running, and too often that is down to the familiar problem of a lack of commercial expertise. If one adds to that the results of an NAO survey which found that more than 15 per cent. of PFI projects examined are not managed on a full-time basis—unbelievably—the whole thing can start to look somewhat amateurish. In this case, as elsewhere, there are some green shoots. The Committee found much to laud in the Highways Agency project to introduce a better motorway communication system, delivering up-to-the-minute information for motorists. The small black cloud on this particular horizon was that it took five years to negotiate a deal that the agency had expected to be tied up in just two. But the agency was determined to sign the deal only—and this is good news—when it had set out exactly what it wanted at a price it could afford, and it successfully did so, which meant that it remained within budget and got the project delivered on spec and in good time. I do not know whether those involved went to Oxbridge, but they did it. In signing the agreement, the agency was also successful in passing many of the risks of the project over to the private sector contractor. Before I close, I want to take a moment to consider the broader implications of our reports for the scale of private sector involvement in public services in the current financial climate. In our last debate, I queried the level of debt being built up under PFI. It is staggering. There are 630 signed PFI projects, with a further 110 in the pipeline, amounting to hundreds of billions of pounds, but only last week the Chief Secretary to the Treasury announced that the embattled financial markets can no longer support these new deals, which is worrying, frankly. The Government will now act as banker to themselves, changing the balance of risk in deals, and with an uncertain exit strategy. Let us remember that the point of PFI was that we would get projects delivered on time and on budget, and that the risk would be passed to the private sector. We are now in an uncertain world. That is a sign of how revolutions have unforeseen consequences, and it will require the very best commercial skills to manage the risk to the taxpayer. It is not for me, as Chairman of the Committee, to cheer or decry any particular measure. The Government have a perfect right to do anything they like—well, within reason. However, my Committee will, I hope, continue to be the taxpayers' conscience, reminding Ministers and officials—should they ever need such a reminder—that the test we apply is not simply, "Can you spend?" but rather, "Can you spend wisely?" I think that the work of our Committee is held in high regard, and that all its members would agree that we are privileged to serve on it. Our impact is the result of the hard work and commitment of all Committee members and I thank them for their dedication. In particular, I would like to thank the my hon. Friend the Member for Ludlow (Mr. Dunne) who has left the Committee since the last debate. I welcome my hon. Friend the Member for Harwich (Mr. Carswell) who, I am sure, will bring much to our deliberations. As ever, I would like to thank our clerk, Mark Etherton, and the Committee staff. Lastly, seven years ago, I commented on the importance of the National Audit Office to our work. That importance remains and I pay tribute to its work in providing so much evidence, across every conceivable aspect of Government activity. I want to thank, too, the current Comptroller and Auditor General, Tim Burr, for his efforts and his support for the Committee during his tenure and for taking on the National Audit Office on an acting basis at a difficult time. Last month, the Committee held its first ever pre-appointment hearing in its 150-year history with the Comptroller and Auditor General-designate, Mr. Amyas Morse. Mr. Morse, I am pleased to say, will be the first ever chartered accountant to hold the historic post of Comptroller and Auditor General. I pay tribute to Nick Macpherson, the permanent secretary to the Treasury, Tim Burr and Andrew Likierman, the new chairman of the NAO. We have worked together to make what I hope is a good choice. The Committee had no hesitation in declaring its confidence in Mr. Morse's suitability for the role and we look forward to working with him from the summer. I hope that the changes in the NAO's governance arrangements will also soon be put on a firm statutory base and we look to the Minister to try to make progress on that. Finally, many of the people whom we represent are going through tough times that are not of their creation. I believe that that makes the role of the Committee even more important. That role is not simply to scrutinise spending, nor is it solely to terrorise witnesses. As I said seven years ago, we do not want to be just an undertaker. We are, I believe, a practical force for good, trying to suggest how things can be done better. Taxpayers and officials both benefit when action is taken to give impact to our recommendations, when they are acted on promptly and when, once the Government say to Treasury Ministers that they have to do something, they actually do it. In our hearings and in our speeches in this debate, we can encourage the revolution in the delivery of public services that hard times require. As we go through these times of financial difficulty and flux, I can say with absolute conviction that one thing, at least, will remain consistent: the determination of the Committee to serve the interests of taxpayers, to stimulate change on their behalf and to hold the Government to account for what they do with our money. I commend the motion to the House.