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Public Accounts

I see him shaking his head but I challenge him to find anywhere in the world that has gained efficiency by increasing the size of its government. However, I agree with him on the huge sums paid to consultancies and how undesirable that is. History will record that one of the defining characteristics of the new Labour Government over these past 12 years has been the extraordinary waste of money on consultancies. I am looking forward to seeing the Committee’s report on Metronet—the report is not before us today—whose failure will have a direct impact on my constituents. I am glad that the hon. Member for Great Grimsby raised the issue today. He rightly focused on a number of MOD, education and other IT projects and, despite our vastly different political views, I think he spoke a great deal of common sense in terms of his desire to see better value for money in public spending, even though he and I might disagree on the precise size of the cake. My hon. Friend the Member for South Norfolk (Mr. Bacon) spoke with his customary forensic skills and fluency and outlined important changes—I will have to read his comments carefully—as to how the NAO will effect better financial controls in Government Departments, which sound like they are welcome. He also said some important words about the culture of the civil service and on working to change attitudes in the public sector in the present environment to focus more on efficiency; getting more for less, as the leader of my party put it. My hon. Friend then launched a devastating critique of the NHS IT contract and its moving goalposts in terms of objectives and what has been delivered in a project that will come to symbolise Government waste as whole over the past 12 years. His examination of the details of the failings and the Treasury’s failure to get a grip, as well as the astonishing consequences for frontline NHS services, should be compulsory reading for all Treasury and Department of Health Ministers. I mentioned the apparent lack of enthusiasm of Labour and Liberal Democrat members for debating the Government’s earlier motion on securing the recovery. I note that, in this debate, there has been no Liberal Democrat speaker from the Back Benches and only one Back-Bench Labour speaker; although the hon. Member for Great Grimsby can hardly be described normally as a pro-Government speaker. It is a great pity that in a full day to debate first the economy and then the public finances, there has been almost no contribution from Labour or the Liberal Democrats. Several themes have emerged today, but all against a common backdrop. No one in this Chamber can fail to be aware of the woeful state of the public finances. The deficit this year is projected to reach round about £175 billion; £14.8 billion was borrowed in September alone, the highest figure on record. September’s borrowing brings net debt to a staggering £824.8 billion and means that debt as a percentage of GDP increased by 2.5 per cent. in just one month, to 59 percent using the Treasury’s own figures. To put it another way, the Government are currently borrowing £500 million a day. To see the seriousness of the situation we are all faced with, we only have to open the inside back page of The Economist and note that of the 42 countries in the magazine’s tables, Britain has the worst budget deficit of all, currently estimated to be heading to about 14 per cent. of GDP. That is twice what it was coming out of the last two recessions. The work of the Committee becomes ever more relevant in such a context, and its reports will prove a valuable resource for the next Government, of whichever party. Value for taxpayers’ money should, of course, always be a priority for those charged with its proper use, but it is a duty that the current Government neglected in a milder economic climate. Perhaps this was an unconscious effect of their verbal trick of labelling all spending as investment and regarding it as an automatic good irrespective of frameworks and controls, and sometimes irrespective of ends. Whatever the cause, there has certainly been a pattern of failure to ask the right questions or to draw the right lessons from mistakes, and the reports before us today provide further evidence to support this view. Collecting the stack of documents from the Vote Office, one ended up with a veritable armful of reading after a slightly hassled clerk had fished out each of the 27 reports—I think that is the right number. As many Members have suggested, the large number of reports presents a dilemma as they all contain insights into their objects of inquiry but it is impossible to comment on all of them. I will focus on some of the reports that particularly interested me, but I shall be as comprehensive as possible in the available time. A number of reports focused on defence. After both the roll call of those who died in the service of our country over the summer months and the general debate last week, the House has been particularly aware of defence matters since it returned from the recess. There are four reports on the Ministry of Defence before us. One has a particular bearing on the situation of our troops in Afghanistan, and all have some relevance in the debate over resources. The Chinook helicopter provides crucial heavy-lift capacity for the Army. It played a battlefield role in the Falklands war and has done so ever since. The current versions were ordered in 1995, in what the PAC described five years ago as one of the worst examples of equipment procurement it had ever seen. The latest report on the eight Chinook Mk 3 helicopters suggests the delays are abysmal "even"—that is the Committee’s telling phrase—by the MOD’s standards. The Committee says:""The absence of these helicopters has meant that British troops in Afghanistan have had to make do with fewer helicopters, make an increased number of dangerous journeys by road and, due to the specialist nature of the Mk3, rely on heavily modified Mk2 helicopters for use on high risk special operations."" Further, the night enhancement package referred to at the end of the assessment is, as the Committee discovered, still regarded as a key safety risk by Joint Helicopter Command. It is shameful that our soldiers have died from roadside bombs when additional helicopter support might have prevented the need for some of the road journeys they undertook and that our troops continue to undertake as we speak. While the Government can, and do, point to other measures they have taken since, that cannot alter the fact that our forces would be safer were it not for a series of Whitehall blunders, many of which have been examined by the PAC. Even the abandonment of the "fix to field" project, a decision taken to accelerate additional lift capacity, led to a 70 per cent. increase in the costs of the successor reversion scheme. The Government dispute the Committee claim that this was due to inadequate analysis and lack of consultation with Boeing, but an impression of hurried misjudgement remains. The departmental response also seems reluctant to accept the MOD’s tendency to over-modify what are intended to be off-the-shelf purchases, or the extent to which the pursuit of perfection on paper leads to defects, delays and cost overruns in practice. While they may sometimes be unavoidable, modifications of contracts run a high risk of undoing the advantages that off-the-shelf procurement can offer, and the attitude displayed is worrying. When our country is at war and lives are being sacrificed, it is damning to know that equipment shortages and deficiencies could have been avoided. Almost the only encouraging note in the entire Chinook report is the reported 20 per cent. increase in flying hours resulting from joint work with Boeing on maintenance procedures. Better use of our existing assets will be essential in Afghanistan and elsewhere. The capabilities review that my Front-Bench colleagues have outlined is just one aspect of the Conservative response to these problems. The other reports on the MOD indicate the scale of the challenges that may face it. The major projects report states:""In the last year, the 20 biggest projects suffered a further £205 million of cost increases, and 96 months additional slippage… Total slippage stands at over 40 years"." Although we accept the uncertainties involving new technology, those statistics bear witness to endemic failures in project management in the Department. Projects are not mysterious entities, and basic causes of project failure are the same whether projects are defence-related or civil, public or private. Yet again and again in the pages of these reports we read about over-optimism and poor controls. The report on the defence information infrastructure system is a case in point. The project was 18 months late at the time of publication as a result of fundamental weaknesses in planning. This huge project is replacing separate systems ranging from those within Whitehall to the onboard systems on Royal Navy ships. The cost was last estimated at £7.1 billion, and some 150,000 terminals are involved, yet assumptions were made on the basis of "totally inadequate research", the timetable was too ambitious and no pilot was undertaken before rolling out the implementation. Like so many Government IT projects—I will discuss the NHS IT system shortly—this one has come unstuck, and is 18 months behind schedule. It should not be necessary for PAC reports to have to include among its recommendations such basic advice as the following:""Where accurate information is not available, assumptions should be prudent and cautious."" It is extraordinary that a need was felt for such basic advice to be included in the report. Existing legacy systems are also known to be at risk of failing. Meanwhile, the Government’s contractor, the ATLAS Consortium, has still to meet many of the original requirements. The capability to handle securely classified information and information held about personnel is in doubt. Perhaps the Minister could indicate what progress the Government have made on the continuing data security concerns. On major equipment procurement decisions, progress seems to have been ruled out. Ministers seem to be leaving all the difficult choices to a future Government. If their intimations of the future come to pass, our priority would be to introduce a much more rigorous and commercial approach. The Department must learn from complex civil programmes if it is to have any hope of completing projects on time and to budget. We believe that greater commercial discipline is the only way to deal with the management of vital and expensive military programmes, and it is essential that industry is brought into the process at an early stage. As my hon. Friend the Member for Gainsborough also outlined, there are more encouraging signs from the Ministry of Justice and the Office of Government Commerce in respect of regular procurement from within the Prison Service—we are very pleased by that—which achieved cash savings of £120 million in the 2007-08 period under review. The Committee claims its share in that success and with some justification, as was acknowledged by the witnesses in its evidence session. The critical 2003 PAC report was used as the starting point for the reforms, which are now being implemented across the MOJ. The use of online catalogues and procurement teams to make better use of the purchasing power of the service as a whole holds lessons beyond that one Department. The potential savings from allowing units within and across Departments access to each other’s contracts are significant, and do not appear to have been driven forward by the Office of Government Commerce to the extent that they should. Prices and service levels negotiated by one become available to all, and low-volume purchasers benefit from the advantages of high-volume supply. That is an important way in which costs can be brought down—we will all have to pay more attention to this—in some cases dramatically, while also improving quality. The Department’s response indicates that it offered to participate in OGC workshops and training events. On the basis of the Committee’s evidence, I hope that that has happened. The OGC’s record on contract management is the subject of another of today’s PAC reports. As it records, central Government spend more than £12 billion annually on IT and other service contracts, and there are some basic concerns. Of those contracts, 56 per cent. had no associated contingency plan for supplier failure whereas 28 per cent. had no documented management plan at all. Worse, the report goes on to state:""Of the contract managers surveyed…25 per cent. of those responsible for contracts that had been running for at least three years had undertaken no value for money testing of ongoing services. And 41 per cent. of contract managers had not tested the value for money of new services."" The OGC’s responsibilities are secondary, as it is obviously the Departments that provide the management. However, it accepts a long list of areas for improvement. The oral evidence provided by the OGC’s chief executive to the PAC at least seems to demonstrate understanding of what is required. As the Committee concluded, however, until Departments’ behaviour changes, incidents such as the SATs testing fiasco are likely to recur. Let me move on to the national health service information technology fiasco. Perhaps the most prominent contractual and project failure of them all is the national programme for IT in the NHS, with total costs projected to reach nearly £13 billion, assuming full implementation is ever achieved. The Committee’s summary, in my view, is surprisingly mild in the circumstances, although the facts speak for themselves. Most of the mistakes were made before 2006—before the period under scrutiny today—but there remains the question of whether the Government are throwing good money after bad. There are real doubts about the ongoing viability of the programme and one of the Committee’s recommendations is to allow trusts to put forward applications for central funding to develop alternative systems. Incredibly, in rejecting that recommendation, the Department of Health stated that it does""not accept that the Programme is not providing value for money at present"." That must be one of the most extraordinary admissions from a Government Department in relation to the PAC. The Department has never published a compelling cost-benefit analysis for its top-down imposition of a structure for which there was so little demand and for which the costs were always projected to be vast. It seems that the Government will remain in denial until the very last. The Opposition believe that integration should be pursued through local procurement that is open to national, open standards. Any action that we take if we are elected will depend on what we inherit, but we intend to halt and renegotiate the local service provider contracts to prevent further inefficiencies and to dismantle the central IT structure.