Public Accounts Committee Debate
Philip speaks in support of the work of the Public Accounts Committee in effecting improvements in efficiency and value for money from Government departments and agencies as a result of investigations by the committee.
7.54 pm
Mr. Philip Dunne (Ludlow) (Con): It is a great pleasure to follow my hon. Friend the Member for South Norfolk (Mr. Bacon), who confirmed his six years' experience on the Public Accounts Committee. That considerably outweighs mine; I have just had my first anniversary.
I have also enjoyed serving on the Committee. I have come to appreciate the value of its work in identifying 23 Oct 2007 : Column 239 management failings in the public sector-whether they involve value-for-money or efficiency issues. We have heard many such failings rehearsed by hon. Members this evening.
I should like to highlight one particular aspect of the Committee's effectiveness which I have noted from a number of our evidence-taking sittings. It appears that the threat of a National Audit Office investigation followed by a PAC report can have an electrifying effect on the relevant Department or agency. When the permanent secretary or chief executive of the agency come before us, they quite regularly seek to respond to our questions by pointing out what improvements they have made since the National Audit Office report was written.
As the hon. Member for Great Grimsby (Mr. Mitchell) said, there is a considerable delay between the publication of the NAO report, our meeting to discuss it, the publication of our report and the publication of the Treasury minute. During that whole period, the Department or agency concerned is under a degree of scrutiny. In many cases, their ability to point to improvements resulting from what has been flagged up in the initial investigation is remarkable. That is clear evidence of the effectiveness of our Committee, and I doubt whether other Select Committees have such an effect; I am sure that they do on some issues, but not as frequently as ours does.
The Committee also occasionally has an electrifying effect on Ministers, who, although they do not appear before us, can make policy adjustments as a result of our conclusions. Sometimes, such measures include the ultimate rectification, which may lead to the scrapping of the initiative or the agency-we have even seen the scrapping of a Department in the past year or so.
I should like to give two specific examples of the effectiveness of our work. The first comes from the 11th report on supporting small business, published on 6 February this year. The Small Business Service was formed in 2000 as an executive agency within the Department of Trade and Industry. On 19 June 2006, a month before I joined the Committee, the PAC took evidence following a highly critical NAO report, which had identified 265 separate funding streams within the Small Business Service. They were included in a total of some 2,500 business support schemes promoted by various branches of the Government. The then Chancellor had spotted that that was a potentially inefficient way to help business, and in the 2006 Budget he announced an initiative to reduce the schemes to a mere 100.
In autumn 2006, the decision was taken to reform the Small Business Service, which has now been reconfigured as a policy unit within what was then the DTI, with 50 core staff-some 10 times fewer than in 2004, when it employed more than 500 people. Since the publication of our report, the Small Business Service has been rectified out of existence and ceased to have executive agency status. On Monday, I looked at the website of the Department for Business, Enterprise and Regulatory Reform to see how many schemes were still in operation. The Minister may well be on top of this, but she might be surprised to know that of the 2,500 original schemes, 2,497 were in 23 Oct 2007 : Column 240 operation, despite the Chancellor's proposal to reduce the figure to 100. She may like to comment on that in her closing remarks.
This morning, I had a meeting with representatives of the Engineering Employers Federation for the west Midlands. During a wide-ranging discussion of support measures for business, one of the messages that came out loud and clear was that there is still considerable confusion about the provision of advice from Government to business. There is a plethora of advisers and schemes but a shortage of cash to help business with the promotion of their endeavours, whether domestically or internationally through exports. I encourage the Minister to consider the proposals in the pre-Budget report to change business taxation, because another message that came across loud and clear is that the changes to capital gains tax, supplementary business rates and increased corporation tax rates for small business are extremely unwelcome in that sector. Taking some advice from the business community on those measures, alongside work through the plethora of schemes that I mentioned, could well have much more impact on promoting small business. I hope that the Minister will consider that.
The second report of our Committee that clearly had an impact was our 37th report on the Child Support Agency and the implementation of the child support reforms. The failures of the CSA have been well rehearsed in this Chamber over many years. The Government have now decided to replace it, and introduced legislation to do so in June this year. They had looked at the Committee's conclusions, and I think that we can take some credit for helping to identify failings in three specific areas. The first of those concerned the identification of uncollectible debts. As we know, the CSA has some £3.5 billion of debts from non-resident parents. The Committee identified, through the persistence of our questioning, that of that amount £1.9 billion is deemed to be uncollectible, partly because the debts were attributed to non-resident parents as a device by the officers involved to try to frighten them into making a contribution by putting a debt on the system which could subsequently not be taken off because of IT incompetence. The system's inability to correct that anomaly was one of the fundamental reasons why it was decided to scrap it.
The second area concerned the backlog of cases stuck between the different phases of the system, where progress was being made but it was painfully slow. More than 100,000 cases remain stuck, and nothing can be done. The third area concerned our pointing out the effectiveness of similar schemes in other countries, particularly Australia. In our conclusions, we identified the effectiveness of the Australian system in providing access to personal tax information on non-resident parents as being an effective way of establishing their genuine income rather than their claimed income. I believe that the Government have taken that on board in the legislation they have introduced and there will be access to information held by Her Majesty's Revenue and Customs. I welcome that.
I should like briefly to touch on a few other reports to highlight some of the areas where we have been helpful or could be helpful to the Government in looking at ways to improve delivery of public services. In March this year, our 13th report on smarter food procurement covered a whole range of aspects of Government procurement designed to provide not only efficiency in the use of public money but other policy initiatives. We have heard about the importance of healthy eating as a means of trying to address public health among children in schools, including in relation to obesity. The public sector could play a much greater role in encouraging the health of our children and young people.
More effective procurement can lead to direct cost savings for the agencies involved, as well as much wider social and economic benefits. That does not apply only to health. With the advent of bluetongue disease, which now covers most of southern England, a major role could be played by Government Departments, especially the Ministry of Defence and other major procurers of large quantities of meat products. If they were required to buy British meat, as opposed to importing it from other countries, that could have a significant impact on improving the lot of British farmers who are suffering all over the country.
That brings me to our 32nd report on the Department for Environment, Food and Rural Affairs, where we looked at rights of access to open countryside. As a result of persistent questioning through our Committee when we met last November, we established for the first time that DEFRA budgets had been cut across the piece as a means of paying the fine that had been imposed as a result of the Rural Payments Agency fiasco. Although the amounts of money in relation to this particular programme were quite small-just over £1.1 million had been cut from that year's budget-it was the first time that I had been aware that the Treasury was seeking to resolve the payment of the fine by slicing budgets across its programmes. Harking back to the comment about who gets rewarded or suffers the consequences following failures within Departments, I remind hon. Members that not only civil servants get rewarded for abject failure, but Ministers too. The Secretary of State at DEFRA at the time of the RPA fiasco was subsequently promoted to Foreign Secretary.
Our 19th report was entitled “A Foot on the Ladder: Low Cost Home Ownership Assistance”. We discovered through our questioning that very little information had been available on the effectiveness of measures to encourage low-cost home ownership or on what happens after funds are deployed to help people to get their first foot on their housing ladder. That is another example of persistent questioning in our Committee encouraging officials to respond appropriately to the relevant criticisms that have been made. The Treasury minute in relation to our suggestions confirmed that it would accept most of our recommendations-for example, on measuring how many households had increased their proportion of ownership after the initial purchase of an interest in a shared equity mortgage property, on how often the purchase of a property through one of these schemes helps to free up social rented housing elsewhere in the locality, and on the effectiveness of the help provided to key workers in seeking to get them housed in areas close to where they work. The Government could also learn lessons from advice from other quarters on how to encourage home ownership. My hon. Friend the Member for Tatton (Mr. Osborne) has made some significant proposals to abolish stamp duty, which would have a dramatic impact on encouraging first-time home ownership.
The last report I shall touch on, which was referred to by others, is the 22nd of the Session, the tax credit report published on 9 May. We have been taking evidence on tax credits from the chairman of the Inland Revenue and it is clear from what he has told us that the whole edifice was originally constructed with a significant amount of error-I do not say fraud-in prospect. The Revenue's accounts have not been signed off by the Comptroller and Auditor General as a direct consequence of that programme, and the extensive fraud and error that it is not able to quantify. It is the case that 2.8 million people have either been overpaid or underpaid tax credits-32 per cent. of claimants as of the latest year end available, 2005-06.
The chairman admitted that a high proportion of errors were designed into the scheme from the outset and I do not need to remind the House that it was the then Chancellor of the Exchequer who designed it. The chairman was unable to quantify precisely how many errors were anticipated but accepted that the complexity of the scheme meant that errors were likely, with individuals having to notify the Department of changes in circumstances each time that they happened.
Mr. Bacon: On a point of clarification, or correction, the accounts were signed, but subject to a qualified opinion. What does my hon. Friend think that it says about the economy, effectiveness and efficiency of tax credits that some of the people who ought to benefit most from them have said, “I want nothing more to do with this, even if it means I'm financially less well off”? What kind of a welfare system evokes that response?
Mr. Dunne: My hon. Friend, along with most other Members, will have had countless constituency cases where, as a result of some of the errors inherent in the system, some of the most vulnerable in our society have been encouraged to repay substantial amounts of money amounting to thousands of pounds. When such errors occur, it undoubtedly shakes the confidence of those individuals in the quality of our benefit system. It is no surprise to hear that some people would rather wash their hands of it.
Another thing that came out of inquiries into tax credits was a lack of transparency in Government when introducing the scheme. The income disregard was increased in the 2005 Budget from £2,500 to £25,000, and at the time I recall that very little, if any, information was provided by the Treasury on the financial consequences of that. An overall number was put into the Red Book, which was an agglomeration of different aspects of the benefit changes involving tax credits, but that particular income disregard was never specifically quantified, and it was only as a result of persistent questioning by our Committee that the Treasury were prepared to come up with the estimated cost of the disregard, two years later. That is a sorry state of affairs, because it had clearly made the calculation but was not prepared to make it public at the time, presumably for reasons of political embarrassment. Again, that demonstrates the value of the Committee in holding not just Government to account, but their officers and organs.
8.13 pm
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COMMITTEE CHAIRMAN EDWARD LEIGH MP'S REMARKS
I also thank my hon. Friend the Member for Ludlow (Mr. Dunne), who is a new member of the Committee, which reminds me to take up one more important point about where our systems often fail. As we saw with the NHS IT project, we often publish our report only for the Department to say that it has dealt with the problem. That is because we have shot ourselves in the foot, because our report has been so long delayed after the initial NAO report. I am trying to put pressure on 23 Oct 2007 : Column 257 the otherwise excellent NAO to try to speed up the process. It is because it is so careful that the process can take so long, but I want to see clearance speeded up. I say to Ministers and civil servants who read the report of this debate that there are often long delays between the NAO team finishing its investigation and its being allowed to publish its report. I want to see the process brought right up to the PAC hearing, so that we get up-to-date information. After the hearing, the NAO should write the draft report much more quickly, so that we can publish it. The whole process should be completed within three months, if possible, so that on the day that the PAC publishes its report we do not get the response from Ministers, as we frequently do, “Well, it's a very interesting report, but we've dealt with all those points.” I am grateful to my hon. Friend for highlighting that point.
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PHILIP'S OTHER INTERVENTIONS IN THE SAME DEBATE
Mr. Philip Dunne (Ludlow) (Con): Does the Chairman of the Committee agree that it is not only important for notes to be made available when they are promised, but for the responsible officers of Departments to appear before the Committee whether or not they remain in post? I am thinking particularly of Mr. Johnson McNeil from the Rural Payments Agency, who failed to appear before our Committee for nearly a year after he was initially invited to do so.
Mr. Leigh: That was a worrying development. Civil servants have a very difficult job, but usually, whatever happens, and whatever mistakes are made, they keep their job. If something goes wrong, however, they know that they must appear before the Public Accounts Committee. Mr. Johnson McNeil presided over one of the greatest failures of government and caused a lot of anguish to farmers. Our hearing, however, was delayed for the better part of a year while various sick notes were put in, phone calls were not returned and so on. Finally, he appeared, and in my view he was a perfectly adequate witness who gave his side of the story.
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Mr. Dunne: I can confirm that he met the Secretary of State twice. The second time was to get fired.
Mr. Leigh: Well, there we are. Perhaps he made the mistake of standing up to a Minister on the first occasion; we do not know.
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Mr. Dunne: The right hon. Gentleman makes a telling point. Does he agree that it is disappointing, given the new structure established this year for the BBC Trust, that Sir Michael Lyons, who chairs it, should have rejected our overtures to re-examine the accountability of the BBC? In a letter to the Chairman and me, received last week, Sir Michael declined the opportunity of a review.
Mr. Williams: That does not surprise me. Indeed, it makes me wonder what the BBC has to hide.
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Mr. Dunne: I am grateful for that explanation. Does it mean that when an external event takes place such as a fining by the European Union, the Treasury will not take the initiative but will rely on each Department to submit an application?
Angela Eagle: No. It will obviously be aware of such events if they are due to happen.
If an unfunded pressure of any sort was expected, there would be a dialogue with the Department concerned. However, if the Department then decided to make a claim on the reserve, the Treasury would make the decision. Although it might have suggestions to put to the Department, it would not insist that the Department do anything in particular about its unfunded pressures; that would be a matter for the Department. As I said earlier, it is a decision for the Treasury only if a claim is made for allocation to the contingency fund. Despite its reputation, the Treasury does not micro-manage every departmental budget.
Mr. Dunne: Given that if a claim is made it is for the Treasury to decide whether to accept or reject it, was a claim made in this case and rejected by the Treasury?
Angela Eagle: The hon. Gentleman has the better of me. We are dealing with 40 reports, and I cannot give him a detailed answer to a specific question of that kind. However, I should be happy to find out whether I can discover the answer for him.
