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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

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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.

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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

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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

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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

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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

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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.

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