Chancellor Announces Reform of Queen's Accounts

The Queen's accounts are to be subject to full National Audit Office scrutiny and open to questioning by the Commons' Public Accounts Committee, in a radical reform of royal finances unveiled by Chancellor of the Exchequer, George Osborne MP.  
Mr. Osborne said that his Sovereign Grant Bill will provide for the Sovereign Grant accounts to be audited by the comptroller and auditor general and laid before Parliament, where they will be subject to the Public Accounts Committee.

Public Accounts Committee Chairman, Mrs. Margaret Hodge MP described the move as 'historic', adding:

"It is hugely important for the future stability of the monarchy and its role in our constitutional settlement that we should modernise our structures, so that they are fit for purpose in today's world and properly meet the legitimate expectations of the taxpayer and the general public.

"This puts, for the first time, those parts of the royal finances that come directly from the taxpayer each year on a transparent basis, consistent with other public expenditure.

"The PAC has a long and well-established history in effective public scrutiny and we will, I am sure, approach these new responsibilities in our traditional way, working objectively and thoroughly on behalf of Parliament and the taxpayer."

Gainsborough Parliamentarian Edward Leigh MP, and Mrs. Hodges' immediate predecessor, said the committee had, under his chairmanship and that of Mrs. Hodge, fought to improve scrutiny of royal finances but added:

"I never thought this day would come."

"This will be tough for the royal household – there is no doubt about that – and there will be strong questioning in the committee, as there is on all these subjects, but that is absolutely right because that is what we are about: accountability. I think they have absolutely nothing to fear."

Shadow chancellor Ed Balls MP welcomed the change and remarked that it was vital Parliament should properly scrutinise such significant sums of revenue.

Conservative economic secretary Ms Justine Greening MP, an accountant, said the Bill brings accountability arrangements for the royal household into line with those for other government departments. She commented:

"Sovereign grant expenditure will be audited annually by the comptroller and auditor general and those reports will be laid before Parliament. Should it wish to do so, the Committee of Public Accounts will also be able to scrutinise grant expenditure and will be able to invite the royal household to give evidence."

Ministry of Defence: Treating Injury and Illness Arising on Military Operations

Edward Leigh MP, Conservative (Gainsborough), Chairman of the Committee of Public Accounts, today said:

"We recognize the good work the MOD has done up to now in caring for servicemen and women seriously injured on operations in Iraq and Afghanistan. The Department and its medical staff are providing a level of care which compares favourably with that provided by the best NHS hospitals.

"What concerns us is the extent to which the MOD would continue to be able to provide that high standard of care if the casualty rate were to increase significantly. Selly Oak Hospital, where returning casualties are first treated, offers injured troops a military culture and environment, expertise in dealing with serious battlefield injuries and wider support for families. The Department needs detailed and robust plans for how it would replicate these important elements in other NHS hospitals and provide the same high standard of care if Selly Oak became full.

"The MOD is planning to expand the capacity of Headley Court where troops with serious and complicated injuries go after Selly Oak for rehabilitation. Given that the facilities at Headley Court are likely to come under increasing pressure, the Department must make sure that the extra beds to be provided are enough."

Mr. Leigh was speaking as the Committee published its 27th Report of this Session which, on the basis of evidence from the Ministry of Defence (the Department), examined its treatment of injuries and illnesses arising as a result of fighting in Iraq and Afghanistan.

A total of 565 service men and women have been seriously injured in Iraq and Afghanistan since October 2001. Over the same time, some 125,000 troops who were based in Iraq and Afghanistan have sought medical help for minor injuries and illnesses, and a further 1,700 for mental health conditions. Medical care for troops injured or ill on operations is first provided by medical officers in the field. More serious conditions are treated at the field hospital at Bastion. Nearly all seriously injured troops who return back to the UK for medical treatment go first to the NHS hospital at Selly Oak and then to Headley Court for rehabilitation.

The Department’s care of the seriously injured to date has been highly effective and the Committee welcomes the efforts of the Department in this area. The Department has developed a number of new medical techniques which have contributed to this. The Department’s success is demonstrated by the rates of unexpected survivors, which are favourable compared to major trauma victims treated by the NHS. The Committee also commends the good work of the Department to support the families of seriously injured troops.

The main challenge the Department faces, should casualties increase significantly, is to ensure that all military patients will receive the same standard of care they currently experience at Selly Oak and Headley Court.

Some soldiers have suffered severe life changing injuries and will require specialist care for many years. This presents a further long term challenge not only for the Department who provide specialist care for them and support for their families while they remain in the Services, but also for the NHS and other government departments who will become responsible for the medical care and support of seriously injured soldiers after they leave the Armed Forces.

Minor injury and illness are a lesser issue but still have the potential to impact on the fighting strength and morale of our Armed Forces in Afghanistan and the increase in rates from 4% to 7% since 2006 is of concern. The Department believes that increased reporting is in part responsible for this rise but cannot quantify the significance of any one individual factor.

'Raving Lunatic' or 'Courageous Soul'?

Austin Mitchell MP, Labour (Cleethorpes), once changed his name by deed poll to 'Austin Haddock' to highlight the plight of British trawlermen, however, cold water is not for him, it seems. Attending a meeting of the Public Accounts Committee, he talked about the 'raving lunatics' who go swimming in the wintertime.

Right: Edward Leigh MP swims in a hole made in the ice covering the Serpentine in Hyde Park on Thursday, 8th January 2009.

Chairman of the Public Accounts Committee, Edward Leigh MP, Conservative (Gainsborough), pointed out that he himself swims in the Serpentine in Hyde Park every day, come rain or shine. A flustered Mr. Mitchell implored the official shorthand writer to substitute the phrase 'raving lunatics' for 'courageous souls'. Mr. Tim Walker of The Daily Telegraph notes gleefully that:

"Happily, Hansard does not go in for redaction."

Promoting Participation With The Historic Environment

Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:

"The Department for Culture, Media and Sport gave English Heritage unrealistic targets to increase the number of visits to historic sites by people from three specific underrepresented groups. With no clear evidence of how the target levels might be achieved, English Heritage opted instead to focus on increasing its income from visitor attractions, at the expense of activities to increase participation.

"The truth is that the proportion of the UK population visiting historic sites is already some 70 per cent, an impressive total, and most of the people who don't visit say that they are not interested in doing so. It is hard to see what useful purpose was achieved by setting targets to increase visits from this or that underrepresented group.

"There was certainly no point in the Department's setting targets to widen participation when it did not know how achievable they were, had little understanding of the different factors affecting participation and had no way of measuring the impact of its own actions or those of English Heritage.

"This Committee supports the principle that the nation's heritage should be accessible to all. A crucial factor in developing a lifelong interest in historic sites is to be taken to see them as a child. English Heritage should aim to reverse the decline in free educational visits by children to its own sites, establish a way of measuring progress and report back to this Committee by April 2010 on what has been done."

Mr Leigh was speaking as the Committee published its 5th Report of this Session which, on the basis of evidence from Department for Culture, Media and Sport and English Heritage, examined the actions taken to achieve the Department's objective to get more people interested in heritage.Many people care deeply about and value the nation's heritage. Widening opportunities for people to interact with the historic environment has been a policy objective of the Department for Culture, Media and Sport (the Department) for a number of years. In 2005, the Department agreed targets to increase the numbers of people who visit historic sites from three priority groups-those with a limiting disability, those from lower socio-economic groups and those from black and minority ethnic groups. The Department missed its targets to increase visits from two of the three priority groups but has no idea why. It has not conducted research into how achievable the targets were, or how they would be met, and the survey for measuring visits to historic sites does not allow the Department to evaluate the impact of its own activities or those of its main delivery agent, English Heritage. English Heritage is the Government's statutory adviser on the historic environment and has a critical role to play in increasing public support and interest in heritage. But in recent years it has been faced with a decline in public funding, coupled with an increase in its responsibilities, and has therefore prioritised increasing the money it makes from visitors to its sites. The Department reached agreement with the English Heritage on what it would do to support the department's objectives for participation in the future only just in time for our hearing, and over half way through the current funding period. Such weak accountability creates serious risks to value for money.

The Department did not convince us that having a target focussed on increasing visits from those in underrepresented groups to historic sites served a useful purpose. The proportion of the population visiting historic sites is already high and most of those who do not do so say they are not interested in heritage. Furthermore, the historic environment can be experienced and enjoyed by walking down the street, visiting a local church, watching television or using the internet. Building stronger public support will depend on taking an inclusive approach to what constitutes our heritage and in particular on developing an interest in heritage in children of all backgrounds. English Heritage has assured us that it will reverse the concerning downwards trend in educational visits to its own sites.

Report available here: Promoting Participation With the Historic Environment (House of Commons, Report By the Comptroller and Auditor General, Session 2008-2009)

A second progress update on the administration of the Single Payment Scheme by the Rural Payments Agency

Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:

"A large part of the responsibility for this public administration debacle lies with the Department for Environment, Food and Rural Affairs. It has consistently failed to spot continuing problems with this scheme for paying EU grants to farmers and to get to grips with issues previously raised by this Committee. But this lack of attention has been compounded by poor leadership and management information in the Rural Payments Agency.

"It is an extremely serious charge from this Committee that negligible attention has been paid to taxpayers' interests. The £350 million IT systems underlying the scheme are cumbersome, overly complex and at risk of becoming obsolete and they continue to soak up huge sums of money. The information held is riddled with error and efforts to recover overpayments have been woefully slow, haphazard and ineffective, causing anxiety and concern to farmers.

"The Department is still unable to come to terms with its failure, first having confirmed the validity of the National Audit Office calculation of some £1,700 for the average cost of administering each claim and then offering an alternative cost of £700. The Committee's confidence in the Department's ability to cut costs in future was hardly boosted by its unconvincing explanation why its interpretation was more reliable than that of the NAO.

"The truth is that the Department has either not grasped the seriousness of what has been happening or been reluctant to face up to problems. We have now insisted, and the Department has agreed, that it provide us with clear evidence of what progress has been made and explain how it is meeting the NAO's recommendations."

Mr Leigh was speaking as the Committee published its 1st Report of this Session. This is the third time in three years that the Committee has taken evidence on the £1.6 billion Single Payment Scheme in England administered by the Rural Payments Agency (the Agency) and the Department for Environment, Food and Rural Affairs (the Department). On the basis of a follow up report by the Comptroller and Auditor General, the Committee examined the progress made in addressing our previous concerns and the capacity of senior managers in the Agency and the Department to resolve matters.

Oversight of the Single Payment Scheme is a singular example of comprehensively poor administration on a grand scale. The paucity of good management information in the Agency and the complacent oversight by the Department have acted to obscure the true situation for far too long. A focus over the last two and a half years in bringing forward payments to farmers has enabled the Agency to bring its deadline forward by nearly seven weeks, but this is still six weeks off the deadline it had planned and a long way short of the standards set in Wales, Scotland and Northern Ireland.

In the meantime, there has been negligible attention to the protection of taxpayers' interests. Despite all the assurances previously given to this Committee, the Agency has spent £350 million on a cumbersome IT system that can only be supported at huge cost and which is increasingly at risk of becoming obsolete. The data held in the system remains riddled with errors and efforts to recover overpayments have been slow, disorganised and haphazard.

The root cause of this debacle has been poor leadership within the Agency and a lack of attention by the Department. Each claim costs over six times more to process in England than Scotland and yet the Chief Executive received a performance bonus in 2008-09. The Department was not able to demonstrate an adequate grasp of the costs of administering the scheme.

There has been a high turnover of expensive senior management appointments in the Agency and it appears to have been reluctant to face up to the problems by taking the firm action required to turn the organisation round.

Responsibility rests with the Accounting Officers to resolve this misadministration. The Committee is very concerned at the absence of progress to date and looks to the Departmental Accounting Officer to take personal responsibility for this scheme, develop an action plan and to report back to us regularly on progress. The Committee expects to receive the first progress report by the end of January 2010 and to see clear evidence that its concerns are being properly addressed.

Assessment of the Capability Review Programme

Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:

“The introduction by the current Cabinet Secretary of a programme of published, external assessments of the capability of individual government departments is a significant advance. The programme has encouraged changes in the way departments operate. What cannot yet be demonstrated, however, is a link between such changes and actual improvements how public services are delivered.

“Assessments currently rely too much on qualitative and subjective measures. A wider range of objective quantitative measures is required. There must be quantitative comparisons with the best private and public sector organizations. And the culture within the civil service of managing the performance of individual staff, with incentives to reflect success and sanctions to tackle failure, must be greatly strengthened. Senior leaders in poorly performing government departments seem proof against dismissal in a way that leaders in local government are not.

“Where departments differ conspicuously from many private sector organizations is in having a much poorer understanding of what their customers want. Without a culture than focuses consistently on the needs of the user, improvements to performance in delivering services will simply not happen.”

Mr Leigh was speaking as the Committee published its 45th Report of this Session which, on the basis of evidence from the Cabinet Office, examined taking forward Capability Reviews to link more clearly with demonstrable improvements in performance, improving leadership and management throughout the delivery chain, and changing the culture of the civil service.

In 2005, the Cabinet Secretary launched a programme of two-yearlyCapability Reviews. They involve published external assessments of departments with the aim of achieving a major improvement in civil service capability. The programme is a significant step forward in how government departments are assessed. To have publicly available commentary, sometimes critical, of important aspects of departments' capability is an initiative of great value, with real potential as a driver for improvement. It is vital that the programme becomes permanently embedded and is developed in line with this report's recommendations. We intend to return to this subject after two years to review progress.

The first-round reviews, in 2006-07, showed that departments had a long way to go. Overall, departments were rated as less than 'well placed' in two-thirds of the assessed elements of capability. In response, departments have made changes in the way they are run, particularly in terms of board and senior executive team visibility and leadership. The 11 departments that have had second-round reviews have achieved significantly higher assessments. However, the recession and a tighter budgetary context will increase future challenges by requiring departments to achieve more with less.

The link between Capability Review scores and delivery performance is not clear because assessments are based largely on qualitative and subjective evidence. The close involvement of the Cabinet Secretary has provided a valuable challenge and check of reasonableness. But it will be essential, in order to achieve sustained improvements in departments' ultimate delivery, for there to be more objective and quantified metrics to link assessments to demonstrable improvements in performance. It will also be necessary to introduce a strong element of external benchmarking to drive greater improvement.

The second-round Capability Reviews show that staff confidence in senior management is improving but is still too poor. Alongside the need for further improvements to senior leadership, Capability Reviews do not yet give sufficient attention to middle management, front-line staff and departments' delivery partners and agencies. And unlike local government assessment, which includes political leadership, Capability Reviews do not consider how well Ministers and senior management work together to achieve desired outcomes.

The Cabinet Secretary intends to use Capability Reviews as a catalyst to change civil service culture so that it is more collaborative, dynamic, customer focused and innovative. We applaud this aim but note that there is a long way to go. Departments need much more robust staff performance management, better insight into their customers' needs and preferences and greater use of innovation.

Investing for Development: the Department for International Development's oversight of CDC Group

Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:

"CDC Group, whose role is to help reduce poverty by investing in private businesses in poor countries, has shown that it is very good at turning a profit. And the Group built up its uninvested cash deposits to £1.4 billion by mid-2008, a far higher level than expected. We need to know, however, how effective it is at reducing poverty and so far there is limited evidence.

"CDC is government-owned but its obligations to report to the Department for International Development have been weak. Oversight by the department of how
CDC operated agreed remuneration arrangements was ineffective. These arrangements led to extraordinary levels of pay in a small, publicly owned organization aimed at fighting poverty. The Chief Executive earned £970,000 in 2007. The pay arrangements place too much emphasis on financial performance and too little on success in reducing poverty. "DFID needs to steer CDC to invest more in those poor countries with less well-known and less developed capital markets, rather than in countries such as China and India which are already successful in attracting foreign investors."

Mr Leigh was speaking as the Committee published its 18th Report of this Session which examined how effectively DFID has exercised its oversight of CDC to maximise its development impact.

CDC Group Plc, formerly the Commonwealth Development Corporation, is the United Kingdom's Development Finance Institution. It is wholly owned by the Department for International Development (DFID), which views it as a means to help reduce poverty by supporting private sector development. CDC is self-financing, having received no Government funding since 1995. It does not donate aid. Rather, it invests equity in private enterprises in developing countries in order to demonstrate to other investors that it is possible to make money in such countries, while at the same time creating sustainable jobs, paying taxes and following good social and environmental policies. It now faces the new challenge of investing effectively during a global recession.

DFID restructured CDC in 2004 in order to invest indirectly, through private fund managers. CDC invests largely in sub-Saharan Africa and South Asian enterprises in sectors as diverse as retail, financial, agricultural and manufacturing. Since 2004, CDC has grown rapidly, more than doubling the value of its assets to £2.7 billion by mid-2008. DFID's oversight of certain elements of business efficiency needs to be improved. High profits have led to CDC accumulating some £1.4 billion of uninvested cash, far higher than expected. And management of rising levels of executive pay has been weakened by misunderstandings, particularly as to when CDC should have consulted DFID.

DFID does not interfere in individual investment decisions but sets the overall framework for CDC's investment policy, which targets poor countries.
As a result, CDC invests over 70% of its resources in poor countries, a far higher proportion than for similar institutions in other donor nations. CDC has limited influence, however, where its fund managers invest within these broad criteria. Only 4% of its resources are invested in small and medium enterprises, which suffer a shortage of finance. And it has only recently reduced new investments in China, which has been relatively well served by other investors.

For DFID, financial performance is the principal indicator of CDC's development impact, but this information is not sufficient to assess CDC's effect on poverty reduction. In 2004, DFID and CDC set out plans to evaluate wider development results and to monitor compliance with ethical investment principles. But it is not doing enough to measure and report these aspects of performance, and work to remedy this situation is only now getting underway.

The level and nature of CDC executive remuneration are also relevant to business efficiency and management incentives. The Chief Executive's remuneration increased from £383,000 in 2003 to £970,000 in 2007, reflecting in part CDC's exceptional financial performance. Advisers concluded that CDC executives were paid below the median for this group. However, CDC does not compete for cash to invest, offers high job satisfaction, and has, since 2004, successfully recruited and retained talented staff.

Examples of Government Waste

This Government has a long track record of wasting taxpayers’ money. In just the last few weeks, when families are tightening their belts, Whitehall continues to waste money as the following examples demonstrate:

1. The Department for Transport spent £121 million on an IT scheme which will save it just £40 million. Current forecasts show that the ‘Shared Services’ Programme will cost £121 million; benefits over the first 10 years will be £40 million; and the net cost to the Department will be £81 million (Public Accounts Committee, Shared services in the Department for Transport and its agencies, 16 December 2008, p.3).

2. IT projects are nearly £2 billion over budget and 86 years behind schedule. Government computer projects are £1.6 billion over budget and 86 years behind schedule. The longest delay is at the Department for Work and Pensions where a new IT system to enforce child maintenance payments is seven years late (The Daily Telegraph, 27 December 2008).

3. NHS hospitals are paying agency staff up to £190 an hour to cover shifts. Figures obtained under the Freedom of Information Act showed some staff were paid hourly rates equivalent to salaries worth hundreds of thousands of pounds a year. Whipps Cross University Hospitals NHS Trust said it paid £188 an hour for an anaesthetics medical consultant – equivalent to an annual salary of £366,000. Trafford Healthcare NHS Trust paid £167 for an A&E doctor, equivalent to £326,000 a year, and Dorset Primary Care Trust paid £158 an hour for a prison GP, which would amount to £307,000 a year (ITV, 3 January 2009).

4. Thousands of pounds a day on celebrities in the NHS. The Department of Health increasingly uses actors, singers, television stars in their advertising campaigns. However it refuses to admit how much it pays these celebrities. Celebrities include The Bill’s Gary Lucy (to record video diaries outlining his struggle to quit smoking), Strictly Come Dancing winner Alesha Dixon (to advertise condoms) and model/TV presenter Melinda Messenger (to promote the 5-A-Day healthy eating scheme). Officials inside the Department of Health have claimed Jenny Frost, of the band Atomic Kitten, was paid £10,000 a day for her work promoting breast feeding (The Observer, 4 January 2009).

Defence Information Infrastructure

Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:

“The Ministry of Defence’s ambitious new £7 billion IT system, designed to replace hundreds of ageing existing systems, was badly planned in important respects. No proper pilot for this highly complex programme was carried out and entirely inadequate research led to a major miscalculation of the condition of the Department’s buildings in which the new system would be installed.

“In addition, the ATLAS consortium implementing the project - led by EDS, a company whose track record of delivering government IT projects has not been exemplary - underestimated the complexity of the software it had agreed to create. For over two years, it was unable to deliver a system that could safely handle Secret material.

“All of these factors contributed towards major delays to the project. There has been recent progress but the rate at which terminals are being rolled-out must improve rapidly if the Department’s latest deadlines are to be realistic.

“Given the scale of delay, the Department must head off the risk that existing IT systems, upon which MoD staff and military personnel rely, will fail. Detailed plans on the cost and timing of work to keep existing systems going must be developed, this planning to be funded from the management fee paid to ATLAS. And if the number of errors in the initial software design increases again, the Department must increase its scrutiny and not hesitate to turn down any claims from ATLAS for higher costs as a result.”

Mr Leigh was speaking as the Committee published its 1st Report of this Session which, on the basis of evidence from the Ministry of Defence, examined the difficulties experienced on the DII Programme in the past and the measures put in place to deliver improvement in future.

The Ministry of Defence (the Department) needs high quality information technology to achieve its goals, both on operations and in the United Kingdom. It is currently replacing hundreds of existing computer systems with a single new system, called the Defence Information Infrastructure (DII). The Programme to design, install and run this is being led by the ATLAS consortium. Ultimately, the Department intends to have some 150,000 terminals supporting 300,000 users at more than 2,000 sites, with additional capability on deployed operations and Royal Navy ships. DII must be able to handle material classified as Restricted, Secret and Top Secret. The Programme began in March 2005 and will cost an estimated £7.1 billion by 2015, if fully implemented.

The implementation of DII has suffered from major delays. Whereas 62,800 terminals should have been installed by the end of July 2007, only 45,600 were in place at the end of September 2008. The main causes of delay were the Programme’s over-optimistic assumptions about the condition of the buildings into which DII would be fitted, and the consequent selection of an inappropriate and unresponsive methodology for installing terminals.

The DII Programme also provides a range of core software such as word processing, email, internet access and security to run on the new system. This should all have been available in June 2006, but less than half of the requirement had been delivered two years later in June 2008. The slow pace of software design has been caused primarily by the ATLAS consortium’s inability to meet the Department’s requirements.

As a result of these problems, the Department’s existing computer systems have had to be used for longer than intended, with the increased risk that one or more of them will fail. The forecast cost of the DII Programme has also increased by an estimated £182 million. The Department has been able to protect benefits of the Programme, totalling an estimated £1.5 billion in due course, although some benefits will materialise later than planned.

In recent months, the performance of the DII Programme has improved somewhat, with some new software having been tested and 3,400 terminals being rolled out on average each month. However, rapid improvement to 4,300 terminals a month will be needed if the Department’s latest deadlines are to be met.

The Department has had a number of significant security breaches of personal data in recent years. An independent review of its data handling was held in early 2008 and the Department is in the process of implementing the recommendations.