Analysis - Where angels fear to tread ...

At the last count the National Audit Office calculated it saved the taxpayer #493m in 1999.

Part of the reason for this is because of the work of the Public Accounts Committee (PAC). The committee, by raising the findings of audit office reports in parliament, is essentially the political arm of the NAO.

It takes the vast majority of audit office reports, then holds House of Commons’ hearings at which Whitehall officials, though not MPs, are often grilled on why things have gone so expensively wrong. Then it produces its own report with a list of recommendations in an attempt to make sure whatever has gone wrong never happens again.

The shocking findings of the NAO are given an extra impetus by the PAC’s power and ability to expose the ways of Whitehall and turn the spotlight on the powerful.

And the government is obliged to respond to its findings through something known as a Treasury minute. Composed of a 14-strong team of MPs, traditionally led by a member of the opposition, the PAC is one of the few areas where parliament has retained the power of scrutiny over the executive.

Among high-profile successes has been the highlighting of the government computing crisis in 1999 that resulted in a backlog of over 500,000 passport applications and queues that shamed ministers. The spotlight also shone on the new #25m Private Finance Initiative Skye Bridge that costs #5.70 a time to use.

Last November the PAC accused the Ministry of Defence of ‘unwarrantable arrogance’ over its findings on the causes of the Chinook helicopter crash in the Mull of Kintyre in 1994 which cost 29 people, mostly military intelligence personnel, their lives.

‘Whitehall fears the Public Accounts Committee. It is the only thing Whitehall does fear,’ says a bullish PAC chairman, David Davis. ‘That’s because the committee has the power to embarrass.’ Its successes seem even more notable given many Commons’ committees are considered under-resourced and overstretched. And its work is varied. In the next few weeks the PAC will consider the multi-billion pound issue of defence procurement, the National Blood Service and the sale of UK gold reserves.

By the PAC’s own calculation there is a 95% compliance rate by government departments of committee recommendations. During the financial year 1998/99 the committee produced 39 reports with 408 recommendations, 387 of which were accepted.

PAC supporters say it is not only financial costs that can be accounted for. Together with the NAO, it helps to spread good practice among government departments and agencies and work to ensure that the same mistakes are not repeated.

‘It’s certainly a system with a lot of strengths,’ said a NAO spokesman.

‘We seem to complement each other.’

But there is one area the PAC does not touch – local government. Despite the fact that local authorities’ annual spending tops #81bn, there is no equivalent PAC body for local government. Davis sees this as puzzling and something that needs rectifying.

He believes it is an anomaly easily fixed. ‘We need another committee. A PAC2, or call it whatever you like. It does seem to me to be a totally obvious idea.’

Such an idea opens up a minefield of other issues – not least whose job should it be the judge of how and why money is spent locally, a committee of MPs, auditors or the ultimate test, local residents through the ballot box?

Davis points to the crucial areas of work covered by local government – health, education and the police – as being the ‘sexy’ issues which go a long way to determining which party is elected when it comes to general elections.

Local government ‘is where the rubber meets the road’ on many vital policy issues he says. As such he feels there should be increased scrutiny of the money spent outside Westminster.

And as well as the traditional area of work by local authorities there is also the increasing use of the Private Finance Initiative (PFI) by town halls. In its Spending Review 2000, the government said it would support #1bn worth of PFI deals at local level in the next financial year rising to #1.6bn by 2003/04.

Critics of the PFI system, such as Professor Allyson Pollock, head of the health services and health policy research unit at the School of Public Policy, say it is too prone to secrecy.

She says many public bodies hide behind the argument that PFI deals are commercially sensitive and therefore negotiated behind closed doors despite their impact on millions of people.

Add to this the acquisition of increasingly expensive IT systems at local level and what Davis calls ‘corruption and waste’ and the whole subject he says becomes more puzzling. Davis is not advocating this work be picked up by the PAC but instead by a new body created that would, along with the town hall watchdog, the Audit Commission, mirror the relationship between the PAC and the NAO. This he claims would help the commission’s reports to be more widely regarded.

‘The Audit Commission does not have the cutting edge of having its own Public Accounts Committee that has to report to government. That takes an edge off of what they do,’ he says.

This is not the first time Davis has aired the topic in public.

During Environment, Transport and Regional Affairs select committee hearings into the Audit Commission last year, Davis floated the idea of a ‘PAC2’.

Although he believes the commission does ‘good quality work on the value for money side’, he questions how far it replicates the role of the committee when it comes to financial audit.

The commission says that any change in the arrangements on scrutiny is a matter for the government, although it welcomes extra scrutiny. But others are more forthcoming. Senior figures in local government say scrutiny of local government is fast becoming a growth industry. Currently councils must face an internal and external auditing process, with the results released to the public.

Councils face Ofsted and Social Services inspections and the introduction by New Labour of the best value regime means that all local authorities face an imposing set of national and local indicators on every council service. Adding another layer they claim would be one too far.

‘Across the public sector in the UK, local government is the most audited and inspected already. What we don’t need is another round of scrutiny. There is enough national prescription,’ says Brian Briscoe, chief executive of the Local Government Association, the body that represents councils in England and Wales.

It is a viewpoint that the select committee has sympathy with.

‘We are alarmed at the current and future impact of a developing culture of over-inspection in the public sector,’ it concluded last year following its examination into the commission. This burden seems to be particularly acute for local authorities. The government must recognise the potentially dire consequences of failing to minimise and co-ordinate inspections of local government.’

Part of local government’s sensitivity is that they feel there is too much central prescription from Westminster, where telling local government what to do remains in fashion whatever party is in government. Briscoe argues that the introduction of a PAC would be another example of central government ‘bullying’.

He argues that the gaze of parliament is best directed elsewhere. ‘There is so much opportunity for the politicians, the new start agencies, the water agencies. Local government is far more accountable than other sectors.’

Sir Jeremy Beecham, chairman of the LGA, says he would rather have parliament’s efforts directed into examining the financial relationship between central and local government that leaves councils relying on almost all of their funds coming from Westminster.

His argument is that the tight control on cash acts as a form of scrutiny itself.

Janet Sillett, policy officer at the Local Government Information Unit, says there are flaws within the PAC/NAO system that means it may not be the ideal model to emulate.

‘The big reports that the NAO does could be more useful if they were done before (major projects were completed).’ But accounting for public sector money, billions of it, is something that will always prove contentious.

At the heart of the issue is transparency and accountability.

As local government is used by Westminster to use it to implement central policy objectives such as the reduction of class sizes or neighbourhood renewal, councils may find they come under more scrutiny. The end result could be that Davis will find his view is the one that is ever more commonly held.

News analysis: Sharman puts audit on public view, page 12

Information about the Public Accounts Committee can be found at www.parliament.uk/commons/selcom/pachome.htm

Profiles of David Davis and other major Whitehall players can be found at www.accountancyage.com/Public+Services/1113116

TIMELINE

Like many things in the UK, the Public Accounts Committee is an invention of the Victorian age.

Established in 1861, its job was to examine parliamentary spending.

In 1983, with the passing of the National Audit Act, its main work has been to examine NAO reports on the value for money provided by government departments and other bodies that use Westminster resources.

It has fifteen members, who are nominated at the beginning of each parliament, reflecting party proportions in the House of Commons. The committee also chooses its own chairman.