Public Spending – Waste not want not

David Davis MP says he has the best job in opposition as chairman ofs. the House of Commons’ powerful Public Accounts Committee (PAC). It gives him the chance to conduct a wide review of public spending and find out where money is wasted and where it is spent well.

Recently, the committee has examined the legal aid system, and Treasury advice on privatisation and the Private Finance Initiative, and investigated why the courts system is both costly and inefficient.

‘The committee is not allowed by convention to comment on policy, but it is allowed to comment on delivery of policy – and that is a fine line,’ says Davis.

‘But it seems one of the great problems of post-war western countries, certainly post-1960s, is in the delivery of policy. You get politicians passing new laws and regulations, with almost invariably good aims, and what happens is that it doesn’t achieve what you expect and costs more than you expect.

‘Politicians also have a habit of doing something and moving on and, apart from at elections, very rarely are they brought back to the delivery of what they designed. It is like aircraft designers who never fly in anything.’

Davis is a fan of the National Audit Office and of its head Sir John Bourn, the Comptroller and Auditor General. He says that staff at the NAO are intellectually the equal of any civil servants he has come across anywhere, even in the notoriously cerebral environment of the Foreign Office, where he was a minister until the last election.

He dismisses the criticism of the NAO by Sir Peter Kemp, a commissioner at the Audit Commission and former permanent secretary at the Cabinet Office, who suggests the NAO should be taken over by the Commission.

NAO reports may appear mild, says Davis, because the audited body must agree an NAO audit report, but this allows the PAC to interrogate departments from a basis of uncontested fact. It is then up to the PAC to give witnesses a hard time and to draw sometimes withering conclusions.

‘Local authorities like Doncaster have problems that have arisen while under Audit Commission audits, which I would never expect to see in Whitehall,’ Davis adds. ‘I think the Audit Commission does a difficult job well, but I don’t think you can set one against the other and say that one is better than the other.’

He also praises Robert Sheldon, the previous Labour PAC chairman who built its prestige but who had to step down from his position of influence when Labour won the election, reflecting the convention that the chairman must be from the opposition. But Davis makes it clear that he wants to do things differently. A list of proposed reforms slips off his tongue.

Most important, Davis wants the PAC to operate less with hindsight and more with foresight. The committee will focus on new policies and examine their immediate impact. An example is the recent hearings into the operation of the PFI, with PAC reports challenging the Treasury guidelines.

Davis says he will leave to the accountancy profession technical questions, such as whether PFI deals should be off the balance sheet or on, but the committee will carefully examine whether this results in better value for money.

Can PFIs obscure liabilities?

One of the questions the PAC has asked is whether some PFI contracts lead to liabilities being hidden from departmental accounts; an example is the sale of Ministry of Defence homes that will be rented back by the MoD at the cost of likely higher revenue expenditure.

Davis has a different concern. ‘There are plenty of committed income streams in government, much more so than in commercial concerns. It is the decision making that is critical to me: are you losing an income stream, or are you losing a cost stream in the analysis? There is also an argument about where the risk lies.’

Another priority for the PAC is to enable the NAO to audit public money wherever it goes. ‘If we chase down the line and come to a contractor, we want to be able to know more than Deloitte’s or whoever will want to know,’ Davis says.

This would even extend to Camelot, whose income is effectively indistinguishable from public money, says Davis. It would also include companies set up and financed by public bodies, but which company law prevents the NAO from auditing. Davis wants the NAO to have access rights, and to be able to instruct the auditing firm, rather than conduct the audits itself.

The royal household’s #40m expenditure is likely to be audited by the NAO for the first time. ‘It is not about the royal family’s money; it is about taxpayers’ money used in support of the monarchy, the monarchy’s role as head of state, palaces, transport, and so on. That properly should be accountable, that is a constitutional issue,’ argues the monarchist Davis.

Other targets for harsher auditing are housing associations and legal aid.

Across the board of NAO and PAC activity, Davis wants to focus more on value-for-money-audits, using benchmarking to ensure that public sector management is effective. ‘We are as interested in the delivery as we are in cost; that is why our remit is different from many audit functions.

It is, incidentally, one of the reasons why we attract such high-quality youngsters to work for the NAO. They can see this really rather interesting half of the equation, not just the financial audit side, but the propriety.

There is also the value-for-money side.’

Inevitably, near the top of the in-tray for the NAO and PAC is resource accounting – examining the impacts of the new practices and seeing whether there is a common interpretation of Treasury rules. One persistent problem, which the Treasury has acknowledged, is in asset valuation for heritage sites. The Houses of Parliament, for example, have no market value because it is inconceivable they could be sold.

Davis looks forward to the implementation of a Freedom of Information Act. It appears to give some rights to the individual that the NAO currently does not have, he says, which should allow the NAO more access to information, even if staff have to apply for it as private citizens.

The government will in any case find it difficult to refuse to give the NAO more access to departmental records if public access to information is eased. Davis also expects more NAO cases to be initiated through whistle-blowing from members of the public and employees who use their freedom of information rights.

But he is not so relaxed about other forthcoming legislation. While he believes that the relationship between the NAO and PAC and the Welsh Assembly has been resolved – because the Welsh Office took NAO advice – he says there are potentially serious conflicts with the Scottish Parliament. He has tabled Parliamentary amendments calling for the Scottish Parliament to establish its own PAC, to be cast in the same mould as that of the House of Commons. But the government believes this is a matter for the new Parliament itself to decide upon.

Although not a trained accountant, Davis does have a background in financial management, having once been a finance director, and he has a degree in computer sciences. He even taught accountancy at a London college after completing his masters degree at Harvard. He is, in every sense, well qualified for his position, and as enthusiastic as any opposition politician can have ever been.

Watch out government departments, you have a very keen bloodhound on your trail.

Paul Gosling is a freelance journalist.

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