COMMONS

PAC Chair delivers keynote speech on 'Accountability in today's Public Services'

15 March 2012

The Chair of the Commons Public Accounts Committee, Rt Hon Margaret Hodge MP, today delivered a keynote speech on 'Accountability in today's Public Services':


We are all united in the quest for value for money in public spending. Never has that quest been more important than now, as we respond to the imperative of reducing the deficit.

This ambition is shared by politicians on the right and on the left, and shared between politicians and civil servants. We all want the same thing.

The Government, both ministers and civil servants, are tasked with pursuing this goal. But Government must be subject to the closest scrutiny. 

The Public Accounts Committee of the House of Commons is crucial to ensuring appropriate scrutiny and I am fortunate to be its chair – and I am fortunate, too, in having an able bunch of colleagues, as committed to the task as I am.

Lately, it seems that the Public Accounts Committee has been rattling the cage too much for some. There are those who say that shows we’re doing our job properly, but there is a real challenge from the Civil Service on how we are approaching our work on behalf of Parliament and the taxpayer.

Some have upped the ante, even asserting that the PAC’s activism affronts some constitutional principle (of which the civil servants consider themselves custodians). Anonymous briefings suggest that some would even like to dismantle the Committee itself.

So, I am grateful to Policy Exchange - and congratulations, by the way, on your 10th anniversary - for this chance to take a step back from the day-to-day grind of our committee’s work, so that I can reflect and ask some difficult questions about both the relationship between Parliament and the Civil Service and about the changes I believe we need to ensure proper accountability in the new public services landscape.

Just before his departure from Government, the Cabinet Secretary Sir Gus, now Lord, O’Donnell wrote me a letter on behalf of all the Permanent Secretaries raising concerns about the way in which the Public Accounts Committee was seeking to hold the Executive to account. It was as if he had taken on the role of shop steward for aggrieved permanent secretaries.

He berated me for the way in which the Public Accounts Committee was seeking to hold the Executive to account. He was particularly exercised about the hearings we had held during the autumn involving HM Revenue & Customs investigating how it had tackled tax disputes with large corporations and specifically the settlement it had made with Goldman Sachs.

During those hearings we demanded answers from civil servants to serious questions about deals concluded with major corporations which did not seem to properly protect the taxpayers’ interest and which appeared not to comply with HMRC’s own procedures and protocols.

The committee was frustrated. Officials obfuscated, refused to answer our questions. So, during one hearing, we took the very unusual step of requiring a senior civil servant to give evidence on oath.

Thanks to our pressure, and with the help of a whistleblower, we uncovered serious systemic issues which substantially damaged the taxpayers’ interest.
Indeed, in response to our investigation, the Government has now introduced significant changes to the way in which HMRC deals with large tax disputes in future.  Yet despite this acknowledgement of systemic failure, the mandarins continue to insist that we overstepped the mark.

They think we contravened the constitutional ‘principle’ that to maintain impartiality, civil servants should not be accountable to Parliament but should be accountable to ministers, who in turn are accountable to Parliament for all the policy and all the actions of the Government. As for the longstanding right of the PAC to invigilate the chief spending officials, the accounting officers in Whitehall departments, Sir Gus acknowledged the PAC’s role, but wanted to interpret its duties very narrowly.

Is that really a ‘principle’ of the British constitution, or a convenient view from a group who want to resist proper openness and accountability? Call it a convention or a principle – if it does not change, more taxpayers’ money will be wasted, public services will continue all too often to provide poor value, and transparency and accountability will become a charade.

Let me develop the argument. But let me start by stating that I was privileged, as a Government minister through most of the years of the Labour Government, to work with many very bright, committed and hardworking civil servants for whom I have a high regard.

And I know that Government works best where there is a strong partnership between ministers and civil servants.

Although I have to also admit that I more than once wondered  whether the power didn’t always reside with the more permanent  civil servants, rather than with the more  transient politicians.

A couple of anecdotes. I remember an instance when I was Children’s Minister and we were trying to deal with serious problems in Cafcass, the service to support children in court proceedings. I had to talk to Charlie Falconer because we shared responsibilities and received a speaking note from officials which said:

‘I have drafted up a one page “what to say “and “what not to say,” This sounds very Sir Humphrey...But if there are any awkward direct questions, it’s entirely open to Margaret to just say “that’s a matter for Lord Falconer.” In fact she would be wise to do so. Sympathetic nods, “mm interesting” and “I see” are good too....’

I was told!

Another more telling example was when I was Arts Minister. We oversaw the appointments to many of the boards of our national arts and heritage institutions. I found that only one in four of the appointments were to women and wanted to get to a more equal and balanced outcome. Within a year, we had improved considerably and 46% of our appointments were of women. I then had to take a year’s compassionate leave and when I returned I found that, surprise, surprise, we had reverted to only one in four of the appointments being secured by women!
  
These stories are amusing reflections on the struggle for power between civil servants and ministers in Government.

But the battle over whether and how the civil service should be accountable to Parliament and through us to the public is serious.

The traditions surrounding civil service accountability are steeped in history. It was the Northcote-Trevelyan reforms introduced under Gladstone in the 1850s which articulated the idea of a non-partisan civil service, selected on merit and ability and not on patronage and influence. This formed the basis of the Civil service we know today.

Through the Haldane Report after the first world war to the introduction of the Osmotherly rules in 1980 and to Robert Armstrong’s memorandum in 1985 the doctrine of ministerial accountability to Parliament  and civil service accountability to ministers became embedded and now traditionalists want to defend that principle whilst modernisers believe it needs reform.

Robert Armstrong articulated the principle when he said: ‘The civil service has no constitutional personality separate and apart from the Government of the day. The duty of the civil servant is first and foremost to the Minister of the Crown who is in charge of the Department in which he or she is serving.’
The current arrangements can be seen as equally valuable and frustrating to both ministers and politicians.

They are helpful because  ministers can always put up their hands and say ‘Not me Gov’ when things go wrong, as Theresa May did recently on the Border Agency’s lax interpretation of vetting people entering the country, whilst civil servants can escape criticism for major cock-ups on new IT projects or defence contracts.

They are maddening because politicians resent having to accept responsibility for mistakes made by civil servants and civil servants resent being blamed without being able to clear their name in public.

The old doctrine of accountability isn’t fit for the 21st century.

When Haldane created the modern civil service in 1918 the Home Office employed just 28 civil servants. Today, even after the headcount cuts demanded by the deficit reduction programme there are 34,000 civil servants in the Home Office and its agencies. Expecting ministers to accept responsibility for the actions of 34,000 people is plain daft.

Both the Freedom of Information Act and the role of the Ombudsman have helped to open up the civil service to public account and so alter the conventional principle of ministerial accountability.

We live in an age of payment by results and performance management yet ministers are prevented from themselves appointing, promoting or sacking the senior civil servants for whom they are said to be accountable, on the grounds that this would politicize the civil service. You begin to wonder whether the whole doctrine of ministerial accountability is not constructed on a lie. How can anybody be held accountable for the actions of people they can’t hire or fire?

So civil servants escape external accountability because they are protected by the convention of ministerial responsibility, and they escape internal accountability because ministers are powerless to hold them to account in any meaningful way.

Some former ministers, such as Beverly Hughes, acknowledged the doctrine of ministerial responsibility and fell on their swords when their officials failed to carry out ministerial policies. But today, Theresa May’s insistence that she knew nothing of the actions of her civil servants has been accepted. I think that is right. But if she is not responsible and the civil servants are, who is to hold them to account? It must be Parliament.

The senior civil service needs to acknowledge that we live in a different world from the world in which ancient conventions could prevail.

Everybody wants greater transparency and accountability.

Indeed this Government is continually legislating to demand greater transparency of public bodies.

But if the Government wants to hold others to account it must itself be held to rigorous account and that’s not just the here today, gone tomorrow ministers. It includes the civil servants who are responsible for the execution of policy too.

That is just what we are trying to do in the Public Accounts Committee.
 Working to carry out necessary constitutional duties.
 
Of course it’s uncomfortable when we unearth gaping holes in the governance and accountability of HMRC. Of course the Government and the civil service will get cross if we identify huge potential cost overruns on aircraft carriers. Of course they hate it when we look at the Olympics budget in its entirety and warn that they could break their own budget limits and of course it’s embarrassing when we allege excessive profiteering, poor practice and potential fraud in A4E, one of the major work programme providers, delivering a key plank of this Government’s (and the previous Government’s) reform programme.

But for ministers to respond by asserting that we are straying beyond our remit is frankly pathetic. And for civil servants to hide behind their ministers will simply not do. Senior civil servants can be adept at using convention to make detailed scrutiny ineffective.

When the IPPR undertook a study of the civil service in 2006, they quoted a senior civil servant as saying that whilst appearances before select committees might be unpleasant, ‘appearing before the PAC doesn’t change the price of fish.’
 
Well we are determined to ‘change the price of fish’ and have an impact on how the Government spends our money. We are not interesting in lining shelves with reports that don’t make a difference.  And from anonymous briefings it appears that the civil service response may be to attempt to abolish us!

So what has changed? Government has got vastly bigger and more complex and so the doctrine of ministerial accountability is now insufficient. Of course ministers are responsible and accountable for the policies they pursue. But civil servants are responsible for the execution of these policies and should, as the IPPR study argued, also be accountable for them.
 
I accept that there are times when the distinction becomes blurred, but that does not mean we can’t find a sensible, pragmatic way through the issues, and Parliament through its select committee inquiries is competent to figure out where praise and blame lie. Certainly this challenge should not become an excuse for relying on out-dated conventions.

Further, there is a general welcome for the ways in which Parliament is seeking to reclaim its authority to hold the executive to account. After an era of too much ‘sofa’ Government and in the wake of the first coalition Government since the second world war, Parliament is developing greater independence.

Select Committee Chairs are now elected and that gives us stronger legitimacy to challenge both ministers and civil servants. You only have to look at the excellent work of my colleagues on the Public Administration Select Committee, the Treasury Select Committee, the DCMS, Health and Home Office Departmental Select Committees to appreciate the increasing authority and autonomy of Parliament.

The public want more transparency and they want people to be both properly responsible and clearly accountable.

Recently the PAC took yet another look at the Rural Payments Agency. This system for paying farmers their European subsidies has been disastrous since its introduction some six years ago. Farmers are paid late; they often receive the wrong amount and the Government ends up paying hundreds of millions of pounds back to Brussels because the payments were wrong.

The Permanent Secretary at DEFRA, Helen Gosh, had been in charge of this for five years but had recently been promoted to the Home Office. We wanted to break with convention that the newly appointed accounting officer should come before our committee and wanted the person who had been in charge for the previous five years to give evidence on why she had not sorted out the problems during her tenure.

She rejected several invitations to appear and it was only when I signed an order demanding her appearance that she finally came. In our view, officials who are responsible should remain accountable even if they change jobs.

Also the doctrine of ministerial accountability simply doesn’t work across the whole of Government. HMRC is a non-ministerial department on issues of taxation. The department is not accountable to any minister for the way it handles tax disputes with Goldman Sachs, Vodafone or any other big corporation. Yet there are big sums involved and potentially £25 billion of tax income is at stake. So in this particular instance, there is no democratic accountability and it was only because whistleblowers gave evidence to the committee that we were able to start to unravel what was happening and identify the major systemic failures. To argue that we were wrong to try and hold the civil servants accountable to Parliament, especially when the evidence of the Permanent Secretary for Tax was at best inconsistent, and at worst may have been misleading, is I believe wrong. And if we don’t hold civil servants in non-ministerial departments to account, who does?

What I am saying is not new. For years, politicians, commentators, academics and frustrated taxpayers have argued for greater accountability of the civil service to Parliament for executive decisions.

For instance in the Scott Inquiry into the Arms for Iraq affair, the Commission said:

‘the enforcement of accountability depends largely on the ability of Parliament to prise information from governments which are inclined to be defensively secretive where they are most vulnerable to challenge.’

I agree. I also believe we will get better government, better value for money and better public services if we develop clearer and stronger accountabilities for the civil service to Parliament for the execution of ministerially determined policy.

I have no doubt that if individual officials responsible for our defence procurement contracts were held openly to account for how they delivered, we would not be wasting literally billions on ill-defined projects, increased costs because of changed specifications, and extra costs arising from deliberate delays and poorly negotiated contracts.                                                                                                                                                                     
The same is true of the stream of IT contracts, the post-code lottery on delivering value for money in health services, or the loss because of fraud and error in many public services.

Too often we miss the huge arena of discretion open to the civil service as it spends public money and organises public services which may not be visible to ministers.

Furthermore, the direct accountability of those administering our services becomes ever more important as the Government implements its reforms and transforms the delivery of public services.

The Government’s policy of localism and their desire to bring in more private contractors to deliver public services will make it much more difficult to follow the taxpayers’ pound and ensure value for money.

We will have a plethora of independent foundation trusts and commissioning bodies in health; many more schools will be independent academies or free schools; private contractors will deliver much of the welfare to work programme and other public services like probation services or family intervention services.

With the abolition of the Audit Commission the National Audit Office becomes the only body that will examine public expenditure to ensure value for money.

I accept that the Government believes that its transparency agenda will help to secure good value but I think they are only partially right. Many of these independent bodies will not provide transparent financial information for even the armchair auditors to have a go at vetting them, because they will hide behind commercial confidentiality.

Many citizens will be less concerned with value for money and more concerned with other performance measures. Parents care about results; patients want to be seen quickly and the unemployed want a job.
And the very early indications are that if we don’t put in place proper, vigilant systems, taxpayers’ money will be wasted.

I think that requires a proper review of accountability. The National Audit Office provides a first-class service but it was established to do a qualitatively different job – to ensure value for money in big Government departments with large Government contracts.

In the emerging fragmented world, with a massive range of bodies providing services from the taxpayer’s pound, we need to ensure that our audit and accountability arrangements are fit for purpose.

And in my view we ought to amend the Freedom of Information Act so that private companies are compelled to share with the public information on contracts which are funded with public money. Again, we need to be able to follow the taxpayers’ pound.

None of this is partisan. It appears that way because some ministers, public servants and their advisers (and this is as true under Labour as under the present Government) take the view expressed in Luke 11:23 – those who are not for us are against us!

They misunderstand that the constitution, by accident and by design, sets up checks and seeks to balance power.

One check on executive overreach and, as importantly, executive waste and incompetence is parliamentary scrutiny, inquiry and ‘fuss-making.’

We want to highlight success and good practice where we find it, for example in our recent hearing on the apprenticeships programme or the inquiry we did last year on the work of the Youth Justice Board. We’re even planning to introduce an annual reward for the best value-for-money issue we considered in the year!

But it’s our job to blow the whistle and shout loudly when the evidence before us is that the executive is not doing a good enough job. That is going to be uncomfortable for both ministers and the civil service.

It’s time for us to rethink and restate the relationship between Parliament, Government and the Civil service.

Rather than responding defensively, the civil service should embrace the opportunity.  It is in all our interests for this to happen. It will help all of us to deliver better public services with better value.

 

At Policy Exchange, 15 March 2012 

 

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