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Richard gave this speech to the Chartered
Institute of Public Finance in Northern Ireland on 23 March 2006.
I would like to start by thanking the Institute for giving me the opportunity to speak today on Service Delivery and Accountability in Northern Ireland.
Our committee is a guardian of taxpayers’ money. We are not a policy committee and so by and large we do not pursue policy questions. The nature of the PAC’s work is that we do
not look at the “should” question – should the government’s policy be x or y or z, but rather at the question
if the government pursues a particular policy, did it do so well? Did it spend taxpayers’ money wisely? Did it meet the test of the “three Es” , that is, spending public money effectively, efficiently and economically?
In order to tackle this subject, I shall draw on my experience with NI issues at PAC, since the return of direct rule in October 2002.
However, I would like to set the scene with a few observations on the context within which you operate.
Devolution All of my colleagues on PAC are aware of the key role that the public service has played in holding the fabric of Northern Ireland together over the past 30 years. We recognise the professionalism with which you maintained the structures of public administration in a period of conflict. The fact that there are still so many political uncertainties which need to be resolved in Northern Ireland makes it easy to overlook the quantum leap which the region has taken in the last 10 years.
I was first here 15 years ago, and it fair to say that there has been a transformation since then. The ‘Troubles’ are very much a thing of the past. NI has moved on and no one wants to see a return to those dark days. The challenge now is, of course, to deliver another transformation: that same public sector professionalism needs to be applied to improving public services in a post-conflict society.
Review of Public Administration
I see evidence that the challenge of reforming public services is being grasped. The radical proposals announced last November in the Review of Public Administration are a good example. This aims to establish new relationships between local and regional government, including the reduction in the number of local councils from 26 down to 7, and similar restructuring of the Health and Education sectors.
Public Accounts Committee
Turning to PAC, I must acknowledge at the outset that we can be very critical where we see poor performance and I am aware that Accounting Officers will sometimes accuse us being intimidating or only interested in point scoring. It is, of course, an essential part of our role to ensure that where things have gone wrong, lessons are being learned but I also believe we give credit where credit is due.
Examples from elsewhere in the UK
I think it is fair to say that Whitehall departments provide us with a regular workload of fairly spectacular problems.
The Ministry of Defence spent £3 billion for 67 new Apache helicopters, but half of them are sitting in storage in a shed for several years because the MOD forgot to train enough pilots in time. They also spent £259 million on 8 new Chinook helicopters which can’t fly if it is cloudy.
We saw a report on a farmer who received subsidies under the Arable Area Payments Scheme and also under the Fibre Flax scheme for what turned out to be the same piece of land. He also received subsidies for territory which, long after the payments had been made and using the grid references he had actually supplied, were discovered – entirely accidentally – to be in the North Sea between Scotland and Denmark; and on the mainland of Greenland and Iceland.
The Home Office national probation service information systems strategy had seven project directors in seven years, five of whom knew nothing about project management. Then there was the fiasco at the Passport Office, where people couldn’t get a passport in time to go on holiday, the separate fiasco at the Criminal Records Bureau which left schools and nurseries unable to hire people because the background checks couldn’t be processed. And of course, there are the infamous problems with the Child Support Agency and with tax credits.
So I wouldn’t want you to run away with the idea that Northern Ireland is unique in getting things wrong. The government manages to mess things up quite spectacularly in the rest of the United Kingdom too!
Northern Ireland
Nonetheless, when it comes to our Northern Ireland casework, I cannot disguise the fact that the reports which we have considered have regularly turned up major issues of concern. This does frustrate the Committee, since we see NI as a region which is relatively well funded by the taxpayer which, because of its small size and potentially coherent public sector, should be an exemplar for joined up government and be capable of achieving excellence in its administration.
I am well aware that we don’t take the full spectrum of the NI Audit Office’s output. Some of those reports deal with good practice such as the report into ‘Modernising Construction Procurement’. Such reports are not unimportant - it is right that the application and development of best practice should be encouraged and highlighted. However, the added value that PAC can give to such reports is limited, particularly given the restrictions we have on time spent on Northern Ireland issues. As a result of these restrictions we have only had the opportunity to deal with 10 NIAO Reports since your return to Direct Rule in October 2002 and I am going to comment on a selection of these.
The Use of Operating Theatres
During 2004, the Committee decided to come over to Northern Ireland to hold two sessions on ‘The Use of Operating Theatres’ and ‘Navan Centre’. This decision was taken in order to send out a clear message to the local taxpayer that someone is continuing to monitor the expenditure in the local public sector in the absence of devolution. Operating Theatres was very much the main hearing that day.
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I remember the Accounting Officer telling us that the theatres operated on a five day 7 hour shift system. However, this compares unfavourably with England and Wales where many of the theatres were available for much longer. Our concerns must be seen in the context of waiting lists and waiting times for hospital treatment in NI. These were by far, and still are, the highest in the UK. This is despite NI having the highest per capita spend of any region in the UK.
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Even within the timescales when they were available, we found that theatres were idle almost 40% of the time and, in some cases more than this.
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There was also, if I remember correctly, a high incidence of last minute cancellations of operations and indicators of poor management and control. I was flabbergasted to learn that the reasons for this included the persistent taking of annual leave at the last minute by some consultants. As a result, no time was left for redeployment of scheduled anaesthetic cover and resulted in a waste of resources.
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It should have been obvious to any lay person that, with appropriate planning, organisation, and proper management, many cancellations could and should have been avoided.
We had concluded at that time that there was no convincing explanation as to why Northern Ireland, with one of the highest levels of funding in the United Kingdom, did not get the same return on the use of its operating theatres as other parts of the United Kingdom.
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The Jobskills Programme
We described Jobskills as one of the worst-run programmes we had ever seen – a scheme which had cost the taxpayer over £500 million.
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There was a quite astonishing catalogue of failures and control weaknesses, all of which we thought pointed to a disturbing level of complacency within the Department. And while I readily acknowledge that the Department has to deal with some very difficult groups of young people, this certainly did not explain the widespread shortcomings in supervision and control that existed.
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It was clear that Jobskills had not received the senior management attention that it deserved. One of the most damning aspects of the Department’s handling was the extent to which a number of the most fundamental weaknesses – such as poor quality training and high levels of early leaving from the scheme -
persisted over many years. And yet, we saw little evidence of the Department having tackled these problems with any great vigour, prior to the Comptroller and Auditor-General’s review. This suggests to me that there was a lack of internal challenge within the Department to improve this programme.
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At half a billion pounds, the funding provided to this programme was by any standards enormous. Given the serious and ongoing concerns about the quality of training, the poor performance of a number of training providers, the limited employment impact of the programme and the substantial ‘skills mismatch’ between Jobskills and the needs of Northern Ireland economy, we could only conclude that it provided poor value for money.
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I note that, in the wake of our examination, Jobskills is to be axed! My point is that it should not have taken a PAC session to achieve this. I do not think that anywhere else in the UK, a programme as important as this but with these profound failings would have been allowed to drift on for as long as this did without drastic remedial action.
I hope that any successor programme will be much more tightly managed and will do more to help the people who need help.
Failures in the Oversight of Emerging Business Trust by DETI and LEDU
In our most recent evidence session on NI matters, we examined witnesses from the Department of Enterprise, Trade and Investment (DETI) on how the Department, and its Local Enterprise Development Unit (LEDU), had overseen the setting-up, funding and operation of the Emerging Business Trust (EBT).
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Our examination found this to be one of the
most blatant examples of conflict of interest we had ever seen. The
extent of the conflicts and the fact that they went unchallenged for
so long is really quite astonishing.
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LEDU was one of the founders of EBT and it provided substantial public money to the company. But it not only allowed its own Deputy Chair to be appointed as an EBT Board Member, neither it, nor the Department, raised any objection when her accountancy practice was appointed, without an open competition, to manage the company.
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Normal public sector rules in competitive tendering were set aside. This accountancy practice eventually received £1.4 million in management fees from EBT – in my questioning I established that this was around a quarter of the total public money made available to the company for small business regeneration in depressed areas.
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Unfortunately, the conflicts of interest did not stop there. The Deputy Chair and her husband had shares and other business interests in a number of companies supported by EBT.
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These blatant conflict of interest were compounded by an extraordinary series of lapses including a failure to conduct an appraisal of the business case for the Loan Fund. LEDU failed to ensure that its funding commitments to EBT were properly authorised and failed to draw up effective letters of offer.
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The extent of the conflicts of interest in this case, the failure to deal with them and the unusually wide range of the control failures obviously raises the question as to whether there was collusion by former LEDU staff. The Department said its investigation found no evidence of collusion. If this is the case the only conclusion we can draw is that LEDU’s senior management, its Board and the Department were thoroughly incompetent and demonstrated a complete lack of commitment to the promotion of proper standards in public life.
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The events I’ve outlined are really very disturbing, many of my colleagues felt this was the worst case of conflict of interest in public bodies that they had ever encountered. We in the Committee expect the highest standards of ethical conduct from those in public life and that there are rules and procedures are in place to ensure that this happens; this certainly was not the case here.
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Our report into this case is now being drafted and will be published shortly. We will recognize that the Permanent Secretary has some sensible proposals for improvement. The problem is that a case like this shakes Parliament’s and the public’s confidence in standards of governance in the region. Northern Ireland cannot afford another scandal of this nature. Indeed, to restore confidence you really need to be ‘whiter than white’ and aim for excellence in your governance arrangements.
Waste Management
As you are probably aware, the Public Accounts Committee’s report on the Northern Ireland Waste Management Strategy was published today. During our examination, we found that:
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The Department of the Environment had been very slow to transpose EU Directives into Northern Ireland legislation, which exposed the UK to the risk of paying EU infraction fines. This would clearly be an unacceptable waste of taxpayers’ money, and I am glad to see that transposition is now up to date.
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The Department has not shown the kind of leadership that everyone has the right to expect if Northern Ireland’s poor performance in managing its waste is to be improved, and EU targets met. At the very least, DOE should set, and meet, annual targets for reducing, reusing and recycling its own waste, as a means of encouraging other public bodies to do the same.
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The Department recognised that the first Waste Management Strategy for Northern Ireland contained targets that were not sufficiently demanding. We made it clear that we expect the new Strategy, due for publication this month, to be much tougher, with challenging targets to achieve the improvements needed to bring Northern Ireland into line with better-performing countries.
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The Department needs to tackle the issue of illegal dumping head-on, given its estimate that the black economy makes around £24 million from this source. I particularly welcome the recent successful prosecutions of offenders, because this kind of illegal activity demands an uncompromising response from government. |
Clearly NI is moving in the right direction, but still has a lot to do to clean up its own mess!
The Management of Industrial Sickness Absence
In our review of the Management of Industrial Sickness Absence, we addressed the issue of sickness levels among industrial civil servants. And what did we find?
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That local absence rates were over 60% greater that the rest of the United Kingdom.
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Similarly, levels of medical retirement were also much higher at three times the UK average.
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This was estimated to be costing you and me, the taxpayers, £2m a year in direct salary costs alone.
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One of the themes emerging from this review which, I have to say, I am tired of hearing was that procedures were good, but management at all levels, failed to apply them effectively. I wish I had a pound for every time I heard that during my tenure on PAC.
In simple terms, if procedures had been properly applied from the start, or if senior management had acted earlier to address the problem, high levels of absence could have been avoided. This was a very damning indictment of management which the Committee found very disturbing and was not well received by the Committee.
Sheep Annual Premium
Sheep Annual Premium was an EU subsidy scheme which, between 1995 and 2002, paid over £170 million to Northern Ireland farmers.
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We found a catalogue of errors and control failures, all of which pointed towards a particularly slack regime. It seemed to us that the Department had consistently neglected the interests of the taxpayers, in favour of farmers - what was needed was to get the right balance between the efficient payment of income to farmers and the controls which protect the integrity of public money.
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Perhaps the most damning aspect of the Department’s handling was the extent to which key requirements of the scheme were repeatedly ignored, over a long period of time. It was clear that the scheme had not received the close management and supervision that it deserved. With non-compliance often leading to overpayment of premium, the only conclusion we could come to was that the Department had been failing in its duty as custodian of the public purse.
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Our overall impression was that the Department had been soft on fraud. Indeed, having carefully examined the evidence, we were convinced that many fraudsters would have regarded an attempt to cheat the scheme as a risk worth taking, given the slackness in control and the Department’s poor record of prosecution!
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The Department assured us that it now operates a policy of zero tolerance to fraud and that attempts to cheat the system are being tackled in a much more vigorous way. I welcome the improvement, but I wonder why it took a PAC examination to bring it about.
Housing the Homeless
The Assembly’s Public Accounts Committee was preparing to examine this topic in October 2002, but suspension intervened, and we examined it at Westminster instead, taking evidence from the Department for Social Development and Northern Ireland Housing Executive.
We found that:
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homelessness levels in Northern Ireland were higher than in other parts of the United Kingdom, rising by 50 per cent between 1999-2000 and 2002-03 alone. Despite this increasing problem, it had taken the Northern Ireland Housing Executive 14 years to develop its first formal Homelessness Strategy, which was published in 2002. This delay undoubtedly exacerbated the homelessness problem.
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Although the Housing Executive acknowledged the unsuitability of B&B accommodation, except for emergency use, it was spending around £7.5 million of its £24 million annual homelessness budget for homelessness services on this type of accommodation.
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Some of the mismatches between homeless clients’ needs and the accommodation offered to them were most insensitive. For example, we were most disturbed that NIHE continued to use one particular B&B establishment that had been the subject of numerous complaints from homeless persons placed there, with regard to poor hygiene standards and drug-dealing on the premises.
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Homeless clients accommodated in B&Bs were likely to be there for some time – on average, three times longer than the target – and often, at huge cost to the taxpayer. In one case, a woman and her 5 children spent 18 months in a hostel, at a cost of £27,000 because permanent housing could not be found for them. We made it clear to the Department that we expected it to review urgently its projections for the numbers of new social housing units required to tackle the growing demand, and the level of funding needed to provide them.
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In light of this situation, the improvements built into the 2002 Homelessness Strategy were most welcome, if long overdue. Homeless persons should not be expected to accept lower standards than other NIHE clients, and we urged the Department and the Housing Executive to keep up the momentum for improvement, so that real inroads could be made into dealing with this complex social problem.
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Management of Teacher Substitution and Sickness Absence
This did not make pleasant reading for your local Department of Education, as in our review, we found that:
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school children would spend, on average, one year being taught by substitute teachers between the ages of 5 and 16.
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The Department appeared to have largely ignored the undertakings it gave to the Committee in 1992 that strict controls would be exercised over the re-employment of teachers who had benefited from premature retirement terms.
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Perhaps most worryingly, the number of sick days per teacher in Northern Ireland was double that in London. It appears that a culture of high absenteeism may have been allowed to develop in some parts of the teaching workforce in Northern Ireland, which gives rise to a particular concern about how this will impact on pupils' learning.
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In the terms used in the Headmaster’s report, I think the department’s performance to date would be assessed as ‘needs attention’.
Local Management of Schools
In Local Management of Schools, we reviewed how well schools were coping with their allocated budgets. We were particularly concerned with:
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the general lack of accountability for performance and the weak budget monitoring arrangements. Monitoring is made more difficult by the financial systems in schools and Boards not communicating properly – something highlighted by the C&AG more than 10 years ago! I understand that this issue will be addressed by Autumn 2007 – not before time!
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As a result in 2002-03 over 18% of schools had a deficit of 5% or more, yet at the same time 37% of schools were holding surpluses in excess of 5%. This involves considerable sums of money with deficits of more than £11 million and surpluses of more than £31 million.
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We therefore concluded that the failure to enhance the systems for controlling budgets has meant that children currently in schools with deficits and surpluses have been let down and disadvantaged as a result of resources not being used effectively to influence teaching and learning for those children.
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Conclusions on Northern Ireland Departments
So what conclusion can I draw from PAC experiences of NI departments? I am not going to say that NI standards are generally worse across the board than the rest of the UK. However, I must say that in some of the problem areas we have investigated (e.g. Jobskills, Sheep Annual Premiums, LEDU) we have been concerned that problems were allowed to accumulate on the scale that they did, for as long as they did.
There may be much that is good in local administration, but when things are bad, they seem to be far below what we expect. As a member of PAC, I am worried that NI citizens and taxpayers may not be receiving the service we expect to see in the rest of the UK. The overall message must be, in all the areas that we have looked at, that there is enormous scope to improve.
Achieving value for money in the delivery of public services
The Committee has tried to point up some of the key lessons on this in our recent report on “Achieving value for money in the delivery of public services”. This was issued just before Christmas and provided an overview of PAC activity, its key findings and conclusions over the last 10 years. In this report, we identified seven areas which departments need to focus on if improvements in the delivery of public services are to be achieved.
The seven areas are as follows:
- planning carefully prior to implementation;
- strengthening project management;
- reducing complexity and bureaucracy; (it was Einstein who said
“One should make things as simple as they
can be, but no simpler”);
- improving public service productivity;
- being more commercially astute;
- tackling fraud;
- better and more timely implementation of policies and programmes.
The issues in this report as equally relevant on this side of the Irish Sea as in GB. However, there is one area where there is a special message for you in NI and that is in the handling of the growing number of PFI departments are now involved.
PFI
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Over the years, PAC has taken great interest in the problems which have dogged PFI casework and tried to develop sound guidelines for identifying good practice and avoiding the pitfalls. These are clearly recorded in our various reports;
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NI has the advantage in that it has started into the process of substantial PFI rather later than the rest of GB. It is crucial that you do this with an awareness of GB best practice so that you are not doomed to re-invent the wheel or to re-learn the lessons PAC has insisted that Whitehall Departments take on;
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On the positive side, it is encouraging that you are in the early stages of your new 10-year £16bn Strategic Investment Programme, of which 20% will be PFI. I look forward to meeting David Gavaghan tomorrow to see how this is being handled;
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PFI Exemplar Model
I have also been interested to hear of NI’s best practice initiative in the area of exemplar modeling in PFI.
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I recently became aware, through meetings with the Royal Institute of British Architects, of proposals which it is developing which it believes will deliver better architecture and improve public services through PFI.
My attention was drawn to an exemplar model currently being developed within your Department of Health, Social Services and Public Safety in Northern Ireland.
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What is new in this approach is the
direct interface between the users and a creative design team. Through consultation between these parties, it should be possible to design a model which will fully satisfy the strategic and operational needs of the client with respect to the delivery of the core services. This Exemplar model is then offered to bidders as a threshold concept design which must be equalled or bettered. |
The Department believes, that this approach has the potential:
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to greatly reduce bid costs and times.
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to facilitate better client assessment of detailed design proposals and more effective monitoring of the implementation of the agreed design;
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to facilitate the development of more accurate costings;
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to truncate the tendering process;
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to achieve significant cost savings in the delivery of core services.
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I understand that this approach has already been piloted in the £42m Belfast City Hospital Cancer Centre, which I hope to visit today, and also in the design of new £18m pharmacy and laboratory facilities for Altnagelvin Hospital in Londonderry (due for completion in 2007).
It is good to see that NI can lead the way as well as follow in the footsteps of GB.
Conclusion
In closing, I believe that I should clarify that we on PAC expect to see public sector managers pulling together to try to minimize mistakes and to learn from those mistakes which do occur. We also welcome any opportunities to recognize and promote success (such as the Exemplar Model in PFI I have just referred to).
Through addressing the issues I have raised today, you have the opportunity to transform your public service into a model that you can continue to take pride in and that best meets the needs of the citizens in Northern Ireland.
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