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  The state of the Home Office and the National Programme for IT in the NHS

This speech was given in the House of Commons on 18 July 2006 as part of the Public Accounts Committee debate

Mr. Richard Bacon (South Norfolk) (Con): It is a great pleasure to take part in the debate and to follow the hon. Member for Portsmouth, North (Sarah McCarthy-Fry). I, too, greatly enjoyed the visit to Harvard Business School and would commend it to anyone. I hope that before long the Government also go there and listen to the professors.

My hon. Friend the Member for Gainsborough (Mr. Leigh) referred to my role in the exposure of the foreign national prisoners scandal. I do not propose to say anything about that in this debate, but merely to make one comment about the former Home Secretary, the right hon. Member for Norwich, South (Mr. Clarke). I consciously and deliberately did not call for his resignation over that matter, and I was sorry to see him go. Some may say that his departure became inevitable, but I continue to have a high regard for him and I think that what has happened in the Home Office since then demonstrates that the problems go much deeper than the issue of one Cabinet Minister. I pay tribute to the right hon. Gentleman for the work that he did during his time at the Home Office. “Oops, sorry, I did not mean to destroy your Cabinet career” is not necessarily the most welcome thing to hear from a parliamentary opponent, and that was not my intention. I can only repeat that I have a high regard for the right hon. Gentleman, and I hope that he will continue to make a contribution in this place.

Nevertheless, as was pointed out by my hon. Friend the Member for Gainsborough, there is a serious problem with the Home Office that goes well beyond one issue connected with the immigration and nationality directorate. My hon. Friend said that the Home Office had been unable to present a set of audited accounts to Parliament. There have been the most serious problems possible with the Home Office accounts. They were flagged up in a memorandum from the National Audit Office to the audit committee of the Home Office, entitled “Home Office Resource Accounts 2004-05 Audit Update from the National Audit Office”.

I pay tribute to Mr. Darren Box, financial audit director at the National Audit Office, whose persistence caused the seriousness of the problems to come to light. His memorandum to the audit committee states

    “At this stage we are contemplating a disclaimer opinion on the accounts on the grounds that fundamental control failures mean that we are unable to form a opinion on whether the accounts are true and fair and whether expenditure recorded in them is regular.”

The memo continues:

    “The accounts display a very limited understanding of how different figures within financial statements relate to one another indicating skills and experience deficits within Accounts Branch. The accounts showed little evidence of meaningful management review at any level.

    With the notable exception of IND, there is no evidence of the accounts production process being subject to any proper project management disciplines.

    Issues raised in our previous management letters have not been actioned and appear not to have been disseminated to relevant staff”.

Later, under the heading “Control Weaknesses”, the memo states:

    “In addition to late and poor quality financial statements, serious control weaknesses have also been identified during the audit. The weaknesses include:

    IT Controls: There is a lack of security within key IT applications through the absence of unique identification for system administrators, no audit trails, weaknesses in control over standing data”

and so forth.  The memo adds:

    “Bank reconciliations are the most fundamental of all accounting controls as they enable payment, receipts and cash balances to be validated to an external source and provide assurance about debtor and creditor balances. Due to difficulties in implementing the Adelphi accounting system, the Home Office has been unable to reconcile its cash at bank position”.

That bears repetition—the Home Office has been unable to reconcile its cash at bank position.

Bank reconciliations are fundamental. They are an essential control over cash to ensure that income and payments recorded in any organisation’s bank account match its accounting records. Matching also provides assurance about debtor and creditor balances—in other words, amounts owed to and by a Department—and can help to prevent and detect fraud and error.

What was worse was that the Home Office had not even realised that failure to reconcile cash fully could ultimately undermine its ability to provide Parliament with fully audited accounts.

The memo goes into further detail about the Adelphi accounting system, stating:

    “A further cause for concern has arisen from our review of Adelphi transaction data. It took six months for the Home Office to supply us with transaction data that we were able to reconcile successfully to the Adelphi general ledger. However, when the gross transaction value of debits and credits within this data was totalled, they each amounted to some £26,527,108,436,994, almost 2,000 times higher than the Home Office’s gross expenditure for 2004-05 and approximately one and a half times higher than the estimated GP of the entire planet. This suggests that something has gone seriously awry...We have yet to receive an explanation for what has happened... Collectively, these control weaknesses expose the Home Office to a high risk of fraud, irregularity, poor value for money and waste in its financial operations.”

David Taylor: Given that the Home Office is feeling its way through this incoherent and inaccurate maze of figures that underpin its performance and direction, can the hon. Gentleman suggest why it is so certain that savings that are available under contestability and outsourcing are sufficient to apply those two techniques on a grand scale to the National Offender Management Service?

Mr. Bacon: I do not think that I can. Many of the so-called savings to be found under various aspects of Government efficiency programmes—had we been in office, they would probably have been found under the James committee savings—are very questionable. A different example, with which the Financial Secretary will be only too familiar, is that Her Majesty’s Revenue and Customs is busy sacking fraud staff, who were bringing in many hundreds of times their own salary in some cases, in order to meet rather spurious targets. However, I will not dwell on that.

The result of all that activity was that the Comptroller and Auditor General, Sir John Bourn, was unable to reach an opinion on the truth and fairness of the Home Office accounts for 2004-05, so he disclaimed an audit opinion. It is worth explaining what disclaiming means. A disclaimer is not the same as a qualified opinion. We are familiar with the idea of qualified opinions—for example, because of concerns about fraud and error, there has been a qualified opinion on the Department for Work and Pensions’ accounts since 1988, which specifies the particular aspects, such as housing benefit fraud, income support fraud or whatever, that are the subject of concern. The same happens with the European Court of Auditors in respect of EU accounts. However, that is not what I am talking about. This is Sir John Bourn, an Officer of the House, telling Parliament that he has no information at all with which to form a view. The accounts were presented to Parliament unaudited.

Irrespective of whether we are talking about a public or a private sector organisation, that is an almost unbelievable state of affairs. It is hard to imagine any private sector organisation—whether it be a golf club or a multinational corporation—for which that would fail to lead to enormous consequences. The Home Office cannot say with any certainty how much it spent during the year, what debts it was owed and what it owed to others or what assets it owns. There is no assurance that all expenditure incurred during the year was in line with what Parliament authorised and financial information provided by the Home Office is unreliable. Those are the most basic failures of financial stewardship and control by the accounting officer who is legally responsible to Parliament to account for how moneys are spent.

In that case, the accounting officer failed in his duty to Parliament and one might have thought that the person responsible would have been hauled over the coals, exposed and brought to the Bar of the House to explain himself. What actually happened, however, was that he was promoted to become Deputy Governor of the Bank of England in charge of financial stability in the banking system, which, if nothing else, at least shows that the people who run the country still have a sense of humour.

What I would like to know is where the Treasury is in all that. The NAO memo goes on to state that

    “late qualified accounts are extremely damaging to the Home Office’s reputation, particularly with the Treasury who are likely to exercise closer scrutiny over the unaudited resource budget outturn submitted to them each summer.”

What assurances can the Financial Secretary give us about the Home Office’s use of public money? Is the Treasury now keeping a close eye on what happens? What supervision regime is now in place? Is there now a Treasury hit squad inside the Home Office helping to sort things out? How often does the Home Office have to report in and tell the Treasury what it is doing? It has been a disgraceful episode and I hope that it is soon sorted out.

I come to the national programme for information technology in the health service. I do so with some trepidation because I see that the hon. Member for Glasgow, South-West (Mr. Davidson) is in his place. The last time I made a speech on this subject—it was some years ago, I can reassure him—he said that he was glad that there were anoraks in this place who were prepared to devote so much attention to such areas and that he was very glad that he was not one of them. I have to say that the problems have not gone away; if anything, they have become worse. The scale of the national programme is simply huge. As the NAO described it:

    “The scope, vision, scale and complexity of the Programme is wider and more extensive than any ongoing or planned healthcare IT development programme in the world.”

It started with the beguiling idea that information technology offered enormous potential benefits for the NHS. Above all, patient records could follow the patient smoothly and quickly around the system, bookings could be made online, and doctors could consult records easily in their surgeries and during their rounds. Managers and clinicians could track and report on the work of hospitals and trusts, on the prevalence of clinical conditions and on the success of the health service in treating them. IT in the NHS seemed to offer nothing short of a revolution. However, the problem was that the revolution appeared to be outside the Government’s control. System standards were being set at the centre, as they should be, but system procurement was happening at a local and trust level.

Kitty Ussher (Burnley) (Lab): The hon. Gentleman mentioned procurement. Will he join me in congratulating the Department of Health on having secured the cheapest ever deal with Microsoft across the whole world?

Mr. Bacon: The hon. Lady may recall that Sir Peter Gershon, when he was at the Office of Government Commerce, negotiated a deal with Microsoft that saved the taxpayer £120 million. As the hon. Member for Livingston (Mr. Devine) said earlier, there have been serious problems with the public sector failing to exercise the procurement power that it has, and I welcome any steps towards improving procurement and using the purchasing power that is available.

In relation to the national programme—in which Microsoft is not involved, by the way—the system standards have been set at the centre, but procurement has happened locally. The whole process must have seemed terribly slow to those who wanted to make things happen more quickly. That was why, some years ago, the Prime Minister called to a seminar the heads of some of the world’s largest IT companies. They told him that there was no problem and that they could design, deliver and install national systems across the entire NHS that would do everything that the most optimistic advocate of health IT could want. Of course, they said it would not be cheap and they quoted a figure of £2.3 billion, but, as the Prime Minister said, up to 600 million pieces of paper would be saved a year.

Thus the national programme for IT in the health service was born and with it a new bureaucracy, Connecting for Health. Promises were made, headlines garnered and giant regional contracts were duly let. However, five years on, where are we? For one thing, the cost of the whole programme has inflated enormously. By 2003-04, £6.2 billion worth of contracts had been placed and, in evidence to the PAC, the director general of IT in the health service, Mr. Richard Granger, told us that the figure is now £12.4 billion. The Minister of State for Health has said that the figure is closer to £20 billion, although there is some dispute about what he is including in that. In any event, those are huge numbers.

David Taylor: Even taking the mean of those projected figures, it suggests an overspend of £12.5 billion, which would fund in total the trust deficits that the NHS is experiencing for more than 20 years, which would take us moderately close to the next Conservative Government.

Mr. Bacon: The hon. Gentleman ends on a very optimistic note, and I join him in that. The fact is that the numbers, as well as being very large, have been very varied. We have heard £2.3 billion; £6.2 billion; £6.8 billion; £1.9 billion of central costs, making a total of £8.7 billion; £3.4 billion of central costs making £12.4 billion; £20 billion; and three to five times central contract costs, which could push the figure to more than £30 billion. The fact that the figures are so vague and varied is part of the problem. The potential opportunity cost is also enormous, as the hon. Gentleman points out.

Dr. Pugh: Apart from the central cost, there is the serious issue of what the programme will cost individual trusts and PCTs. No one will put a figure on that.

Mr. Bacon: The National Audit Office put a figure of £3.4 billion on it, although how much that takes into account the full costs is a moot point. One has only to read the board papers of trusts around the country to see IT directors saying that they are incurring costs that they cannot recover, in many cases including costs that they incurred through the old information for health programme that was stopped when the national programme for IT in the health service was started and costs incurred on legacy systems. No matter exactly what the sum is, it is definitely big. One could say that cost overruns are nothing new; they are regrettable and to be avoided, but they happen. However, surely in return for that vast forecast expenditure we would now expect to be on the way towards a world-beating IT system.

Kitty Ussher: Will the hon. Gentleman explain where, within the scope of the motion that we debating this evening, the report on IT in the NHS lies?

Mr. Bacon: As the hon. Lady will know, we have looked at the national programme for IT in the health service a number of times during the last few years and I dare say that there will be future reports. In fact, the National Audit Office has said there will be other reports on it further down the line. It is a matter of enormous importance to taxpayers and, I am sure, to all members of the Committee.

One of the suggestions that has been made by Connecting for Health is that 750,000 prescriptions have been issued by using the electronic prescribing service. One of the slightly alarming facts is that only 1.5 per cent. of those were received electronically by pharmacies and hence dispensed. The rest of them—some of 740,000—simply vanished into the ether, never to be seen or heard of again. The thought of thousands of NHS staff typing pointlessly away is a combination of industry and futility that I find rather depressing to contemplate. The reason for that state of affairs is that, where systems were put in place in GP surgeries, the corresponding systems were not put in place in pharmacies, and sometimes vice versa. That is a relatively small example of some of the problems. There are many others.

Perhaps the most important and difficult component of the national programme is the delivery of patient administration and clinical systems into acute hospital trusts. We should by now have 110 acute hospitals with patient administration and clinical systems in place. The actual number is just 12. Of those 12, how many are clinical systems? The answer is none. Not a single hospital-wide clinical system has been delivered under the national programme.

The choose and book system should allow patients to book appointments with doctors electronically. Almost half of all GP referrals—some 8.5 million a year—are supposed to be made under that system by September 2007, but so far we have only 300,000 bookings. The number of bookings can found on the Connecting for Health website. What is not on the website, but is true, is that by the Department of Health’s own estimate, only about one quarter of the bookings that have been achieved were made truly electronically; the remaining three quarters were made by telephone.

One redeeming feature in this rather grim scene is that most of the forecast cost of the national programme has yet to be spent. So far, total expenditure is about £1.5 billion. That figure of actual expenditure so far was confirmed to the Committee by the director general of IT in the health service. Although £1.5 billion is admittedly rather more than the £654 million referred to in the National Audit Office report, it leaves us wondering what sort of organisation can run up almost £850 million of central administration costs before it has even achieved its main aims. However, it remains true that many billions of pounds have yet to be spent, so it may not be too late to turn back from the road that we are currently on.

That is a crucial point. It is easy to think of NHS IT as a complex and enormously expensive abstraction—as a subject for techies and computer journalists, but not for politicians or the national media. In fact, good IT systems offer enormous benefits to patients and bad ones cause them direct harm. The national programme is therefore an issue of great importance. The US firm Cerner, and its partner Fujitsu, have the regional contracts covering the south of England under the programme. It has recently been reported that Cerner is also to enter into a contract with BT to deliver systems in London after problems with another US software supplier, IDX. The Nuffield orthopaedic centre in Oxford is the only trust under the national programme now using the patient administration system offered by Cerner. I have been shown a board paper from the trust, which shows that the trust failed to meet its waiting list targets because IT system problems meant that it could not identify which patients were waiting for what treatment. The paper, by the director of nursing and operations for the trust, states:

    “the scale of the difficulties and the duration of time that the problems persisted meant that operationally it was impossible to maintain assurance that all patients could be identified to be treated within appropriate timescales.”

In fact, the standard of the patient information produced by the software system was so low that all the information had to be checked and corrected manually. In other words, the trust and its patients would have been better off with no electronic system at all.

In Birmingham children’s hospital, the patient administration system was provided by the troubled UK firm iSOFT. A series of problems in Birmingham culminated in the trust losing 800 children’s records in a fortnight. Some of those children turned up for appointments entirely unexpectedly because their records could not be found, while others were presumably not summoned for appointments that they required. To give one more example, the child health system deployed by BT in London lost so many children’s records that the number of vaccinations given to children in the primary care trusts that were even in a position to report any statistics went down by 18 per cent.

Volume 16, No. 25 of “CDR Weekly”, the Health Protection Agency’s journal, stated:

    “This is the third quarterly report in which national trends could not be reported due to problems with new child health systems being implemented in London. Comparing the year 2005/6 to 2004/5, the number of children in London who are missing from the COVER programme is nearly 18,000 for children turning 12 months, over 14,500 for children turning 24 months and nearly 19,000 for children turning 5 years of age.”

The number of children getting vital vaccinations for measles, mumps, rubella, polio and so on fell by a fifth. The Health Protection Agency commented:

    “If new child systems fail to deliver ... then children risk missing out on vaccination. Thus, they remain unprotected and eventually will catch measles, mumps, and rubella infections.”

The HPA report continued:

    “Falls in coverage of this magnitude not only indicate that individual children may be at risk, but also represent a potential major public health threat to the control of the diseases in the community.”

Those are chilling words. It is extraordinary that no clinical systems have been deployed under the national programme. However, on reflection, given the damage that patient administration systems now seem to be doing, perhaps that is just as well. The implications of similar failures in clinical systems hardly bear thinking about.

Finally, I want to deal briefly with the consequences of the crisis in the national programme for IT contractors. Mr. Granger, the programme’s director general, is fond of using blood-curdling metaphors when speaking about IT contractors. He intends, he says, to treat them like huskies—when one goes lame, it is shot, cut up and fed to the rest—apparently, that keeps them keen. However, managing a massive IT programme is not like running a dog sled. I believe that that brand of macho management threatens to bring yet more chaos to an already tottering system.

By the end of March this year, the four major contractors—BT, Accenture, Fujitsu and CSC—had received only £250 million in payments on£5 billion-worth of contracts.

However, their spending in what I believe to be a doomed effort to make the fundamentally flawed system work has been massive. Accenture has wisely already set aside £260 million as provisions against losses on the contract, but the remaining three companies have remained strangely silent. By the end of March this year—two and a half years in—BThad received just £1.3 million on its contract of£996 million. My best advice indicates that BT has spent more than £200 million trying to get systems up and running. That amount does not yet figure in its annual accounts. I understand that BT intends to replace its existing software supplier with Cerner, fresh from that company’s poor performance at Nuffield. However, that means that most, or perhaps all, of BT’s work in progress on the existing contract will need to be written off. We have already seen what happened to the software supplier iSOFT, when shareholders—

Mr. Speaker: Order. I am most impressed by the hon. Gentleman’s expertise on this subject, but it does not relate to the matter before us. Although there will be other occasions on which he will be able to raise the problems of the NHS, he must get back to the matter in hand.

Mr. Bacon: Thank you for that guidance, Mr. Speaker. I will rapidly draw my remarks to a conclusion and allow other hon. Members to speak.

The national programme for IT in the health service has been covered by the National Audit Office on several occasions, as I am sure it will be in the future. It is the largest civilian IT programme in the world and a matter of great importance. I hope that it is also of great importance to the Treasury and that the Financial Secretary will find time in his winding-up speech to refer to the interest that the Treasury has in the matter, because the amounts involved are so enormous that they could have huge consequences for the Exchequer, fiscal policy and, indeed, the rest of the country.


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