We rage at Hain and Conway but miss the real profligacy
MPs' much-publicised transgressions are as nothing against the gross waste of public money on PFIs and consultancy
Jenni Russell Wednesday January 30, 2008 The Guardian
Just for a change, it was a Tory MP's embarrassment over the possible misuse of money that was leading the news bulletins yesterday. A Commons committee found Derek Conway had overpaid his teenage student son when he employed him as a part-time researcher. In three years the son earned £45,000, but the committee could find no official record of his work. In its judgment this was, at least, an improper use of parliamentary allowances and, at worst, a serious diversion of public funds.
I don't doubt that this is an important story. MPs are given public money to fund their offices and have a lot of latitude in how to spend it. It's right that they should be censured when they break the rules. But coming after weeks of headlines about the problems Labour MPs have had with keeping to the rules about funding their election campaigns, it has made me wonder about the ease with which we focus on simple stories about individual politicians misusing relatively trivial sums for their own ends, rather than looking at what really matters to us all - the way in which these politicians are spending, and risking, vast amounts of money on our behalf.
Just at this moment, the Northern Rock debacle is at the forefront of our minds because its collapse has been so public and the immediate consequences so severe. There are myriad other cases, though, where politicians are taking wasteful and sometimes disastrous decisions, and yet these barely break the surface of our consciousness. They certainly don't generate the righteous outrage and column inches that, say, Peter Hain's forgotten £100,000 has done.
Some of these wasteful decisions look like sheer political cowardice. We are now committed to spending £20bn on Trident missiles, and yet senior figures in Labour and the Tories have told me that they can't see the point in the system. Their parties voted for it for fear of seeming soft on defence. Other misjudgments, like many of the PFI contracts, or Brown's decision in 2003 to sell a stake in the MoD's research arm, QinetiQ, demonstrate the government's continued tendency to be shockingly naive when it negotiates with the private sector. Within three years, that company had been floated for £1.3bn, giving its directors a return of 20,000% on their investment. The government got an annual return of 14% on its stake, while the private company got 112%. But perhaps more important than either of these is the series of poor decisions which stem from the government's lack of managerial ability and its consequent blind faith in the two false gods of IT and management consultancy. A Labour government has chosen to pour unprecedented billions on the private companies providing both, and much of that money is simply being squandered.
The collapse of the Child Support Agency, and the years of misery its incompetence brought to mothers and children, was due in large part to the fact that its half-billion-pound computer system, designed by EDS, never worked properly. An internal company memo admitted the system was "badly designed, badly delivered, badly tested and badly implemented". The disastrous implementation of the tax credits system, where a third of the 6 million families involved were over- or underpaid and a billion pounds was lost in the first year, was made infinitely worse because the computer system built to run it repeatedly crashed. The insanely overambitious NHS computer scheme is more than two years behind schedule, while the estimated cost has tripled to £20bn. This month a senior civil servant at the Department for Work and Pensions, Joe Healey, told a seminar that the government is spending £14bn a year on IT, and yet only 30% of the projects or programmes were successful. He concluded: "It is not sustainable for us as a government to continue to spend at this level."
Even less visible is the money lost as poor managers resort to consultants, using them as either a cure or a figleaf for their own failings. The government won't reveal what it spends in this area, but former consultant David Craig estimates it at £10bn in Labour's first seven years, and rising. The public-sector consultancy business is booming.
A civil servant who arrived at one part of Defra a couple of years ago was stunned to discover that very few of the department's internal business mangers had any financial training, which meant they could neither control costs nor run the finance system. Money was a dirty word. Instead, expensive agency accountants or outside consultants were doing the job. Consultants were also employed whenever difficult or unpopular decisions had to be made. "Managers didn't want to tackle vested interests themselves; it was too uncomfortable. But they didn't listen to us, because we were nobodies. So instead we had teams of people, some on £5,000 a day, repeating our views back to management, and getting hundreds of thousands of pounds for it."
A consultant who earns more than half a million a year, much of it from public-sector work, confirms that very often what his teams do is quite unnecessary. "We're brought in to knock heads together, as in the merger of prisons and probation services. And it makes anxious bosses feel better to say, look, we spent a few million on consulting and reporting, so the conclusions must be right. But this is really a huge tax. They should be able to do it themselves."
And that is the heart of the problem. Our indignation at