Share Britain suffers from mind-boggling waste of public money, right across government

Britain suffers from mind-boggling waste of public money, right across government Some police forces spend £20 per hi-vis jacket, others as much as £100

Some police forces spend £20 per hi-vis jacket, others as much as £100 Getting value for money from public spending isn't a party issue. It's simple common sense

Britain has 43 independent police forces. They spend 13 per cent of their income, £1.7 billion, on buying goods. Yet the price they pay for standard items varies hugely: handcuffs cost from £14 to £43, boots from £25 to £114, high-visibility jackets from as little as £20 to as much as £100.

The prison service has taken the revolutionary step of standardising uniforms in all prisons – saving £2.6 million on an £8 million clothing budget. But police forces are not able to do the same, because they jealously protect their right to decide how many pockets their uniform should have, and where those pockets should be.

Just imagine how much cheaper it would be if they all had the same jackets. Or, indeed, if there was just one standard white shirt for anyone working in the police, prison, fire and ambulance services.

It’s the same story with the NHS. The National Audit Office conducted a survey a few years ago of 61 hospital trusts. Between them, they bought 1,751 different types of cannula and 652 different types of surgical gloves. One hospital bought 177 different types of gloves, while another managed with just 13 variations.

David Nicholson, the then chief executive of the NHS, defended this on the grounds that “when you stick a knife in somebody and you are in that intimate relationship with an individual on a table… you want everything to be right for yourself.”

But I am not sure hundreds of varieties of gloves really impacts on the intimate relationship between a surgeon and their patient.

As chairman of the Public Accounts Committee, I came across thousands of dedicated and talented men and women who spend their lives on the front line of our public services.

But I also came across a mind-boggling waste of taxpayers’ money, right across government – an alarming and deep-rooted culture in which the officials concerned felt no personal responsibility for spending our money.

It’s not just the headline-grabbing fiascos: the cancellation of the West Coast Main Line contract, or the collapse of the NHS IT system.

Spending decisions across government are constrained, among other things, by the tension between localism and efficiency; the reluctance to consider the long-term implications of decisions; a failure to think outside silos; and the refusal to prioritise early action that could prevent greater costs being incurred later.

In terms of the tension between localism and efficiency, it is surely right that we devolve responsibility to individual hospital trusts or police forces. But it is surely also right that central government, which is responsible for spending money on behalf of taxpayers, makes a concerted effort to seek better value, for example by using its enormous bulk-buying power.

In terms of the second factor – the bills for tomorrow created by decisions taken today – the pressure of politics always drives people towards short-term decisions. Yet we are only starting to realise the extent of the problems our grandchildren will take because of our short-termist attitudes.

PFI has delivered assets worth just under £39 billion, at a cost of an estimated £150 billion

Take the Private Finance Initiative, or PFI. Originally, this offered government two short-term advantages. First, it could be accounted for off balance sheet. Second, the costs could be deferred into the future – spend now, pay later.

In the early days, the private finance companies enjoyed unbelievably huge profits from PFI projects: they refinanced their loans, securing cheaper money and so increasing their profit margins, in part because of the absolute certainty of getting the money back from the taxpayer.

Recent contracts have been more canny – but the most recent assessment is that the 700 PFI deals signed by the government have delivered assets worth just under £39 billion, at a cost over 30 years of an estimated £150 billion, of which £42.2 billion will be spent on interest charges.

Furthermore, government is locked into the assets for 30 years. So the government used PFI to build big district hospitals – only to find, 10 years later, that the NHS actually wanted to treat more patients in their own homes.

Next, there is thinking in silos. A glaring example of this is the failure to consider the connection between adult social care and the NHS.

Between 2011 and 2013, we identified a 12 per cent real-terms cut in council spending on elderly people, as their budgets were squeezed by central government. Inevitably, that has led to hospitals being unable to discharge patients because there are no services available in the community.

In healthcare and elsewhere, it is obviously the case that prevention is better than cure. Yet it is hard to persuade decision-makers to switch from spending on acute services to preventative interventions.

A full 80 per cent of NHS expenditure on diabetes is for complications that could have been avoided via simple and inexpensive checks

The most remarkable example of this came from a study we undertook of diabetes. There are now four million people in the UK who have a form of the disease – including our new Prime Minister. Diabetes UK estimates that by 2025, this will be five million.

The NHS spends around a tenth of its budget, or roughly £10 billion a year, treating such patients. A full 80 per cent of that expenditure is used to deal with complications that could have been avoided if simple and inexpensive checks had been made much earlier on – which would also avert 24,000 of the 75,000 deaths from the condition every year.

I was elected as a Labour MP, and have supported that party all my life. But ending the waste, bungling and profligacy that so often afflict public spending should not be a party-political issue. It’s simple common sense.

So how do we improve our performance? How do we end a situation where government seems institutionally incapable of learning from its past mistakes, where the same things seem to go wrong time and time again?

I think we could make a good start by focusing on three areas of reform: transparency, accountability and training and management within the Civil Service.

By simply revealing what is happening – by being able to properly follow the taxpayer’s pound – we would incentivise improvements in both efficiency and effectiveness.

Success should not be measured by how quickly civil servants move on to another job, but how effectively they complete their task

That means opening private sector contracts delivering public services funded by our taxes to inspection by the public and the National Audit Office, and preventing government hiding behind claims of commercial confidentiality when it wants to suppress unhelpful information – for example over the dizzying costs of Britain’s new aircraft carriers, whose specifications were repeatedly changed by ministers at the cost of billions of pounds.

Similarly, we need to call to account those involved in particular projects – which means the civil servants, not just the ministers. Success should not be measured by how quickly civil servants move on to another job, but how effectively they complete their task. They should be personally rewarded when projects go well.

Finally, there is a wide consensus on the need to develop new skills within the Civil Service – but the pace of change is painfully slow. There are simply not enough civil servants with good commercial, financial, IT and project management skills.

A bold and brave prime minister might do well to recruit a strong group of new top Civil Service executives from outside Whitehall, from local government and the health service as well as from the private sector, to challenge and change the deeply embedded culture.

The Public Accounts Committee is the oldest committee of the House of Commons, established by Gladstone in 1861 when he was Chancellor of the Exchequer. When he founded it, he believed that the committee’s duties would be of “a dry and repulsive kind”. My experience was that it was exciting, important and fascinating.

In 1861, the committee was responsible for some £69 million in public spending – less than £8 billion in today’s money. In 2016-7, the government is set to spend £772 billion. It has never been more important to see that we as taxpayers get the very best value for that money.

This is an edited extract from Margaret Hodge’s new book Called to Account: How Corporate Bad Behaviour and Government Waste Combine to Cost us Millions. (Little, Brown)

Dame Margaret Hodge is MP for Barking and was chair of the Public Accounts Committee between 2010 and 2015.

Share