Strapped for cash? Poppycock! As the NHS wails that it’s broke, the woman who fought to account for every penny of public spending says it’s pouring millions down the drain 

As I know all too well, there’s a widespread obsession with waste in public services. People hate it — but they don’t know the half of it. During my five years as chairman of the Public Accounts Committee, we found waste and shocking profligacy everywhere.

It was there in the NHS, in the Home Office, in the Departments for Energy, for Defence, for Work and Pensions, for Business — and many more. We even found appalling misuse of public money at the BBC.

Let me be clear, this failure to achieve better value for money is not a party-political issue. Both Labour and the Conservatives have an equally dismal record on waste. Nor does the public sector behave any better than the private sector. Both waste far too much of our hard-earned money.

During her time as chairman of Public Accounts Committee, Labour politician Margaret Hodge uncovered massive waste in NHS and Ministry of Defence spending

All too often, the same mistakes were repeated. This is partly because politics tends to concentrate on ideas for the future rather than how they’re being implemented in the present.

Every minister in every government wanted to leave his or her mark by introducing a new initiative. Once, I counted 18 new initiatives to tackle urban regeneration taken in as many years by successive ministers. But no initiative was allowed time in which to work.

Equally, few government ministers seemed to care about the cost to future generations of nuclear waste (£77.5 billion last year alone) or student loans (an estimated £600 billion in money owed by 2035) or medical negligence (a quarter of the entire NHS budget last year, and rising fast). After all, they’d no longer be there. The crippling bills would be someone else’s problem.

And the civil service? Shockingly, we found that many senior officials were infected with a similar short-termist approach. They felt no sense of personal responsibility for public projects because it wasn’t their own money.

Sometimes they couldn’t even distinguish between their public responsibility and their own private and personal interest. Or they simply shifted the blame to another person or institution.


Pressed for funds, the NHS has never had to be so careful about how it spends its money. Or so you’d think.

In 2011, the Public Accounts Committee decided to take a close look at the purchase of medical supplies by 61 different NHS trusts, at a cost of £4.6 billion. To our amazement, we soon discovered a number of absurdities.

Between them, the trusts had bought 652 different types of surgical gloves and 1,751 types of cannula, at widely varying prices. One hospital alone had bought 177 different types of gloves, while another managed with just 13.

Margaret Hodge claims that achieving common sense practice when dealing with the NHS’s spending is probably more difficult than climbing Mount Everest (file photo)

Even when it came to A4 paper, the trusts had managed to buy 21 varieties — again at differing prices.

When we questioned David Nicholson, then Chief Executive of the NHS, about the gloves, he tried to argue that choosing a particular type or make was very important for surgeons. ‘When you stick a knife in somebody and you are in that intimate relationship with an individual on a table, or whatever, you want everything to be right for yourself,’ he told us.

Somehow, I don’t think many people would empathise with that approach. After all, buying low-cost and efficient surgical gloves should be no more difficult than buying low-cost and efficient rubber gloves for the washing-up.

Why wasn’t someone telling the trusts to get their act together? Well, NHS trusts are independent bodies, so the Government is reluctant to intervene, even when it’s plainly common sense to take advantage of the Government’s bulk-buying powers.

Just imagine how much cheaper it would be if, say, there was just the one type of standard white shirt worn by anyone who worked in the ambulance service, as well as in the police, prison and fire services. Yet achieving this common sense practice is probably more difficult than climbing Everest.

When David Nicholson, ex NHS chief, was questioned about a hospital buying 177 types of gloves, he argueed that choosing a particular type was very important for surgeons

The NHS at least recognised that it should try to get better at bulk-buying, so it established a plethora of organisations — all of which cost money — to encourage trusts to collaborate. There were regional collaborative procurement hubs; trusts with informal collaborative arrangements; a national procurement council for the NHS; and a ‘national supply organisation’ that was outsourced to DHL.

Did that solve the problems? Not really. One survey of more than 4,000 individual products bought through the ‘national supply organisation’ found that more than half the items were more expensive when purchased nationally.

The upshot was that many trusts went back to making their own decisions about what to buy, with some continuing to spend vastly more than others. Indeed, if we did another tally in 18 months’ time, I doubt much would have changed.


Here’s how a government contract can go badly wrong. In the case of the private contractor Serco, it may even have put lives at risk — and it certainly caused much distress. It happened in Cornwall, where a local GP co-operative had been running the out-of-hours GP service for £7.5 million a year. Then, in 2011, they lost out when Serco bid just over £6 million to take over.

Serco proved good at winning the contracts but not so good at running the services.

It didn’t take long for its staff to question the company’s figures: on how quickly the phone was answered, how fast they got a doctor out to see a sick patient and how often they called out the ambulance service.

Private firm Serco won a contract to run an out-of-hours GP service in Cornwall – but such was its poor service that 14 per cent of patients abandoned calls after unsuccessfully trying to a reach a doctor (file photo)

However, no one paid much attention to the whistleblowers at first. Their complaints to both the company and to the health authorities went unheard. Stories in the local paper were brushed aside.

Serco had a convenient answer, anyway: it blamed two maverick employees, sacked them, and made them sign confidentiality agreements to stop them telling their side of the story.

We finally gave the issue a public hearing in April 2013 — two years after Serco had taken over. And it was soon plain that with less money in the contract, Serco had employed fewer people — so there weren’t enough GPs and most shifts weren’t fully staffed. Similarly, there weren’t enough staff to handle phone calls.

In the summer of 2012, when many holidaymakers were visiting Cornwall, Serco’s performance was particularly poor. Calls should have been answered within 90 seconds, but one in four took longer — and a further 14 per cent of those who tried to reach a doctor abandoned their calls. Lack of staffing also led to more patients being referred to the ambulance service.

Lack of staffing at the Serco surgery also led to more patients being referred to the ambulance service (file photo)

As before, Serco blamed all the cheating on individuals. We found that hard to understand, especially because one of the most shocking aspects of this story was their attempt to clamp down on whistle-blowers. Not only was Serco trawling through its employees’ emails to try to identify the whistle-blowers, but it was rifling through their personal lockers.

Looking more closely at Serco’s contract, we found that the NHS ‘performance measures’ actually encouraged poor behaviour — whether it was falsifying data or manipulating computer programmes. Indeed, the contract was so poorly written that, despite all the evidence of what was going wrong, Serco could still claim bonus payments. It couldn’t go on.

Adverse publicity started damaging their reputation and they were forced to recruit more staff — and therefore lost money on the Cornish contract. They bailed out of it in 2013 — leaving the NHS trusts to take over their work.


During the course of our work, we came across plenty of examples of Government IT disasters. In fact, if any official mentioned a new IT project to the committee, we’d laugh at the very idea that it might be introduced on time, within budget and save money.

One of the worst fiascos was the national programme to computerise the NHS, launched by Tony Blair in 2002. Blair had been convinced during a meeting with [the Microsoft tycoon] Bill Gates that this great reform would bring about a national system for booking appointments, a national prescription service and a national health records service.

One of the worst fiascos was the national programme to computerise the NHS, launched by Tony Blair in 2002

In 2011, we examined just part of the programme: the health records system. The aim was to have everybody’s medical records held electronically on one big system, so that all NHS doctors and nurses had instant access to them.

The sums involved in developing this national IT system were mind-boggling. Costs had already risen from an initial £2.3 billion in 2002 to an estimated £11.4 billion in 2011. The records system alone was estimated to cost £7 billion.

At the time of our hearing, the Department of Health and the NHS had already spent some £6.4 billion on the project as a whole.

Just think what that money could buy in terms of front-line doctors, nurses and much-needed drugs.

But Tony Blair was mad keen on the project — so much so that he pushed officials to have it delivered in time for the 2005 General Election.

This meant that political imperatives, macho-style concepts and electoral cycles overrode sensible planning, leading to untold waste on a project that officials admitted was beyond their capacity to deliver.

There were other major problems. The Government failed to consult NHS professionals about how the system should work, and ignored concerns about patient confidentiality. For instance, would an HIV/Aids patient really want their records to be so readily available?

So the Department of Health was trying to do something completely new and untested, doing it hastily, and without any say-so from the users. It was, of course, a recipe for disaster.

In the end, the Department of Health decided to abandon the project — but found it couldn’t extricate itself from all its contracts. By the time we started our inquiry in 2011, two out of the original four contractors, BT and CSC, were still hanging on.

The sums involved in developing the NHS’s national IT system were mind-boggling, with a records system alone estimated to cost £7 billion

Their contracts were so poorly written that officials told us it would cost more to terminate them than to continue spending what was of course taxpayers’ money. Both companies had massively driven up the price, and delayed putting in the national system because of problems in its design. Chiefly, they spent their time providing interim IT solutions for health services that could no longer afford to wait.

In the case of BT, it started selling IT systems to community and mental health trusts in the South at an average of £9 million each. Yet, bizarrely, Bradford District Care Trust had bought the same system and the same services from another supplier, CSE Healthcare Systems, for £1.3 million. As soon as we learned this, we called for the programme to be halted.

The Government gleefully obliged — declaring that it was axing Labour’s profligate and wasteful scheme. In reality, however, they are still locked into the poorly-drawn contracts with BT and CSC. Then, shortly after this announcement, the new Secretary of State for Health, Jeremy Hunt, promised that the NHS would be paperless by 2018 — and the Treasury gave the NHS yet another £1 billion for new technology to support and produce integrated care records.

So the Government has set off on the same weary journey yet again — and costs will no doubt keep mounting.

  • EXTRACTED from Called To Account: How Corporate Bad Behaviour and Government Waste Combine To Cost Us Millions by Margaret Hodge, published by Little Brown on September 15 at £18.99. © Margaret Hodge 2016. To order a copy for £15.19 (pp free, offer valid to September 23) visit or call 0844 571 0640. Margaret Hodge will be speaking at the Henley Literary Festival on October 1,

 £6billion fiasco of the warships we STILL can’t use

Want to know how we could save billions of pounds? Simple. The government just needs to stop the unbelievably awful level of waste at the Ministry of Defence.

Every year, the Public Accounts Committee looked in detail at orders for new planes, ships and submarines, as well as for new equipment for the armed forces. Every year, we were shocked.

I recall one memorable hearing when we uncovered some £8 billion of wasted expenditure in the space of just two hours. And this eye-watering sum had been spent on equipment and support that provided absolutely no benefit for the armed services.

One story of unconscionable waste concerned the contract to build two aircraft carriers to replace three existing Invincible carriers (pictured) – at an estimated cost of £2.8billion

Projects had been abandoned; deliberate delays had added unnecessary costs, and changing specifications halfway through a contract had piled on further millions.

It was as if the MoD had torn up £8 billion-worth of bank- notes and tossed them into the air like confetti.

Indeed, our regular reviews revealed a deep-seated spend-thrift culture going back for generations, that all too often resulted in money being squandered.

In the past, I’d never taken any interest in defence equipment: I thought of it as ‘toys for the boys’. But once I became aware of the vast sums involved, I realised that in the interests of taxpayers I needed to get my head round these complex, technical projects. And I learned a lot.

One story of unconscionable waste concerned the contract to build two aircraft carriers to replace three existing Invincible carriers. The decision to do this was taken in 1998, and the cost was estimated at around £2.8 billion.

By July 2007, however, no contract had yet been signed and the defence budget was wildly overspent. But Gordon Brown was nonetheless keen to go ahead.

Why? Because he was determined not to lose jobs in the Rosyth shipyards [on the East coast of Scotland]. In other words, the justification for building the two new carriers was dictated more by the Government’s industrial policy than by its defence priorities.

Gordon Brown was keen to go ahead with the project so jobs were not lost in the Rosyth shipyards, in Scotland

No one seemed to worry about where all the cash would come from. At the time, there was a black hole of at least £6 billion in the MoD budget — but they thought they could save a bit by reducing or delaying the provision of armoured vehicles for front-line troops.

Clearly this wasn’t going to get them very far, but they hoped that the Treasury would later come to the rescue.

Some described this approach as a ‘culture of optimism’. To me, ‘a culture of recklessness and irresponsibility’ would be a more apt description.

By the time the contract was finally signed in 2008, the price of the carriers had gone up by 30 per cent to £3.65 billion. They were expected to enter service in 2014 and 2016. They even had names: HMS Queen Elizabeth and HMS Prince of Wales.

Predictably, the MoD ran out of money after just seven months. At this point, they simply halted all work on the carriers for two years — though they still had to pay for expensive specialist overheads and keep many people who’d been working on the carriers in place. Price: £900 million.

But costs have a habit of rising — and by the end of the two years they found themselves facing an extra bill of nearly £1.6 billion.

Obviously Gordon Brown and his government were to blame — but no one was ever held to account for this incredible waste of taxpayers’ money.

Things didn’t improve under the Coalition. Shortly after the 2010 General Election, the Government considered cancelling the contract for the second aircraft carrier. But the main contractor, BAE Systems, told them that it would cost more to cancel than to go ahead.

Now, I know from my own dealings with BAE, when I was a trade minister, that this company can be very aggressive. Whether its claims were challenged or not — and I suspect not — it persuaded the Government to continue building both aircraft carriers. Because of spiralling costs, one of them would then be ‘mothballed’ — or left sitting unused in dry dock.

Then the Government got to thinking: wouldn’t it be a good idea to have different planes for the carrier in service than the ones already envisaged?

Thus it was decided to fit the Queen Elizabeth with ‘cats and traps’ — a catapult launch and recovery system —– which would enable the new planes to be used on deck.

Price: another £500-£800 million.

Gordon Brown and his government were to blame for the spiralling costs of the aircraft carrier replacement project — but no one was ever held to account for this incredible waste of taxpayers’ money

Less than 16 months later, in May 2012, ministers came back to the House of Commons to say that they’d changed their minds. Again. They wanted to go back to the old specifications, after all.

It turned out that civil servants had under-estimated the cost of the changes, partly because they’d forgotten to add VAT or take inflation into account.

Cost of this change of heart: around £74 million.

In 2014, the Prime Minister announced that the Government wanted to bring both carriers into service after all — which added many more millions to the costs.

And now? Still no sign of the completed carriers. And according to the latest estimates, the final bill for building them will exceed £6.2 billion.

This disgraceful saga, it hardly needs saying, has been at taxpayers’ expense. But what is particularly disconcerting is that civil servants let this happen.

Both Brown’s determination to protect jobs in Rosyth and David Cameron’s whim in choosing a different plane should have been challenged. Their bad decisions could, and should, have been stopped.

After all, the top civil servant at the MoD, the permanent secretary, is personally accountable to Parliament for the use of public money.

If he believes that ministers are taking decisions that don’t demonstrate value for money, he is required to seek a written ministerial instruction, known as a ‘letter of direction’. The issue then becomes formal and public — so the minister’s justification has to be robust.

But letters of direction are rarely issued. And in the case of the carriers, nobody acted. No one accepted responsibility for the waste — and all the politicians involved have moved on.


Margaret Hodge found the prices different police forces paid for high-visibility jackets could cost as little as £20 or as much as £100

Let’s imagine you wanted to order some standard boots for policemen in your local force. Doesn’t sound all that difficult, does it?

Someone would have worked out in advance where you could get the cheapest bulk order of the correct decent-quality boots. Then a quick phone call or internet order . . . and everyone would be happy.

The trouble with this scenario is that it’s probably pie-in-the-sky.

As I discovered during hearings of the Public Accounts Committee, some forces were getting their boots for £25 a pair. Others were spending up to £114.

It was a similar story for other standard items. The prices different forces paid for handcuffs varied between £14 and £43. And their high-visibility jackets could cost as little as £20 or as much as £100.

To make matters worse, police forces all over the country were facing holes in their budgets and having to make cuts in neighbourhood policing.

Nonsensical? Indefensible? Yes — but that’s not the way that the police authorities see it.

They all jealously protect their right to decide how many pockets their force’s uniform should have, for instance, and where those pockets should be.

And God forbid that you make them wear the ‘wrong’ boots!

Even today, the MoD continues to suffer from the same underlying problems. There’s still strong pressure to commit to spending more than they have. They constantly change their minds, thus adding unnecessary costs. And they under-price projects, which end up costing much more. Because so many of these involve the most expensive, up-to-date and complicated equipment, problems inevitably arise.

But it’s no good looking around for the civil servant responsible: usually they’ve taken another job within a couple of years.

In particular, too many people who are trained in managing major defence projects then leave for better-paid jobs in the private defence sector.

Meanwhile, the MoD continues to sit on one of the best real estate portfolios in Britain. Did you know that it owns an astounding 1.5 per cent of all the land in the UK, worth around £20 billion? Or that it possesses an incredible 57 separate sites within the M25 and still has 15 golf courses?

Yet there’s no point in asking the MoD about all this. It has little idea whether it needs all its land; it has scant information on the relative value of sites; it doesn’t know which ones are properly used or how much they cost to run.

Whether it truly needs all this land or not, the fact remains that many millions of pounds have been regularly wasted in the name of defence. And, at the same time, the regular Army has been drastically reduced by 20,000 soldiers.

The reason? Because the MoD needs to save money…