Yesterday’s Public Accounts Committee hearing was on the Care Quality Commission, the regulator for the National Health Service set up in April 2009 bringing three predecessor organisations together: the Healthcare Commission, the Commission for Social Care Inspection and the Mental Health Act Commission.  It has a budget of £139 million.

The hearing was like a case study in what went wrong in the last Government’s approach to regulation. The Care Quality Commission is an organisation that the National Audit Office concludes does not provide value for money; diverted huge resource to registration (yet failed to complete this on time); and did not undertake a single new investigation between May 2009 and June 2011 (its first two years). It has not launched a single prosecution because the hospitals it regulates are too big to fail and it has no audit system to ensure that there is consistency in the inspections it undertakes.

It also has no effective controls regarding the training of its inspectors, many of whom are reviewing clinical areas without any clinical qualification. It remains unclear exactly how many inspectors working for the Care Quality Commission have a clinical background and the Chief Executive has agreed to send the Committee a note providing a detailed breakdown. Given that just ten days of training was provided to inspectors in 2009/10 (some of which was e-learning) and that many inspectors work from home, I remain concerned as to whether inspectors are largely reviewing processes rather than having the expertise to question clinical staff. Where clinical staff are working for the CQC, there was no evidence to confirm that their clinical discipline relates to the issues they are inspecting.  For example, a dentist has a clinical qualification but will be less effective, I suspect, in inspecting the deaths of babies on a maternity unit than someone with clinical experience of working on such a unit.

One of the most glaring faults with the Care Quality Commission which I highlighted yesterday is the conflict between its role as a regulator that promotes whistleblowing and a culture of openness within the NHS, and the gagging clauses imposed on departing CQC staff by its own Chief Executive. It is quite remarkable that a distinguished member of the CQC’s own board, who has 11 years experience as a Mental Health Commissioner, stated “My endeavours to provide robust scrutiny and challenge led to my professionalism being challenged.  Doubt was cast on my mental health and my performance.”

Another of yesterday’s remarkable revelations was that a regulator responsible for improving the quality of healthcare nationally has, in the view of the Permanent Secretary of the Department of Health, a flawed strategy: the management information provided of its own board is solely quantitative, not qualitative. In short, they are simply measuring how many boxes they tick rather than the quality of the work they do. If they cannot get their own strategy and management information right, what authority do they have when telling those they regulate how to do things?

Another disturbing revelation was that senior management, in order to protect their own reputation, changed the regulator’s approach to news management by ensuring information was circulated on a local and regional basis rather than nationally.  This had the effect of playing down problems, when wider circulation of the lessons to be learned could have helped patients in other areas of the country.

Yet another failure was the decision by the Chief Executive of the CQC Cynthia Bowers to scrap the dedicated whistleblower line, previously manned by investigators.  Instead, whistleblowers were put through to a general helpline where we know that calls were missed. One such case led to the Panorama investigation of Winterbourne View where abuse was taking place and CQC ignored more than one call from a whistleblower. We do not know how many other scandals were missed where abuse might still be continuing.

As readers of my blog will know, I have been campaigning for some time for a change in the Department of Health policy as it applies to whistleblowers. At yesterday’s hearing, the Permanent Secretary at the Department of Health, Una O’Brien, agreed to look again at the circulars sent out by her department in 2004 which allows health bodies to sign gagging clauses to silence staff.  She has agreed to send a note to the Committee within the next week and I hope she will take the opportunity to finally change their policy 

It was also far from impressive to hear – from the Chief Executive of the CQC – that Parliament had been misled when it was told in the Annual Report that twice as many inspections had been carried out as was in fact the case. The Chief Executive of the CQC suggested that this was a typo. Yet, she was still unable to say when Parliament was informed of the correct information. An error relating to an additional 7,500 inspections is sufficiently large that it is reasonable to expect that it would be spotted. She has said that she will write to clarify the chain of events.

In short, the registration process applied by CQC was flawed. Not a single major investigation was undertaken in the first two years. By contrast, one of their precursor organisations, the Healthcare Commission, undertook 16 major investigations in 5 years identifying significant issues such as the importance of C-difficil. The number of inspections was half the actual number claimed and no prosecutions have been undertaken. The dedicated whistleblower line was scrapped and the news management has sought to play down issues, in order to avoid bad publicity for the NHS. Despite its evident problems, the CQC management underspent against its budget in 2009/10.

For providing leadership to this organisation, Cynthia Bowers is paid £198,000 annually in salary and currently has a pension pot of £1.35m which, bizarrely, has gone up by £421,000 in real terms in the last two years. Ms Bowers suggested this was another typo or error in the Annual Report.

It is not every day that you meet a constituent whose father fought in the Boer War (1899) and whose husband served in the Navy in the First World War. Yet that was just two of the wonderful memories shared with me by Mrs Dorothy Morley, my constituent in Chatteris who recently celebrated her 100^th birthday. 

 I was fortunate enough to enjoy a chat with her and her son and daughter where we discussed some of the changes that have taken place in the Fens over recent years. It was a real highlight of my week.

Fenland District Council was asked today to take new measures to tackle the growing problem of Houses of Multiple Occupation and anti social behaviour in and around Wisbech.  Currently just two members of staff from Fenland District Council work on the Private Sector Housing Team, according to figures I obtained earlier this week.

I have been concerned for some time at the growing problems cause by houses particularly in Wisbech where a number of properties are being used illegally to house large numbers of people.  Unless action is taken urgently, lives may be lost in a fire.  There is also ongoing inconvenience and often anti social behaviour linked to these properties which impacts on neighbours.

This is not just an issue in Wisbech, but the problem is particularly evident here.  I spoke last month with the leader of Peterborough Borough Council, Marco Cereste, to learn the lessons recently applied in Millfield.  I have also discussed this with Councillors and Officials.  I am now calling on Fenland District Council to take a similar robust approach in Wisbech. 

Following discussions with the Chief Executive of Fenland District Council, Paul Medd, I welcome his commitment to host a partner based meeting within the next few weeks, to bring all the relevant parties around the table to review what more can be done.  Last year there were 55 interventions by council officers across Fenland, but it appears very few houses were actually taken out of use.

This issue is also linked to the recent emergence of a number of properties being used to sell alcohol without a licence.

The first step needs to be to increases the dedicated resources applied to the Private Sector Housing Team to urgently investigate and enforce against houses which are well known locally to be breaking the law.

Fenland District Council has accepted that action is needed.  Harry Baxter, who works in the Private Sector Housing Team, said there were issues with ‘poorly managed premises’ which require ‘intervention’.

I have also raised my concerns with the Police and Fire Service, but this issue cannot be tackled by individual organisations acting alone. 

We need a step change in the approach which sends a message out to the community that those breaking the law will face enforcement action.  This is not just about the council addressing housing, or the Police tackling anti social behaviour, or the Fire Brigade providing more smoke alarms.  We need to raise the profile of this issue, have a clear programme of action, and ensure there is real change on the ground. 

This requires a co-ordinated approach involving a number of agencies.  I am therefore asking Fenland District Council to provide leadership in gripping this issue, starting with the partner based meeting which they have given a commitment to organise as a matter of urgency.

HMRC allowed Vodafone to route a loan through a series of foreign companies in order to avoid paying UK Corporation Tax running into hundreds of millions of pounds. 

In the light of this, the opportunity for the Prime Minister and the Deputy Prime Minister to act on their words last week, about large UK companies who avoid paying tax, may have come quicker than either realised.

Documents filed in Luxembourg regarding a Swiss branch of Vodafone show that it had a wage bill last year of just over seven thousand US dollars (USD), yet made a staggering two and a half billion USD ($7,290 USD in wages set against a profit of $2.448 billion USD). Page seven of the Vodafone Luxembourg company’s most recent annual accounts (enclosed in the document below) highlights these figures.

This profit was generated as interest on $27 billion USD of loans to Vodafone’s US interests, where it will have been given tax relief and thus reduced US taxes.  There is nothing unusual about this; it is normal practice for a global company to fund its foreign businesses through a mixture of debt and equity and, as long as the debt is not excessive, the interest on it is tax-deductible where it’s paid.  This is, however, on the basis that it is taxed in the hands of the lender of the money.  Here’s the clever bit, though:  the loan was transferred through the Swiss branch of Vodafone’s Luxembourg company as it meant UK corporation tax would not apply to the $2.5 billion paid this year.  Nor would UK tax apply to the profit in other years covered by HMRC’s sweetheart deal entered into with Vodafone in 2010.

Luxembourg did not tax this profit as they do not apply corporation tax to profits generated in foreign branches. This is why the Swiss branch was used rather than the Luxembourg business. It also explains why the loan was routed via the Luxembourg company rather than from a Swiss branch of the UK company, where it would have been subject to corporation tax in the UK.

Switzerland also did not apply corporation tax to this profit even though it was here that the branch registered the profit.  This is because no work was actually done in Switzerland – as shown by the tiny wage bill.  The Swiss branch simply transferred the loan and collected the profit.  As such the Swiss only apply what is in effect a transaction tax – shown in the document below as $627,178. 

UK tax laws brought in by Nigel Lawson in 1984 clamped down on this kind of scheme and said that the tax haven company’s profits should be taxed anyway.  Recent European Court decisions have restricted the application of these laws to wholly artificial cases where there is no genuine economic activity. It is difficult to imagine the UK Courts finding such arrangements as anything other than artificial.  It is for this reason that most companies cannot get away with such a set up.  However, in Vodafone’s case they received approval from Dave Hartnett, HMRC’s top tax commissioner as part of their wider sweetheart deal in 2010. 

This is not so much a tax loophole in legislation, but rather an avoidance scheme that should have been challenged by HMRC. HMRC’s own procedures say that where they would expect a legal challenge to be successful, they must only settle for 100% of the outstanding tax due.  Clearly they failed to do so.

This is one of the deals which the Public Accounts Committee has been questioning in recent weeks, with Mr Hartnett now summoned three times.  To date, questions on Vodafone have been stonewalled on the grounds that legal privilege applies.

However, these documents put in the public domain (albeit obscurely in Luxembourg), when combined with other documents put in the public domain by Vodafone (where they tell their investors that they have settled all liabilities with HMRC on deals like this, known as Controlled Foreign Companies or CFCs), suggest HMRC have agreed to allow this scheme without penalty.

As the Vodafone interim management statement (the page of the document enclosed below) shows, Vodafone reported in 2010 to their investors that when they settled with HMRC they had “reached agreement that no further UK CFC tax liabilities will arise in the near future under current legislation. Longer term, no CFC liabilities are expected to arise as a consequence of the likely reforms of the UK CFC regime due to the facts established in this agreement. The settlement comprises £800m in the current financial year with the balance to be paid in instalments over the following five year”.  So arrangements like the one using the Swiss branch appear to have been included in the sweetheart deal with HMRC.

The lost tax to the UK from this one arrangement is considerable.  This year alone the Treasury would receive around £400 million UK pounds, if based on a rough exchange rate of 2.5bn US dollars as 1.5 billion UK pounds taxed at corporation tax of 26%.  However if other years are included under the scheme, the potential tax lost is far higher – potentially £2 billion in total.  This is based on the fact that the Swiss branch arrangements were put in place in early 2006, and the HMRC deal covers the period up to 2012 allowing for next year a similar profit to avoid UK tax (12.5bn USD at roughly 7.5bn UKP would generate 2bn UKP in corporation tax).  Vodafone may wish to clarify these figures more precisely.

So what next? Firstly, Vodafone may wish to issue a statement explaining these arrangements.  Secondly, Mr Hartnett has announced he will retire in the summer but currently continues in post.  Contrary to earlier statements, he is not prevented by law from commenting on this case.  The 2005 legislation does not require him to comment, but does not prevent him from doing so where certain criteria is met. This includes where disclosure is part of the function of HMRC and one such function is assisting Parliament. As such, he could write to the Public Accounts Committee now clarifying HMRC’s interpretation of Vodafone’s public statements.  Whether he chooses to do so is at his discretion of the tax commissioners.

Thirdly, a retired High Court Judge, Sir Andrew Park, is currently investigating HMRC’s deals on behalf of the National Audit Office.  He is due to report in the Spring 2012.  The terms of reference for Sir Andrew’s investigation are set out on their website at http://www.nao.org.uk/publications/work_in_progress/larger_tax_settlements.aspx.

I hope Sir Andrew will now confirm that he will interview Andy Halford, the Chief Financial Officer of Vodafone, as part of his investigation.  Such questioning could consider not only the Swiss branch arrangements, but also the statement from Vodafone that they were given five years to pay their tax liabilities in breach of HMRC’s own guidelines. 

The Public Accounts Committee will wait for Sir Andrew’s report before holding any further hearings.  If these issues are not adequately addressed in this report, and as these documents are already in the public domain, the Public Accounts Committee may wish to call senior executives from Vodafone to Parliament in the Spring.

A fast-expanding local web publishing company in March is to double its workforce by recruiting another 15 staff.

The Construction Index was only established five years ago, but has become the most popular website for the UK construction industry. The March-based web service provides news, data, jobs and product information, and so far has attracted around 4 million visitors and delivered more than 24 million pages of information.

I am particularly keen to encourage the growth of ambitious small and medium sized enterprises such as this.  New media companies like The Construction Index can play a crucial role in regenerating the Fens.  

Positions which The Construction Index is currently recruiting for include: graphic designers; web developers; coders; JNR programmers; and sales executives.  It is great to see that even at a time of economic challenges there are still opportunities for local people who want join this fast moving industry.

I am also pleased to see that the company is also giving back to the local community.  Its employees will be providing careers advice to Neale Wade School, Sir Harry Smith Community College and the College of West Anglia.  This is exactly the kind of support we need to raise aspiration in local schools to ensure that pupils go on to the best universities and go on to successfull careers, especially in the technology sector.

“Anyone joining the business can rest assured there will be plenty to keep them busy!” said Paul Buist the business owner.

Blunders by clinical staff in the NHS have now left the taxpayer with a bill currently estimated at £16,639,000,000 (£16.6 billion), according to the NHS Litigation Authority.  This just under £10billion higher than the bill just five years ago.  So why is it that the Department for Health has been so slow to act?  It is only now they have commissioned a review by industry experts.

The NHS litigation Authorities figures show that in 2004/05 there were 5,609 new clinical negligence claims, whilst by 2010/11 this had climbed to 8,655 new negligence claims.  Claims against GPs, the costs of which falls on the taxpayer through a different scheme, have risen by 50% in the last three years according to the Medical Protection Society.

It is understandable that the value of some clinical negligence claims have increased as people survive longer with severe conditions, and more advanced equipment is available which is expensive to buy and frequently needs to be replaced.  For example it is not unusual to settle catastrophic injury claims for £6 million now compared to £3.5/4 million a few years ago.

Another factor behind the huge negligence bill has been the high cost of claimant lawyers.  Of the £729million paid out by the NHS Litigation Authority in 2010/11, a third went to lawyers.  Of this, four times as much was spent on claimant lawyers compared to those working for the NHS.  This massive legal bill which includes £200 million spent on claimant lawyers is particularly surprising given that only 2% of clinical negligence claims are estimated to ever make it to court.

I raised my concern at the scale of this government liability at the recent Public Accounts Committee hearing with Treasury officials.  It is remarkable that clinical negligence now amounts to 15% of the government’s liabilities according to the National Audit Office.  However, this is not just a value for money issue.  The fact that the number of clinical negligence claims has increased is an even greater worry for the thousands of patients who suffer when their treatment goes wrong.  Clearly lessons are not being learnt quickly enough to improve treatment and prevent mistakes.

Looking at the figures, it seems that claims against the NHS have risen up to 20% faster than those against medical professionals as a whole.  No adequate explanation has been given to Parliament as to why this is the case.  Why is the NHS record of clinical negligence worse in recent years than in private healthcare sector?

One of the ways of reducing the risk of clinical negligence is to have an open culture where best practice is shared and mistakes are learned from.   I have previously written about the importance of Whistleblowers in protecting patients in the NHS, and hope to have an adjournment debate on this to change the current policy which allows whistleblowers to be gagged with confidentiality agreements.  For more details see my blog here. 

What is clear is that a liability of £16.6 billion in a ring fenced health budget represents not only far too many damaged patients, but also huge resources which could be spent on patient care at a time when the NHS has to meet increasing demands.  I will continue to press officials through the Public Accounts Committee for a clear action plan to get these costs under control.  There has been too much complacency on clinical negligence for too long.

Yesterday I spoke briefly in the Commons to highlight the need for individual enforcement action against bankers whose incompetence has costs the taxpayer £25billion to date with RBS.  Rules currently only allow for enforcement action against individuals if they are dishonest, but these should be extended to those who are incompetent.

If you would like to watch my question it is at 17:56.08 in the video below.

 The collapse of the Royal Bank of Scotland (RBS) raises a key issue: why have none of its directors faced a regulatory fine for their failures?

For the taxpayer, the consequence of the bank’s collapse is stark – our current loss is over £25 billion with more than £45 billion of capital invested.  That pays for a lot of nurses and teachers.

Lord Turner’s report into the collapse of RBS argues that the Financial Services Authority (FSA) could only succeed in enforcement action against ex RBS directors if they prove that they acted dishonestly – not if they were incompetent.  In short, he is saying that the regulatory regime set up by the last Labour Government does not give them the powers to act over directors who failed to do their job. It is striking that in over 6,000 pages of rules in the FSA Handbook and legislation such as the Companies Act, there is no scope to enable regulatory action against a Chief Executive who does not understand their own balance sheet.    

Lord Turner has pointed the finger of blame at Labour’s flawed regulation but must not be dismissed as an ‘anti Labour’ figure.  To the contrary, he was appointed as Chairman of the FSA by Gordon Brown and carried out numerous projects for the Labour Party, including Climate Change, Pensions, Low Pay, as well as being Vice Chairman of the pro Euro group ‘Britain in Europe’.

Lord Turner’s report is backed up by Sir Nicholas Macpherson, the top official at the Treasury, who told the Public Accounts Committee just last week: “When we took on some parts of RBS it became clear that the company did not understand its balance sheet”.  In fact, the Treasury were so alarmed at the time of the bank rescue that, despite ten months work on RBS, Sir Nicholas sought a letter of direction from then Chancellor Alistair Darling MP.  (A letter of direction is when an official wants an explicit order from their Minister to go ahead with a decision over which they have concerns).

The reality is that while Sir Fred Godwin and other RBS directors did not understand their own balance sheet, they will nevertheless keep their massive bonuses without any regulatory action for their failure. Similarly, despite the biggest financial crisis in generations, only two directors of Northern Rock (not even the Chief Executive) have faced individual fines.  In both cases their fines were less than their bonus for the previous year.  Next time you hear Labour MPs blaming bankers for our national debt, perhaps you will ask why they failed to put in place legislation to enable bankers to be punished for failure.

What also surprises me is the lack of scrutiny in the political debate regarding the role of Pension Fund managers.  They drove the short term strategy in banks in the pursuit of dividends and churned stocks to generate fees for themselves.  Why are there no interviews today with the Pension Fund managers who approved the ABN Amro deal?  Is it a co-incidence that Labour’s city minister, Lord Myners, was himself a fund manager?

Likewise why have RBS’s auditors not been interviewed today either? It is startling that the Coalition Government is currently employing the same auditors who signed off the RBS accounts, despite the Treasury telling Parliament that it could not rely on their work. 

In light of the Treasury’s experience on RBS, there are three key questions which Parliament should consider:

1) What changes need to be made to the Companies Act following Lord Turner’s report?

2) What changes are required to the role of pension fund managers to (a) better align investors long term aims with their strategy, and (b) ensure they better challenge management?

3) What changes are necessary to the role of auditors?

Constituents are right to be angry that Sir Fred Goodwin – knighted by Labour in 2004 for services to banking – has been able to walk away from his failure without enforcement action.  Lord Turner’s report highlights that, for all the changes made (such as more intrusive supervision by the FSA), the role of pension funds, auditors, and individual enforcement still requires work.

Yesterday I asked a question to the Secretary of State for International Development, on what his department is doing to tackle fraud to ensure any aid given reaches those which need it most.  I have previously written on this issue here.  If you would like to watch the question it is at 11:55.07 in the video below:

The Fenland rivalry between March and Wisbech is well known.  But there seemed to be a truce on Saturday, as the March Brass Band ventured to the The Horsefair in Wisbech to play Christmas carols for shoppers.

Despite the cold weather, which required some of the band to wear gloves, the band played a wide range of favourite Christmas music.  March brass band has over 30 members with ages ranging from as young as 9 to over 70 years of age, although a smaller contingent were out at the week-end.

On a different note, I was surprised to learn that the band has to pay £21 for a temporary licence just to play music for shoppers in the town centre.  This is daft.  I have therefore called Cllr Alan Melton, Leader of Fenland District Council, to see if this charge can be waived.  The band have recently paid £84 on four temporary licences and, with Christmas approaching, it would be great if the council could thank the band for their Christmas music by returning this money.

I am pleased to report that Cllr Melton is now investigating.