Parliamentary Works Sponsor Body: Annual Report

Lord Vaux of Harrowden Excerpts

Tuesday 16th November 2021 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, I want to say at the start that I am completely supportive of both getting on with the R&R project quickly and a full decant. My noble friend Lord Best eloquently described the situation, and I wholeheartedly endorse his description of the critical need for wholesale restoration and renewal. As some of my comments will raise questions about elements of the R&R process, I wanted to make sure that that was clear at the outset. I do not want to derail the process, just ensure that it goes well. I also put on record my appreciation for the work that the noble Lords who sit on the sponsor body do— especially my noble friend Lord Best, the Lords spokesman. I suspect that this is a rather difficult and thankless task; they all deserve our gratitude.

I will restrict my comments to the information that is set out in the annual report and accounts for the year 2020-21—I am probably one of the few who has read it, as my noble friend mentioned—and a few other public announcements, tempting though it is to stray into wider matters such as the continued presence. I should stress that I am no expert in heritage restoration; I am one of the amateurs just referred to. I am just an accountant who has taken a reasonably close look at the figures.

My first comments are about value for money during this first investigatory phase—not the actual building phase, just this stage. I am afraid that, despite the various claims in the annual report about

“a rigorous approach to value for money”

and

“a relentless focus on identifying savings and efficiencies”,

I have real concerns that that is not clearly demonstrated by the figures. Let me provide some examples. Staff costs appear extremely high. The 122 employees have a total cost of £13,751,000, which is an average cost per head of £122,713. That is very high by anyone’s standards. The 36 permanently employed staff—this in that first year—cost on average £100,250 each, while the 52 seconded staff are a bit cheaper, at an average of £72,173 each. The 34 other staff, who I believe are interim, cost a staggering £187,912 each. These are extremely high numbers.

On top of the employee costs, there are huge consulting costs. Between the sponsor body and the development authority, a total of £51.6 million was paid to consultants during the year for project management fees, design services and other unspecified services provided by the integrated delivery partner. That is nearly four times the cost of the employees. There is no more detail in the report and accounts about what they were doing, or what sort of rates they are being paid, but this kind of reliance on consultants is always going to make the costs higher than they might otherwise be. There is no detail about how this is controlled. In my experience, there is a risk that excessive use of consultants can become self-fulfilling: consultants identify additional needs that they can then fill, and they become self-feeding entities. Without stringent controls on every single engagement—that is, asking, “Do we actually need to do this now, and could it be done more cheaply?”—this can quickly run out of control. These numbers raise those sorts of questions, especially as, as we shall hear later, little actual survey work was carried out during the year.

Then we have IT costs. If we include the £5.2 million of IT costs that have been capitalised, which has the net effect of reducing the headline total expenditure by £4.5 million, a total of £22.9 million has been spent on IT, comprising £7.2 million of equipment and £15 million on maintenance, development and support. That is a quite extraordinary £187,705 per employee. Some £59,000 on equipment on average has been spent for each employee.

The report and accounts point out that the IT expenditure has been benchmarked by a company called Proxima, and found to be

“in line with value for money expectations.”

I am afraid I have a rather cynical view of benchmarking. It is entirely dependent on what you benchmark against and the question you ask. If you choose the right comparators, you can justify anything. As an example, let us assume that I am looking to buy a new car. My neighbour on one side has a Ferrari, the neighbour on the other a Lamborghini, so the McLaren that I rather fancy looks like a completely reasonable choice and entirely justifiable to my wife. Actually, I just need a car to get me to the station in the morning—a second-hand VW Polo would do the job. In my experience, there is always a good enough solution at a much lower cost. I wonder whether those good-enough solutions were fully explored. We should be spending only what is essential at this stage, not what is nice to have.

So I have my concerns about how much money is being spent and whether it truly represents good value for money but, as my predecessor as chair of the Finance Committee—the noble Baroness, Lady Doocey —will I am sure confirm, one of the biggest reasons why so many of our large projects have gone over budget and over time is because we have not spent enough time and money up front on detailed intrusive surveys and preparatory work to make sure we really understand the scale and scope needed. I therefore agree wholeheartedly with those who say that we must spend enough now in this preparatory phase to ensure the success of the final project. As the noble Lord, Lord Carter, said, we must get it right in the beginning. Money properly spent now should lead to savings in the future, and as the report and accounts rightly say with respect to the current year budget:

“This investment will improve the chances of success of the Programme and create value in the future by … Understanding better the state of the building by carrying out an extensive range of surveys”.


Perhaps that is what all this money, especially the consultancy fees, has been spent on. If so, I would be generally happy. Value for money is just as much about what you spend the money on as about how much you spend. But I am afraid not. Despite the slightly misleading headline in the

“What we have delivered this year”


section of the report, which says

“Important progress on the Palace of Westminster surveys and options”


and the statement

“We have made good progress with intrusive and non-intrusive surveys”,


when you read a bit further you discover that in fact not a single intrusive survey was carried out in the year. The report states:

“The bulk of the intrusive work will take place next year”—


in other words, during this current financial year. But even that has not happened. My noble friend Lord Best has pointed out and the sponsor body has put out a press release that says that over 50 specialists have, since the start of this financial year, carried out nearly 5,000 hours of detailed surveys. That sounds good, but let us put it into context. That represents only 13 days’ work for each of those specialists. That does not include the essential intrusive surveys, which, according to the latest press release in October, will now take place over the winter and next year. That is apparently somewhat delayed compared with the claim in the report and accounts that the bulk will take place in the current year. I understand that that has been further delayed since.

--- Later in debate ---

[Lord Vaux of Harrowden (CB)]

I was just saying that the intrusive surveys that were supposed to take place in the current financial year have now been delayed until the next financial year. That begs the question: what we have been spending all this money on? According to the report and accounts, the current year budget totals £155.6 million. Let us assume that these 50 specialists who have been carrying out the 5,000 hours of surveys are consultants charging—let us be generous and think of a number—£300 an hour. That is just a guess; I hope it is much lower than that in reality. If so, then so far this year just £1.5 million would have been spent on surveys, which is only 1% of the total budget. I confess that I find that difficult to understand, and it really does not seem consistent with the statement I quoted about the budget being an investment in understanding better the state of the building by carrying out an extensive range of surveys.

Importantly, it appears that serious decisions may be made before the essential intrusive surveys are carried out, including the continued presence decision referred to by my noble friend Lord Best. As we know from past projects, including the Elizabeth Tower, as the noble Lord, Lord Carter, mentioned, decision-making on large complex projects that is not based on full detailed surveys is a recipe for disaster. We must have a full and clear picture of the scale of the problems before we can make informed decisions around how we go ahead. It is not at all impossible to imagine a decision on continued presence being taken based on incomplete information, and it then being very difficult to row back from it if subsequent surveys throw up something that might have led to a different decision if known about up front.

As I said at the start, I remain convinced that we need to save this building and that we need to get on with it quickly, probably with a full decant. Although I have raised concerns about how well the money has been spent, I would be delighted to be proved wrong. We need to spend substantial amounts up front to ensure the success of the project. My concerns are more about how the money is being spent rather than the amount, and whether efforts are really being concentrated on the essential tasks, such as surveys. If this is not to be a disaster, our decisions must be based on full, intrusive and necessarily expensive surveys, not just on the consultation and desktop modelling that appears to be where most of the time and money has been spent until now. I will continue to want to be convinced that the phase 1 spending is only on what is essential to allow proper decisions and to make the actual restoration phase a success, and that we are not wasting any taxpayers’ money on non-essential items or unnecessary gold-plating.