Identity Cards Bill

moved Amendment No. 259A:"Before Clause 37, insert the following new clause—" ““ESTIMATE OF COSTS (1)   Section 37 shall not come into effect until— (a)   the Secretary of State has submitted to Parliament a detailed estimate of the costs of implementing the powers contained in this Act (to be known as ““the Cost Estimate””); and (b)   each House of Parliament has approved the Cost Estimate. (2)   ““Costs”” for the purposes of this section shall include all costs whether of a capital or revenue nature actually incurred or estimated to be incurred by— (a)   the Secretary of State; (b)   all other Ministers of the Crown; (c)   Government departments; (d)   a Northern Ireland department; (e)   the National Assembly for Wales; (f)   any other person who carries out functions authorised by this Act. (3)   The Cost Estimate shall cover the period— (a)   from 26th April 2004 to the date that the Cost Estimate is prepared; and (b)   10 years after the date that the Cost Estimate is prepared or such longer period as shall be determined by the Secretary of State, and shall be analysed into each of the financial years ending 31st March covered by the Cost Estimate. (4)   The Cost Estimate shall be examined by the Comptroller and Auditor General who shall prepare a report on it and shall lay the report before Parliament.”” The noble Baroness said: I had intended to take no part on the Bill whatever. So far as these Benches are concerned, it is in the capable hands of my noble friends Lady Anelay and Lady Seccombe. However, on the first day of Committee, I happened to be in the Chamber—as one does—and I came across a fascinating debate on the costs of the national identity register and identity cards in connection with Amendment No. 1 tabled by my noble friend Lady Anelay. Many good questions on the subject of costs were put to the Minister from all sides of the Committee. However, it is fair to say that the Front Bench opposite gave little of substance in response. The Minister has since sought to provide further information in a letter circulated to Members of the Committee on 12 December. While nearly six pages of the letter were devoted to costs, not much light was shed. Rather, the letter concentrated on the information the Home Office would not give. Therefore, in consultation with my noble friend Lady Anelay, I have tabled Amendment No. 259A to try to make some progress on the costs associated with the Bill. The amendment is simple in concept. Subsection (1) says that the Government may not make use of the ability to charge fees in Clause 37 until they have satisfied both Houses of Parliament as to their estimate of the costs that will be involved in the implementation of the powers in the Bill. The Secretary of State could, in theory, start to use the powers in the Bill to place information on the register and to issue ID cards without making any charges, but I have judged that the Secretary of State would not, in practice, want to do that and would not have budgetary cover if fees could not be charged. The Minister may well say that a delay on the fee-charging provisions of the Bill is a curious way for Parliament to get some information on costs, and it would probably be better if Parliament’s satisfaction on costs preceded some of the other powers contained in the Bill. I intend to research that before we reach report. The Minister will therefore be aware that I regard Amendment No. 259A as a probing amendment for the purpose of today’s debate in Committee. In a moment, I shall explain the contents of the rest of the new clause, but it may help noble Lords if I put that in context. The Government have given very little information to date about costs. We have been given one figure of £584 million, which seems to be some kind of annual cost, averaged over a number of years, possibly 10. Any attempt to elicit further information has not been successful. The Government have broadly rested on an assertion that it would compromise their commercial position if any more information were given either about Home Office costs or about the costs that other departments might incur. We are pretty sceptical about the commercial confidentiality argument but, more importantly, we regard it as unacceptable that the Government have introduced legislation that will have far-reaching effects on the citizens of this country without being prepared to discuss the full costings with Parliament. I cannot think of a precedent for this. Realistically, we know that the Government can be obdurate on the matter of denying information to Parliament. Parliament in turn has two possible responses. The first is to defeat the Bill completely. The Bill has already completed its passage in another place and so your Lordships’ House would need to set itself in opposition to another place. For those on these Benches, that is not an attractive prospect, especially for a Bill that has, to some extent at least, the backing of a manifesto commitment. The second course is the one that underpins my amendment. It is to give the Government the benefit of the doubt, so far as legislation is concerned, but, at the same time, to ensure that once the costs are better known, or are, at least, in a shape that has fewer confidentiality constraints, Parliament will be able to scrutinise the costs properly before the powers in the Bill take full effect. That seems to us to be a fair and reasonable response to the Government’s obstinacy. I shall now turn to the detail of my amendment. Subsection (2) of the new clause defines what we mean by costs. First, it covers both capital and revenue costs. There was some confusion in the earlier days of Committee about whether the Government’s own estimated annual costs of £584 million covered both revenue and capital costs. The Minister repeatedly said that the £584 million is the annual running cost, which implies that it includes nothing for capital costs and, possibly, other up-front costs. The Minister said that she would give no details to the Committee on capital costs, but she did say:"““Looking over a 10 to 15-year period, the operational costs . . . are far greater . . . than the capital cost of initially setting up the system””.—[Official Report, 15/12/05; col. 988.]" So, on the Minister’s own analysis, that places the capital costs at a figure somewhat below the range £5.8 billion to £8.7 billion. That still implies a very significant figure, but somewhat less than some others believe will be involved. I am not today going to go into the analyses produced under the aegis of the London School of Economics. Suffice it to say that the capital costs are a major matter of dispute. That reinforces the need for Parliament to look at precisely what is in those figures and how allowances are made for capital spend, both during and after the initial phase of implementing the Bill. There is, however, a mystery about capital costs. In a Written Answer to the noble Lord, Lord Barnett, whom I am glad to see in his place, the Minister said:"““The cost of depreciating the initial capital costs have been included in the annual operational costs””.—[Official Report, 30/11/05; col. WA 38.]" That implies that the estimate of £584 million includes something for capital. We do not know how much and we do not know what depreciation methods or asset lives have been used. As I have mentioned, the noble Baroness hinted at orders of magnitude. Suppose that capital costs come in at the lower end of the 10-year figure for annual costs and amount to, say, £3 billion. That would be less than half the cost of the current NHS IT programme, so it is probably on the light side. Let us further generously assume that there is a 10-year life for those capital costs. Ten years is a very long time when talking about IT systems, but let us use it as an example. This implies annual depreciation costs of £300 million a year, which would leave non-capital costs within the £584 million of around £284 million. But that does not make sense because the Passport Services’ plans for 2006–07 estimate that its total costs will be £397 million. So is it the revenue costs that are the problem or the capital costs? The Minister will see why so many of us are concerned to understand the financial dynamics of the register and of ID cards. Subsection (2) will ensure that the Government disclose all the costs, including capital and initial costs. But the subsection goes further and makes it clear that the costs included in the costs estimate cover the whole of government. The Minister made it clear on the first day of Committee that the costs she was talking about were partial, covering only the costs of the Home Office. She said that,"““the figures for other departments are for them; that they will have to find that money from their budgets; and that I am unable to tell the Committee the figures that other government departments will need to find for that””.—[Official Report, 15/11/05; col. 986.]" We are clear that that is not acceptable. The Minister should always speak for the whole of government and Parliament is entitled to see the full financial consequences for the public purse. As I understand it, the Government have never said exactly how the register will be used, but it is clear from the Bill and earlier debates that the Department for Work and Pensions, the DVLA and HM Revenue and Customs will use the register—and I understand that the ID project now subsumes the National Population Register, which the Office for National Statistics wants. It does not take much imagination to produce a long list of other departments which would wish to use the register. Indeed, I understand that the Home Office’s procurement strategy sounding document identified 265 government departments, and I hope that the Minister will be able to confirm or elaborate on that when she responds. It is important to understand that I mention other government departments not only for the costs that those departments will incur but also for the costs of the Home Office itself. That is because the design of the register, and therefore the cost of the register, will have to take account of all potential users of the register. I should mention in passing that there will also need to be clarity about the non-governmental users of the register because that too will drive the costs of the system. The procurement strategy document I referred to earlier cites 44,000 private sector organisations being accredited for this purpose. I hope the Minister can say something about that as well today. Subsection (3) states that the cost must cover a period of at least 10 years, although the Secretary of State can specify a longer period. If the Minister thinks that a longer or different period should be chosen, I am open to offers on that. Also in subsection (3), the start date for the cost estimate has been set as 26 April 2004. As I am sure that the noble Baroness is aware, I chose that date because that is when the Government published their first Identity Cards Bill, which seems to represent a reasonable start point. Again, if the Minister thinks that an earlier or later date would be appropriate, I would be happy to reconsider that. Lastly, subsection (3) requires the cost estimates to be analysed into financial years. That is important because the only figure that the Government have given so far is the £584 million of annual costs. As I mentioned earlier, that is some sort of average, but we know that costs never occur in such neat bundles. For example, the scheme will start as voluntary and progress to be compulsory. It will be important to see the impact of that on costs. Capital costs are lumpy, as are initial and set-up costs. Also, costs such as maintenance do not occur evenly over time. I imagine that the Government have made some forecasts of unit cost reduction based on learning or experience curves. Wage inflation alone will mean that the salary cost element, even when deflated by the GDP deflator, will not be the same each year over whatever period. Seeing how those costs fit into each financial year will be an important part of Parliament understanding the Bill’s impact on government expenditure. The final subsection of my new clause requires the Comptroller and Auditor General to examine the cost estimate and report on it to Parliament. Parliament is entitled to some external verification of the numbers. I am aware that the Home Office commissioned a review by KPMG. For the information of the Committee, I mention that I am a former partner in KPMG but, nevertheless, claim no special merit for a report bearing its name. We have not seen the full report or the terms of reference, but it is clear that, even if we did, it would not amount to an audit of the figures, which is what my amendment requires. I am conscious that my amendment deals with only one side of the cost/benefit equation. The Government have given a broad overview of benefits that the Home Office foresees from its perspective, as well as some benefits potentially accruing elsewhere. The amounts indeed appear significant. The Minister may find my amendment lopsided in not seeking to ascertain the truth about the calculation of benefits but, as I said, this is a probing amendment for the purposes of our discussion in Committee and I hope to consider our discussion carefully with a view to tabling an improved amendment on Report. I beg to move.