The cancer of corruption: MPs deal heavy blow to 'back to basics' with tough warning that scandals and waste of public money threaten to destroy traditional standards of probity in the public service

CORRUPTION could take hold in British public life unless the Government exercises tighter management controls. Time-honoured values of integrity, impartiality and incorruptibility are being severely tested by the influx of people from the private sector, according to a powerful cross- party committee of MPs.

Robert Sheldon, Commons Public Accounts Committee chairman, said outsiders coming into Whitehall had to understand that 'public money is different from private money'.

The unprecedented and damning report is a severely embarrassing blow to the Government's 'back to basics' campaign and much-vaunted reputation for tight financial management. Millions of pounds of taxpayers' money had been wasted, the report said, adding that the Government was not doing enough to prevent corruption in the Civil Service and was allowing public-sector standards to lapse.

Presenting the report, Mr Sheldon said: 'The greatest cause of inefficiency is corruption - once you have corruption you're in trouble and it is very difficult to break out of.'

Publication of the report led to strong Opposition attacks on the Government's ability to manage, and falling standards in public life.

The report was prompted by a spate of recent scandals involving government departments and agencies. Coming so soon after the District Auditor's report into Westminster City Council, its timing could not have been worse for the Government. Mr Sheldon drew parallels with Italy and other countries where corruption was rife. In this country, he said, we discounted corruption and put our faith in the Civil Service's integrity.

However, examples such as the Welsh Development Agency flying officials on Concorde merely because they had not done so before, and the Development Board for Rural Wales, where executives operated to a set of unpublished criteria and awarded each other houses, had made him think otherwise. The report contained 26 instances of failures in financial systems and controls which, the committee said, 'have led to money being wasted or otherwise improperly spent'.

The committee emphasised it was 'not calling for more effective rules' but for 'effective systems of control and accountability and above all responsible attitudes on the part of those handling public money'.

Part of the problem was the 'fundamental changes' brought about by government policies of contracting out and market testing. 'At a time of change it is important to ensure that proper standards are maintained in the conduct of public business.'

A 25-point checklist for members of government departments and 1,444 quangos includes:

Application of financial controls and systems;

Proper training of staff;

Avoiding conflicts of interest;

Full and open competition when privatising or contracting out;

Following of rules for car schemes;

Obeying guidelines on redundancy payments;

Ensuring quango chiefs remain accountable and within the law.

Labour immediately went on to the attack. Gordon Brown, the shadow Chancellor, said: 'The central issue which the Government must now address is their failure to tackle the waste of billions of pounds of public money through incompetence, malpractice and even fraud.'

At Prime Minister's Question Time, John Smith, the Labour leader, asked John Major to explain 'the devastating catalogue of incompetence, mismanagement and waste of public money'.

Mr Major replied by welcoming the report and said it provided 'a useful check-list which suggests there has been no decline in standards and says, quite rightly, that improving the efficiency of the public sector isn't inconsistent with propriety'.

For the Liberal Democrats, Paddy Ashdown said people were 'being asked to pay unprecedented levels of taxation only to see your government hand that money over to quangos and executive agencies to throw away on waste, corruption and fraud'.

In an attempt to defuse Opposition attacks on Tory standards, Sir Norman Fowler, party chairman, wrote asking Mr Smith to condemn the apparently discriminatory policies of his own Scottish local council, Labour-controlled Monklands.

WHERE THE MONEY WENT

Examples of waste and bungling cited by the committee include: golden handshakes and recruitment irregularities at the Welsh Development Agency; an pounds 81,000 redundancy payment for a West Midlands Regional Health Authority official facing the sack; millions wasted at the Department of Employment; pounds 20m squandered on a Wessex RHA computer system.

Labour intends to attack the appointment of Tory supporters, including ministers' wives, to quangos and NHS boards.

An pounds 80m-a-year campaign to cut heart disease and stroke by encouraging GPs to set up health promotion clinics is likely to be largely a waste of money, a study concludes.