Leading Article: Who is to blame for water scandal?

YET ANOTHER privatisation chicken flies home to roost on Labour's roof. Last week the way the Tories sold off British Rail landed on John Prescott's desk. This week we are told his Department for Environment, Transport and the Regions is liable for a huge pensions bill for the state- owned water industry - because, surprise, surprise, most of the choicest of the assets that were meant to pay for water employees' pensions ended up after privatisation in the coffers of the water plcs.

The story is complicated, but it matters a great deal, not just to current pensioners, but potentially to hundreds of thousands of other state employees and to the taxpayers who may have to do the bailing out. Talk by ministers about tight belts and spending limits ceases to convince if - albeit unknowingly - they are presiding over massive profligacy. This imbroglio is not of Labour's making, but it is in the Government's interest to show that it is tidying up the mess. A few executions, figuratively speaking, would help.

This is a tale of divvying-up public sector assets in anyone's interest but the public's. When water was privatised in 1989 employees had the choice of moving to new employers' pensions or staying with existing arrangements. Those who stayed had their pensions guaranteed, they thought, from a fund into which various assets were put. But this "closed" fund got short shrift. Some of its assets were duds, such as a stake in a company that later went bust. This fund is now in huge -pounds 400m plus - deficit, with a great and growing gap between what it can pay out and the obligations it has to pensioners now and to come. Guess who makes up the shortfall - taxpayers.

The story is told in a report today from the National Audit Office. This is the 800-strong team of accountants and specialists charged with ensuring public money is properly spent. It answers to the Comptroller and Auditor General, Sir John Bourn, who in turn answers to the House of Commons Public Accounts Committee. This is the ultimate mechanism to detect and remedy spending abuse. Taxpayers have nowhere else to turn. Yet this report instils a disquieting sense of how little we, or anyone, knows about the vast archipelago of state bodies spending public money. Here the NAO tells only half a story. The recent history of pensions for the water industry is a catalogue of mistakes, perhaps even recklessness with public money. NAO auditors have evidently followed the paper trail. But where are their conclusions? Where, most important, is their bill of indictment?

The public has suffered a huge loss. Who is responsible? Where do we look - to pensions advisers, trustees, fund managers, or to civil servants or Secretaries of State for the Environment? Does Sir John Bourn not know who is answerable - he surely cannot fear naming names, since his reports enjoy parliamentary privilege?

In another corner of the public empire there is the Audit Commission, which oversees council and health service accounts. The district auditors it supervises do name names; they sometimes even surcharge them and disqualify them from public office. Why is there such a disparity between local and national levels in the business of detection and punishment?

With this report Sir John Bourn has let it be known he is anxious about the custodianship of other public-sector pension funds, their assets totalling some pounds 100bn. (If he really wanted to scare us he would also mention the pay-as-you-go pension arrangements for local authority staff which are seriously out of kilter.) But warnings only go so far. The Public Accounts Committee has the power to identify individuals responsible for this farrago. If they cannot be hauled before a court then they at least can be publicly named and shamed. The Government believes in that procedure for miscreant youth. Let us see it, not before time, applied to people who instead of serving the public have by their incompetence or negligence cost the public huge sums of its money.