HC Deb 04 December 1957 vol 579 cc572-80

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Brooman-White.]

12.59 a.m.

Mr. Philip Goodhart (Beckenham)

This is an Adjournment debate about railways, and I should like, at the start, to say that our thoughts turn tonight to all those involved in the serious accident which took place a few hours ago.

I have sought this debate to raise the issue of the purchasing procedure of the British Transport Commission for three principal reasons which I wish to discuss. First, I do not believe that justice has been fully done to my constituent, Mr. Gethin, whose charges were the basis of the investigation which was made by Sir Harold Howitt. Secondly, I do not believe it is possible to over-emphasise the cautionary tales which can be drawn from the report of the investigation. Thirdly, although I believe that much good has already come from the report, there is still more to be done.

Mr. Gethin was the chief contracts adviser to the British Transport Commission for almost two years. After his departure from the Commission he cited a number of important cases in which he thought that the Commission has purchased unwisely. As the Commission was engaged on a modernisation programme, involving the expenditure of some £1,200 million, this was obviously a matter of national importance.

Sir Harold Howitt investigated these charges, and we should be grateful to him for, in his own words, setting out the relevant facts in some detail so that they may speak for themselves. The narrative that he has written has been of great value, even if at times he has seemed to make two and two equal five, which is an odd action for a distinguished accountant.

Many informed commentators, notably The Times and the Financial Times, believe that Sir Harold Howitt has been rather less than fair with Mr. Gethin, that, in fact, the narrative supports Mr. Gethin rather more than Sir Harold will allow. Indeed, in the words of Mr. R. J. Mitchell, the President of the Purchasing Officers' Association: there is a general feeling, which many of us share, that Sir Harold's findings hardly do justice to Mr. Gethin. Mr. Gethin made four minor allegations, if one can call them that. Sir Harold has had some rather sharp comments to make about many of them, noticeably that of the replacement of the s.s. "Dinard", which was originally supposed to have cost just over £1 million and, in the end, cost more than £11 million. Sir Harold has made certain strictures, even if they are not always clearly expressed.

Mr. Gethin made three main charges: first, about signalling; secondly, about overhead electrification; and, thirdly, about the provision of vacuum brake cylinders. Sir Harold has found, certainly in the first two of these cases—signalling and overhead electrification—that no money was wasted. Of course, if one asks only one firm to tender and does not call for competitive tenders, it is quite impossible to prove that any money spent has been wasted.

But it is interesting to note that the efficiency of the financial safeguards imposed by the Transport Commission can he checked, because there is the case of the vacuum brake cylinders. On 23rd April the Commission's Supply Committee agreed that the Westinghouse Brake Company should supply 500,000 of these cylinders, and the price was to be just over £30 apiece. There then followed a period of controversy, and the British Motor Corporation was brought into the field. The Corporation offered to supply cylinders at £21 14s. 8d. apiece. Westinghouse then lowered its price to £23. It is possible to believe that Westinghouse would have lowered its price without this spur of competition, because it was bringing in new manufacturing processes, and it is impossible to believe that the moon is made of Gruyère cheese.

The British Transport Commission's Financial Department had agreed that £30 was a fair price far these vacuum brake cylinders, and when the British Motor Corporation bid came in the Commission decided to inquire of the Corporation to find out whether it really was possible to produce these vacuum brake cylinders at the price offered—to quote to satisfy ourselves that they can, in fact, produce a cylinder for the price quoted. This is the only case in which it is possible to check the efficiency of the Commission's financial safeguards, and I do not believe that in this instance they have proved to be efficient. I hesitate to follow Sir Harold in his belief that they have worked in signalling and in overhead electrification.

Now to the future. The new British Transport Commission purchasing directive is an improvement on the old one, but, as Sir Harold says, everything depends on the spirit in which it is implemented. It is common knowledge that in many big industrial firms there is a clash between the engineering men on the technical side and the contract or purchasing side. There is always bound to be. The engineers are interested in fancy, specifications. The contracts men are interested primarily in costs, and they believe in competitive tenders. In this situation an effective contracts officer is almost bound to have his run-in with the engineers, and I believe that this is what has happened in the British Transport Commission. I believe that Mr. Gethin, who is a trained engineer, was sacked because various engineers were tired of what they considered to be his meddling and interference in their traditional preserves. They did not like the new methods that he was trying to introduce and they threatened to resign if he was not sacked.

In a normal profit-making firm the contracts officer can count on the cooperation of the board of directors, because they are interested in saving all the money that they can. In a nationalised industry, of course, the members of the board are interested in not wasting money, but they are not so immediately, personally involved as people in a private firm. Therefore, in a nationalised industry it is particularly important that the contracts officer should have all the help that he can get.

Will the fate of Mr. Gethin encourage his successors to stand up to the engineers? What will happen if they do? Will they get a handshake from Sir Brian Robertson, or an illuminated address or a pat on the back from the Parliamentary Secretary, or will they get the sack? Mr. Gethin got the sack.

How can we strengthen the hand of the contracts officer? I would like to see the establishment of a small board of outside auditors who would, at irregular intervals, descend on the various nationalised industries to check the procedure and practice of contracting. Perhaps even one man could do the job. The establishment of an external watchdog would have one further benefit. At the moment, manufacturers who deal much with a nationalised industry are inhibited from complaining when they think they have been unfairly treated. They are frightened of making a fuss, because they think that they will lose what business they have. The appointment of one small poodle of a watchdog would give them an additional means of access and an additional avenue of complaint.

Of course, the key to all this is competitive tendering. It has often been said that the Transport Commission departs from competitive tendering only with the greatest reluctance, but in 1956, when £120 million was spent, only 41 per cent. of this amount went out to competitive tendering. That is clearly not good enough. It is the secret allocated contract which is the root of this evil. Let us, at best, have a watchdog committee. Let us, at second best, have just one watchdog. At third best, let us have a rule that all allocated contracts should be made public with the accounts each year. This would be a poor check, but it would be better than no check at all.

I close with some more words by the President of the Purchasing Officers' Association: By sacrificing his personal security in order to protect the national interests, Mr. Gethin has earned the respect of all. What a pity his intervention was needed before the Transport Commission started to put its house in order.

1.13 a.m.

The Joint Parliamentary Secretary to the Ministry of Transport and Civil Aviation (Mr. G. R. H. Nugent)

I rise at this early hour of the morning to reply to my hon. Friend the Member for Beckenham (Mr. Goodhart), but may I first respond to his opening remark and say this about the very serious railway accident which occurred this evening. I am not yet able to give an official account or details of what has taken place, but reports indicate that the toll of dead and injured is heavy—perhaps very heavy. I take this, the earliest opportunity, to express, on behalf of Her Majesty's Government and myself, my deep sympathy with the relatives and friends of those involved. In the meantime, I am assured that everything possible is being done to deal with the very difficult problems involved on the site.

My hon. Friend has raised the problems that arose during the summer, which were dealt with by Sir Harold Howitt in his report, and he has raised a number of points in his speech with which I should like to deal. The last point raised by my hon. Friend was that there should be some sort of watchdog with power to look into the affairs of the Transport Commission. I say this to him, that at the present time my right hon. Friend is responsible to Parliament for the broad policy and action of the Commission. Once a year the Commission presents its Annual Report, which is debated here and can be studied in detail by hon. and right hon. Members of this House. That gives an opportunity for reviewing what the Commission is doing. In addition to that there is the Select Committee on the Nationalised Industries, which can, of course, look into many aspects of its activities. These are very substantial safeguards and inform Parliament of what the Commission is doing, and, in my opinion, they are quite adequate.

My hon. Friend started with the contention that Sir Harold Howitt was less than fair to Mr. Gethin in his Report. I really think there is very little if any independent evidence to support that allegation. Sir Harold Howitt had complete freedom to investigate any aspect he thought necessary within his terms of reference. He is completely independent. Indeed, the general impression his Report has made is an impression of impartiality and thoroughness.

I understand that Sir Harold Howitt turned on to the job of this investigation about 14 of his own staff, and that they were working for eight weeks on this exclusively; that during that period, as well as studying a great many papers, they interviewed 40 responsible officials apart from the many personal contacts they had. Indeed, the Report makes it quite plain that a very thorough, careful check was done. At the end of it the Report gave, to the benefit of this House and the public, Sir Harold Howitt's own very expert judgment, as a very experienced public man and a very experienced accountant, of the balance of the information which his investigations had produced.

It is a matter of opinion whether one agrees with it or not, and it is for each one of us to decide, but my hon. Friend is taking on himself a very big responsibility in conflicting with these views, reached by Sir Harold Howitt and quite obviously generally accepted throughout the country. Sir Harold Howitt had the benefit of a complete investigation, carried out thoroughly and impartially, and, having collected all the information he thought necessary, he then reached the findings which were put in his report.

Mr. Goodhart

As I have indicated, my views are shared by the President of the Purchasing Officers' Association, which is the recognised professional body.

Mr. Nugent

The President of the Purchasing Officers' Association is perfectly entitled to his view, but, of course, it is a view naturally sympathising with another purchasing officer, and I really cannot find it in my mind to agree that he is in a better position than Sir Harold Howitt to judge just where the right balance lies in these matters, and I believe very few other people will either.

The report shows that during Mr. Gethin's two years' service, or just under two years' service, he did, of course, make a useful contribution to the development of the right solution to this complex problem. He was a senior official highly paid to do just this. He did it, and, indeed, it would have been very surprising if he had not, and Sir Harold Howitt in his report gives him credit for it. Along with the Commission and other responsible officials he helped to secure competition and lower prices on the Westinghouse vacuum brake problem and to develop a stronger organisation for purchasing and contracting.

I do not propose to go into detail on the vacuum brake problem or other problems, but once again I rely on the comment that I have just made that Sir Harold had no other purpose but to make a completely impartial and independent report. He gave us the benefit of that report after very careful investigation. It would need extremely strong evidence to show that his report was either unfair or unsound. Although my hon. Friend draws a conclusion from the Westinghouse incident that Sir Harold was unsound on the overhead electrification and signalling cases.

It is not easy to decide when contracts are allocated instead of being competed for. One can only decide by collecting facts and by an expert man carefully reviewing the evidence. Sir Harold Howitt gave us the benefit of that. In the end, this is a matter for each one of us to decide whether we agree or not, but without supporting evidence, which has not yet appeared, it is very difficult indeed to reach the conclusion that Sir Harold was wrong. On the Westinghouse incident I would say only that Sir Harold concludes in paragraph 79 by saying: I do think, having regard to the amount involved and the urgency of the programme insufficient effort was made by the staff concerned "— which includes Mr. Gethin— prior to the meeting of the Supply Committee on 21st April to explore alternative source-of supply. Therefore, it was quite evident that in Sir Harold's view there could have been greater effort before. But let us be clear that at that April meeting Mr. Gethin rightly, because it was his job, called the attention of the Committee to the need to look beyond the traditional suppliers, and three days later the Commission itself was deciding something very much on the same lines. In the ensuing months, not only Mr. Gethin but Mr. Hanks, a member of the Commission, and other officers were actively engaged in following the matter up to see what competitive tenders could be obtained.

Mr. Goodhart rose—

Mr. Nugent

I have only four minutes left, and I want to deal with one or two other points which my hon. Friend has raised.

It was quite clear in the final result of the vacuum brake incident that although Mr. Gethin played a useful part in it, and a part that one would expect him to play, it was by no means by his responsibility alone that competition was obtained in due course.

The question of the relationship between purchasing engineers and staffs is a common problem in industry as well as on the railways, and it is a particularly difficult one. The history in the Commission is that in 1955, before Mr. Gethin arrived, the Commission had started reviewing the purchasing procedure. It knew it had a difficult problem, and, indeed, the appointment of Mr. Gethin was one way in which it was hoped to deal with the problem. He was included with the committee of senior officers which reported in October, 1956—the "Blue Report" which has been referred to and which was supported by Mr. Gethin. After much deliberation the Commission finally decided to produce a new supplies organisation in May, 1957, resulting in August, 1957, in the directive which provided for the appointment of a chief contracts officer laying down the relationship with technical departments and his duties. In paragraph 49 of the Report Sir Harold Howitt quotes that Mr. Gethin broadly agreed with this.

The chief contracts officer was appointed two months ago and is making good progress. He is establishing good relationships and a uniformity of contractual practice. Normally tenders are competitive, but where that is not the case and contracts have to be allocated, special financial safeguards are required, and it has been his responsibility to define them. Allocated contracts of over £100,000 the Commission must approve, and when they are under £100,000 either the Works and Equipment Committee or the area board approves.

There will always be some occasions when it is in the interest of the railways, as indeed with other big industrial and commercial units, for contracts to be placed without competition. It is the exception, but inevitably it arises sometimes in particular, with the modernisation of the railways when time has been such an important factor, and still is. The balance of advantage then has justified the placing of contracts by allocation and not by competitive tender. The decision as to whether or not that should be done must lie with the Commission. To limit its discretion or require special reports would undoubtedly reduce its competitive ability.

These matters are essentially within the scope of the day-to-day management of the Commission, that is to say, they are matters for the Commission and not for my right hon. Friend or for Parliament. So I must reject the suggestion of my hon. Friend that this new control should be created. A progress officer is in the course of being appointed. A production officer will be appointed in a few months when the Commission has completed its present review of production policy. This will give the necessary officers the authority about which my hon. Friend is concerned. They will have direct access to the Commission and also the right of access to the Chairman himself. That should provide a complete safeguard against the possibility about which my hon. Friend is anxious that they will not have the necessary authority and influence to cope with the very influential technical and engineering departments.

Regarding the comments of my hon. Friend about the "sacking" of Mr. Gethin, we must be clear that he left the Commission by agreement. Mr. Gethin has never made any complaint about that in public or in any other way. He left on an agreed basis and said so publicly in an agreed statement with the Commission. It was not until after he had left that he made his allegations about the Commission, and, therefore, the implications made by my hon. Friend that the Commission "sacked" him because of some clash is completely without foundation and I am surprised at my hon. Friend for making them.

The effect of my hon. Friend's suggestion would be to increase the control and direction of the Commission from the centre. I believe this is fundamentally wrong.

The Question having been proposed after Ten o'clock on Wednesday evening and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty-nine minutes past One o'clock.