HC Deb 15 July 1958 vol 591 cc1183-96

Considered in Committee.

[Sir GORDON TOUCHE in the Chair]

I. Whereas it appears by the Army Appropriation Account for the year ended on the 31st day of March 1957 that the aggregate Expenditure on Army Services has not exceeded the aggregate sums appropriated for those Services and that, as shown in the Schedule hereto appended, the net surplus of the Exchequer Grants for Army Services over the net Expenditure is £8,355,653 17s. 8d., viz.:—
£ s. d.
Total Surpluses … … … … … … … 11,754,546 17 11
Total Deficits … … … … … … … 3,398,893 0 3
Net Surplus … … … … £8,355,653 17 8
And whereas the Lords Commissioners of Her Majesty's Treasury have temporarily authorised—
(1) the application of so much of the realised surplus on Vote 8 for Army Services as is necessary to meet the net deficit of £727,322 8s. 5d. on Vote 11 that would otherwise have been met by issues out of the Consolidated Fund under the Armed Forces (Housing Loans) Acts, 1949 and 1953.
(2) the application of so much of the remainder of the said total surpluses on certain Grants for Army Services as is necessary to make good the remainder of the said total deficits on other Grants for Army Services.
SCHEDULE
No. of Vote Army Services, 1956–57 Votes DEFICITS SURPLUSES
Excesses of Actual over Estimated Gross Expenditure Deficiencies of Actual as compared with Estimated Receipts Surpluses of Estimated over Actual Gross Expenditure Surpluses of Actual as compared with Estimated Receipts
£ s. d. £ s. d. £ s. d. £ s. d.
1 Pay, &c., of the Army 181,013 8 10 231,668 4 3 — —
2 Reserve Forces, Territorial Army, Home Guard and Cadet Forces 132,777 18 6 66,338 2 10 — —
3 War Office 20,115 3 5 — — 2,678 3 4
4 Civilians — — 1,614,744 10 2 497,306 0 2
5 Movements — 246,914 17 1 3,253,007 8 0 —
6 Supplies, &c. — 1,072,740 16 10 1,072,408 9 6 —
7 Stores 96,761 15 11 — — 2,894,015 4 3
8 Works, Buildings and Lands — — 1,174,037 16 4 203,664 19 0
9 Miscellaneous Effective Services — — 772,978 8 0 166,796 14 0
10 Non-Effective Services 198,189 7 2 — — 55,420 0 11
11 Additional Married Quarters — 774,811 12 8 47,489 4 3 —
— Balances Irrecoverable and Claims Abandoned 377,561 12 9 — — —
1,006,419 6 7 2,392,473 13 8 7,934,665 16 3 3,819,881 1 8
Total Deficits: Total Surpluses:
£3,398,893 0s. 3d. £11,754,546 17s. 11d.
Net Surplus £8,355,653 17s. 8d.
Resolved,
That the application of such sums be sanctioned.—[Mr. Simon.]
Mr. John Strachey (Dundee, West)

Ought we not to have some explanation of this question?

II. Whereas it appears by the Air Appropriation Account for the year ended on the 31st day of March 1957 that the aggregate Expenditure on Air Services has not exceeded the aggregate sums appropriated for those Services and that, as shown in the Schedule hereto appended, the net surplus of the Exchequer Grants for Air Services over the net Expenditure is £7,415,590 11s. 7d., viz.:—
£ s. d.
Total Surpluses … … … … … … … 35,636,871 16 6
Total Deficits … … … … … … … 28,221,281 4 11
Net Surplus … … … £7,415,590 11 7
And whereas the Lords Commissioners of Her Majesty's Treasury have temporarily authorised the application of so much of the said total surpluses on certain Grants for Air Services as is necessary to make good the said total deficits on other Grants for Air Services.
SCHEDULE
No. of Vote Air Services, 1956–57 Votes DEFICITS SURPLUSES
Excesses of Actual over Estimated Gross Expenditure Deficiencies of Actual as compared with Estimated Receipts Surpluses of Estimated over Actual Gross Expenditure Surpluses of Actual as compared with Estimated Receipts
£ s. d. £ s. d. £ s. d. £ s. d.
1 Pay, &c, of the Air Force — — 385,675 13 3 818,400 13 8
2 Reserve and Auxiliary Services — 17,246 6 9 266,443 1 3 —
3 Air Ministry 378,389 17 4 5,688 2 4 — —
4 Civilians at Outstations 3,019,748 7 6 35,172 13 7 — —
5 Movements 1,298,495 5 1 — — 273,031 12 11
6 Supplies — — 1,490,987 2 9 1,960,986 7 9
7 Aircraft and Stores — 18,015,871 18 7 26,571,667 17 11 —
8 Works and Lands 3,804,722 0 5 — — 1,497,338 15 10
9 Miscellaneous Effective Services — 329,765 12 8 807,648 1 2 —
10 Non-effective Services — — 192,044 7 5 66,519 9 0
11 Additional Married Quarters — 1,306,128 13 7 1,306,128 13 7 —
— Balances Irrecoverable and Claims Abandoned 10,052 7 1 — — —
8,511,407 17 5 19,709,873 7 6 31,020,594 17 4 4,616,276 19 2
Total Deficits: Total Surpluses:
£28,221,281 4s. 11d. £35,636,871 16s. 6d.
Net Surplus £7,415,590 11s. 7d.

11.38 p.m.

The Financial Secretary to the Treasury (Mr. Simon)

I beg to move, That the application of such sums be sanctioned.

The purpose of these Motions is to give Parliamentary sanction to the virement which was temporarily authorised by the Treasury between the Votes of the Service Departments for 1956–57. The Treasury has exercised its temporary

The Deputy-Chairman

I am afraid I have now put the Question, but there can be debate on the second Motion.

virement powers in that year in relation to the War Office and the Air Ministry, the Admiralty having incurred an excess Vote. In previous years these Motions, which I think are known as "The Monk Resolutions," have frequently been moved only formally. It is true that this year the Public Accounts Committee has said that there is no reason why Parliament should not sanction the virement temporarily authorised by the Treasury —and I hope Parliament will do so this evening and, in due course, through the Appropriation Act—but the Public Accounts Committee also recommended that further consideration be given to certain matters. Any report of that nature from the Public Accounts Committee raises technical points of public accountancy which are also important because they affect the Parliamentary control over Government expenditure. I therefore feel that the Committee would probably expect me to say a few words on this occasion.

There is, I think, another reason why the House would like the Government spokesman to say a few words of introduction. I am sure that hon. Members would like me to pay a tribute to the late Sir Frank Tribe, by whose passing the public service has suffered a very great loss. In his office of Comptroller and Auditor General, he earned the respect and gratitude of this House and, in particular, of the members of the Public Accounts Committee whom he served so directly.

When he took office in 1946 he was confronted with the task of reintroducing standards of audit and accounting in keeping with normal peace-time arrangements after the relaxations that had necessarily been permitted during the war. Moreover, the expansion of the Health Services and the growth of support to industry by means of subsidies raised new accounting and audit problems. That he was able to deal with this new situation so smoothly and without creating any feeling of rancour is a great tribute to his judgment and impartiality. Sir Frank Tribe had a sense of responsibility and a devotion to duty in keeping with the high office that he held so ably, and I know that the House would wish on this, the first possible occasion, to pay tribute to his passing.

Perhaps I may now deal, briefly, with the Resolutions that are before the Committee. The Civil and Revenue Estimates, as the Committee knows, are presented in separate units known as Votes, and those Votes are divided into Subheads. In the case of the Civil Estimates, there is power, with the consent of the Treasury, to use money which is under-spent on one Sub-head to discharge an excess of expenditure on another Subhead. I should emphasise that this power exists only in regard to the Sub-heads.

In the case of the three Service Departments, the Estimates are presented in the same way—as a series of Votes for each Department, and the Vote is divided into Sub-heads. But, in the case of the Service Ministries, in addition to the transfer, with the consent of the Treasury, between one Sub-head and another, it is also permissible, where the conditions of Section 4 of the Appropriation Act are fulfilled, to utilise savings on individual Votes of these Departments to meet excesses on other Votes of the same Department. That power of switching—with the consent of the Treasury—between one Vote and another and between one Subhead and another is known as virement. The power, of course, is conditional on the aggregate provision in the Estimates for each Department not being exceeded.

That power of virement is subject to two very important qualifications. In the first place, the Treasury's powers of authorising virement are only temporary and subject to the sanction of this House, which I am seeking on this occasion. Secondly, and even more important, Parliament is safeguarded against any misuse of Treasury powers by the vigilance of the Comptroller and Auditor General and the Public Accounts Committee. Over the years there has been built up a code of precedent and practice to which the Treasury earnestly endeavours to adhere in, I think it is right to say, the spirit as well as in the letter.

As I have said, the Public Accounts Committee has, in its second Report in this Session, been critical of the exercise of the powers of virement by the Treasury on this occasion. I hope that the House will not press me on the details of the points raised by the Public Accounts Committee. There is a procedure laid down whereby these may be dealt with. The procedure is that, in due course, a Treasury Minute is prepared which replies in detail to the observations of the Public Accounts Committee. That goes before the Public Accounts Committee, when it is set up again in the next Session. The Public Accounts Committee has full power to call for witnesses and to examine them if it wishes for further evidence, and in the unlikely event—indeed, I think, the unprecedented event—of an unreconciled difference of opinion between the Treasury and the Public Accounts Committee there is an old undertaking, dating from 1884, that the Government will, in those circumstances, bring the matter before the House for decision. As I have said, such an irreconcilable difference of opinion has never yet occurred, and I trust will not now occur.

I think the Committee is entitled to an explanation, even if not of the detailed matters which will, in due course, be reported to the Select Committee. A preliminary examination of the points which have been raised does not suggest that the Treasury has acted in any way not in accordance with past practice. The main criticism of the Public Accounts Committee is that it is undesirable to use virement to meet excesses on the works Vote, especially when new works services have been started without provision in the original estimate; and secondly, that virement between the ordinary works Votes and the special Votes for building married quarters by loans from the Consolidated Fund should not be exercised on any considerable scale.

As to the first point, it would, if accepted, entail a fundamental restriction of the Treasury's powers of virement. The Committee will not want me to argue that case in detail, especially as the House has set up a Select Committee on Procedure, within whose jurisdiction such a problem might well lie. But virement has always been exercised—at least for a great many years—both to and from the Services' works Votes. It has been applied to meet excesses on the works Vote—as on the Admiralty's works Vote for 1954–55—even when new works services have been started which were not included in the original estimate. That, I should point out to hon. Members, has not excited the criticism of the Public Accounts Committee.

On the second point, the Public Accounts Committee in 1950–51 gave approval to the use of virement from savings on the ordinary works Votes of the Service Departments to meet expenditure on the additional married quarters Vote which would otherwise have had to be met by loan. They placed no restriction on the amount of virement, although there was evidence before the Committee of the size of the sums likely to be involved in this arrangement.

The Treasury will be submitting in very much greater detail to the Committee next session a Minute dealing with the criticism made and, in view of the fact that the general question of virement between Service Votes could be examined by the Select Committee on Procedure if necessary, I hope that I have satisfied hon. Members that the Treasury has acted in accordance with well established practice, and that it has done so even in the matter in which it has been criticised in the Report. Further, the Committee saw no reason why Parliament should not sanction the virement suggested. It made observations only so far as the future is concerned, and in all these circumstances I hope that the Committee will pass this Vote.

11.50 p.m.

Mr. John Strachey (Dundee, West)

I am glad that the Financial Secretary has said something this year on this subject, because it is a most appropriate place and time to pay a tribute to the late Sir Frank Tribe. I knew him very well at the Ministry of Food and recall that after that period in his career he did very great work as Comptroller and Auditor-General. It is fitting that the Committee has this opportunity to pay tribute to a very distinguished public servant, whose death was premature, was unexpected, and a very great shock to us all. I am very glad that both sides of the Committee have had this opportunity to say that.

Coming to the issue of virement this year, I cannot quite agree with the Financial Secretary. I am bound to say that I was very struck by this Report of the Public Accounts Committee in which, after all, with a Government majority, it came out with some really searching criticism of the Government's procedure in this matter. The hon. and learned Gentleman says that he does not at this stage want to discuss the points in detail, but the fact remains that the Public Accounts Committee, which cannot very well be brushed off, is clearly of opinion that virement has been stretched this year beyond its natural function.

There are two respects in which it has been stretched. In the matter of the Air Force Vote, the under-spending on works Votes and the switching of really quite important sums from that to the starting of a cookery school, which the Committee notes as an example, was really a very long way from the purpose for which the money was voted by Parliament. These things are all matters of degree. There is no doubt that it is a convenient and sensible practice that there should be a certain amount of elasticity here, but when the amounts go beyond a certain sum and when the objects diverge beyond a certain limit, I should have thought that the Public Accounts Committee was on sound ground in issuing some warning.

The second point is, to my mind, a much more important one. We have here actually a case of virement or switching between moneys which, by the intention of Parliament, should have been borrowed moneys to voted moneys. This arises on the Army's housing programme. Hon. Members on both sides of the Committee, I think, regard the special provision by which the Army builds married quarters as a very sensible one. The Army has become, as the Committee knows, in effect a local authority for this purpose, and it builds houses on borrowed money just as a local authority does. I say that both sides of the Committee take that view, because the Army does this under an Act originally passed during the period of a Labour Government and under another Act passed during the period of a Conservative Government. There is, surely, no party difference in the matter. It is a sensible and appropriate method by which the Services meet their housing needs just as a local authority does, not out of current revenue, which is inappropriate for housing, but out of borrowed moneys.

We now find that, by a wide stretching of virement, those Acts have really, as regards the Army at any rate, been rendered nugatory, and large sums which were voted by Parliament for quite different purposes have been used for housing. The Public Accounts Committee recognises the serious objections to the use of virement to vary the allocation between voted and borrowed moneys which had been approved by Parliament in the Estimates. The sums involved are quite considerable. The Committee further says Expenditure by the three Service Departments charged to special Married Quarters Votes up to 31st March, 1957, amounted to £53 million. Of that sum about £23 million or almost a half was met by the application of savings on ordinary Works Votes under the virement procedure mentioned above. Indeed, over the years 1953 to 1957, the whole of the War Office expenditure on additional married quarters, which amounted to some £9 million, was met by virement out of moneys voted for ordinary works services. That really does seem to me an abuse of virement. I should have thought it much more sensible to have gone on working the Acts which were intended to give—the War Office in this case—the power to borrow money for its housing programme. I just do not understand why that was not done. I should have thought it was more sensible. So I would have hoped that the Financial Secretary would have at any rate indicated to us whether the Government consider that the War Office should continue to do this and, if so, why.

Why should it not use the Acts as Parliament unquestionably intended it should to run its housing programme, borrow moneys and return to the Treasury in effect the surpluses on its works Votes as they arise? That would seem to me to be carrying out the intentions of Parliament much more clearly. That is the view of the Public Accounts Committee with a Government majority. I should like the Financial Secretary to tell us why he disagrees with us, if he does, before we let this Vote go through.

11.57 p.m.

Mr. Simon

I do not think I can refuse to respond to an appeal to justify the accountancy which has been carried out—I mean the use by the Treasury of its power of virement between a works Vote and a housing loan Vote. The right hon. Gentleman said the Public Accounts Committee cannot be brushed off in this way. I hope I did make it perfectly clear that we shall be submitting to the Public Accounts Committee in due course a detailed Treasury Minute in which we shall be replying to the criticisms made and submitting the matter once again to the judgment of the Public Accounts Committee. Nothing I have said is intended in any way to be derogatory of the Public Accounts Committee, which is a Select Committee of the House and which, I should add, has shown an understanding of the problems of the Treasury and, as the right hon. Gentleman indicated, of the Service Departments in respect of which virement has to be exercised.

As to virement, the purpose of which is to allow surplus sums on the works Vote to be used to meet expenditure on married quarters housing which would would otherwise have to be met by borrowing and for which there is power to borrow, I do not want to go into great detail now. I do not think this is the occasion to do so. However, I would just point this out. In the first place, the power given to the Government, to the Air Ministry and to the other Service Departments to borrow in respect of their married quarters housing, their married officers' and other ranks' housing, is not a mandatory power; it is a discretionary power. They are not bound to borrow for that purpose. Secondly, the total of the building for married quarters in the year in question and over the years has not exceeded the amount voted by Parliament, that is the amount sanctioned by Parliament in the Estimates. The only question is how it should be financed.

The third thing is, as I said, that the Act is permissive, and all that has been done in effect is to use the current surplus in order to build the married quarters rather than throw the burden on future Defence budgets. I could go into the matter in greater detail. It is a question of proper accountancy practice. Obviously, it is an important matter because it relates to Parliamentary control over Government expenditure. I would emphasise this. In the services which were sanctioned by Parliament and which were voted in the Estimates, the Estimates have not been exceeded. All that we have done is to use money which was available in order not to mortgage the future. As I indicated in my opening remarks, what the Treasury has done on this occasion in the way of virement in this particular respect is sanctioned by the authority of the Public Accounts Committee on a previous occasion. If the House passes this Resolution, the matter is still not finally disposed of, because it goes back to the Public Accounts Committee. I hope that with that explanation the Committee will pass this Resolution.

12.1 a.m.

Mr. Glenvil Hall (Colne Valley)

I have listened carefully to what the Financial Secretary has said, and although I stood in his shoes for five or six years, I cannot remember any occasion during the whole of the Labour Government's period of office from 1945 to 1951 when this kind of situation arose. He is correct in saying that the money has been voted by Parliament, but that money was voted for a particular purpose and, like all other Estimates, it has to be devoted to the purpose for which it was voted and no other. Only when one comes to the Defence Departments is a certain amount of latitude allowed, and moneys which have been voted for one purpose may be utilised, provided Parliament sanctions it later, for another. The reason is obvious, because defence is something which should not, in certain circumstances, be kept short of the necessary money to provide all that is necessary for that purpose. But here we are dealing with something quite different, and it was the continual reiteration by the hon. and learned Gentleman of the fact that Parliament had voted the money that brings me to my feet, because that is not the essence of this at all.

I should like to voice again the request made by my right hon. Friend the Member for Dundee, West (Mr. Strachey) that this is the last time this kind of thing should happen, and we should like an assurance from the Treasury that in future it will insist that the Monk Resolutions should be used for the purpose for which they were designed.

May I also say how much I share the sentiments expressed by the hon. and learned Gentleman about the sad and regrettable death of Sir Frank Tribe. Like many other hon. Members of this House, I knew him well and worked with him over a period of years. He was extremely able and had other qualities which endeared him to many of us who worked with him and met him week by week. His death came as a great shock, for we looked forward to many more years of active service by him both to the House and the great Department he controlled. It is sad that he should be cut off as he was. Fortunately, the Treasury is always rich in men of ability, and today we will all have read in The Times that a worthy successor to Sir Frank has been found in the person of Sir Edmund Compton. We all wish him well in the post he now takes over.

12.4 a.m.

Mr. George Wigg (Dudley)

For only a few moments I would raise my voice in protest against this archaic nonsense, which goes on from year to year and which is a survival of the conflict between Parliament and King 300 years ago. Still it remains a major crime to spend twopence on pay which has been voted for rations. It is a lot of fun and a bit tough on the warrant officers and N.C.O.s who have to administer through the archaic system of regulations which flow from it. It may be an interesting and amusing survival even at this time of night, but it has an unfortunate effect upon Army administration.

Mr. John Arbuthnot (Dover)

Is the hon. Gentleman suggesting that Parliament votes money for one purpose and that it ought to be spent on another?

Mr. Wigg

Not at all. I am suggesting that the modern and up-to-date way would be to vote to the Secretary of State for War or the Secretary of State for Air whatever sum the House thinks fit, as is done in other Departments, and to leave the Departments more or less free to spend it, instead of compartmentalising it in the way in which it is done now, with the whole system of Treasury watchdogs sitting in the War Office. I have no objection even to that, but the effect upon the efficiency of the Services is extremely profound.

Whenever I look at the Monk Resolution and the principle of virement year by year and listen to the dirge—I say that with respect to the Financial Secretary—and I want an antidote I go back and read those amazingly able lectures given by Sir Charles Harris when he was Director of Finance at the War Office. He saw through the nonsense; he saw what it cost in terms of men and lives and raised his voice in protest and tried to do something about it, but he failed because the vested interests at the Treasury were too strong for him.

It is about time that some long-term thinker, either in a Service Department or at the Treasury, looked at the actual cost in terms of efficiency. It is very great indeed. Every senior officer in the Service who comes up against this problem raises his voice against this nonsense. It is a little like Aladdin rubbing his lamp and the genii appearing. Nobody is clear what it is about.

I am sure that I have transgressed the rules of order, but before I resume my seat may I express the hope that before another year is passed the Treasury, or the Service Departments, or perhaps even a new Minister of Defence, may start to do something about it.

12.7 a.m.

Mr. Simon

I wish to say only one word more, and that is in answer to the criticism that what was done on this occasion by way of virement between the works Vote and the married quarters Vote was something of which Parliament had absolutely no warning. I would with respect draw attention to page 179 of the Army Estimates for 1956–57 where, under the note on Vote 11 relating to additional married quarters, it was specifically stated and drawn to the attention of the House that: Any surplus that may arise on Vote 2. subhead D, and Vote 8"— which is the Works votes— may be applied to meet expenditure under subhead A of this Vote and reduce the sum which would otherwise be issued out of the Consolidated Fund. I realise that there is an important constitutional problem here which admits of argument, but what was done on this occasion was done to the knowledge of Parliament and in accordance with precedent.

Question put and agreed to.

Resolutions to be reported.

Report to be received this day.