GUIDED WEAPONS (REPORTS FROM COMMITTEE OF PUBLIC ACCOUNTS)

HC Deb 19 December 1960 vol 632 cc894-962

3.50 p.m.

Mr. Harold Wilson (Huyton)

I beg to move, to leave out from "That" to the end of the Question and to add instead thereof: this House takes note of the Second Report from the Committee of Public Accounts in the last Session of Parliament, and the Special Report from the Committee of Public Accounts, with particular reference to paragraphs 25 to 45 of the Report which relate to Development and Production of Guided Weapons. Today's debate, Mr. Speaker, is a new departure in Parliamentary practice. There are no precedents to guide us, but I am sure that we all hope that it may be the beginning of a development which, within rather restricted limits, may be useful both to the House and to the Government, and, therefore, to the taxpayer, in controlling Government expenditure. I am sure that I speak for all hon. Members—I certainly know that I speak for all members of the Public Accounts Committee—when I say that I do not regard this debate as one that should take place on party lines.

Although I am speaking from my accustomed place, I am speaking today, not on behalf of the Opposition but as Chairman of the P.A.C.—a Committee representing the whole House—and, in my view, the confrontation in this debate is not between Government and Opposition but between the House of Commons, with its traditional responsibility for controlling the public purse on the one hand and the Government on the other.

Though it may be that in future years—today we are feeling our way—some future chairman or members of the P.A.C. or other Members of this House may wish to use any Report of the Public Accounts Committee for a stinging attack on Government profligacy and waste—as any such Report can always be used—I want now to examine the problems raised by the survey of last year's expenditure, and, in particular, the problem of controlling expenditure on research and development contracts, which the Committee has highlighted in this year's Report.

Before I come to this rather special problem, I should like to say a word or two about the general problem of controlling Government expenditure and the contribution that these Reports and these debates can make to that end. For some years there has been growing concern about the level of expenditure. It was emphasised particularly by a group of hon. Members opposite, including the noble Lord the hon. Member for Dorset, South (Viscount Hinchingbrooke), immediately after the election, and particularly after the publication of the 1960–61 Estimates last February, showing an increase of over £320 million over the previous year.

The feeling was then expressed that Parliament should do more to assert its control over expenditure. I think that that would be generally agreed, but it is important to distinguish between what Parliament can do and what it cannot do. One thing that, in all sincerity, it cannot do is to vote one year for increased social or military expenditure and then complain in the following February if the total Estimates have gone up. Another thing that cannot be done in this modern world is to think that we can control expenditure on a day-to-day or even on a year-to-year basis. Many of the spending programmes with which we are concerned are inevitably committed for several years ahead.

One can think of two examples in that connection—education and roads. During the debate on the Crowther Report last year, the right hon. Gentleman the Minister of Education referred to educational expenditure, then running at £700 million, and said: Making no allowance for any of Crowther's recommendations, this £700 million, as we continue the drive to put the present policies into effect, will have risen by the end of the decade by one-half and, by the middle of the 1970's by four-fifths."—[OFFICIAL REPORT, 21st March, 1960; Vol. 620, c. 54.] that is, about £1,300 million. On that occasion, the only criticism from all sides of the House was that that increased programme expenditure was not sufficient.

The Financial Secretary, who I understand is to reply to the debate, will recall the words that he used when dealing with the problem of Government expenditure. During the Budget debate last April, he largely turned his back on this side of the Chamber and addressed his hon. Friends who had been raising questions. The hon. Gentleman then said: … It is just no good thinking that we can, as a House of Commons, approve a major step forward in social reform and ensure it, without the expenditure of a great deal of public money … when we introduce a large social reform, we must expect the cost to go up over the years … We have long been used to doing a certain amount of forward looking in regard to capital spending, but we shall have to get used to the same concept in relation to revenue spending as well."—[OFFICIAL REPORT, 7th April, 1960; Vol. 621, c. 588–90.] I think that the hon. Gentleman was quite right in saying that. We cannot, therefore, expect to control the level of expenditure year by year because so many programmes go for a long period ahead. The plain fact is that this places a very severe limit on any hopes hon. Members may have about what the House of Commons, as such, can do to control this expenditure. In that connection, I quote words that have echoed round this Chamber now for over a hundred years: "Expenditure depends on policy."

I think that it was in 1862 that Disraeli said: I have so often maintained it in this House that I am almost ashamed to repeat it, but unfortunately it is not a principle which has yet sufficiently entered into public opinion—expenditure depends on policy. Robert Lowe, in 1871, said: Finance is the handmaid of public policy. Again, Haldane, in 1904, said: It is no use having an enquiry into expenditure; it was a matter of policy. After the First World War, when the Select Committee on National Expenditure in 1922 had called for some very stringent measures of public control of finance, Sir Robert Horne, in 1927, then Chancellor of the Exchequer, said: When we come down to bedrock, the cause which is chiefly responsible is the policy of the Government. It is policy upon which expenditure is founded. I do not think there can be any doubt that if anyone in any part of the House wants to make a significant change in the level of Government expenditure he has to attack policy and not the administration of the expenditure. It is clear, therefore, that unless this House is prepared to call in question major programmes of Government policy, whether in the social or in the military field, it is unable to make a serious impact on the volume of Government expenditure.

In fact, I would doubt, having regard to some of the continuing programmes I have mentioned, which are due to rise from year to year, whether anything we as a House can do in present circumstances can hope to prevent a rise in the total level of expenditure. All we can hope to do is to moderate the rise that is already inevitable, and to see that—and this is where the House really has a job to do—as far as humanly possible we get value for money in that expenditure.

I do not intend to go into the different rôles of the two principal Committees which have been given this duty or to comment on the important new duty given to the Select Committee on Estimates in respect of comparing each year's Estimates with those of the preceding yeas and accounting for any changes. Although the duties of the two Committees are different and are quite clearly laid down in our instructions from this House, I should like to dispose of one elementary fallacy that we hear very frequently; namely, the view that while the Estimates Committee looks to the future, the Public Accounts Committee looks only to the past and is concerned only with inquests on a fiscal corpse.

The Public Accounts Committee, of course, spends a great deal of time—roughly from December to May in every year—examining Government spending of the twelve months that ended in the previous March. It is true that when its Report is published in the July or August of any given year it is usually reporting on expenditure that ended some sixteen or seventeen months earlier, but the continuing nature of very many Government spending programmes means that the Committee's comments, criticisms or recommendations on the expenditure in any given previous year are directly relevant to current spending activities and future spending activities. In many cases the criticisms and recommendations which the Public Accounts Committee make, arising out of its examination of the past year, are designed to produce reforms in the system of expenditure control for the future.

If one takes the Report which is at present before the House, amongst other items it deals with specific and general expenditure programmes covering such things as hospital building, the continuing rise in expenditure on proprietary pharmaceutical products, missiles and missile testing, the building of motorways, charges to consulting engineers for supervising road construction, fertiliser subsidies and other agricultural subsidy programmes, aerodrome accounts and certain aspects of atomic energy. Every one of these is a continuing programme, and in every case the recommendation which the Public Accounts Committee has made arising out of its examination of the previous year is designed to cut out waste and promote economy in the future.

Year by year the Committee, and I am sure the House as well, expects every recommendation that it makes either to be accepted by the Government and to be told so in the ensuing Treasury Minute, or at any rate to have a very good explanation why it is not being accepted. That explanation has got to be good. In many cases the remedy is forthcoming even before the Committee reports. The grilling of the Accounting Officer of a Department often leads to speedy action, even before the Committee has produced its Report. Often, indeed, the publication of criticism in the Comptroller and Auditor General's Report leads to anticipatory action so that by the time the Accounting Officer comes before the Committee he has his answer all ready on what he has done to put matters right.

I do not think anyone could underestimate what I have called the in terrorem effectiveness of the Public Accounts Committee in preventing waste. I am sure the Financial Secretary will agree that its very existence is a powerful weapon in the hands of the Treasury every year when dealing with spending Departments who have exaggerated ideas of what their Estimates should contain.

Next April the Public Accounts Committee celebrates its centenary. It was, in fact, one of the earliest of Gladstone's financial reforms, and it is one of the reforms which have stood the test of time. Its success and, I believe, its indispensable contribution to the working of our financial system is due to three things—first, if I may say so, the dedication and devotion to hard work of its members. I have been a member of the Committee for so short a period that I think I can say that without anyone thinking that I am claiming any great credit for myself.

When we read, as we have done in the past weeks, strictures about Members of Parliament not attending to their duties, about Members' laziness and all the rest of it, I would invite some of the newspapers concerned to study the 3,957 questions which were put by members of the Public Accounts Committee in last year's Session and to recognise that these questions were not put without a good deal of understanding and hard work behind them.

In saying this, I am sure I am speaking for the whole Committee. I would pay tribute particularly to my hon. Friend the Member for Chesterfield (Sir G. Benson), who has been a member of the Committee for over thirty years—practically one-third of the life of the Committee. [An hon. Member: "A record."] Yes, I am sure it is a record. His Chairmanship was noteworthy for the development of the Committee as an essentially non-partisan body, which was a change from only a few years ago, producing Reports the authority of which has been immensely increased by the fact that they were agreed unanimously. I do not think they have lost anything in consequence.

The second reason is the inspired work and devotion to duty of the Comptroller and Auditor General and his highly expert and dedicated staff. Other countries have copied us in appointing an independent Comptroller. Two months ago I had the pleasure of attending a function connected with the gathering in London of Comptrollers and Auditors General from the entire Commonwealth. But although we welcome that spreading and have noticed that even some of the newest countries in the Commonwealth have appointed their Comptrollers and Auditors General and Public Accounts Committees—I believe that in one country the Chairman of the Public Accounts Committee is in prison; not a precedent, I hope—I doubt whether the House as a whole, and certainly the taxpayer, fully realise the debt that we owe to Sir Edmund Compton and to his predecessors in office.

The third reason that I think the Public Accounts Committee has this successful rôle is that through the Public Accounts Committee this House reaches out direct to the Accounting Officer of the spending Departments. This is an unusual and, I think, typically British breach in the pure theory of the separation of powers between the Legislature and the Executive. Accounting officers, almost invariably Permanent Secretaries, are responsible, in fact, not only to their Ministers but also to the Public Accounts Committee and, through the Public Accounts Committee to this House.

It has been my privilege, as a civil servant and Minister, to work with some of the greatest public servants of the past thirty years. I can think of some of the strongest personalities in the British Civil Service who never feared the toughest Ministers of either party, but who did lose sleep before facing the Public Accounts Committee.

When discussions were taking place last summer about these debates the members of the Public Accounts Committee, especially the most experienced members, were concerned that nothing should be done to break down this century-old direct relationship between the Committee and Accounting Officers, nor the responsibility of the Treasury—and I emphasis the Treasury—to reply to the Committee's observations through the Treasury Minute, a Minute which is itself the subject of examination and cross-examination in the following year. I myself strongly pressed that the Treasury's reply to this debate should not be regarded as a substitute for the annually published Treasury Minute on the previous year's Report. I am glad that our views have been accepted, not only in that regard but also in the fact that the Financial Secretary and not a Departmental Minister is to reply to this debate.

Our business in the Public Accounts Committee is with the Treasury, because our business is with the mechanism of controlling public expenditure. But the Financial Secretary will be the first to recognise that his Treasury Minute, which was recently sent with comments on the Public Accounts Committee's Report, and any reply that he may give today to the points raised in last year's Report, will not be accepted by us as final, because, as I have said, the Treasury Minute is itself to came before the Committee in the next few months.

Having said this by way of a rather lengthy introduction, I now turn to the specific problems highlighted in the Amendment. The House might have expected that in the first of these debates—this is the first debate of its kind in the hundred years in which the Committee has been sitting—we should have dealt more generally with the problems raised in the Report, some of which I have mentioned. It is a mark of the special concern of the Committee about what is really a new problem in public finance that we have chosen to devote this first debate not to a general discussion but to one special and so far unsolved problem, namely the control of expenditure on research and development programmes, particularly in the field of guided weapons.

Here I would quote from paragraph 45 of the Report of the Public Accounts Committee, where we state: Your Committee feel bound to draw attention to the large sums spent in recent years in the development of new and experimental equipment under contracts providing for payment of a contractor's cost plus profit. Indeed development contracts on the present scale are something new in the financial history of this country: open as they inevitably must be to abuse, they clearly call for new methods of supervision and co-ordination at the highest level. We say, therefore, that developments on this scale are something new in the financial history of this country. Indeed, I would go further. Speaking for myself, and not necessarily carrying the Committee with me, I believe that this problem, involving expenditure running into hundreds of millions a year, and so far completely defeating any system of control, is in danger of breaking down the whole system of control of public expenditure under which we work. If this problem is not solved, future Public Accounts Committees, this House and the Treasury will be in the position of carrying out a meticulous examination of the expenditure of pennies—what Gladstone referred to as the "candle-ends"—whilst, owing to this problem of cost plus research and development contracts, the hole in the public purse is letting through hundred of millions of expenditure.

Traditionally, the work of expenditure control, whether by the holy inquisition of the Public Accounts Committee itself or the secular arm which the Treasury represents, has always been with identifiable objects of expenditure. Until the last year or two the Reports of the Public Accounts Committee have referred to expenditure on identifiable objects—a hospital, a post office, a cable-laying operation, the provision of telephones, a Royal Ordnance Factory, a quantity of pharmaceutical drugs, a quantity of army boots or clothing, a rifle, a tank or a battleship. In every case one knew not only what the items cost but what one got for the money. In the case of every bit of identifiable hardware, one knew at the end of the operation what it cost. If the Treasury had given approval for £1 million for the hardware and it cost £1,100,000, then the full powers of the inquisition were invoked through the Public Accounts Committee and somewhere the person or persons concerned appeared at the next auto da fè held by the Treasury.

But now we have a quite new problem. It began, I suppose, with aircraft. Previous Public Accounts Committee Reports have noted the growing problem—that when a cost-plus contract was given for, say, a fighter with this speed, that rate of climb, some specified fire power and the rest, this expenditure began to get out of hand. But with guided missiles the problem is now completely out of hand.

I can illustrate this by reference to a recent personal experience. We know that throughout the field of Government expenditure, apart from the expenditure which I have mentioned, there is the most meticulous examination of every penny. Hon. Members who go abroad to Colonial Territories know haw detailed is the control of expenditure, particularly in Colonial Territories where the names of the Comptroller and Auditor General and the name of the Public Accounts Committee are perhaps even more fearsome weapons than they are in Departments here. Recently I was in Malta where I was impressed to see the detailed control over every penny of expenditure exercised by the Government Departments there—the Colonial Office, the Admiralty and so on. They were arguing over bills for £1, £1 10s., £2 10s. and so on. However, on a trip round Malta harbour I saw the missile testing ship "Girdleness", which was concerned with the missile testing Seaslug weapon, on which the Public Accounts Committee reported last year. I must confess that when I saw the ship—it is an ugly looking vessel—I felt that if it had been built of platinum it would not have cost more, because the total amount of the programme looks like being about £70 million. There is no Treasury control whatsoever over that expenditure. Yet, as I have said, in the Malta dockyard a mile from there there was, and rightly so, full Treasury control over every expenditure of £1 or £1 10s.

This is a new and unsolved problem, and this is how I hope we shall look at it in this debate. I will not use the words "scandal", "waste", or "inefficiency", which might be appropriate to a more normal Supply Day when the Ministry itself is before us and when we are concerned with any errors of omission or commission by individual Departments. What we are concerned with here is a problem which none of us has solved. The Report contains many pieces of evidence of individual mistakes by Government Departments in respect of the missile programme, and I may refer to one or two of them in passing. But all I am concerned with—I think today the House also is primarily concerned with it—is not with human errors in the normal sense which are always found in Government Departments and everywhere else but with a general problem of expenditure control. That is why I am glad that it is the Treasury and not the Ministry of Aviation which will be replying to the debate.

I will not go over in detail the relevant pages of the Report or the many hundreds of questions and answers. It is all set out in the Report before the House.

We were concerned with three weapons: Type A, known familiarly as Seaslug; Type B, originally known as Red Shoes but in its operational manifestation as Thunderbird; and Type C, first known as Blue Jay and later known as Firestreak. I must make it clear that Blue Streak has not been before us—yet.

I will not make too much of the discrepancy between the original estimates and the latest estimates, figures which are given in the Report. I will merely say that Seaslug was estimated at £1 million to £1.5 million expenditure, and, as the Committee reports, the latest estimate of the direct cost of developing the missile and its control and guidance system is £40 million, while the total estimated all-up cost is £70 million, including the ship-borne radar developed by the Admiralty.

Thunderbird's original estimate was £2.5 million, and the estimated total cost now is £40 million. Firestreak was originally estimated to cost £4 million, and the total cost is now estimated to be £33 million plus an additional £20 million for the cost of the Mark IV variant.

I am ready to accept, as the Committee does, the great difficulty confronting Ministry experts at the outset of a programme of this kind where one was embarking on entirely unknown ground. There is, of course, no party point here on the question of the estimation of the cost, because some of these missiles were started under the Labour Government and some under the Conservative Government. Whatever Government it was, one had that great problem of estimating what the cost would be. But that is the problem—that, having made one's estimate, it is entirely impossible to keep to whatever estimate has been made.

I do not intend to go this afternoon, though other hon. Members may wish to do so, into some of the specific mistakes on which the Committee commented. I will merely summarise what they are without comment. The first was the failure to give Government Departments and Government research establishments more responsibility for weapon development instead of handing it over too quickly on a rather loosely controlled system to private firms. Secondly, there was the serious failure of the Seaslug contractor—I quote the Committee's Report: to provide competent leadership and to co-ordinate the work of other firms developing equipment for the project. The third was the five-year delay in the estimated delivery date. Indeed, delivery of the weapon was five years behind the programme. Fourthly, there was the action of the Ministry on Thunderbird, when the Ministry's funds were restricted, in accepting the offer of the contractor, English Electric, to put up £750,000 of its own money, the Ministry of Supply promising to reimburse that money either out of the cost of the weapons when they were delivered or as some part of cancellation compensation. The Ministry of Supply did all this without consulting the Treasury, which was justifiably annoyed when it found that it had to pay on delivery or cancellation a sum of £750,000 to which the Government had been committed without Treasury approval—a most unusual eventuality.

Fifthly, there was the placing of a contract on Firestreak which failed to incorporate any specifications whatever and which was so vague that work started on Mark IV under the financial authorisation relating to Mark I and went on for fifteen months without any contract authority. Here I quote the Report: The Ministry stated that the terms of the original contract were such that work on different Marks of the weapon could properly be carried out under it. The separate contract placed later was made for the Ministry's convenience. It did not contain a specification, but required certain preliminary work to be carried out in a given period to the satisfaction of and in accordance with a programme approved by the Ministry's Controller of Guided Weapons. A detailed specification was not incorporated in the contract until January, 1960. That was eight years after the programme had begun—for eight years it was operating without a detailed contract—and during the eight years tens of millions of pounds had been spent.

These specific points to which the Committee drew attention are partly errors in administration, but they are partly endemic to the problem with which we are dealing. I think it is important now to summarise, before I sit down, the main reasons for anxiety about the whole system. Here again, I am making no party point, nor, subject to the detailed questions to which I have referred, am I being particularly critical of the Ministry. I am trying once again to outline the problem which we as a House of Commons have to solve.

The first general reason for anxiety is that, unlike the hardware that I mentioned—the battleship, the hospital and so on—the orders about which we are talking are not, when originally placed, related to anything specific or anything capable of specification. They are open-ended cost-plus contracts. The ultimate cost, and even the ultimate prospect of success, is very much a question of guesswork at the best.

Secondly, this system—let us be frank about it, because the Committee recognised it and said so frankly—is wide open to abuse. Though the Committee was not in a position to obtain direct evidence of where it has been abused, money is paid, very big money, by the Government on no more than a monthly progress report, on no more than a contractor's certificate, which says that the amount which he is claiming is no more than is payable under the contract. Usually, the contract, and very often the work, proceeds without even a contract, but with an "Instruction to Proceed", and the contract or the I.T.P. is thus open-ended, so that we have a situation in which the money being paid out in accordance with a contract which itself says nothing about how the money is to be spent. We know that proposals are being introduced currently involving a quarterly report, which brings in the technical people from the Ministry as well as the financial people. We hope that when the Financial Secretary to the Treasury replies he will tell us how it has worked out.

It would be unfair, because of the possibility of abuse, to say that there is any real racketeering or the presentation of chits which cannot be backed by real and relevant expenditure, but it must be said that there were very frank statements in another place last Session, which suggested that the system was being grossly abused. I will, however, mention one example which I have learned from outside sources and not from the work of the Committee, not involving actual dishonesty, but certainly putting an undue burden on the Ministry.

In the case of one of the missile contractors, who was faced with a shortage of draughtsmen, as often happens when firms are short of draughtsmen, it put some of its draughtsmen's work out to contract, which is more expensive than employing its own draughtsmen. Every time this contractor had to put work out to draughtsmen it was the Ministry's work that was put out, and thus the cost was much more per unit of output, whereas the ordinary civil, profitable work was retained. This is one simple example. There must be many others in which there is this swing between Government authorised expenditure and contractors' expenditure. No doubt, this example could be multiplied, but when the House considers the meticulous checking which has to be given before a penny can be paid out, say, in a Colonial Territory, or a Service Department, or on a normal munitions contract—or the check that is made on dentists and medical practitioners—I am sure that the House will feel that the disbursement of tens of millions of £s on a signed chit in respect of a Government cost-plus contract is a grave breach in our whole system of financial control.

Thirdly, we have here a system where financial control on behalf of the taxpayer is exercised, not by trained civil servants with a lifetime of experience in these things, but by private contractors whose training is quite different and whose enthusiasm for saving the taxpayers' money may be less than wholehearted. We have this graphically illustrated in the case of the Spadeadam waste, on which the Committee also reported. This horror story is set out in full in Questions 1,282 to 1,400, and I will refer only to one or two aspects, but I am bound to say that I almost felt Gladstone spinning in his grave while the evidence was being given. Here we have this Spadeadam Testing Station, this monstrous edifice erected on a desolate peat bog in Cumberland, 25 ft. of bog, devoid of access roads for the mammoth weapons which had to be taken there, an erection consisting of the 70-ton buckets, the 120 ft. towers capable of withstanding 80-mile-an-hour gales, with little idea even of the ultimate design of the structure when the work was begun. Every one of us has sympathy for the Ministry of Works in hav- ing to embark on this operation at the request of the responsible Department.

The problem for us today is the system of financial control, and that has happened to this thing costing over £20 million. The Ministry were little more than consulting engineers. The contractors were the British Oxygen-Wimpey consortium, working on a prime cost basis, and they were in fact, the financial controllers of the operation, controlling the sub-contractors, of whom the two principal ones were British Oxygen on the one hand and Wimpey on the other. It was clear from the evidence that the financial relations between the main contractors and the sub-contractors were haphazard and chaotic and made any control by the Ministry quite impossible. In Question 1397, the Chairman of the Public Accounts Committee put the following Question: It does seem that you have had these firms acting both as joint consultants with you in planning the whole thing, and as main contractors, in one case as a sub-contractor, and in one case as financial controller. The same people have had to fulfil all these very different rôles, and the Ministry of Works have been trying to maintain in face of great difficulties the other end of this tug-of-war rope? To which the answer was: I am afraid there is some truth in that, yes. My last point relates to the question of efficiency, and a whole series of questions was put by the hon. and gallant Member for Croydon, North-East (Vice-Admiral Hughes Hallett), together with the answers. I do not need to refer to them, but would refer the House to the Questions and Answers from Question 3065 onwards, which would seem to indicate that in some of these weapons the big technical break-through was achieved by Government establishments. I understand that the actual missiles were produced, and that it was only after it was handed to private firms that all the difficulties involving costs and delays began to mount, while at the same time the degree of financial control inevitably diminished to vanishing point. This is a question as the Committee itself recommended in paragraph 27, to which I have already referred, whether this work might not with advantage have been carried much further by Government Departments. However, if the hon. and gallant Member for Croydon, North-East succeeds in catching your eye, Mr. Deputy-Speaker, he may wish to make that point with much greater authority than I can command.

I do not apologise for going into all this detail of research and development. I do not claim, nor does the Committee claim, that we have any solution to this problem, but I understand that there has been a Government committee sitting on this problem for some two years, first under the late Sir Claude Gibb, and now under Sir Solly Zuckermann, and I hope the Financial Secretary will be able to tell us whether it has now reported or when he expects it to report, and whether the Government feel that they have an answer to the problems which I have been outlining.

Certainly, neither the Committee nor the House can leave matters where they are, because, I repeat, again quoting the Report of the Committee, that we are dealing here with a problem which presents— —something new in the financial history of this country and, if it is not solved, the whole edifice of Parliamentary, indeed governmental, control of expenditure is imperilled, and solutions of a far more radical character, going far beyond the scope of the present debate, will have to be sought.

4.29 p.m.

Mr. Airey Neave (Abingdon)

I warmly congratulate the right hon. Member for Huyton (Mr. H. Wilson), as Chairman of the Public Accounts Committee, on what he has said in outlining this very considerable problem of public expenditure, and I also congratulate the Committee on its Report.

My right hon. Friend the Leader of the House, in the debate on the control of Government expenditure at the beginning of this Session, said that insufficient tribute had been paid to the work of the Public Accounts Committee in the past. I think that is very true, and I must congratulate the Committee on the very proper occasion which it has chosen to bring before the House this major problem, and also congratulate it on the 3,597 questions which it asked. I happen to know that work very well, because I was myself a member of the Public Accounts Committee until the end of 1956, under the chairmanship, and the very agreeable chairmanship, of the hon. Member for Chesterfield (Sir G. Benson), to whom tribute has already been paid by the right hon. Gentleman. Those were the days of a distinguished Comptroller and Auditor-General, the late Sir Frank Tribe, whom we should remember during the course of the debate. I associate myself with what the right hon. Member for Huyton also said about the present Comptroller and Auditor-General.

Speaking therefore as an ex-Member of the Committee of Public Accounts, I applaud the decision to have this discussion. It is quite clear that the question of controlling development and research into aircraft and guided weapons has got into a glorious mess. There is no doubt that it has bedevilled our financial system for some time. While I shall have something to say about the question of whether we are getting value for money, I believe that the Committee has performed a very proper duty in emphasising the need for far more businesslike and far stricter methods than in the past.

The whole system of our expenditure, as the right hon. Gentleman said, is involved, because this is an entirely new feature of our public finance. At paragraph 42 of its Second Report the Committee lay down certain principles, which I commend to the House and to the Financial Secretary, for the control and examination of estimates in regard to guided weapons. The House will note that the firms concerned and industry in general did not give evidence to the Committee, and I may want to say something about their point of view. However, I believe that there are talks going on between industry and the Ministries concerned and that broad agreement is likely to be reached, with the Ministry of Aviation, on a new control system for expenditure on research and development in guided missiles. I hope that the Financial Secretary will say something about that.

Despite the urgent need for control, which nobody will dispute, one has to remember that the manufacture of guided weapons—and I think that the Committee realised this—cannot be studied except in terms of a continuing process of research and development. This is not something which one can necessarily divide up into mathematical formulæ. As the right hon. Gentleman said, this expenditure does not often concern identifiable objects. It is subject to changes in defence policy and in technology—as one will see from reading the evidence on guided weapons referred to as types A, B and C.

I and other hon. Members stressed in the debate on Blue Streak that in this technology there are bound to be modifications and disappointments. I see that the Public Accounts Committee seems to realise this, and the right hon. Gentleman himself mentioned it. At paragraph 43 of its Second Report, the Committee states: Your Committee have noticed an additional defect. The instructions to the main contractors responsible for the guided weapons projects were in such general terms that difficulty must have been experienced in ensuring that all the work paid for was properly directed to the objects desired by the Ministry. The Committee recommended that there should be more supervision and said that the Ministry was seeing to it that it was the responsibility of the technical staff to see, that any variations due to technical developments are properly examined and justified at the earliest possible stage. In my short experience of Government in this connection, that sentence sums up the whole problem of development contracts in a highly experimental subject. It is vital that from the Ministry point of view "any variations due to technical developments are properly examined and justified at the earliest possible stage".

The right hon. Gentleman instanced a number of items from the evidence to the Committee when costs ran on for a long time because no decision had been made at an early stage about the variations and modifications which were required. Variations and modifications are bound to be required in this work. Particularly were they necessary at a time when these early weapons were being developed. I do not believe that budgeting for guided weapons is possible with any semblance of accuracy unless the objectives are clearly defined. One of the difficulties about that is that one can very seldom clearly define the objectives of a guided weapon until one has done some preliminary studies, and those studies may vary from a paper assess- ment to a prolonged investigation into the feasibility of the guided weapon. The cost of such studies is a major factor.

I said that the whole thing had got into a muddle, but if we are to reach a sensible system of collaboration between industry and the Government in controlling these costs, both sides will have to appreciate what I have just said. If one takes once more the example of type A, or Seaslug, then it is proper to ask how far the objectives of Seaslug as a naval weapon were clearly defined to the industry as far back as 1948, at a time when experience in this matter was extremely limited.

I am not clear from the evidence how far that is so. Presumably, the original figure of £1 million to £1½ million did not relate to the whole weapons system. Did it relate only to the part which the firm was to play in the contract for the cost of a simple test vehicle for the experimental stage? If it did, that is entirely relevant to the whole question of assessing whether subsequent development costs in this case were surprising, in view of the lack of central control of expenditure and, as the right hon. Gentleman said, the surprising lack of technical supervision.

I believe that the system designed for the future is to be that the supervision will be the responsibility of the technical branch of the Ministry. I believe that to be essential, and I am sure that the industry will be glad to co-operate in that way if it is asked. I should like the Financial Secretary to say something about that matter, because I am not clear from the evidence whether any attempt was made between 1948 and 1957 to make a total estimate of the cost of Seaslug.

I do not want to go into too much detail about the evidence which was given, except in the proper fashion adopted by the right hon. Gentleman as Chairman of the Public Accounts Committee, but it is fair to say that, although it took 13 years to bring to operational standards, Seaslug may prove to be a very effective guided weapon. That its financial history seems very vague from the evidence and very unsatisfactory none of us can doubt, but it was one of the very early weapons when there was little experience in time scales, which are very important. I hope that any measures taken as a result of the strong recommendations of the Committee will avoid that sort of situation in future.

When one considers these high costs—and they are high costs and need explaining—one ought to look at the problem of guided weapons as a whole. In the last three years, £750 million has been lost through abandoned weapons in the United States because of cancelled weapon systems. This is a tremendous problem of public finance, but there is no reason, why we should not tackle it. We must tackle it if the whole thing is not to get entirely out of hand. The United States can afford a vastly wider field of experiment than we can, but I believe that our industry can produce effective weapons more economically than the Americans, and we shall do that especially if we follow the recommendations of the Committee.

Of course, this question of guided weapons is important from the point of view of employment. There is a large and increasing number of people employed in this industry, and in that connection, having made mention of employment, we must remember that, for instance, in the case of a weapon like Seaslug, the average salary in 1948 of a design artisan was £9 10s. a week and today it is £19 5s. a week, and the average productive labour rate was half what it is today. Of course, these items are only on the fringe of the problem which we have been discussing, and I have already accepted the need for much stricter technical supervision, but speaking in general terms and not only in relation to Seaslug, I think we can say that the Government must clearly recognise in their discussions with the industry the shattering results of serious modifications which may be ordered at any time and the need for quick decisions, and I think the industry in their turn must inform the Government of the effect of such modifications on the costs.

It is often said—indeed, it has been said in the newspapers as a result of the publication of the Public Accounts Committee's Report—that weapons are obsolescent by the time their development is finished. I think that that is an oversimplification. Some techniques may have become out-dated, but it does not follow that the weapon will not be the best available at its completion date. I think one does not want to over-simplify too much.

I have tried to put these two points of view before the House. I think that both sides should follow very closely the recommendation contained in paragraph 43 of the Report. I welcome the way in which the right hon. Gentleman treated this as a House of Commons matter, as, indeed, it is. I hope that the Report and the debate will lead to substantial and effective collaboration between industry and Government Departments, and that, in particular, it will lead to quicker decisions and better value for money.

4.42 p.m.

Vice-Admiral John Hughes Hallett (Croydon, North-East)

I am sure that no one on this side of the House will quarrel with the way in which this debate was opened by the right hon. Gentleman the Member for Huyton (Mr. H. Wilson). I should like as, I think, an even newer Member of the Public Accounts Committee than he is himself to pay my tribute to the way in which he followed the precedent set by the hon. Gentleman the Member for Chesterfield (Sir G. Benson) in keeping party politics out of our proceedings. After all, the efficiency of the Public Accounts Committee depends entirely on that being done. We in the Committee examine senior civil servants, and it would clearly seem wrong to use their evidence as a basis for attacking Ministers whom they serve.

Indeed, the Public Accounts Committee has always filled me with awe since my student days. It has always seemed to me to be a rather interesting example from a constitutional point of view of the fact that there is some limit to the all-embracing nature of Ministerial responsibility, at any rate in the realm of finance. We recognise that a measure of responsibility is retained by the accounting officers and their immediate subordinates, or, to put it another way, that senior administrative civil servants are something more than purely advisers, in exactly the same way as we always recognise that to be true of senior officers in the Fighting Services.

It may well be that the realisation that the Public Accounts Committee's Reports are not really entirely suitable as vehicles for tremendous attacks upon the Government of the day that Parliament has in the past taken so little interest in them. I was refreshing my memory yesterday about the past history of the Public Accounts Committee and I found an interesting quotation from Professor Berriedale Keith's standard work, "The Governments of the British Empire". After describing the constitution and organisation of the Committee, he goes on to say: Parliament itself treats the Reports of the Committee with indifference born of the reluctance of any Member of Parliament to economise. Efforts to insist on discussion of the Committee's Reports have failed to achieve success So this is a rather historic debate and it is one which, I think, ought to give some satisfaction at any rate to my hon. Friend the Member for Dorset, South (Viscount Hinchingbrooke) who was so active in the moves which led to this debate.

The Amendment in particular calls attention to the paragraphs which dealt with the development of guided missiles, and I am sure that the House will agree that it is right that this should have been so on this occasion. After all, this development covered a period which varied from 12 years in the case of Seaslug to, I think, eight years in the case of the most recent weapon, and considering the cost of the three projects together we find that the Treasury was originally advised that the total expenditure would amount to some £4 million compared with the current estimate of £143 million. That is the alpha and omega of this story: £4 million at the beginning, £143 million at the end.

I hope that it will be in order if I digress for a moment to say a little about the Treasury control in general. The House will recall that the Sixth Report from the Select Committee on Estimates for the Session 1957–58 dealt particularly with this subject. I want now to link up that Report of two years ago of the Estimates Committee with the present Public Accounts Committee's Report. The earlier Report contained certain criticisms and warnings which, I must say, are most strikingly illustrated by the Public Accounts Committee's Report dealing with missiles.

As the House knows, there is no single method of Treasury control. It is a continuing process, but it can roughly be divided into four stages: firstly, control at the time when the policy decision is made; secondly, control when some new project arising from the policy decision is sanctioned; thirdly, control when the annual Estimates are being prepared; fourthly, control when any large items of continuing expenditure on projects which have already been begun are sanctioned.

I would submit that in the case of these missiles the first and third of these stages are hardly relevant. The policy was simply to develop a guided missile or controlled rocket as it was originally called. That was a decision made early in the war which I do not think anyone would call in question. The annual Estimates, on the other hand, so far as projects of this magnitude are concerned, simply reflect decisions which have been made from time to time as they continue.

Therefore, I think we must first ask whether it was right to have sanctioned those development contracts in the first place at the time and in the manner that they were sanctioned. In the light of what we now know, the answer must surely be in the negative. Ought this to have been clear at the time? How many senior officials realised ten or twelve years ago that they were advising Ministers to embark upon expenditure which was to bear no relation whatsoever to estimates which had been given?

Here I should like to read one or two sentences which are highly relevant from that Report of the Estimates Committee on "Treasury Control of Expenditure" as a whole. In paragraph 46 the Committee pointed out that The Treasury do not themselves employ professional or technical experts …. The value of prior sanction control depends to a large extent on the effectiveness of the 'lay critic' That was an expression which was repeatedly used in the evidence before that Committee. Then at the beginning of the next paragraph the Committee pointed out: Nevertheless, this reliance on laymen has its drawbacks. It possibly encourages, and certainly makes possible, attempts to blind the Treasury with science in relation to some types of project. In the next paragraph—this is the one to which I particularly invite the attention of the House—we said: One other feature of this technique causes some doubts about its effectiveness. Laymen may be examining proposals submitted by laymen, while the technical officers who initiated the proposals and who really understand the details, remain behind the scenes. This may mean that the Treasury are not as well informed as they should be about the subject and also that the technical officers really concerned are not sufficiently associated with the financial decisions. After one or two other sentences, the paragraph concludes: An awareness by technical officers of the financial implications of their proposals seems, to Your Committee, to be an essential feature of a system which places a large measure of economic responsibility within spending Departments. In the case in question, we had laymen at the Treasury examining proposals submitted to them by laymen at the Ministry of Supply, as it then was. That, surely, is the fatal weakness of the system in projects of this nature. What possible chance have classical scholars and the like—I make no reflection on them—of achieving a true understanding of the immensely complicated engineering and scientific proposals which are involved?

On the other hand, I cannot believe that the technical officers who were behind these projects originally were quite so naive. If they really believed that their estimates were accurate, all I can say is they were not fit for the positions they were occupying. At the same time, I feel quite sure that they never dreamed for one moment that expenditure would be twenty times in excess of the estimates first given. Their failure probably lay in not understanding big business. Once the contracts had been let, I think that a lot of the scientists and production engineers employed by the Government were lost like the babes in the wood. The only difference was that this was a golden wood provided by the taxpayer.

The next question we have to ask is what should have happened when things began to go wrong, when the months turned into years and when the millions turned into tens of millions of pounds. Here again, I feel sure that the chief trouble must have lain in the inability of the accounting officers who hold the legal responsibility to challenge the views of the technicians and scientists who held the moral responsibility.

One imagines two or three senior civil servants, desperately anxious at the way things were going, going home at night, perhaps sitting down by the fire, closing their eyes and trying to picture where and how all these vast sums of money were being spent—and trying in vain. One pictures equally harassed technical officials being asked to give their support to costly ramifications which probably they themselves did not full understand, conscious the whole time that if they were too obstructive or too critical, a hint might be dropped in the Minister's ear that they were rather difficult people.

I believe that the action that has already been promised by the Treasury to tighten up the financial control—to impose, if I understand it aright, a kind of continuous costing—will go some way towards keeping all this sort of expenditure under better control, but it will not by any means go the whole way. At best, it will make firms and the officials who deal with them anxious to try to give a truer estimate in the first instance. Whether that estimate is unduly high will not greatly be affected by arrangements for more up-to-date information while the money is being spent. Bolder changes are needed, as is made clear from paragraph 45 which the right hon. Member for Huyton read when he opened the debate.

I want now to turn to the sort of changes that might be made. In doing so, I must make it clear that I am giving my personal views and not those of the Committee. To begin with, wherever possible—this was touched on by the right hon. Gentleman—development should be carried to a further stage at a Government research establishment when an entirely new project is under consideration. In my experience, the ideal is, if 'possible, to defer placing a development contract until the Government establishment has produced and tested a satisfactory experimental model, with the result that the contract need only be, in effect, for a redesign on lines suiable for quantity production and in a form suitable for operational maintenance. Such a contract, subject to the design being successful, can often, and with great advantage, include a firm order for the first batch of the weapons required. Contracts of this nature need not necessarily be on a cost-plus basis.

A good example of a weapon that was produced, not exactly on those lines, but more or less on them, and which is no longer on the secret list, is the antisubmarine mortar called Limbo, which came out about ten years ago and which, I think investigation will show, was produced as economically as any of the post-war generation of rather complex weapons have been produced. I do not, however, claim that this is a method which would have been possible in the case of guided missiles, although the Committee, as the right hon. Gentleman has pointed out, was inclined to think that the Government establishments might well have been associated to a greater extent with the subsequent development.

However, I should like to make the additional point that if Government research establishments are to play their part in this way, they must be so managed that the operational or user officers can exercise as much direct influence on the way they work as is the case with the Admiralty experimental establishments. The right hon. Member for Easington (Mr. Shinwell) often criticises these establishments. I do not wish to pursue the matter in detail, but it is relevant to the question of the control of development to observe that the set-up in the Admiralty and the Ministry of Supply and Ministry of Aviation establishments is far from being identical.

I well remember that the late Sir Henry Tizard, whom many hon. Members will recall and who was an extremely practical scientist, greatly preferred the system that had been developed by the Admiralty. I mention this because one of the most deplorable features of the present story, which wasted years of time and millions of money, was the decision to start developing these missiles with liquid fuels. Hon. Members will find extensive reference to this in the Minutes of Evidence.

I do not blame the Treasury or the Accounting Officers for that, but I think that the decision reflects discredit on the Service Departments if their operational side were aware of it. Whether that was so, I am inclined to doubt. Even if the liquid fuel missiles had been successfully developed, there would have been the gravest possible operational objections, to embarking in ships, or having in mobile units with the Army, missiles depending upon these peculiarly obnoxious and dangerous fuels.

Granting, however, that development must often be done by contract—for instance, in the case of aircraft—and granting also that there must also be contracts on a cost-plus basis, the question then arises of what now methods of supervision and co-ordination are required. Ideally, I believe that one man should be appointed and made responsible to act as the liaison between the Government and the firms concerned, a man of sufficient stature to be able to work on the Ministerial level. Unfortunately such men are rare, although they appear from time to time. I can think of contemporary or almost contemporary figures. Sir Henry Tizard was one, and I suppose that one could include Lord Reith and Lord Fisher earlier in the century. The trouble is that by the time their names become known they are otherwise occupied and are not available for a task of this nature.

Yet the alternative which was actually adopted in these contracts was a complex of project officers, of controllers general, and controllers, and a little mass of co-ordinating committees. That proved hopeless. I stress that I am speaking for myself, but I suggest that the supervision of any new major projects on this scale—those costing over £10 million—which must go forward on a cost plus basis, should be supervised by a triumvirate of Government officials.

One of them should be a senior operational authority appointed by the user Department, a man with the power to resist changes in staff requirements half way through and who can, if necessary, push through relaxations in staff requirements when it is obviously necessary and common sense to do so. The second member—I am not putting them in order of precedence, for I regard them as being jointly responsible—should be appointed by the Ministry responsible for placing the contract, and should be the member with the scientific and engineering knowledge to understand what it is all about. The third member should be appointed by the Treasury to watch the financial side. This body should have the sole task of supervising one of these big contracts or, possibly, a group of closely related big projects.

Meanwhile, the House will recall that the Estimates Committee's Report on Treasury control recommended that a new committee should be set up to examine the working of Treasury control as a whole. The Government accepted that recommendation and a committee has been set up. We were promised that Parliament would be informed of the Government's decisions in due course. Can my hon. Friend the Financial Secretary tell us what progress has been made and whether Parliament will be given an opportunity to debate this matter further when the Government's decisions are announced?

Sir Harry Legge-Bourke (Isle of Ely)

My hon. and gallant Friend has made an interesting suggestion about a Minister's responsibility for placing contracts and having a representative on his triumvirate. Would he agree that there may also be reason for doubting whether the system of Ministerial responsibility itself is all that it should be, in view of the extraordinary relationship between the Minister of Defence and the three Service Ministers? Would he also agree that it might well be an improvement if the Departmental Minister were given rather more responsibility to see the job through instead of its being left to the Minister of Defence?

Vice-Admiral Hughes Hallett

I think my hon. Friend has misunderstood me. When I talked of Departmental responsibility I had in mind the Ministry of Aviation, or the War Office—which has now taken over some research and development work—or the Admiralty. I do not see that the Ministry of Defence should come into the picture at all. I suggest that staff requirements are on a lower level in the Service Ministries. Obviously the first two members of the triumvirate would sometimes come from the same Ministry—that is to say, Departments which are self-supplying, like the Admiralty, and, to some extent, the War Office.

I beg Her Majesty's Government to recognise the importance of their approach to major research and development contracts from the point of view of British industry as a whole. A change of outlook is needed. I believe that we have been corrupted by the example of America, which can afford methods of research and development which are immensely extravagant and wholly unsuited to a country like ours.

It is too readily assumed that modern weapons systems—whether missiles or aircraft or anything else—must inevitably cost vast sums to develop. That is true if one proceeds by the method of setting up enormous teams of rather mediocre young men to carry out development. It can be done like that. We were taught that if we had a quintillion monkeys banging on a quintillion of typewriters for a quintillion years, they would produce all the great works of literature. Presumably if they produced all the great works of the past then they could produce all the great works that have yet to be written.

The present method should be scrapped. There is another approach, which is more traditional to this country, more economical and more likely to keep us in the forefront. We should look for those few men of imagination tempered with judgment, who possess ability and flair, to produce results silently and quickly without a lot of advertising. These men also are very rare, because they have a touch of genius. Nonetheless, they exist.

It was my privilege to know one such man, Commander Stoker, more than 40 years ago, who worked with a small band of associates at the Greenock torpedo factory. None of them earned four-figure incomes, but they produced the first steam torpedo which, with one stroke, put this country years ahead of the rest of the world.

It is depressing today to consider all the money sunk in torpedo research and development over the years and to realise that it has had very little effect on the modern propelling machinery which is not very dissimilar from that produced by Commander Stoker during the First World War. Such men cannot be conjured up merely by offering bigger salaries or such things as concessions on Surtax. They will reappear if we can find a better way of promoting and controlling research and development. That is why this Report and the debate today are so important.

5.8 p.m.

Mr. John Cronin (Loughborough)

The hon. and gallant Member for Croydon, North-East (Vice-Admiral Hughes Hallett) has made his usual thoughtful and helpful contribution. I particularly congratulate him on the idea that more of this work should be done by Government establishments, and I shall develop that idea further.

The Government were fortunate that my right hon. Friend the Member for Huyton (Mr. H. Wilson) spoke purely in his capacity as Chairman of the Public Accounts Committee, and for that reason felt bound to speak of the situation with great moderation. He might well have said, like Robert Clive, in thinking of his opportunities My God … at this moment I stand astonished at my own moderation, We have reached an extraordinary state of affairs. Members on both sides of the House will agree that there has been a complete breakdown of Treasury control of expenditure of £150 million. This is not the first instance which has been brought to our attention. We have heard in the Report, and have heard again from my right hon. Friend, of how estimates of £1½ million were translated into £70 million; of how £2½ million became £55 million, and how £4 million became £53 million.

These figures surely indicate an extraordinary disorganisation on the fiscal side in the Government. Normally, the Treasury directs all the Government's financial traffic, but on his occasion it seems that it has became a sort of robot traffic light with the contractors operating the buttons. The Financial Secretary to the Treasury must be very unhappy about this situation and I have no doubt that it has repercussions throughout the Government. It is certainly a tremendous breakaway from the condition of strict Treasury control which we have had for well over a century. If the Financial Secretary goes to the Chancellor's room and looks at that famous portrait of Gladstone, I think that he will find Gladstone's features contorted with fury.

There are aspects of this matter, however, other than the purely financial ones. For instance, one is astonished by the apparent extraordinary indifference or lack of knowledge on the part of the Ministry of Supply, at it then was, about what was going on.

Mr. Frank Tomney (Hammersmith, North)

That is not new.

Mr. Cronin

That may be so, but the time has come when we must take serious steps to prevent it. The contract for Seaslug was signed in February, 1949. A progress committee expressed dissatisfaction in 1953 and then in 1954 members of the Ministry of Supply expressed dissatisfaction to the contractors concerned. In 1955 there were even complaints by officers of the Ministry to the group which controlled the contractor, and it was in 1956 that the Ministry finally assumed the responsibility for supervising the carrying out of the contract. All through the years while this was happening, according to the minutes of the proceedings of the Committee of Public Accounts, the Permanent Secretary of the Ministry was meeting the heads of his Department in committee regularly. A footnote on page 312 of the Committee's Report makes it quite clear that at no time did this committee of heads of Department make any note of the serious situation that was going on and of the increasing dissatisfaction that was felt at the way the contract was progressing.

One is rather astonished also that there is such inadequate supervision of the actual expenditure of money by the contractors. One finds that there has been no way of checking for certain what moneys the contractor has spent on labour and materials. This is an extraordinary situation when gigantic expenditure of this nature is involved.

In the actual expenditure by the contractor on Seaslug there must have been some capital items of equipment such as sheds, store houses and machinery. I do not think that anybody would suggest that all this capital equipment was used exclusively or could only be used exclusively on work on Seaslug. Obviously it could be used for other purposes, but again there was no evidence before the Committee of Public Accounts about the ultimate disposal of these items of capital equipment. There is no specific answer to the question put on that very point in paragraph 3187 of the Minutes of Evidence.

Another aspect of this matter which we must consider carefully is the complete lack of co-ordination there has been in the production of these various guided missiles. We have Seaslug produced by one firm of contractors with numerous sub-contractors. Then there is Red Shoes, another guided missile, produced by an entirely different firm, Bloodhound produced by a third firm, and Firestreak by a fourth firm, and all these firms have their groups of sub-contractors. Thus we have four guided missiles being developed and constructed by four entirely different firms with their sub-contractors.

Surely there must be some point of similarity in the development and construction of these missiles. Seaslug and Red Shoes are both solid-fuel missiles. One homes on a target located by radar and the other homes on a radar beam. Bloodhound is a ram-jet missile which homes on a target, and Firestreak is either a ram-jet or a solid-fuel missile.

All these missiles have considerable overlaps of similarity and yet four different sets of contractors are engaged in producing them. There must be a terrible overlap of research work and ideas. All four firms appear to have been working by themselves in a vacuum with no co-ordination of ideas and know-how. It seems very odd that there could not have been more co-ordination and that the Ministry could not itself have acted more as a leader in doing this work.

Another aspect of this problem is the use of other types of missiles. We have heard of another missile, Terrier, produced by the United States much more cheaply and in a much shorter time. This was available when the work on Seaslug was only about half way completed. Would it not have been more economical for us to have purchased Terrier, or the information available about it, from the firms that were constructing it in the United States? That would have saved an immense amount of money.

As far as one can see, there has been no attempt to rationalise the requirements of the various Armed Forces. There appears to be a great similarity between Seaslug and Bloodhound in their operational function. Would it not have been possible to have some kind of missile which would have served both Services? I know that numerous technical considerations are involved but there is no evidence that these considerations have been thought about. The missiles seem to have been kept entirely in airtight compartments by two firms when one would have thought it possible to have used a common missile for both purposes. One cannot see, from an inspection on the North coast, why the Bloodhound missile could not have been equally well mounted on Her Majesty's ships.

Mr. Basil de Ferranti (Morecambe and Lonsdale)

This has been considered, but it is impossible for the very simple reason that it will not fit. Obviously a ship is a form of construction which imposes very severe limitations of length and diameter on any missile that can be used on it. Unfortunately, Bloodhound simply does not come within that specification.

Mr. Cronin

I am very interested to hear the hon. Gentleman's views. I have no doubt that he has special information of an authoritative nature. Bloodhound seems to be no higher than Mr. Speaker's Chair. It seems incredible that some ships could not carry a missile of that nature, but I am happy to accept the hon. Gentleman's correction, which I presume is based on authoritative information.

I should like to suggest a constructive solution to some of these problems. My suggestion may not be entirely pleasing to some hon. Gentlemen, but it ought nevertheless to be considered. The hon. and gallant Member for Croydon, North-East touched on this. He suggested that much more of this work should be done by Government establishments. If I understood him correctly, he said that much more of this work should be done in the public, rather than in the private sector. This seems to me to be a principle which could be considerably extended in the production of guided missiles. In other words, I suggest that the time has come to give serious consideration to public ownership of the means of producing guided missiles.

This would have numerous advantages. First, it would eliminate the anxieties that we have about financial control. If these missiles were designed and produced by Government establishments, the Comptroller and Auditor-General could send his officers to the various places where the missiles were being produced and thus ensure that every penny that was spent was spent on the equivalent units of labour or the equivalent units of materials. This is particularly desirable in a situation where large sums of Government money are spent without any clear physical results. As, I think, one or two hon. Gentlemen said, there is no possibility of getting effective control of purely developmental expenditure when it is in private hands.

Vice-Admiral Hughes Hallett

The hon. Gentleman is rather mixing up design and production. They are two different things. It is fair to point out that the condition to which the various Government establishments had been brought at the end of the last war would have enabled them to have continued with this work. Why I think the hon. Gentleman should keep this on a nonparty basis is that it was the Labour Government of the day who decided on the original policy of putting this on to private firms.

Mr. Cronin

I appreciate the point, but the hon. and gallant Gentleman must be aware that when this was discussed before the Committee of Public Accounts it was made clear by the Permanent Secretary to the Ministry of Aviation, when he was being cross-examined, that these various Government establishments which were left over after the last war would not have been suitable for the production of guided missiles. They were suitable for what they were used for then, the production of guns and shells, but they were not suitable for the production of guided missiles. I think that answers the hon. and gallant Gentleman's point. I am glad that the hon. and gallant Gentleman is still with me, that much of this work should be done directly under Government auspices.

Another argument in favour of my suggestion would be that it would lead to increased co-ordination in research. If one Government Department were responsible for the production and development of all these missiles, it could pool its research and "know-how," and clearly there would be an economic advantage from the large-scale production of these weapons. I do not think that anyone would seriously suggest that a Government establishment engaged on the production of these missiles would be any less efficient than the firms which have so far done this work, because we have heard a most melancholy tale about the inefficiency of these firms, particularly in one case.

It is often suggested by hon. Gentlemen that if the means of production is invested in public ownership one loses the profit motive which tends to produce greater efficiency. I think that argument might apply in many forms of public ownership, but in this kind of private work, where there is a cost-plus basis, the profit motive can only work against efficiency, because obviously it is in the interests of the contractor to spend as much money as possible because his profit is calculated as a percentage of what he spends. He is, therefore, the last person with any real desire to do the work as economically as possible. The profit motive works against the public interest in the development and construction of weapons. It therefore seems to me that there is a case for the development and construction of guided weapons to be carried out entirely under the auspices of public ownership.

I know that this idea is probably unattractive to hon. Gentlemen opposite, and at this season of amity and amicability I do not want to say anything to upset them. I will, therefore, not put it more strongly than to suggest that the Government should carefully consider the desirability of extending the sphere of public ownership to the production of weapons, at least to some position half-way between that of the hon. and gallant Member for Croydon, North-East and myself. In other words, there should be an extension of public ownership in the production and development of guided weapons.

Hon. Members on this side of the House are worried about the lack of control over expenditure during the last few years. I know that many hon. Gentlemen have the same feelings. It is very unfortunate that every few months we hear of another instance of extravagance and uncontrolled expenditure by the Government. Only a few months ago we heard about £100 million being thrown away on Blue Streak. We find, after some years of abuse, that the Ministry of Health has suddenly realised that American firms are selling us drugs on a 70 per cent. profit basis. One constantly comes across what my right hon. Friend the Member for Huyton referred to as profligacy in expenditure.

This is causing everyone who thinks about it the most serious anxiety, because never before have the people of this country paid so much money in direct and indirect taxes. Never before have so many people contributed to the Exchequer in the form of taxation. Never has Government expenditure reached such an all-time high. There are good grounds for a detailed examination by the Government of methods to achieve real economies, particularly in armaments, and to achieve effective control over expenditure. To parody the words of the right hon. Member for Woodford (Sir W. Churchill), "never has so much been spent for so little result."

5.30 p.m.

Mr. Basil de Ferranti (Morecambe and Lonsdale)

In view of the festive time of year I do not want to pursue the last suggestion of the hon. Member for Loughborough (Mr. Cronin), that these weapons should be produced in a nationalised industry, nor do I wish to introduce any kind of discordant note into what has been a most satisfying and agreeable debate. Many hon. Members have made some interesting suggestions, especially my hon. and gallant Friend the Member for Croydon, North-East (Vice-Admiral Hughes Hallett), but I want to try to show that some of the things that have been suggested are not so easy to carry out. In fact, this could be said of practically all the problems in this field. I shall speak from the narrow point of view of the manufacturer of these weapons, and in accordance with the traditions of the House I must here record my interest in the manufacture of guided missiles. I hope that this will not be interpreted by any hon. Member as a commercial.

This is a field in which angels would fear to tread. I am no angel, and I am therefore treading with great care and trepidation. It is right that I should do so, because I am in the fortunate position of knowing something about the matter, having lived with the problem that we are discussing for about ten years.

The one point of real substance made in the admirable Report by the Commit- tee of Public Accounts was that the cost of these projects exceeded the orginal estimates by 30 per cent., 10 per cent. and 6 per cent. respectively. The Committee went on to deduce that there had been a lack of financial control. That would appeal to be the case, but in logic I am not sure that it is the correct deduction to make. The first deduction is that the original estimates were wildly out, and that they should not have been accepted by the Ministry—and certainly they should never have been accepted by the Treasury.

It is clearly desirable that estimates for expenditures of this kind should be correct. If they had been correct in this case the Treasury may well have said that the country could not possibly afford to undertake this work, and the contracts and developments would not have been proceeded with. This would have saved a lot of money. However, it simply is not as easy as that. It is all very well to say that these estimates should be accurate, but as these weapons systems become more and more sophisticated it becomes impossible even to use past experience as a basis on which to improve estimates. One is venturing into wholly unknown territory, and the only thing one can state with any certainty is that whatever estimate is produced it will be wrong. That has been my experience over same years of association with this matter.

There is no way of getting round the fact that, if the nation decides to have this sort of weapon in its armoury, no matter what sort of suggestions are made or what techniques are used to control expenditure the nation is, in effect, signing a blank cheque. But if changes are to be made—and I certainly accept the criticisms of the Public Accounts Committee that changes would be desirable if they are practicable—there is something to be said for building an incentive into the contract, so that it is in the manufacturer's interest to produce his weapon system as cheaply as possible. That follows up the remarks of the hon. Member for Loughborough.

One way in which this could be done would be by phasing the work. First, a development study contract could be placed—perhaps partly in a Government establishment and partly in industry, depending upon who has the necessary expertise. This would be a comparatively inexpensive effort, but it would enable the state of the art to be examined more carefully. After that stage several development contracts, in series, could be placed with the manufacturer, taking him as far as the existing knowledge of the subject could be seen to enable him to go. These development contracts would have an agreed maximum sum placed on them, and if the manufacturer exceeded that maximum sum he would be able to get paid for the work only when the production contract was eventually placed. This would mean that he would be out of pocket, which could be a very serious matter in regard to contracts as large as these. He would have a real incentive to keep the cost below the maximum sum stated at each phase of the contract.

This sounds rather easy to carry out, but it is just another suggestion of the kind upon which I commented earlier. We should then have the problem of what to do about modifications. In the case of one weapon system I know of there were well over 2,000 modifications, some of which were small but others of which were very important. It is appallingly difficult to try to fit this aspect of the work into a phased contract of the type I have described, but I am sure that it is worth trying, and I am sure that the Public Accounts Committee was right in drawing attention to this matter. If this method is tried I hope that it will prove successful.

Vice-Admiral Hughes Hallett

When my hon. Friend talks about "modifications" is he referring to modifications arising from changes in the staff requirements? If so, does he agree that these should be resisted at all costs?

Mr. de Ferranti

I am thinking not in terms of modifications arising from Changes in staff requirements but of modifications either to the specification or to the detailed design of the missile itself. These are bound to occur. We are exploring the frontiers of knowledge, and both the customer and the manufacturer are trying to edge their way towards a weapons system which will be satisfactory. Each stage in the process involves a modification of original ideas in order to try to get to the next stage, it is a fantastically complicated, difficult job to develop these sophisticated weapons. It must have been dfficult enough with the steam torpedo, of which my hon. and gallant Friend has some knowledge, but these weapons are of an incredible order of complexity, and modifications are inevitable to the design. What slightly frightens me is the thought that if we were to use this type of contract we might find that it would merely become an additional burden on the Ministry and the manufacturer in their performance of a most difficult task, and might well prove to be a real threat to the possibilities of the success of the overall scheme.

The Public Accounts Committee said that there should be more financial control. I would differentiate strongly between financial supervision and financial control. If there were financial control it would mean that the manufacturer, at innumerable stages in this complex process of development, would have to get permission from the Ministry for the next phase, and the length of time it takes to perform a development contract varies almost directly in proportion to the number of decisions required from the Ministry. If we built in a system which required innumerable decisions from the Ministry the job would not get done at all—or, if it did get done, it would cost a great deal more money.

It may be that things are not so bad as to necessitate drastic measures. The cost of the development of these three has admittedly been £143 million. But let us look at the other side of the picture.

The Army, the Navy and the Air Force have all got viable weapons to use which would be operable in the event of an attack. Compare this, with respect, with the American position. The Americans must have spent well in excess of five times as much money as we have in this matter, and they have been able to produce only two more or less operable weapons. One is able to intercept only one aircraft at a time and the other has so short a range as to make its use in war time extremely limited. On the other hand, with a fraction of the expenditure, we have been able to provide our Armed Services with first-class weapons.

Frankly, I think that credit it due to the Socialist Administration who first negotiated the majority of these contracts and, of course, to their advisers, for the way in which they have been able to produce a system of working which has been successful. Were I to be asked for any one reason why these contracts have been successfully executed. I would say that lack of control is one reason. If we have a team of creative engineers performing an extremely difficult task, we cannot expect to succeed if we are continually messing them about. For one thing, they will leave the job and do something else. The type of man referred to by my hon. and gallant Friend would be the first one to leave a development contract if he found that his work was being continuously interfered with. These people are "prima donnas". We must give them a job, and leave them to get on with the work. Of course, there must be financial and technical supervision, but if we try to impose rigorous control, far more of the taxpayers' money would be wasted than might be imagined possible.

I think it worth while to look at another aspect of this matter. Not only has the programme produced three technically successful guided weapons; it has also made a substantial contribution to our balance of payments, in that we have been able to sell several weapon systems to overseas countries, particularly to Sweden and to Australia. It is to be hoped that we shall be able to sell more in the future and, speaking personally, I am sure that we shall be able to do so.

Even more important than exports is the purely incidental contribution which development programmes have made to development in the civil sphere. Everyone knows of the civil developments, which, as a matter of course, have come out of the war-time armaments programme.

Mr. Tomney

With commercial benefit.

Mr. de Ferranti

Certainly to the benefit of the consumer and the taxpayer. Whether the manufacturer makes any money out of it is a matter for considerable speculation, as I know from personal experience.

To try to excite the imagination of the House I should like to mention some of the things which have come out of the guided-missile programme. First, there is the method of controlling processes in real time. Obviously, a missile when on the way to the target requires a computer in the loop as it were. This computer has to work in real time and has to do all the calculations during the flight of the missile. One can use a similar type of computing technique to control large chemical plants, and, for instance, the start-up sequence of boilers in a power station.

These applications can save many millions of pounds over the years, and just that one application, I think, would amply justify the entire expenditure of £143 million on this programme. One has to save only 1 per cent. of the operative costs of, say, a large chemical process or the boilers of power stations in the United Kingdom to realise that £143 million is quite a small sum in comparison with the sort of saving which might be effected. Other things which have resulted have been advances in some techniques in the field of semiconductor devices and, what is perhaps most important, a reservoir of highly-skilled people whom we should probably have been quite unable to train by the normal commercial processes in industry.

I have tried to show that the Governments involved in this have nothing to be ashamed of. I have tried to show that they should be careful not to jeopardise a system which, on the whole, has worked well. There seems to be a feeling that the work of this sort of programme should not proceed until the whole thing has been lined up and planned in detail. I have tried to show that, from the very nature of the work, it cannot be lined up and planned until after the development is finished. It is not possible to do it before. Elaborate arrangements can be made to produce paper estimates; but, no matter how elaborate are those arrangements, the estimates will still be wrong in the future. The point is that the development of these vast weapon systems is a highly complex business—a sort of creative excursion over the frontiers of knowledge—and, by definition, must be unplannable.

To meet the criticism of the Select Committee and to do all the things which the Committee would rightly like to see done would be like asking Einstein how long it would take to produce the general theory of relativity. It would be a question of that type. It is not practicable. For what it is worth, my advice to the House is that if we really want to save money, we should follow the line of reasoning of the right hon. Member for Huyton (Mr. H. Wilson). Expenditure basically depends on policy. If we wish to save money in the sphere of guided weapons, we must decide not to have particular guided weapons at all. If we try to save money by fiddling about, the only result will be that such weapon systems as are decided on and proceeded with will never produce a workable result.

5.47 p.m.

Sir George Benson (Chesterfield)

This is the first time in this century that the House has decided to debate a Report of the Committee of Public Accounts and, as an old member of the Committee, I am not sure whether to take that as a slight or a compliment. However, I am glad that we are debating these Reports because I think that the work of the Committee is vital to the economic and efficient running of our great Civil Service machine.

Originally, the function of the Public Accounts Committee was to see that the expenditure of the Government Departments fitted closely with what were known as appropriations; in other words, that the Departments kept strictly within the limits of their estimates. In the old days, before the war, when expenditure was extremely repetitive from year to year, the job of the Committee was mainly to deal with what now seem rather niggling and technical points relating to accountancy. Today we are spending vast sums. Not only are the sums vast but there are great swings in the direction which the expenditure takes, and the function of the Committee has become not the rather narrow function of seeing whether expenditure and appropriation are analogous, but whether the Departments are spending these sums efficiently and economically.

The small size of the Reports indicates pretty well that we have a highly efficient Civil Service. True, we always have something to do, but I wonder what kind of report would be issued to the shareholders if the activities of ordinary limited companies were subjected to the same detailed investigation and scrutiny as is given to the Civil Service by the Exchequer and other audit Departments. The fact that we report on so little is, I think, a great compliment to the efficiency of our Civil Service.

One thing I must emphasise is that it is not the job of the Public Accounts Committee to curtail expenditure. That is a matter for the House. Our duty is to see that expenditure has been made on what has been permitted by the House and that the expenditure has been made with adequate economy. If we find that a Department has fulfilled both those functions, we have nothing to say. The best thing a Department can hope for from the Committee is that it should be ignored. A great deal has been said about the chaos of missile development. The lesson to be drawn is that this entirely new development into regions about which we have little or no information throws into sharp contrast the efficiency with which the Civil Service runs. It is a tribute to our Civil Service.

The Public Accounts Committee is a non-party Committee and of that I think we are entitled to be extremely proud. We are the only Public Accounts Committee in the world which functions really effectively. It does so because it is a non-party Committee. My experience as chairman was that I probably had more trouble in controlling the severity of Government members than the severity of Opposition members. We work as a team, and I am very proud of that.

When, as sometimes happens, representatives of foreign Public Accounts Committees or finance departments of the Colonies ask if they may sit in, we always give them permission to do so. I always emphasised, however, what I think is the most important contribution we have to make to other Public Accounts Committees—that this is a non-party Committee. I remember a lady, who represented a colonial administration, coming to the Committee. I told her the usual tale, that we are completely non-party, but she was entirely sceptical. I said "All right, you shall sit in and afterwards I shall ask you if you can recognise which member is a member of the Conservative Party and which member is a member of the Labour Party." I listened very carefully to the attitude adopted by my colleagues and I must say I thought they came through with flying colours. I expected that.

Then I asked the lady, "Did you distinguish?", and she said, "I think so. I think the gentleman who sat there was a Conservative and the gentleman who sat there was a Conservative"—and she was right. I was horrified. I said, "How on earth did you distinguish?" She replied, "I thought their clothes were better cut." I am certain no one but a lady would have thought of that. I think it as high a compliment as anyone has paid to the Public Accounts Committee. Although I have been a member of the Committee for a long time and was Chairman for many years, I feel that we are entitled to be proud of the Committee.

5.55 p.m.

Sir Henry d'Avigdor-Goldsmid (Walsall, South)

This is a very agreeable debate in which to take part for several reasons, above all because it gives one the opportunity to pay tribute to that devoted servant of this House, the hon. Member for Chesterfield (Sir G. Benson).

The hon. Member talked about the non-party feeling in the Public Accounts Committee. That is something felt on both sides of this Chamber in respect of the hon. Member however high party feeling may run. It has been particularly agreeable today because the right hon. Member for Huyton (Mr. H. Wilson) started on such a satisfactory note. He referred to the fact that it is policy which makes expenditure. Perhaps the fact that we have not been discussing policy directly today accounts for there being a rather empty House. However, as the right hon. Member suggested in his conclusion, the policy by which our expenditure is handled is liable to have a very marked effect on our future deliberations and on our entire financial position.

If I may refer to the speech of my hon. Friend the Member for Morecambe and Lonsdale (Mr. de Ferranti), I cannot help feeling that a complete surrender of control by this House would run counter to anything we have ever known in peace time or that we could possibly tolerate or agree to in peace time. Unlike most hon. Members who have taken part in this debate, I have not the honour to be a member of the Public Accounts Committee, but I am a member of that other group, the Select Committee on Estimates, whose members will be rising to catch your eye very shortly, Mr. Deputy-Speaker.

The right hon. Member for Huyton referred to the Public Accounts Committee as the Holy Office whereas the Treasury conducted the auto-da-fe. I was trying to see how the Estimates Committee comes into that framework, but my knowledge of theological organisation is not as close as his. I have no direct suggestion to make, but I remember an organisation during the war which was known as the General Headquarters Reconnaissance Unit, or "phantom", and described as a small body of men entirely surrounded by officers. It was in fact represented in this House not long ago. The object of that organisation was to bring information direct from outlying units to G.H.Q. I cannot help feeling that the Estimates Committee, in its inquiries, may serve a similar purpose.

I wish to refer to the Sixth Report of the Estimates Committee in the Session 1957–58, on Treasury Control of Expenditure conducted by a sub-committee presided over by my hon. Friend the Member for Farnham (Sir G. Nicholson) in which my hon. and gallant Friend the Member for Croydon, North-East (Vice-Admiral Hughes Hallett) took a leading part. That Committee looked into the question of Treasury control, raised certain doubts and questions and was rather reassured by the replies of the Treasury and other Departments which gave evidence. I wish particularly to quote paragraph 24 of the Report of the Select Committee, because it sets out a state of affairs which the members of the Committee were very pleased to hear about, but which appears not altogether to tally with the matters we are discussing today.

Paragraph 24 runs: An important development has recently taken place in the control of defence expenditure by the Ministry of Defence and the Treasury. 'Forward looks' or forecasts for three years ahead are prepared each summer, on the basis of current policy, of the total and major features of defence expenditure. These are prepared primarily for planning purposes so that the Treasury may see what they are committed to by the policy. As a result of such a 'look' modifications may be sought in the policy. This is the key sentence: The forecast for the next year becomes, when approved by the Government, the defence budget which is the foundation for that year's defence Estimates. The Committee adds the qualification, This technique is still being developed". We are debating some of those developments.

The Committee was very impressed by this technique and said, Your Committee find this development most interesting, and are disappointed that there seems to be little parallel effort on the civil side". In fact, it is rather fortunate that there has not been parallel effort on the civil side with what we have seen on the defence side. Had there been, the size of the figures which we are discussing would have been very much larger.

In examining the evidence given to that sub-committee by the Ministry of Defence, one is struck by the fact that the Ministry of Defence controls very little money indeed. The total Vote was only £17 million, of which 90 per cent. was on contributions to N.A.T.O. and other bodies and only 10 per cent. was on its own administrative expenses. The Ministry also gave evidence that the costings were reliable and that certainly the estimate came to a manageable figure.

When the Treasury was called upon to give evidence it touched on the question of underestimating, which it considered unavoidable at times, and referred particularly to the establishment of a committee under the chairmanship of the late Sir Claude Gibb, a committee of which I understand Sir Solly Zuckerman has now assumed the chairmanship. I hope that in the case of Sir Claude Gibb it was post hoc but not propter hoc and that in the case of Sir Solly Zuckerman it will have no damaging effect on his activities.

The Treasury reported on the question of post-mortems, using the word "post-mortem", having borrowed it from my hon. and gallant Friend the Member for Croydon, North-East. I can only say that some of the corpses must have been somewhat odorous. In any event, the Treasury was satisfied that the post-mortem procedure was satisfactory.

Even that did not altogether satisfy the Estimates Committee, but in reply to its comments the Lords Commissioners of the Treasury replied as shown in the Seventh Special Report from the Select Committee on Estimates, 1958–59, which was printed on 17th June, 1959, presumably at a time when these matters now being debated were well known to the Treasury. The Treasury replied: My Lords have difficulty, however, in concurring in the Committee's view that the Treasury 'appear to have little control over, and perhaps too little interest in, the costs of procurement orders for military equipment' How far the Treasury should assist responsible Departments in this field by increasing Treasury control is under discussion; but more is done already than was perhaps appreciated by the Sub-Committee. Those words should go on record because, if more were done than was appreciated by the sub-committee, it still suggests that a great deal more could have been done without yet achieving the objects which the Treasury had in view.

The logical conclusion of our debate, perhaps, has been put by my hon. Friend the Member for Morecambe and Lonsdale. No less a person than the Minister of Defence, at the N.A.T.O. Conference this week, said that, in this field, if it works it is out of date. Perhaps one should go on from that to say that if its costs can be accurately estimated, it ought never to have been begun. Frankly, I do not know the answer to these questions, but they have been posed by responsible people. One is reminded of the remark of the late Mr. Pierpoint Morgan, when he was asked by a friend what was the cost of running a yacht. He replied that people who want to know the cost of running yachts cannot afford to run them.

There is a moral for us in that. As a House and a country, we are devoted to Commons control of Governmental expenditure. My hon. Friend the Member for Morecambe and Lonsdale probably knows more about the technical side of this matter than any of us here, and he certainly knows a great deal more than I know. I was impressed by his words that the only way to control this form of expenditure is not to go in for it at all. Perhaps that is not the object of this debate, but I feel that the debate has served a most useful purpose particularly, as mentioned by the hon. Member for Chesterfield, in indicating, on the whole, how extraordinarily well our finances are run. It has drawn attention to this situation, which has certain elements of the chaotic about it, and focussed the attention of the House on this problem—can we afford to go in for a programme which cannot be satisfactorily run under present Governmental methods of accounting?

6.7 p.m.

Mr. J. Grimond (Orkney and Shetland)

Like the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), I am sure the House is obliged to the right hon. Member for Huyton (Mr. H. Wilson), not only for his work on the Committee, but for the speech with which he introduced the debate. He mentioned Mr. Gladstone. I am not sure that Mr. Gladstone would always approve of the right hon. Gentleman's fiscal views, but so amiable was the right hon. Gentleman's speech this afternoon that it would have received a celestial pat on the head from the Grand Old Man himself.

I want to make a point at the outset. The debate has been largely concerned with a special problem. Of course, the Report of the Public Accounts Committee goes much wider than this special problem, and indeed the whole problem of the public control of expenditure should exercise this House, in matters more definite perhaps, easier perhaps, but certainly as important as that which we are considering. The right hon. Member for Huyton quite rightly said that the amount of money the Government spend depends upon the policy. I wholly agree with him. But I am sure that he in turn would not dissent if I said that this does not absolve the House from exercising supervision over administrative expenditure. The public are very concerned about administrative expenditure. When I say "supervision" I do not necessarily mean cutting down expenditure. I mean seeing that we get value for money. I thought that the hon. Member for Chesterfield (Sir G. Benson), in a most interesting speech, made an important point when he said that the Public Accounts Committee was not concerned to cut down expenditure but to see that it was proper and that we were getting value for the money spent.

Two questions arise on the special subject which we have been considering. First, there is the question of how it happens that the original estimate was so far out. The hon. Member for Morecambe and Lonsdale (Mr. de Ferranti) made a valuable contribution. The House is lucky to have him here this afternoon. It is said that the House of Commons always finds somebody, even on the most abstruse subjects, who is an expert, and that has been proved today. He pointed out that it was an almost superhuman task to estimate for development of this kind. Nevertheless if estimates were made—and they were in this case—the House is right to inquire why they were so very far out. The figures were £4 million against £143 million. That is the first question. But, as a layman, whether there was waste is much more interesting to me. Did we get value for money? It has been suggested by the hon. Member for Huyton that there are indications that some waste may have occurred. There were no contracts in some cases and in other cases the contracts were open-ended. There is no evidence that some of the firms were desperately concerned in keeping down costs. It is on the subject of waste that I believe the people who are concerned with our deliberations will be most interested.

What are we going to do about that? The House has been no more able to make concrete suggestions on this question than have the various committees which have considered this from time to time. The suggestions set out in paragraphs 42 to 45 of the Report seem good to me. I hope that the Government are going to follow them up. But I must say that when it comes to suggesting that the initial estimates should be made by the technical staff and that they should then be criticised by the financial staff, I am not sure that it carries us very much further. The original estimates in this case appear to have been made by the technical staff, and, presumably, were criticised.

I thought I noticed a slight look of terror come onto the face of the Financial Secretary when the hon. Member for Morecambe and Londsdale indicated the problems we would be concerned with included computers running through the real time in a loop. We know that the Financial Secretary can tackle almost anything, and I am sure that the question of a philosophy of this sort will be within his capabilities. However, I think we are put in a difficulty as to how the staff is going to make sense of the extremely technical propositions put before them.

There is a simpler point I wish to make, and that is that any financial control is made far more difficult in times of inflation and inflation is the cause of the unsatisfactory cost plus system. The difficulty of control is greatly accentuated if we are bound to have inflation. I hope we shall be told something about the progress of this review of the Treasury. It is obvious that the jobs which the Civil Service in general and the Treasury in particular are now being asked to undertake are very different from a hundred years ago. They are no longer concerned with just supervising expenditure on definite projects but they enter into partnership in commercial or scientific enterprises in which exact supervision of a type common one hundred years ago is impossible.

I wonder whether we have not to look again at the type of Treasury official and Civil Servant that we have. We are extremely proud of them, and I have no doubt that they are still by far the most expert service in the world. However, when they are being asked to undertake totally new jobs we should consider whether some new form of training or experience is not required. It might be useful if from time to time members of the Civil Service and the Treasury were to take a year or two off and go out into the commercial or scientific world.

But the crux of the matter is responsibility. Responsibility not only in the special case of guided missile development but over the control of expenditure in general. Where there is no responsibility control vanishes. The hon. and gallant Member for Croydon, North-East (Vice-Admiral Hughes Hallett) also spoke of responsibility. I was not, however, quite certain to what sort of responsibility he was referring. He went on to say that the sort of man he thought would be valuable today to take responsibility was someone like Fisher. That is not the sort of responsibility I have in mind. Fisher was a man of very strong personal prejudices. If he had been responsible for this sort of problem before the war there certainly would not have been any mines, because he did not approve of them. It was made clear by the right hon. Member for Woodford (Sir W. Churchill) that it is fatal to allow ultimate responsibility to fall entirely into the hands of experts. It is not only part of our Parliamentary system but historically the way to get the right decisions to see that responsibility remains with Ministers, even though they may be laymen on a particular subject. The responsibility has been leaking out of the hands of Ministers into committees, into the hands of experts, and so on, and we shall never get proper control of these projects, proper supervision of expenditure, until it is squarely fixed on the Minister and, through the Minister, on other people in the Ministry; but not hived off, so to speak, to a committee in the way the hon. Member suggested.

If we have done nothing else this afternoon we have, as the hon. Member for Chesterfield said, by debating this Report of the Committee on Public Accounts, shown to the public, if the public is interested in these matters at all, that the House of Commons is keenly concerned about public expenditure. We shall have given some publicity to the work done by these Committees of Public Accounts and to the very detailed, accurate and important work which goes on behind the scenes. Very often this is not appreciated, and the more we can do, both to give it some currency and also to persuade the Government to give their views on it and assure us that steps are being taken to implement its recommendations, the better job we shall do for our constituents.

6.16 p.m.

Sir Colin Thornton-Kemsley (North Angus and Mearns)

Although I have been a member of the Public Accounts Committee longer than most, in the very short speech I shall make this evening I propose to abandon what I might call the ordinary Public Accounts Committee point, and deal with two matters only, which go rather wider than the kind of questions which the members of that Committee can put to an accounting officer.

First of all, I want to talk about what, for want of a better word, I call "perfectionism". Secondly, I want to talk about co-operation with the United States of America. As to perfectionism, the House will remember, from the course of the debate this evening, that the missile which was known, first of all, by the code name of "Red Shoes" and later as the "Thunderbird", was originally an Air Force and Army project. Later, two different operational requirements became obvious and, for reasons given in the answer to Question 3232, the Army went for the Thunderbird and the Air Force for the Bloodhound. I am not convinced that the deterrent effect of these weapons is lessened appreciably by a lack of absolute perfection in the finished article. We are producing deterrents, but I am not sure whether we need them, to the exclusion of considerations such as cost and the time taken, to achieve absolute perfection.

As the accounting officer for the Ministry of Aviation pointed out to the Committee, there is always a struggle between the ideal and the need to produce something technically acceptable at a reasonable cost. The point was made by the hon. Member for Loughborough (Mr. Cronin)—and I am not sure that I agree on this point with my hon. and gallant Friend the Member for Croydon, North-East (Vice-Admiral Hughes Hallett) in his retort to my hon. and gallant Friend the Member for the Isle of Ely (Sir H. Legge-Bourke)—about the part the Ministry of Defence should play in these arrangements.

I understand that there is a body called the Defence Research Policy Committee set up by the Ministry of Defence. I would welcome some reference being made to that kind of co-ordinating committee concerning the requirements of the three Services for weapons of this kind. We are, perhaps, needlessly going for perfection and sacrificing economy and time in our search for the ideal.

Sir H. Legge-Bourke

I am grateful to my hon. Friend for referring to the intervention which I made in the speech of my hon. and gallant Friend the Member for Croydon, North-East (Vice-Admiral Hughes Hallett). Does my hon. Friend realise that at present there is a good deal that the three Service Ministers are never told by their Departments, for reasons of security? If any Minister knows, it is the Minister of Defence. Does not my hon. Friend agree that this is a matter which should be looked at? How can a Minister possibly control a development which is so secret that he cannot be told what it is?

Sir C. Thornton-Kemsley

I am not convinced that the details are not known at the highest Ministerial level, which is what counts in cases like this.

Turning quite quickly to co-operation with the United States, this country took about eleven years to produce Seaslug, at an all-up cost of £70 million. The American Terrier, which is generally admitted to be not quite so good as Seaslug, was produced in eight years at a very much lower cost.

I have a question, not far the Public Accounts Committee, but for the Government. The more this question is asked in the House, particularly from this side of the House, the better. When shall we learn to pool our resources with our American allies? Today the House has discussed three weapons—Seaslug, at an all-up cost of £70 million; Thunderbird, at an all-up cost of £40 million; and Fire Streak, at an all-up cost of £33 million, making a total of £143 million. We have not yet looked at Blue Streak.

My hon. Friend the Member for Abingdon (Mr. Neave) said that the United States has spent £750 million on abandoned weapons. One day we shall be driven by the mere force of economics to collaborate with our allies. The sentries at Buckingham Palace have now been put behind the railings, and no one can imagine why it was not done years ago. Before long, we shall wonder why it took us so long to work out a system of full collaboration with our friends the United States of America as regards these other and far more important defensive arrangements.

6.23 p.m.

Mr. James H. Hoy (Edinburgh, Leith)

I apologise to my right hon. Friend the Member for Huyton (Mr. H. Wilson) for not being present during his speech. Despite all the developments which have taken place in the last decade in ballistics and space research, aeroplanes still cannot take off or land in fog. If the firm with which the hon. Member for Morecambe and Lonsdale (Mr. de Ferranti) is associated could do something about that, it would be a public benefactor.

I want to take this opportunity to pay a tribute to the public servant—the Comptroller and Auditor-General—who performs such a wonderful service on the Public Accounts Committee. The present Comptroller, like his predecessor, has been of tremendous value to us. We could not do our work competently without his assistance.

I also want to take the opportunity to congratulate my hon. Friend the Member for Chesterfield (Sir G. Benson), who has been associated with the Committee for a third of the century that it has been in existence and has presided over it for many years. Hon. Members will understand my desire to congratulate my hon. Friend when I explain that I am second in seniority on the Committee.

We have been discussing this afternoon only one facet of the work of the Committee. Such a Committee must cover all forms of public expenditure. It is worth while reiterating that there are two things for which our Committee is not responsible. First, it is not the job of the Public Accounts Committee to lay down policy for this or any other Government. Secondly, it is not the responsibility of the Committee to vote any money.

I remember one discussion we had in the Committee on the expenditure being undertaken by universities. The chief of one British university launched an attack on us. He said that, if the Public Accounts Committee had its way, it would not vote any further money for university work or would seriously curtail it. That is not the duty of the Committee. It is the duty of the Committee to ensure that what has been voted is efficiently and economically spent by Government Departments.

It is perhaps for that reason that the Report takes such an interest in the development of missiles. The hon. Member for Morecambe and Lonsdale made an interesting speech, but he was not quite consistent. He said that it was very, very difficult to estimate the cost. He went on to say that it would be fantastically difficult to make up an estimate of the cost. He then said that, if the correct estimate had been made up and submitted to Whitehall, Whitehall would have sent it back and said that it would not accept it. If it is so difficult for experts, how can the men in Whitehall know better than the experts who prepared the estimates? That is the difficulty.

What we were faced with was that the expenditure of public money ran into millions and millions of pounds. At the end of the day the Public Accounts Committee must prepare its comments on whether the money has been spent efficiently and wisely. Whatever faults we may have, what we are doing is in the interest of the taxpayer. Because the Treasury felt that there had been some inefficiency in supervision, not only over expenditure but perhaps over the preparation of accounts, one contractor had to repay about £40,000. The Treasury felt that there had been an over-charge or lack of control.

That is one thing which has followed on from the war period. Throughout the whole of my service on the Committee I have opposed the cost-plus system. I do not believe that it makes for careful and good management over the whole field. It may be necessary when a new missile is being developed, when it is very difficult to control expenditure, because of the very novelty of the project. I am prepared to admit that, but in the main the cost-plus system is bad, not only for the Government, but for contractors, because it may lead to carelessness which would not otherwise take place. It is the Committee's job to ensure that the taxpayers' money is efficiently and economically spent.

I had hoped that even in this short debate we should have heard some remarks about the Committee's comments on the working of the Independent Television Authority. The Committee's unanimous Report contained some comments about the profits being earned. It questioned whether the Authority was fulfilling its part of the contract and paying certain surpluses over to the Government. This has gone on for a considerable time.

In its last report the Independent Television Authority stated the reasons why certain people are selected. The Authority rejected the Committee's suggestion that competitive tendering should take place for the granting of contracts. The Committee's point of view was that there should be competitive tendering only if the Authority was convinced that the contractors were technically and economically sound and in other ways efficient enough to do the job. I see that in its last reply the Television Authority says that not only has it to think of this but the public standing of the people concerned, and their influence on public opinion. I thought that that was the very thing that arose in the case of the closing down of the News Chronicle. Perhaps the Financial Secretary would like to say a word or two about that.

On behalf of all members of the Public Accounts Committee, I want to say how grateful we are to the House for discussing this Report—the first occasion on which it has been able to—in this, our centenary year. We are grateful to hon. Members in all parts of the House for the kind things they have had to say. We can only hope that as a result of our work, whether it be on guided missiles, groundnuts or the wearing apparel, male and female, of the Army, we have at least made a contribution towards seeing that public moneys are expended economically.

6.31 p.m.

The Financial Secretary to the Treasury (Sir Edward Boyle)

We have had an interesting and useful debate, though whether it can quite merit the description of an historic debate, as my hon. and gallant Friend the Member for Croydon, North-East (Vice-Admiral Hughes Hallett) said at a quarter to five, I leave the House to judge.

The debate started with what I thought, if I may say so, was a very balanced and helpful speech by the right hon. Member for Huyton (Mr. H. Wilson) in his capacity as Chairman of the Public Accounts Committee, and I am sure that we were all particularly glad also to have had the service of the hon. Member for Chesterfield (Sir G. Benson) to whom tributes have been rightly paid. I hope that when people outside this building judge of our work in the House of Commons they will remember those who, like the hon. Member, Session after Session have done very great work as Members of Parliament behind the scenes. I would only add that I was interested to note, after listening to the hon. Member, that I would not apparently be mistaken for a Conservative Member of the Public Accounts Committee.

I am sure that the House is glad of the chance to consider the work of the Public Accounts Committee. There have been quite a number of discussions in recent months, and a very considerable interest shown, both in this House and outside it, in the whole subject of the control of Government expenditure. It is more clearly recognised today than ever before that it is not only a job for the Government but must also be a matter of great concern to the House of Commons to make a forecast of the economic resources likely to be a ailable in the years to come, and of the main claims that will be made on those resources.

Perhaps I may, by the way, be allowed to say to the right hon. Member for Huyton that I remember very well that time five years ago when he was lambasting me night after night for what he was pleased to call "Boyle's Law". Today, for the first time in my recollection, he quoted a new "Boyle's Law", with which he felt able to agree.

This is, of course, the season of the year when hon. Members in all parts of the House—and Ministers, certainly—are particularly aware of the problems of Government spending, and the very notable contributions by the Committee on Public Accounts to ensure that we get the best value for money, and improve and strengthen the system of financial control, have not, as far as I know, been brought formally before this House in this way for a very long time. As this is the Committee's centenary year, it is very apposite that we should now be considering its work.

It has always been realised that the House cannot undertake those detailed inquiries that Select Committees, with skilled assistance, can undertake, and perhaps the House would not take it amiss if, for the next ten minutes or so, I made a few general remarks about the Public Accounts Committee and its relations with the Departments and with the Treasury, before coming to the special subject of paragraphs 25 to 45 of the Committee's last Report, which paragraphs relate specifically to the development and production of guided weapons.

As the right hon. Member for Huyton said, the Select Committee on Public Accounts will be 100 years old next year. It is a fair generalisation to say that in our national history there have been two really great periods of administrative reform. The first was under one of the greatest, and certainly one of the most maligned Englishmen, Thomas Cromwell, in the sixteenth century, who, for the first time, established bureaucratic Departments and offices of State. Roughly speaking, his system, with developments, lasted a very long time. It is a remarkable thing that even in the eighteenth century, while there were considerable experiments in the field of government, we did not then have any uniform system of public accounts—and still less any method for bringing them under Parliamentary scrutiny.

It was not until 1857 that a Select Committee recommended the extension of a regular system of appropriation accounts to the Civil and Revenue Departments, and it is my belief that the third quarter of the nineteenth century, which brought us the modern system of public accounts and a professional Civil Service—and, incidentally, the beginning of our modern political parties—was one of the great formative periods in our modern history.

It was in 1861 that, under Standing Orders, the Public Accounts Committee was established, and the framework of the whole system of Parliamentary audit and control as we now know it was finally completed with the Exchequer and Audit Departments Act, 1866, which laid down in considerable detail the system of accounts to be maintained by Departments, and provided for the appointment of a Comptroller and Auditor-General.

The further amending Act of 1921 laid on the Comptroller and Auditor-General the duty of satisfying himself, in regard to every appropriation account that … the money expended has been applied to the purpose or purposes for which the grants made by Parliament were intended to provide and that the expenditure conforms to the authority which governs it. It is really since that Act was passed that the Public Accounts Committee as we know it today has been working, and I should certainly like to join in the tributes that have been paid in this de- bate today to successive Comptrollers and Auditors-General. I know what valuable work they have contributed to the Committee, and I was very glad to hear the tribute specially paid to the present Comptroller and Auditor-General, Sir Edmund Compton, with whom I was fortunate enough to have personal dealings when I was previously at the Treasury.

It is fair to say that the Public Accounts Committee has, throughout its history, shown a considerable flexibility of attitude and methods. It has been found a valuable instrument for its purpose, despite the revolution in the whole function of Government and the problems of public finance. Quite obviously, the type of scrutiny appropriate to the total of Government expenditure at the start of the century, or even thirty or forty years ago, would not be suitable today. Not only has the amount of money voted by Parliament increased very rapidly but the scope of Government expenditure, its objects and its whole impact on the economy have changed out of all recognition.

This has naturally had very profound effects on the way in which Departments and the whole of the Public Accounts Committee approach their task. For instance, the problems of controlling social service and defence expenditure, with which the Committee finds itself constantly grappling, are different in kind from those that engaged much attention even up to the beginning of the last war. I think that the right hon. Member for Huyton was quite right, both in his article in the Guardian and in what he said this afternoon, that paragraphs 25 to 45 of the present Report deal with a completely new problem, to which I shall come in a few minutes.

The limits of the responsibilities of senior officials who appear before the Committee are well understood, and I know that the sometimes tricky line of decision is conscientiously respected by all members of the Committee, on whichever side they may sit. I am sure that the right hon. Gentleman was right when he spoke of the seriousness with which Permanent Under-Secretaries approached the Committee, and I was interested in the suggestion of my hon. and gallant Friend the Member for Croydon, North-East who said that, in a way, one could almost say that the Committee constitutes some limit on Ministerial responsibility. In strict accuracy, I am not sure that that is not going a little too far, but it is certainly true that the Public Accounts Committee is the means whereby this House gets into absolutely direct contact with the accounting officers of public Departments.

As regards the way in which the Public Accounts Committee and the Executive work together, I am sure that neither the Committee nor Parliament would expect the Treasury or the Departments to feel themselves absolutely bound by recommendations of the Public Accounts Committee made in circumstances quite different from those of today. But the general principles of control remain as valid as they ever did, and so, indeed, do certain tenets of prudent financial administration, even though the types of activity and expenditure to which they are now applied have changed so very greatly.

Perhaps I may now say a word about the Committee's relationship with the Treasury. I think it is well known to the House that the relations between the Committee and the Treasury have always been very close, and I think they have worked extremely well. Of course, the Treasury's very important responsibilities for the control of expenditure are founded on the authority of Parliament. As the hon. Member for Chesterfield (Sir G. Benson) and others have so rightly said, the Public Accounts Committee is in no sense a committee for the control of public expenditure. The Treasury's responsibilities are one aspect of my right hon. Friend's concern with the well-being and the balance and growth of the whole economy.

It is not for me to deal with this matter at length this evening, except to say that Government expenditure is by no means the sole claim on the economy. We have to consider all the great obligations of demand on the resources that we produce and to see that a balance is kept between the total of those demands and the total of our resources. Obviously Government expenditure has this unique importance from the point of view of the Executive, that it is the one component of demand that is basically and directly within the Government's own control. Conversely from what I have been saying, Parliament has for a long time recognised that it must delegate to the Treasury many duties of financial control and management which it could not possibly undertake directly. None the less Parliament has the duty to assure itself, so far as it can, that this control is exercised efficiently and in accordance with its own views.

May I say that we are today considering whether money has been spent wisely and whether there has been some degree of waste. Those are questions that Members have asked. But I hope that they will not forget the important aspect of the Public Accounts Committee in considering the propriety of the expenditure—whether expenditure has been made, whether it is a large or small sum, in accordance with what Parliament has decided.

That question of the propriety of Government expenditure is a highly important one which we should never forget when considering the functions of the Committee. The Committee can each year examine very carefully only a comparatively narrow front. Particular topics are selected from the whole examination of the accounts and relevant papers by the Comptroller and Auditor-General which are thought to bring out problems of financial administration which seem particularly to merit scrutiny. Then, within the limits of agreed policy, accounting officers of the Departments must be prepared to answer any question on the way that their Departments have carried out the operations in question.

After due consideration of the evidence, the Committee issues its Report, including its conclusions or recommendations on the specific matters that the Committee had had under review. These recommendations are very carefully considered by the Departments and the Treasury in consultation, and the Executive's comments, in the traditional form of a Treasury minute, are conveyed to the Committee and published by the Committee as a Special Report, as the right hon. Member for Huyton said.

I should like to emphasise that the Treasury minutes are, as it were, the Executive's comments on the Report. They are not just Treasury comments. They are the comments of the whole Executive.

Mr. H. Wilson

When the hon. Gentleman says that they are the comments of the whole Executive, I hope that he is not in any way derogating from the fact that the Treasury accepts responsibility for the comments before presenting them to the Committee?

Sir E. Boyle

Not at all.

Mr. Wilson

I ask that because there was considerable concern last year about a Treasury minute which was no more than a quotation of some words cooked up by the Post Office or the I.T.A. or somebody, and the Treasury passed on the words in inverted commas. Is the hon. Gentleman aware that the Public Accounts Committee and the House of Commons expect the Treasury to act as a Treasury and not as a Post Office?

Sir E. Boyle

When I said that they were the comments of the Executive, I did not mean to derogate from the responsibility of the Treasury. I merely wanted to point out that the terms of the minute are drafted after careful consultation with the Departments concerned. I shall have a word to say on that matter of the Independent Television Authority at the end of my speech.

I now wish to say a few words about the question which we have been discussing, namely, paragraphs 25 to 45 of the Report which relate to the development and production of guided weapons. We are not having an Estimate debate today. Therefore, it is not for me to reply on issues of policy. I know that if my right hon. Friend the Minister of Aviation were here and were speaking in the debate he would have a number of comments to make, and he will be only too willing to answer an Estimates debate on this subject on another occasion.

The only point to which I wish to draw attention is this. Some of the cost comparisons that have been made today have struck me as a little unreasonable and, indeed, as going rather beyond paragraphs 25 to 45 of the Report. It is true that the initial estimates for these guided weapons were understated, but they were, by the custom of the time, related only to development up to the production of a prototype. The heavier part of the expenditure falls in the long period of testing and proving after the prototype. That is why I do not think it is fair to compare £4 million with £143 million. I think that a fairer comparison, in a sense—and this is implicit in the words of the Report—is to compare £1 million to £1½ million for the original estimate for Seaslug with a figure of something like £9 million. Indeed, I am not sure whether £6 million would not be a fairer comparison, because some of these contracts were placed before the big rises in prices which took place in the early years of the last decade. I say this not in any way to mitigate the seriousness of the issues but to show that we do not strengthen the case by comparing like with unlike.

Vice-Admiral Hughes Hallett

Is my hon. Friend suggesting that in 1948 the Ministers were aware that there was going to be this greater expenditure in testing prototypes?

Sir E. Boyle

This is not within my own sphere of responsibility, but I am told that the initial estimates were, by the custom of that time, related only to development up to production of a prototype.

I should like to say a word or two on this matter from the point of view of the Treasury. The Committee outlines the financial history of three guided weapon developments, and the main faults that the Committee finds with the whole history of the development can be reduced to two. First, the original estimate was so far from reality as to be useless for purposes of financial control, and, secondly, the Minister's control over firms was not as complete as it ought to have been. The Public Accounts Committee comments, in general, that control in the past was seriously inadequate.

I think one can say that the Treasury reply does two things. First—and here I refer to a paragraph on page 7 of the Special Report of the Public Accounts Committee—it accepts that the financial management of guided weapon development projects was deficient during the first decade, and it also points out that this field must be a difficult one in which to forecast costs accurately.

Let me explain that point in a little more detail. The arrangements between what used to be the Ministry of Supply—now the Ministry of Aviation—and the Treasury for the control of guided weapon expenditure have, I believe, been considerably improved during the last year or two. Until a year or two ago, what happened was this. The Ministry of Supply, having obtained Treasury authority to undertake the development of a guided weapon at an estimated total cost of, say £X million, would then, as part of the ordinary estimate scrutiny, notify the Treasury each year of the latest estimate and the total cost of the project; but it did not need to obtain Treasury approval before continuing this project even if the estimated cost increased.

The right hon. Member for Huyton, in his Guardian article and in his speech today, put his finger, quite rightly, on the whole trouble. When the Government are spending money on, it may be, a battleship or a school, there is something identifiable to show for the money when the project is completed. The trouble about our old system, however, was that at the end of each year there was nothing to show for the money except, as the right hon. Gentleman fairly said, a chit that so much money had been spent. It is clear from paragraph 44 of the Report of the Public Accounts Committee that this system has to some extent now been changed. Indeed, it was in process of being changed even before the Committee began its investigations.

What happens nowadays is this. A Treasury authority for development is tied to the estimated cost of the work, and as soon as that cost rises by either 10 per cent. or by £1 million, whichever is the lesser, fresh authority has to be sought. In that event, the Treasury normally requires all the Departments concerned to conduct a thorough review of the total cost involved—that is to say, not only the cost of the development but also the cost of production and deployment.

What the Ministry of Aviation is now trying to do is to make sure about each step before going on to the next step. This starts with a precise definition of objectives, and the process goes on through feasibility studies and a fuller scale design study, from which emerges a detailed costing programme for the whole development. The Treasury, in other words, requires all the Departments to conduct a thorough review of the total cost involved, and to consider at, perhaps, Ministerial level, in the light of the current assessment, the importance of the operational requirement which the weapon is designed to fulfil, in order to establish whether this increased expenditure is justified by the military need under current economic conditions. That, I believe, is the right way to proceed.

We are here dealing with a sector in which the Government are themselves making direct claims on scarce economic resources. It is absolutely right at each stage of the operation to see whether this claim on scarce resources is justified. I am sure that in Government, as in business, there are times when it must be right, as it were, to cut a loss and not to go on with a project which both costs greatly more money than originally was expected and which is not justifying the scarce economic resources which it is using up.

Sir H. Legge-Bourke

My hon. Friend is speaking very fast and I am trying to take in as well as I can what he is saying. May I have an assurance that we shall not revert to what happened all too often before the war—that is, that the Treasury will now have the power to reverse a decision taken by the Defence Committee of the Cabinet?

Sir E. Boyle

What I said was that the Treasury will require all the Departments concerned to conduct a thorough review. These matters must be important Ministerial decisions. There is no question at all of the Treasury coming in as a sort of grand joker in our economic system and cancelling out decisions taken by Ministerial authority. It must be a Ministerial decision whether a certain project is proceeded with.

I was a little worried at my hon. Friend's remarks earlier this afternoon when he came close to saying either that we do not go in for the guided missile field at all or that we must simply give a blank cheque for whatever expenditure is needed. That is too pessimistic a view. It may be perfectly right to embark on a project and to develop to a certain stage and then, perhaps, to discover in the course of development that the project is costing considerably more than was expected, not simply in terms of money but also an unjustifiable amount in terms of the scarce resources which it is using up.

In parallel with the question of Treasury control, the Ministry of Aviation has itself thoroughly reviewed and, I believe, improved its own internal procedures as well as its procedures for controlling expenditure by contractors. All of these improvements, coupled with the accumulated experience of ten years in what must be regarded as a novel and difficult field, ought to mean more satisfactory control in the future. At the same time, we must recognise that probably the basic form of Treasury control—that is to say, measuring performance against estimate—can never be 100 per cent. effective in this sort of work.

I agree with the right hon. Member for Huyton. We are dealing with a completely new field and it is no good pretending that our methods here can be exactly as successful as those dealing with a simple and identifiable project. Development is an extended process of invention which involves the examination of technical problems and experiments to find means of solving them. By its very nature, development means moving all the time into unknown or into only partly-known territory.

Both my right hon. and learned Friend the Chancellor of the Exchequer and I have served together at the Ministry of Supply. I well recall the White Paper published at that period in which we said that development in this field might be described as all the time creating new scientific capital. That is a fair way of putting it. Any estimate of the cost of work of this kind is, of course, liable to error, as the Committee's Report makes clear. By the increased use of preliminary design studies and very careful administration, I hope that we have improved estimates techniques, but there must always be an element of uncertainty. Both the Ministry and the Treasury will have to be alert to seek new ways of ensuring that rising costs are known as soon as possible, and that the utility of the end product is repeatedly measured against the resources which will be needed to get it into the hands of those who will use it operationally.

I should like to say a word to those hon. Members who have talked about technical advice. I am not sure that sound administration in this field is simply a matter of getting more technical experts. Those of us who are concerned at all in this field, whether as officials or as Ministers, need some degree of familiarity with technical questions. I have always believed that the best adviser to a Government was somebody who had at least a sufficient amount of technical knowledge of his own subject, coupled with sound judgment and other qualities that are needed for any job in Government. Perhaps the same goes for Ministers, too. I am not, however, necessarily convinced that the best advisers will be those who are trained as technical experts.

The right hon. Member for Huyton asked a question about the Zuckerman Committee and one or two hon. Members asked about the Plowden Committee. The Zuckerman Committee hopes to report before the end of March, that is to say, before Easter. The question of whether its report should be published must be a matter for consideration when the report has been received. The initial public announcement of the report must be a matter for my noble Friend the Minister for Science as the Minister who set up the Committee. In any event, I am certain that when the Committee's report has been completed it will help to reinforce the measures already taken to improve control of expenditure on defence research and development and to ensure getting the best possible value for money.

Concerning the Plowden report, I can only repeat what my right hon. Friend the Home Secretary said in October when he told the House that the work of this Committee is continuing, and it remains the Government's intention to announce to the House in due course their conclusions based upon the advice contained in the Plowden Committee's Report. My right hon. Friend went on to say: I am not yet, however, in a position to give any indication when this might be or to indicate what bearing the fruits of the Committee's deliberations might have on the subject now before the House."—[OFFICIAL REPORT, 25th October, 1960; Vol. 627, c. 2259.] The hon. Member for Edinburgh, Leith (Mr. Hoy) asked about the Treasury minute on the Third Report of the Public Accounts Committee concerning the Independent Television Authority accounts. The Report notes the Treasury's explanation why we did not express any views on the dispute between the Committee and the I.T.A. I simply repeat the assurance which we have given that the Government will take the Committee's previous Report into account when considering what to do in this regard on the expiry of the Television Act in 1964. After all, we now have a high level Committee studying the whole subject, and the Committee's recommendations will be taken into account.

In my concluding few moments, I want to say a few words about the relationship in financial matters between Departments and the Treasury because this seems very relevant to the work of the Public Accounts Committee. I think the time has long passed since finance and economy could be regarded as exclusively the concern of the Treasury. It must surely be a cardinal point of administration that policy and finance at all levels and at all stages cannot be separated into watertight compartments.

I believe, indeed, that nowadays as between Departments and the Treasury, the emphasis ought to be on co-operation in securing value for money and the right balance of expenditure between the various objectives of policy. There are times when the Treasury has to say to a Department "No, the money is not available," and, in answer to my hon. and gallant Friend the Member for the Isle of Ely (Sir H. Legge-Bourke) it is then for the Government corporately to make a decision on the issues at stake. I would say that what cannot be right is for Departments to pledge themselves to increased expenditure without Treasury approval and without Ministers having considered the matter. Any important matter involving Government expenditure must be a corporate Ministerial decision.

So far as is possible, the Treasury hopes to carry Departments along, even in less welcome decisions. Given the great and continuing pressure on resources, not only by the Government but by all the components of demand in our economy, it is all the more important that the Government should get the best possible value from the money they are spending. From this point of view, I believe that in the long run the interest of the Departments, the Treasury, the Committee of Public Accounts and this House is really identical.

Mr. H. Wilson

In order that the House may now proceed to debate the Report of the Select Committee on Estimates, without expressing an opinion one way or the other about the adequacy of the hon. Gentleman's reply, which will obviously have to be examined further, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Main Question again proposed.