PROPERTY SERVICES AGENCY

HC Deb 20 March 1974 vol 870 cc1042-54

3.53 p.m.

Mr. Robert Taylor (Croydon, North-West)

I am grateful for the opportunity to open the debate upon the Consolidated Fund Bill, particularly because I want to draw the attention of all hon. Members to the enormous increase in expenditure which has been occasioned by the Property Services Agency, which comes under Class VI, 5 of the Supplementary Estimates.

Before going into the detail of the increase in expenditure it would be correct for me to declare what might be regarded, in some quarters of the House, as an interest, because I am a director of a firm in the building supplies industry. Like all firms in the industry, much of its business emanates from the Property Services Agency. However, in view of the fact that my objectives in raising the matter are critical, and that I intend to delve into expenditure, I hope that all hon. Members will acquit me of any improper motive.

When looking at the expenses of the Property Services Agency we are not talking of insignificant funds; indeed, we are discussing very large amounts. These Supplementary Estimates call for a further £8,160,000 in addition to the Vote earlier in the year. Although the sum of £8 million goes to additional salaries and expenses, a further £160,000 is expenditure already incurred on furniture, equipment and other supplies. If we add these two Supplementary Estimates to the original Estimates of £56,992,000 for salaries and another £4,832,000 for furniture and fittings we find that the expenses for the current year of the Property Services Agency are only £16,000 short of a total of £70 million.

The Property Services Agency was set up, so far as the House is aware, only on 5th May 1972, when it was announced by my right hon. Friend the Leader of the Opposition, in his then capacity as Prime Minister, by way of a Written Answer to a Question from my hon. Friend the Member for Devizes (Mr. Morrison).

In view of the expenditure involved hindsight might suggest that it would have been preferable for the House if the announcement had been made in a manner which would have enabled us to have had a debate on the subject, or alternatively, through an announcement which could have been open to oral questioning.

In the Written Answer my right hon. Friend set out clearly the purposes for which the Property Services Agency had been set up. I shall quote from the answer in column 217 of HANSARD for 5th May. The then Prime Minister stated that it had been decided: to establish a Property Services Agency, forming an integral part of the Department of the Environment, for the provision to other Government Departments of property management services, building construction and maintenance, and the appropriate supplies. He further stated: It is intended that wherever possible units of accountable management will be introduced."—[OFFCIAL REPORT, 5th May 1972; Vol. 836, c. 217.] It is my belief that that Written Answer raises some questions which should be brought forward, having regard to this additional money which we shall have to vote to the Consolidated Fund tonight. First, if the principal purpose was to relieve other Departments of certain costs, which Votes of the Consolidated Fund show a reduction to compensate for the £70 million worth of expenditure which has been incurred by the Property Services Agency? Secondly, have any units of accountable management been introduced, and, if so, how many of these units are represented in the total of £70 million worth of expenditure; who has seen the accounts; and are they available to hon. Members?

Thirdly, how was it possible to underestimate only nine months ago by the sum of £8 million the salaries required by the Property Services Agency and at the same time to overestimate by £1,400,000 the amount forthcoming for other Departments for work done by the agency—in other words to underestimate on the expenses by £8 million and to overestimate on the work expected to be done by as much as £1,400,000? That £1,400,000 represents fees that should have been paid to the agency by other Departments.

Fourthly, how is it that we are expected to approve in the Estimates an increase of no less than 50 per cent. under the heading of "Travelling, etc"? This increase of 50 per cent. is since the original Estimate was prepared for the Consolidated Fund Bill earlier in the financial year.

I note that the Supplementary Estimates state that this additional travelling expenditure relates to underestimation of travelling expenses on transfer from Class VI, 20, but that class and subsection relate to research and, as far as I know, no research establishments have been transferred or moved to different locations. Therefore, that particular footnote to the accounts seems to be inexplicable.

Fifthly, I have difficulty in understanding a certain part of the accounts. On page 205 of the Supplementary Estimates we read that there is a reduction in the surplus that was expected on receipts from the provision of supplies at scale charges. The new figure is £11 million instead of the previous £12,490,000. The economic classification says that current expenditure on goods and services amounts to £1,650,000, and from that is deducted the surplus appropriations which I have just mentioned. If the surplus was less than originally budgeted for, it seems to me that the difference in the figures should not be deducted but should be added to obtain the true figure of expenditure on those goods and services. In other words, under the section head "Economic Classification", instead of there being a balance of £160,000, the two figures should be added, instead of one being subtracted from the other, and the true expenditure should be £3,140,000.

Unless we have careful control over the agency the expenditure is likely to increase at a substantial rate year by year, and I do not expect to sec any reduction in the votes of other Departments. I believe that the intention to create a super-agency of this nature was completely misguided. I am open to persuasion otherwise, but it is my view that if the agency continues on its present lines it will consume a greater and greater amount of available resources of manpower and accommodation—the agency occupies many offices in London—and of revenue which could be used by the Exchequer in other directions.

I hope that the Minister will be able to reassure me that the matter will be carefully examined and kept under careful control, and that he will give an explanation of the matters I have raised.

4.2 p.m.

Mr. Michael Latham (Melton)

I support what my hon. Friend the Member for Croydon, North-West (Mr. Taylor) has said. I do so in no spirit of criticism of the Property Services Agency. There was an element of criticism in my hon. Friend's speech with which I do not entirely wish to associate myself. I agree with the decision of my right hon. Friend the then Prime Minister to set up the agency in the last Parliament. The agency and the Department of the Environment are well served by as fine a public servant as one could wish in Mr. Cuckney as head of the agency, and the agency has a good future before it. I was glad to see a rationalisation of many of the property activities of the Department.

But my hon. Friend has done a service in raising certain matters which I hope the Minister will clarify. There is no doubt that the agency is a very powerful and large organisation within the building industry. Here I repeat the declaration of interest I made in my maiden speech 10 days ago. I am a consultant in the building industry.

I believe that the agency employs about 66,000 staff. The contracts it places runs into thousands of millions of pounds. Therefore, a proper scrutiny of its work by the House is clearly desirable.

I should like assurances on three points, the first concerning accountable management. I have never been satisfied with the explanations I have heard of how that is to be achieved. One of my ideas about accountable management is that those concerned should have the right to hire and fire, subject to the normal procedures and consultation. It is not clear to me how accountable management in that sense can be achieved within what is basically a Civil Service body.

Secondly, I should like an assurance that there can be no question of the agency's going into the contracting busi- ness. Its relationship to the industry has always been to let out work on a proper contractual basis to building firms. I hope that that will continue, and that there will be no question of setting up a Department direct labour force to carry out new construction. The Department does maintenance work on airports, and that is not criticised, but I hope that there is no question of a direct labour force for new construction being set up by the agency.

My third point concerns the agency's tendering policy. The industry made its views clear to the previous Government, which announced a major concession on firm price tendering. The industry had asked that the previous two-year restriction on firm price tendering should be lifted and that clients in the public sector should be allowed one year of firm price tendering, subject to certain clauses outlined by the National Economic Development Council. I hope that that will continue to be the agency's policy, because a two-year firm price tendering policy in the present climate of the building industry is unsatisfactory. I hope that the Minister will assure us that the agency will operate only a 12-month system, subject to the break clauses outlined by the National Economic Development Council.

Mr. Speaker

Mr. Oakes. [Interruption.] If the hon. Member for Stroud (Mr. Kershaw) wishes to intervene, it will be more convenient if he speaks before the Minister, but I cannot call hon. Members unless they rise.

4.6 p.m.

Mr. Anthony Kershaw (Stroud)

I am obliged to you for calling me, Mr. Speaker. I had thought that so many hon. Members would rise that I did not have to hurry.

While the House is debating the subject of the Property Services Agency, I should like to draw attention to the position of embassies abroad. The agency is to a large extent responsible for those embassies, and I am not sure that the system has yet settled down in the best possible way. To begin with, it must be agreed that the agency, at any rate in its activities abroad, is not, and cannot be, a commercial undertaking. There can be no buying, selling or renting of property on a basis which could give an income. Provision of embassies is something which the country must afford its representation abroad, and to call it a commercial matter is not realistic.

We can be represented abroad either more or less expensively. In the past there has been a great bias in favour of renting. The Treasury—and few Governments have the guts to say "Boo" to the Treasury—obviously wishes to rent, because the expenditure in any one year is much less, and, therefore, the figures look better. However, it is clear that in an age of inflation it is not very sensible to rent when one can buy. The agency now tends to go towards purchase rather than renting of the foreign properties which we have to use. That is a good thing. I hope that the Minister, in deciding what should be done about our proper representation abroad, will have a bias in favour of buying, and, if necessary, selling the property again if it is not in the correct place or is not of the correct size or quality. In the long term that must be much better.

It has been clear to almost everyone for a long time that in central London there is a big difference between the prices which we pay for rented Government accommodation and the prices at which we could buy and build such accommodation. Until very recently our insistence on renting at enormous rents—£12 per square foot and so on—when there was the possibility of building in central London at about a third of that amount was almost a public scandal. I presume that, by its very name, the Property Services Agency will tend towards buying rather than renting. I think that that is a good thing and that the Minister should urge the agency in that direction, and especially abroad where inflation in many places is more serious than here.

In a minor way there are quite a lot of irritants to our diplomats who serve abroad in accommodations which are bought or hired. The responsibility for decoration is, so to speak, a mixed one. The PSA pays and the ambassador, or whoever it may be in the post abroad, chooses. Often there is a large lack of liaison between what the ambassador, the ambassador's wife or the commander-in-chief's wife wants and what the PSA thinks that they should have. Difficulty arises not necessarily over cost but on a question of taste.

It has often been found in the past that the rule that the equipment in a house or the furniture and the furnishings shall be sent out from this country has been unreasonably expensive. It is difficult to send back from Central America the exact specification of a curtain or a lampshade. It is difficult to avoid mistakes being made. It is galling for people abroad when things do not arrive on time and when sometimes they do not arrive at all.

In the course of my peregrinations as a Minister around South America I came across a number of instances where such difficulties had been very trying for the people in posts abroad. For example, the second man in our embassy in a certain country had had not a stick of furniture in his house for three months. The only way in which he had been able to live was by the ambassador loaning him half his furniture. Such difficulties arise when sending furniture and equipment such a long way. It is not as if they were being sent from just around the corner.

I do not believe that liaison has been all that we could have achieved. There are two ways in which it could be improved. First, somebody from this country who is sent abroad on his country's service should be able to go across the river to see the headquarters of the PSA. He should be able to meet the person who will be responsible for furnishing the embassy or whatever the building may be. Such people should be able to liaise with those in this country who will make such arrangements. I hope that the agency will extend an invitation to those who have been posted abroad to make such liaison before they leave. They should try to get to know each other personally.

Second, it would be much to the advantage of the country if the visits from agency assistants to embassies in places abroad could be more frequent and made by more senior staff. There have been reported to me occasions when those who have been able to go out—no doubt they have been worthy young gentlemen but they have been in their early 20s—have had no apparent qualification for furnishing large embassies and like buildings. I dare say that the Minister is constantly doing that sort of thing but most of us do not furnish palaces in our normal course of life. It is not to be expected that a young fellow in the Civil Service, who has joined following a very good examination from some dark university like Cambridge or some such hopeless place—

Mr. Michael Latham

Disgraceful!

Mr. Kershaw

—could possibly know how best to furnish the first floor of an embassy. That is not something, with respect, that you, Mr. Speaker, or I come across all the time. It might be desirable that those who go out from the PSA should be senior staff. They should be experienced in the matters which I have described. They should be able to compare one embassy with another. They should be able to compare one commander-in-chief's house and one secretary's house with another. They should know the sort of things which are expected and which are appropriate and those which will last.

It seems that in these matters too little is left to local initiative. It is very difficult from SE1 to decide what sort of lampshades are suitable in Panama City. It is invariably found when such goods arrive at the other end that they are unsuitable because they are good food for maggots, ants and other things which flourish in that part of the world, or that they are the wrong shape or in some way unsatisfactory. Such fittings are expensive to send and they take a great deal of time to arrive at their destination. As shipping by sea becomes more and more difficult it becomes increasingly difficult to ensure that they arrive when they are wanted.

Electrical apparatus is often different in different parts of the world. It is idle for the PSA to insist that stoves, or whatever it may be, shall be of a certain quality. Such goods may be well known in Lambeth but not in Costa Rica. I hope that a larger measure of local expenditure will be allowed to local people. I believe that the PSA is a sensible way of setting about these matters, but undoubtedly the frustrations caused to those who are on the receiving end abroad are fairly great.

It is a fact which perhaps we forget in the United Kingdom that those who serve in the Armed Forces or the diplomatic service have sometimes, by the end of their married life, been in over 30 houses. During their career the first year in any house has probably been occupied in some kind of refurnishing or refurbishing. When such matters are in hand the people abroad must be in communication with the PSA, as it now is, all the time. These matters loom very large indeed.

I believe that the efficiency of the PSA and the general liaison between it and our representatives abroad can contribute considerably to the way in which our people abroad discharge their responsibilities and the way in which they are regarded. I hope that the Minister, during the course of his term of office, which I hope will be a long one personally but a short one politically, will be able to visit some of our accommodations abroad. It is important for him to see the way in which these important things are done. I am sure he will realise how well we do them on the whole. However, there are gaps which I hope he will be able to fill.

4.19 p.m.

The Under-Secretary of State for the Environment (Mr. Gordon Oakes)

The House is indebted to the hon. Member for Croydon, North-West (Mr. Taylor) for raising this important matter. I agree with him and his hon. Friends that it is not, and has not been, sufficiently debated in the House, given the considerable amount of expenditure over which it has control and its importance in the whole of the Government's property services.

The hon. Member criticised the way in which the announcement of this important department was made on 5th May 1972. The Government do not bear responsibility for that. The announcement was made in a Written Answer and on a Friday morning to boot. That is how the birth of the Property Services Agency was announced. The then Prime Minister, the present Leader of the Opposition, used a phrase which two Members have used today—namely, It is intended that wherever possible units of accountable management will be introduced."—[OFFICIAL REPORT, 5th May 1972; Vol. 836, c. 217.] So far as practicable that has been done by the Property Services Agency. The main progress has been made in the supplies division. A computerised management accounting system is now being prepared as part of the process leading to the eventual provision of a trading fund. I understand that Opposition hon. Members are very much in favour of such a fund.

No other self-contained units of accountable management have been set up within the PSA but a good deal has been done to improve management accountability generally. The definition of aims and objectives for the various directorates and the introduction of a computerised staff costing system whereby the resource costs involved in designing new works projects may be compared with budgets based on outside professional fee scales are examples of what is being done to procure wherever possible the introduction of units of accountable management.

The hon. Member said that the PSA management could not hire or fire civil servants. That is true, but accountable management achieved by better management methods makes the managers concerned far more aware of their costs.

There is no intention that the PSA will go in for new works contracting. No changes are envisaged on the question of firm price tendering.

Mr. Michael Latham

Before the Minister leaves the question of accountable management, will he say a little more about a likely date of introduction of the trading fund?

Mr. Oakes

That relates only to the supply division of the PSA, not to the agency generally. I do not know at this stage. That will be a matter for my right hon. Friend to act on by Order in Council under the Trading Funds Act. I do not know whether it is his intention to do so or when lie would intend to do it, but if my right lion. Friend expresses any intention in the matter I shall ensure that the hon. Member is made aware of it by letter in advance.

The hon. Member for Croydon, North-West said at the outset that he was seeking to draw attention to the enormous increase in expenditure by the PSA. Unfortunately at the present time there are large increases in expenditure in all matters and they arise mainly from the rise in the cost of land and building. The various increases are not peculiar to the PSA but have had to be met by all local government and by the country generally over the last year or two. That period covers the entire existence of the agency, which came into being on 5th May 1972.

There are obvious advantages of scale in allowing central provision to be made, in the form of the PSA, of Government accommodation needs, especially in matters covered by the supplies division where bulk contracts can be placed by the agency. There has been no attack today on the principle of the PSA. It was not expected that savings would suddenly show up in the Votes, because these services were previously provided on a central basis by the Ministry of Public Building and Works. We cannot expect, therefore, to see a dramatic saving in the Vote in so short a period.

The hon. Member for Croydon, North-West asked about the figure of £8 million and I believe I can give a most satisfactory explanation about it. Of the £8 million, £4.3 million reflects the stage 2 pay award for PSA staff. That was an inevitable payment for the agency to have to face and it accounts for more than half of the figure about which the hon. Member is complaining. In addition increased consultants' fees accounted for £2 million. As the hon. Member will know from his experience of the industry, a consultant is paid largely on the costs of the building and the construction. If those costs rise, as they have risen over the last year. the consultancy fees automatically rise too. There is a much smaller sum of £700,000 for increased agency payments, for example, to drawing office staff and for ancillary professional work of that kind.

The hon. Member was most concerned about the shortfall in receipts, estimated at £1 million. It arose largely because the PSA does quite a lot of work for the Post Office, although the Post Office is now a separate body and is not a Government Department. Because of the vagaries of the building, industry, of which the hon. Member will be aware, a lot of work which it was expected would be done was not done because of shortage of labour and materials. This shortfall of £1 million in about £25 million was not bad estimating, simply bad luck. The work was not carried out—not through negligence on the part of the PSA but through difficulties of supply in the building industry.

The hon. Member also asked about the supply division. That is a much narrower point. He said that within the division there was an underestimate of £245,000 in the general administration expenses. This comes under Class VI Vote 6 Subhead B. It relates not to salaries but to general administration expenses such as travelling expenses, postal charges, telephone charges and even office cleaning. They all go under the general head. It is. therefore, a matter not of overspending but of underestimating by the agency. This year is the first time that Subhead B has appeared under this Vote as a separate item and it is the first time that separate accounts were done for Vote purposes in this way. The underestimate was made and revealed itself only during the course of the year, which explains the Supplementary Estimate dealing with this narrow point.

The hon. Member for Stroud (Mr. Kershaw) raised an interesting point about the work of the PSA in connection with properties not only in Britain but abroad. The latter is not basically my responsibility. It is much more a matter for the Foreign Office. But my Department is the central Department for the PSA and as such is answerable for it in the House. The hon. Member said that he hoped that during the course of my Ministerial existence I might have the advantage of seeing some of the work of the PSA abroad. I hope that he is right, but I am sure that he is not. Most of the work of the Department, alas, concerns much more mundane and domestic matters than travel abroad. Nevertheless, it is something I would be delighted to look into.

Mr. Kershaw

I can assure the Minister that if he were to take a personal interest in this matter it would be very much appreciated by the members of the Foreign Office. As he says, his Department is answerable in the House on matters concerning the PSA, but it may be more desirable for a ministerial eye to be cast over the agency's work, and I can recommend the Seychelles in the spring.

Mr. Oakes

I was in Mauritius in the autumn and that was delightful. I passed over the Seychelles on the flight.

The hon. Gentleman referred to accommodation overseas. I entirely agree—and so does the agency—that it is far better to purchase than to rent wherever possible, but that must be subject to vary- ing circumstances in different parts of the world and to the overall restraints on public expenditure at any given time. The hon. Gentleman will be interested in the aspect of the work of the PSA concerned with diplomatic buildings. The agency is negotiating a site in Kensington Palace Gardens for the Russian Embassy. Likewise, the authorities in Moscow are making provision for a site for the British Embassy because they wish it to be sited in a different place. Negotiations are going on for the sites but each country will be responsible for building the embassy when the site is obtained.

I understand that close liaison exists between the agency and the Foreign Office to ensure that the wrong furniture is not sent to an embassy. Mistakes may occur from time to time but these, we hope, will be eradicated by the present close liaison and possibly even closer liaison in the future.

The amount of discretion allowed for local purchases to be made has been considerably increased. This means that there does not need to be a reference back to London on items which are minor and perhaps trivial from a cost point of view but are important for the comfort of diplomatic residencies abroad. There is now much greater scope for local provision.

I think that I have answered most of the questions that have been asked. I welcome the opportunity——

Mr. Michael Latham

Will the hon. Gentleman comment on the firm price tendering point I raised and the PSA's attitude to it? Alternatively, he may prefer to write to me about it.

Mr. Oakes

I mentioned that no change was envisaged at present on firm price tendering. I understand the hon. Gentleman's argument about the vagaries of the present situation. I will go into it with the Department and write to him. At present no change is envisaged.

Although the debate has ranged a little wider than Class VI, Vote 6, Subhead B, I make no apology because it is important that the House should have the opportunity given by the initiative of the hon. Member for Croydon, North-West to debate the PSA, which serves the country well and saves the taxpayer quite a lot of money.