PUBLIC ACCOUNTS

HC Deb 13 January 1975 vol 884 cc49-107

4.26 p.m.

Mr. Edward du Cann (Taunton)

I beg to move, That this House takes note of the First, Second, Third and Fourth Reports from the Committee of Public Accounts in the last Session of the last Parliament and of the Treasury Minutes and Northern Ireland Memorandum on those Reports (Command Papers Nos. 5786 and 5823). Before I comment in detail on the work of the Public Accounts Committee in the last Parliament, I wish to discharge two other happy duties. First, may I pay a tribute to those who have helped the Committee to do its work, namely the Clerk, who has been its most willing servant, the Treasury Officer of Accounts, Mr. McKean, and the Comptroller and Auditor General's immediate colleagues and staff in the Exchequer and Audit Department, those unseen and, I would say, invaluable watchdogs of the public purpose, whose conscientiousness is as deep as its effect, and, not least, Sir David Pitblado, an old friend from Treasury days, and in Washington, who is a most devoted public servant, whose career has been one of continuous distinction and who is now a great servant of this House.

Second, I thank the members of the Committee in the last Parliament for their personal support and hard work, not least for their ready attendance at the sessions of the Committee.

It is always difficult for members of the Committee, a number of whom I am pleased to see in the Chamber this afternoon, to carry out all the duties required of a Member of Parliament in these onerous days, when the Committee is carrying out so much work and is meeting in so many sessions. The constant support of the members of the Committee was a great encouragement. Perhaps I might congratulate them on the penetrating analysis of their cross-examination, which was never carried out at too great a length.

Those tributes are no mere politeness. The Committee worked under a severe handicap. Due to the General Election in February last, the Committee was not appointed until half-way through April, and we did not hold our first deliberative meeting until 6th May. That meant that time for its detailed researches was extremely limited. Difficulties continued, for, though the report was agreed on 24th July, it was not printed until last December with its ancillary papers. That is the reason this motion was not moved, as is customary, of course, before Christmas. I hope the House will feel that the Committee achieved a very great deal in a very little time. How well it acquitted itself as to the quality of its work, right hon. and hon. Gentlemen will be able to judge for themselves.

I need hardly say that the Committee has carried out its work in an entirely non-party spirit. Perhaps I might remind the House of the rôle of the Public Accounts Committee as it has developed in the 113 years of its existence. As historians in this House will recall, the Committee played a major part in the 19th century in assisting and stimulating the establishment of accounting regularity and making sure that public funds were spent only for the purposes for which they had been granted by Parliament. That remains a primary duty of the Committee, but happily we do not have to spend much time upon it, because serious lapses now are rare. The knowledge that if they occurred they would be brought before the Committee perhaps fortifies the sound practices which have for so long been established in the public service under the guidance of the Treasury.

For many years, therefore, the Committee has been able to devote its time to wider aspects of economy and efficiency, dealing with such questions as the elimination of waste and extravagance, with the development of sound systems of estimating and contracting and with improvements in financial administration. In short, the Public Accounts Committee looks to see whether Departments obtain value for the taxpayers' money.

At all times, the Committee must adopt a critical attitude. But I hope that it is true to say that its members consistently aim to be constructive. I hope that we shall always be fair, never pernickety, ever ready to take a broad view, stern when there have been lapses or foolishnesses, yet supporters of innovation, encouraging of modern techniques for accounting, with perhaps an adventurous outlook in their adoption, and certainly supporters of flexibility of management. I should never wish to hear it said in this House or outside it that the Public Accounts Committee did anything other than endorse the most competent and modern administrative methods.

I have said a few words about the history of the Committee for a special reason. In my view, it is time to reappraise the system of financial control exercised by the House of Commons. However, first I wish to come to the details of our work in the last Parliament.

Our First Report, as usual, was on excess expenditure, some cases of which inevitably arise every year. We recorded that we saw no objections to the sums needed being provided by excess Votes, and the House of Commons subsequently voted those sums.

Two of our Reports, the Second and the Fourth, dealt with Northern Ireland accounts, to which I shall refer in a moment.

I turn now and mainly to the Third Report of the Committee of last Session, because that is our chief report. That is based, as usual, upon the examination of witnesses on subjects set out in the Reports of the Comptroller and Auditor General on the 1972–73 accounts.

First, I draw attention to our passages on the Industry Act. Right hon. and hon. Members will find them in paragraphs 41 to 44 in the Third Report. The control of Government assistance to industry has been a subject considered in specific instances by several previous Committees. The Committee of Session 1973–74, under the chairmanship of the present Paymaster-General—and we are delighted to see the right hon. Gentleman in attendance—had started an early and thorough examination of the administration of the various forms of Government financial assistance to industry under the 1972 Act. When Parliament was dissolved in February last year, the Committee was examining the then Department of Trade and Industry on the basis of a memorandum prepared at the Committee's request by the Comptroller and Auditor General on the measures being taken to provide effective control. The evidence was referred to us, and we completed that examination, though in the knowledge that there might be some alterations in policy resulting from the change of Government.

As we said in paragraph 44 of the Third Report, we were pleased to find that the Department had made considerable efforts to establish a sound framework of financial control. This is a matter which has attracted some notice, and perhaps I might draw the attention of those interested in the subject to the memorandum and the papers given by the Department which are published with the evidence and with our report.

The story cannot be allowed to end there. Huge sums of public money are now involved in support to industry, and, with the agreement of the Committee, we shall need to return at once both to the subject in general in order to establish the principles upon which assistance is being afforded and to specific cases as they occur. In the light of current public comment on this scene, I have no doubt that the House will expect this promptness of the Committee which the House has just reappointed.

A study of the contents table shows how wide a range of subjects was examined. There were 27 in all. To enable the House better to follow the broadest aspects of our work of surveillance, I have grouped them under five separate heads.

First, we looked at the arrangements for control of large projects such as the RB211 aero engine, where about £170 million of public money is involved. Also under this head is the multi-rôle combat aircraft, where sums amounting to many times that amount will be spent on research, on development and presumably on production.

Under a second chapter head, we considered the various systems of financial control exercised by the Government. There was the Industry Act 1972, to which I have referred, and I do so again deliberately as it is so important. Then there were other matters such as the Farm Capital Grant Scheme.

As my third example, I select the Forestry Commission, which has now produced a new form of accounts. We thought it proper to examine these in some depth, and what we had to say about the subject is recorded. To express a personal view, although I believe that the Forestry Commission does much good work, I feel that it is time that this House looked carefully at what I regard as the open-ended commitment which the Forestry Commission is allowed for the continuous acquisition of land for forestry in the United Kingdom.

We come, fourth, to cases where proper financial control and methods should be reaffirmed. We looked, for instance, at inventory control in museums and for stocktaking of Government stores. It is surprising how much money is represented in the aggregate.

Then there were cases where matters had gone wrong. One which struck the Committee was where some ocean tugs were to be constructed by the Royal Navy. Instead of the project taking two years, it took four, and the amount of additional money required, due to poor systems of control, which I am pleased to say that the Admiralty now proposes to revise, amounted to £700,000.

Those are the chapter five heads covering the chief matters into which we inquired. There were many others of importance on some of which we had no need to report.

I move to some of the subjects of inquiry into which I wish to go in detail, where there are significant lessons to be learned in the modern context. First, I take one under the head of major projects. Looking into major projects in which the Government engage is an important aspect of the Committee's work. Last year, we took evidence for the first time on the proposals for the construction of a Thames barrier as a protection against tidal flooding. We were concerned to learn that this showed a pattern of large escalating estimates of costs. The first estimate was £100 million. That became £168 million. The latest estimate was no less than £250 million, at December 1973 prices. So often in the past Committees have seen this sort of situation and how important decisions on the type and siting of the barrier, in this case, have been made on too tentative a cost estimate in the first instance. That was why, in paragraph 107, we said: We do not underestimate the difficulties of estimating for a project of this nature, but we consider that realistic estimates of costs should be available when such important decisions are taken. I am sure that all my colleagues on the PAC will agree about the imperative need for realistic estimates of costs before decisions involving hundred of millions of pounds are taken. It is surely all the more necessary in present conditions where unjustified increases in costs through lack of control can be masked by those flowing inevitably from inflation. In an inflationary situation it is all the more important that Government Departments, Ministers, and this House do not approve projects unless they are certain that realistic estimates of costs have been made in the first instance.

Another important review by the Committee was its study in depth of projects for the manufacture of the MRCA, to which I have already referred, in collaboration with the Governments of Italy and the Federal Republic of Germany, and for the manufacture of three types of helicopter in collaboration with the French Government. The House will be aware of my particular if non-commercial interest in the helicopter industry. Estimates of the cost of United Kingdom participation in both projects have substantially increased for a variety of reasons. Among them were reductions in the orders of the participating countries and changes in exchange rates.

I am raising and bringing this matter especially to the notice of the House of Commons because I think it is of significance in the context of our membership of the EEC. We saw the undoubted political and defence advantages springing from the collaboration that I have described and the financial advantages to be gained from sharing development costs with others and increasing production runs. But we drew attention to the problems that can arise when one partner changes his requirements during the course of expensive development and to the administrative problems raised by cost and work-sharing arrangements against a background of differing national levels of cost and industrial productivity.

According to the Treasury Minute, both the Treasury and the Ministry of Defence are alert to these problems, but I have little doubt that a future Public Accounts Committee will wish to examine further the procedure to deal with them. Collaboration with other countries may be important—some may argue that it is vital—but I suggest that in no case will it ever be more vital than good financial common sense and control. It is easy to visualise situations where, for idealistic reasons thought to be practical, this country, in collaboration with others, embarks upon a project the nature of which, in the natural order of time, changes, involving vast increases in cost, but, because the project has been begun, people feel that, for political reasons, it is impossible to vary it. I sound a note of warning in this regard.

Mr. Tam Dalyell (West Lothian)

Last summer some of us went to Panavia in Munich. We were given a categorical assurance by Mr. Madelung and his Panavia colleagues that the collaboration did not in itself raise the unit cost of the MRCA but that a reduction in orders certainly did. Is the right hon. Gentleman denying that?

Mr. du Cann

There is no "Yes" or "No" answer to that question. We can strike a balance sheet of advantage and disadvantage. Clearly it is easy to begin these projects for reasons of good will, reasons which are wholly political, and to continue them irrespective of changes which occur in partnership, design, and so on, en route and to pay too little attention to the cost as a result. The answer to the hon. Gentleman's question may be "Yes", but I should not like to be categorical, because something can be said on the other side. It is possible to argue that with a long run, for example, production costs are less, though it must be admitted that there are now fewer partners in the arrangement than was originally envisaged.

The Expenditure Committee had inquired into a number of aspects of the MRCA project in December 1973—in fact, while the report of the Comptroller and Auditor General to the PAC was being prepared—and the Committee reported to the House last February. We took that report into account while taking evidence on the Comptroller and Auditor General's Report. I think that those who had the patience to read both reports will have seen that the work of the Expenditure Committee and the PAC were, in effect, complementary to each other. As the first chairman of the Expenditure Committee it gives me much pleasure to record that fact, and I suggest that that matter is significant for a reason to which I will return later.

I come now to two particular criticisms. Another subject on which the Committee made detailed inquiries was the settlement with the receiver of Rolls-Royce Ltd for assets transferred to Rolls-Royce (1971) Ltd. We were concerned that the receiver of an apparently bankrupt firm, with substantial potential liabilities to customers for breach of contract, was subsequently able to pay all creditors in full and to distribute no less than the staggering sum of £26.9 million to stockholders. Indeed, I believe that a further sum is available for distribution.

What I have to say is analogous to the reply that I gave to the hon. Member for West Lothian (Mr. Dalyell). One cannot always have certainty in some of these matters involving judgment. We may never know whether the bargain struck by the Government was a good one, but it seems that the outcome for the creditors and stockholders has been vastly better than they could reasonably have expected. I am still of the opinion that public money was spent to excess in that matter.

Another point arises on the subject of Rolls-Royce. The Committee was concerned to learn that the flow of information from Rolls-Royce (1971) Limited to the Department of Industry had not been satisfactory and that the Department was not satisfied with the monitoring arrangements designed to safeguard the Government's considerable investment in that company. I am glad to see from the Treasury Minute that one of the items of information—the company's preliminary five-year forecast for 1975 to 1979—has been received by the Department and is being discussed with the company. But I note with regret that the Treasury Minute makes no comment on the monitoring arrangements. This simply will not do. I hope to be assured by the Financial Secretary, whom it is a pleasure to see here, that these arrangements are in good shape.

There is another matter of principle which I ought to mention which arose from another case which we examined—namely, the leasing arrangements by British Rail for the purchase of rolling stock and equipment. In paragraph 131 of our report we expressed considerable surprise at and general disapproval of the manner in which the arrangements had been introduced and operated. We thought that a point of general principle emerged. These arrangements were made privately. They were not reported to the House. In paragraph 136 we expressed ourselves as follows: We trust that any future government financial assistance to the Nationalised Industries will be provided by more orthodox and overt means so that Parliament are aware of the true position. Hon. Gentlemen who were members of the Committee will recall that we felt strongly on the matter, for it seemed that the truth was being withheld from Parliament. We thought that to be serious and wrong. But I am glad to observe from the Treasury Minute: It is agreed that any specific Government financial assistance to nationalised industries should be provided overtly. We also considered some of the more traditional areas of financial control on which past committees have long ago established the basic rules. Without retailing any of those, I would just comment that I am pleased to see from the Treasury minute that the Treasury and the Department of Employment accept the principle, for instance, that full account should normally be taken, in grant-in-aid negotiations, of all realisable assets held by grantees and that grants in aid should not be issued in advance of need.

I could continue to comment on many more similar matters, but I know that some of my colleagues on the Committee will wish to comment. However, I feel that I have said enough to illustrate the scope and, I hope, the value of work done.

I said that I would say something further on the work of the Committee on Northern Ireland accounts, in respect of which perhaps my right hon. Friend the Member for Down, South (Mr. Powell) will wish to comment later. For two years the committee has had the responsibility for examining Northern Ireland accounts on the basis of the reports of the Comptroller and Auditor General for Northern Ireland, and we examined Northern Ireland accounting officers in the normal way. I was always pleased during last year that this was the case; it seemed to me to emphasise, better than anything else probably could, the unity of the United Kingdom.

The Committee of 1972–73 had most valuable assistance from the Comptroller and Auditor General for Northern Ireland, Mr. Lowry, who has now retired. I should like, on behalf of the Committee, and, I am sure, of the House, to thank him for the work that he did and for all his years of service, and to wish him a happy retirement.

Our Second Report was on two cases of excess expenditure in Northern Ireland, which raised no difficulties, but in the Fourth Report we were particularly interested in a case in which the Department of Commerce set up a Northern Ireland company to take over the assets of a factory which would otherwise have closed down and later disposed of part of the shareholding to a foreign company. I regret to say, but I say plainly, that we were not satisfied that the Department made adequate inquiries or took adequate advice before disposing of part of its shareholding.

I am glad to see from the memorandum of the Northern Ireland Department of Finance on our Fourth Report that it is recognised that a greater degree of investigation may be necessary in such cases. I do not want to dwell on the matter, except to say that in my opinion much more investigation is required in matters of that sort.

So much for our work. I come back to what one can regard as matters of principle about the Committee itself. Parliament is not, nor should it seek to be, an executive authority, but it must surely have the will and the machinery to exercise, as need may require, a control over the executive of the day—and, old-fashioned people like me who believe very much in the power of the back benches would argue, to dominate it.

It is not our business, therefore, on the back benches to do the business of Government. It is our business to criticise, to check and to call to account those who act in the name of the State. I question, as I did at the beginning, whether we set about this affair as skilfully and competently as we might in the modern context. It is said that good government invariably depends on good opposition. That may be. I would say with as much emphasis that governments will always mismanage their expenditure to a greater or less degree unless the House as a whole—I underline and emphasise the words "as a whole"—is prepared to examine and scrutinise the administration in some depth and on a continuing basis. Question times and debates are of immense importance but today this other process of detailed examination has a new importance, to which I am not sure we give sufficient attention.

Any consideration of these matters invokes the history of this place. The fight for parliamentary supremacy in this country is a record of the importance of financial control, as we all know. Yet we all know, too, that in 1975 Estimates laid before this House are never reduced and that control over finance, over spending, is largely non-existent. We vote millions of pounds on the nod and our debates on Supply are excuses for topicality. These debates are important, certainly; I just say that they do not do the job and that we are not doing the job. So expenditure increases, relatively and absolutely, and economies are never made. We do not have control of the total and we have almost no control over the particular. I would even go further and say that Government expenditure now is wholly out of control.

That would be bad enough if it were not for the fact that I have the feeling—I do not know whether other hon. Members share it—that the real tragedy is that so much of our expenditure is not fully effective. If I felt that we always gave aid from the generality of the taxpayers to those who needed it most, I should have no complaints. I do not feel that. I do not feel it in my own constituency even, in which I watch thousands, ten of thousands, even hundreds of thousands of pounds spent on patching up old hospitals which smaller sums would have rebuilt just a year or two ago.

I repeat: our expenditure of the taxpayers' money is not fully effective, and that is the tragedy. If our control is to be effective, hon. Members must be well informed. That means the facility for research and, I am convinced, it means the reports of specialist committees—perhaps published more frequently than we were able to publish this document last year, for the reasons that I have explained —and it means that they must be comprehensive.

I think that we have made some progress. There is this work of the PAC—more of the category of an inquest, of course, into past affairs as a general rule—and, as I have said, if I am re-elected chairman, I hope that we shall be able to speed up its work a little. Now we have the Expenditure Committee, some attempt to look ahead, to compare actual expenditure with forecasts and to consider policy alternatives. But in spite of the devoteed work of members of that Committee and of my distinguished successors as chairman, it still has no staff worth speaking of, at any rate in terms of numbers—I do not speak of quality—and its work has not yet come fully to fruition.

It is not for me, in this speech, to point to remedies, but I say clearly that I believe that we must consider further advances in our techniques. As the right hon. Member for Birkenhead (Mr. Dell) said some time ago, perhaps we should now consider amalgamating the PAC and the Expenditure Committee; perhaps we should take lessons from the Ways and Means Committee in the United States. I am sure, too, that we should examine revenue alternatives.

All that is perhaps for the future. Meanwhile, I hope that the House will maintain the impact of the recommendations of its pre-eminent Select Committee upon the executive of the day and to this end give a non-partisan and unanimous blessing to the Committee's work in the last Parliament.

4.59 p.m.

Mr. John Garrett (Norwich, South)

This debate allows us to consider not only the reports themselves but the wider and more important question of the scope, authority and responsibility of our system of State audit as discharged by the Public Accounts Committee and the Comptroller and Auditor General. These questions are illustrated by the Third Report.

As the right hon. Member for Taunton (Mr. du Cann) has just said, since its foundation in the 1860s the scope of our system of State audit has expanded from simply an examination of the regularity of expenditure—that is, whether the expenditure was properly authorised—into examinations of evidence of waste, of extravagance or inadequate control of spending. But the central purpose is still to ensure that funds are spent on purposes for which they are authorised and that financial procedures are generally effective. The question now is whether, given the enormous increase in public expenditures post-war, much of it in technically complex areas of construction, aerospace and industrial development, our system of State audit is adequate to cope with new demands.

I and others who have written on this subject have expressed some fairly fundamental criticisms of the system, particularly in comparison with the scope and powers of State auditors in comparable countries. I think that these criticisms are borne out by the Third Report.

These criticisms fall under three main headings. First, we who have written about and discussed the subject have been concerned about the limited powers of the Comptroller and Auditor General compared with those of other State auditors. For example, our State auditor has no power to prescribe the form of the accounts he is auditing. This represents a limitation on his investigations. It is my belief that we have singularly uninformative public accounting routines in this country. Increasingly, in other countries the arrangement of Votes and Vote sub-headings is being replaced by the analysis of public spending on a programme basis, which enables the legislature to examine the objectives of items of expenditure and their results in terms of effectiveness and efficiency. Although in this country there has been some move by the Treasury to organise the Estimates into programme categories, this has only marginally improved the situation and we are still a long way from being able to inquire into the results of public spending programmes compared with what they were intended to achieve.

It seems to me, from the Third Report of the Public Accounts Committee, that the public interest would have been better served if, in the case of the hospital contruction reports and the report on the Thames tidal defences, the Comptroller and Auditor General had had the authority to design and oversee the implementation of effective preconstruction cost control systems, rather than complain afterwards that they were inadequate.

In several of these reports the recommendation is that the sponsoring central Government Department should see to it that proper management information and cost control routines should be applied. I am not sure that these recommendations are particularly useful, given that British Government Departments themselves rarely operate any recognisable forms of budgetary control or costing, nor do they have the necessary expertise in systems design. It seems to me that it should be the responsibility of the Comptroller and Auditor General to design, for example, a system to evaluate the cost effectiveness of job creation in the regions rather than the responsibility of the Department of Industry.

Our arrangements compare unfavourably in this regard with those of the Comptroller General in the United States, who heads the General Accounting Office and has statutory powers to direct principles, standards, forms and systems on accounting and has installed management accounting, cost and project control and planning systems in American Government departments and agencies.

An audit is as effective as the information with which it is presented. We need far better management information on Government spending programmes in this country, and only an independent body such as the PAC, served by the Comptroller and Auditor General, is likely to introduce it.

Secondly, the field of activity and the scope of our State auditor is less than that of those in other countries and less than is required by today's conditions. Our State audit is excluded from large areas of public spending—from the nationalised industries and local authorities, for example. Some 66 per cent. of local authority spending is provided by central Government, yet there is no specific accountability to the House for what happens to that money. The British Museum, as we can see from paragraph 169 of the Third Report, can remove spending from public accountability by setting up a limited company for its publications. It may well be that the growing tendency to set up trading funds in Departments in order to serve managerial accountability will similarly remove more public expenditure from oversight by the PAC.

Equally important, the PAC is still primarily concerned with the regularity and propriety of expenditure and not with its efficiency or effectiveness. The Government pour money into private industry and other bodies without ever inquiring into the managerial efficiency of the spender. This is exemplified by the Rolls-Royce case. Here, the Government, in the words of the report, are sole shareholder, banker, principal customer for military aero-engines and provider of launching aid for civil projects. But the Government find out, only long after the event, that the company's inventory control procedures are quite unsatisfactory. Not only that. There is still an inadequate means of monitoring the company's performance to safeguard the considerable sums of public money invested in it. It is surely not good enough to trust that it will not be long before arrangements are satisfactory in every respect. The State auditors in France, Germany and the United States have powers to inquire into and improve the operating systems and management efficiency not only of Government Departments but of private companies which benefit from subsidies or other payments of public funds. The American General Accounting Office has carried out many assignments leading to major reorganisations of departments and agencies. The French Central Committee of Inquiry into the Cost and Efficiency of the Public Services has made recommendations on the organisations, structure and procedures of nationalised industries and universities. The German Federal Commissioner for Efficiency has simplified administration and paperwork and carried out cost reduction exercises and reorganisations throughout public administration.

Our State auditor should become what they are—top-level management consultants to the legislature, empowered to seek out and report on managerial malfunction wherever it exists among spenders of public funds.

It was interesting to me to read in the Third Report about the inquiry into the Forestry Commission. The discussion revolved largely around the figure of 3 per cent. as a satisfactory return on capital for a forestry enterprise, and not whether or not the Forestry Commission was properly organised or managed. This, I think, illustrates the unsatisfactory narrowness of our system of State audit. It identifies major defects in costing, project control, management information, reporting, and accounting after the event, and it does not set these in the context of the management of the bodies which are supposed to be operating these systems.

Finally, I doubt whether the Exchequer and Audit Department is sufficiently expert. It takes in school leavers and puts them through a three-year course. Unlike other State audit bodies, it does not employ qualified cost accountants, engineers, economists and management analysts. Ours is the only State audit in which the auditors are of a status inferior to that of those whose decisions are being audited. Three-quarters of the staff of the United States General Accounting Office have professional qualifications. State auditors in France have to be qualified at postgraduate level in public finance and their average age of entry into auditing is 27 compared with our auditors, whose age of entry is 18. The investigating staff of the Federal Commissioner in Germany are often postgraduates with an average entry age of 30.

The Comptroller and Auditor General's independence of the executive is frequently held up as an example of how well we do things here. Yet the Treasury prescribes the form of the accounts and the Civil Service Department decides the number, grading and status of the audit staff. Other State auditors have far more independence in these matters.

In sum, I believe that our system of State audit has not moved with the times or the requirements of the task. This is no reflection on the Public Accounts Committee or the Comptroller or his staff. It is simply that the technical environment has developed faster than our constitutional procedures. In my view, we now need a State auditor empowered to examine and report on the financial management, administrative efficiency, procedures and organisation of Government, public bodies, quasi-governmental bodies and all recipients of substantial public funds. This would give much more force to public accountability in this country, which I consider is now superficial, and would also be a powerful and positive influence on the improvement of the management of our public institutions.

5.9 p.m.

Mr. J. Enoch Powell (Down, South)

I intend to refer only to the Fourth Report from the Committee of Public Accounts and shall not, therefore, enter upon the wider ground covered by the right hon. Member for Taunton (Mr. du Cann) and the hon. Member for Norwich, South (Mr. Garrett) concerned with the scope and efficiency of our Public Accounts Committee and the material which is submitted to it.

Nevertheless, the two matters on which the Committee concentrated its Northern Ireland findings in the Fourth Report are each of considerably wider bearing than might appear at first sight. The first of those was the brucellosis control scheme and the story of "so near and yet so far" which it illustrated. Beginning with high hopes, based, as the Department itself said, upon being "able to operate in a comparatively small and well-defined area", it was found at the end of the period that not only had far more expenditure been incurred than had been expected but that the result was scarcely an improvement upon the starting point.

The cautious wording of the report and of the Department does not conceal the principal reason for that, which indeed was spelt out in the reply by the departmental witness to Question 465 He said: Looking at the picture, when we plot a map showing the outbreaks, which tend to be concentrated almost entirely, but not quite, around the border areas, this does indicate, I think, that a good deal of our trouble is importation. Certainly some of it, indeed a good deal of it, is illegal. The brucellosis control scheme is to a considerable extent in the position of a Danaid engaged in filling the celebrated jar of the Danaids, and the hole in it is the readiness with which, legally or illegally but without sufficient control, the international frontier is crossed not only by persons but also by animals and goods.

There has in this respect been in recent months, not to say recent weeks, the beginning of a change of attitude. I think it is likely that from now onwards the frontier between the United Kingdom and the Irish Republic will be progressively organised as an international frontier between friendly States ought to be organised—for the mutual benefit of both States; for let there be no misunderstanding: the State on each side of a frontier has an equal vested interest in the proper and lawful control of the use and passage of that frontier.

As I say, we are still in the rudimentary stages of the proper organisation of control. The initial steps taken in recent weeks, which arose, as such long-term policies often do, out of some immediate emergency—in this case, the occasion of the passing of the Prevention of Terrorism (Temporary Provisions) Act in November—are simply a start upon a process which will be continuous and constructive.

The only point in this context which I would like to emphasise is that this organisation of the frontier should not be regarded as a temporary measure related to the current dangers and difficulties in the Province. It is a measure which in many respects is justified in its own right and will continue to be fully justified after peace and normal conditions return to Northern Ireland. Perhaps we could not have a better reminder of the lasting importance of proper control of that international frontier than the comments of the Public Accounts Committee upon the brucellosis control scheme.

I pass now to what is perhaps the major matter; that is, the industrial development project with a computer firm in Belfast to which there is already a commitment of £7½ million of public money. I think that £7½ million will shortly be proved an underestimate; but at any rate that was the sum definitely committed at the time when the Northern Ireland Comptroller and Auditor General made his report.

The first thing which I find absurd—it is quite clear that the Committee too found it absurd—is the pretence of anonymity surrounding the company to which this relatively huge subvention is made. It is not acceptable that a company which receives public money on this scale should be even formally anonymous in reports tendered to the House. In any case, no person with knowledge of the circumstances or knowledge of the industry, reading the evidence tendered to the Committee, reading for example the lengthy question posed to the witness by the hon. Member for Eastleigh (Mr. Price), would have any difficulty in identifying the firm.

Nor was there any substance in the allegation at first put forward that the Department of Commerce was under some obligation to conceal the identity of the firm. In fact, the covenant was a covenant that the company itself should not disclose the terms of the offer. There was nothing, and rightly nothing, which bound the Department to conceal from the Public Accounts Committee—which it did not—nor from the House nor from the public the identity of the firm which was receiving the subvention.

The second unsatisfactory aspect was the rôle of the advisory committee. Statutory advisory committees in the context of public money made available to private firms are today very much in the news. Therefore, I think it is relevant that the report should have informed the House that the advisory mechanism clearly did not work properly in this case. What happened was—the House will find this set out on page 21 of the Fourth Report—that a mass of papers was thrown at the advisory committee before the weekend and an answer was demanded from it immediately after the weekend.

It is not good enough for an advisory committee to be made part of a statutory machinery of subvention and then for the advice to be asked and secured in so cursory and ineffective a manner. It is quite true that the chairman of the advisory committee evidently did his best—he did his best to master the facts, which were complicated enough, and to brief his committee when the members turned up and met; but I am sure that this was not the intention of the House in constituting an advisory machinery.

The intention must be that advisory bodies have adequate time and opportunity to brief themselves independently of the Department before they come to tender their advice. I do not know whether in the present case, had those conditions been fulfilled, the advisory committee would have given its assent to what the Department was proposing; but certainly an unsatisfactory aspect has been shown up by this investigation, and I trust that the lesson will have been noted for further cases and that the advisory committee will always be given adequate time and opportunity.

A third administrative aspect, which was raised by the Comptroller and the Auditor General for Northern Ireland, was the appointment of one of the Department's own civil servants as head of the joint company which was formed by the Department. I do not think the fact that the civil servant was one who was not a career civil servant alters the principle of the matter. The Comptroller and Auditor General for Northern Ireland observed in paragraph 113 of his report—he was stating an important principle—that … where a 'dialogue' is continuing between the Ministry and the company bargaining for the use of public funds, the question of a person acting in a dual capacity with a potential risk of conflict of interest is, I suggest, worthy of examination. He was putting it there very mildly. It is psychologically virtually impossible—indeed, I am not sure that it is desirable—for the person who is appointed to head a company to separate his duty towards that company from his position as the official of the Ministry from which the subvention is proceeding. It is therefore right, I would have thought, as a matter of principle, that the arm's length relationship between companies receiving subsidies and the Department giving them should be carried to the point of a separation of personnel between the top management of the company and the Department's own civil servants.

Coming from those matters of administration to the economics of the individual case, there are three questions that I should like to put to the Minister, who I see is very properly in attendance this afternoon. The first is: can he give the House any further information on the financial prospects? Already the Committee was able to ascertain that the estimate of a maximum of £3 million loss had been exceeded, on the information which was before it at the time. What I should like to ask is whether he can add to the information which was given to the Committee.

For example, it turned out that the estimated loss for the year 1973, which was only £1½ million at the time of the report of the Comptroller and Auditor General, is now known to be virtually £2 million—Question 526. Yet, curiously enough, the estimate for the year 1974–75 was that it would be down from £2 million in 1973–74 to £1.3 million only.

Any indication of a lurch toward, solvency on the part of a company with this kind of history must attract the liveliest interest, and as one-third of the firm's financial year October-September—at any rate, a quarter of that financial year—is already past, I am eager to know whether the Minister has any information which would suggest that the rate of loss making is falling, and, in particular, whether it is at all realistic to suggest that in this calendar year this company will move over into profitability.

Connected with that, there is a second question which goes back to the point about the total public commitment. That public commitment of £7. million is a past commitment. It was a commitment which took account indirectly of expected total losses of £3 million over three years, but it is not a commitment which includes a prospective loss. I should therefore like the Minister to make it clear to the House, supposing losses are continuing, upon whom the liability for meeting those losses would fall. Are they not due to be added to the existing commitment of £7½ million?

The third financial question that I should like to put relates to the commitment of the American concern to take up the further 35 per cent. of shares in the joint company. Page 22 of the Fourth Report states that the transfer rights of that company have to be exercised by February 1975—that is, by next month, whether the beginning or the end of the month is not clear. Very great anxiety was rightly expressed both by the Comptroller and Auditor General in Northern Ireland and by the Committee about the circumstances in which the American company, instead of taking a 50 per cent. share as was the intention—and incidentally was the intention which was submitted to the advisory committee—was going to take up only 15 per cent. of the shares. Incidentally, the Department did not come back to the advisory committee and ask if it wished to alter its information when it heard that the American firm was going to take up only 15 per cent. of the shares.

In view of the anxiety which this change stimulated, it would surely be interesting to know whether the American company is, in fact, going to take up the remaining 35 per cent. of its 50 per cent. share in this joint company. I cannot imagine that, if it intends to do so and has to do so by next month, the Department will be unaware of the intention. I hope, therefore, that the Minister will be able to tell the House—it will be some relief at any rate—that the arrangements for the transfer are going ahead and that they will be implemented next month by the due date.

Looking back upon this whole scheme so far, this involvement of £7½ million plus of public money in this firm, what are the lessons which can already be drawn from it? It was, one knows, an extra-statutory scheme—Question 550—so that while this House in legislation and the former Northern Ireland legislature laid down in statutory form the conditions which it thought appropriate when public funds were to be infused into undertakings for the purposes of industrial development, the Department in this case went beyond its statutory entitlement. It did so, we are told, because of what was considered to be the urgency and the importance of avoiding the imminent unemployment of some 1,500 employees in the firm as it stood in 1971. The House ought to mark its keen interest in such an extra-statutory proceeding. The procedure of this House has always made arrangements for circumstances in which a Government may be called upon to act in ways not covered by statutory authority; but it is really a cause for unease if, in circumstances of the precise kind which have been envisaged in the basic legislation, a Department is found to have acted extra-statutorily. Perhaps that, too, is a point to which the Minister will refer if he intends to intervene in the debate.

I come to the fundamental fact about the whole operation. As was stated by the Department in answer to Question 525, there was no commercial justification for keeping the firm in operation at the end of 1971. Those were the words. Hon. Members who have studied the work of the Committee and the report of the Comptroller and Auditor General will have great difficulty in ascertaining that there is today any more commercial justification than there was in 1971.

So we are brought face to face with a balance, one of those balance sheets to which the right hon. Member for Taunton was referring: on the one hand, the expenditure of £7½ million plus of public money in what, on the face of it, is an operation originally without commercial justification, and highly doubtful upon the material submitted to the Committee and to the House; on the other hand, the continued employment of some 1,500 persons. But that balance sheet, thus presented, is not complete. It omits a vital fact. Paradoxically, at the same time as there are high unemployment figures in Northern Ireland there is a shortage of labour there for a large number of profitable jobs ready and waiting to be done. The movement of labour, as well as the creation of additional demand for labour, is vital for the success of the economy of Northern Ireland. There is no future for Northern Ireland, any more than there is for the economy of this country as a whole, in loss-making activities. There are circumstances in which such activities may have to be maintained, but it is not upon them—this is a truism—that the prosperity of the part or of the whole depends.

I suggest that the Department, at any rate at the time when this scheme was entered upon, too readily assumed that the continued employment, in an operation for which there was no foreseeable commercial justification, of 1,500 persons was a sufficient reason for going ahead.

Of course, the difficulty in casting up this kind of balance sheet is that one is comparing the known with the unknown. One is comparing the employment of these people, here and now, visibly at work in this factory, with what we cannot in the nature of things know; that is, what they would be doing, the use to which their knowledge, their effort and their experience would be put, if, owing to the factory's closure, they found their way, or a way was found for them, into other applications.

But if we always use the power of the State, if we always use public money, to secure continued employment in directions for which there is no commercial justification, the transfer to profit making, to creative application, will not take place. Therefore, we have to take the responsibility—the Government have to take the responsibility, and the House and individual Members have to take the responsibility of supporting them—of making commercial viability the standard from which we are determined not to depart. Thus, in my view, the considerations which the Committee in its study of this one quasi-anonymous instance put before the House have a very much wider bearing.

5.32 p.m.

Mr. Denzil Davies (Llanelli)

I shall not comment on what has been said by the right hon. Member for Down, South (Mr. Powell) because he has plainly made a deeper study of the particular instance of the 1,500 jobs in Northern Ireland than I have, although I was a member of the Committee and I remember the witnesses giving evidence. However, I think it possible that the right hon. Gentleman did not give sufficient weight to the special situation in Northern Ireland, the civil unrest there, and the feat that 1,500 people would become unemployed, would not quickly be re-employed, and would in the event be turned out on to the streets of Northern Ireland—or at least many of them would—thus possibly causing even greater civil unrest than there is at the moment. I think that that was a factor taken into account by the Committee, and pressed upon the Committee by the witnesses who gave evidence.

As the first member of the Committee to speak from this side I wish at the outset to pay a sincere tribute to our Chairman, the right hon. Member for Taunton (Mr. du Cann). I pay my tribute to him for the sincere, efficient and courteous way in which he conducted his chairmanship during the year. It was a great pleasure to serve under him. It was an excellent experience for me to do so, and I look forward to serving under him again in the coming Session.

The right hon. Member for Taunton referred briefly to the Rolls-Royce settlement, the settlement arrived at between the liquidator of the old Rolls-Royce company, the Government and the new Rolls-Royce company, and I wish to elaborate a little upon that matter because I believe that one or two lessons may be drawn from it.

As the House will recall, the receiver of the old Rolls-Royce company eventually transferred to the new Rolls-Royce company, which was under the control of the Government, the aero-engine assets and certain other assets, including the RB211 assets, of the old Rolls-Royce company. The negotiations for that transfer were conducted in the first few months of 1971, and the assets were transferred in May 1971. The whole matter is dealt with in the Committee's Third Report, paragraphs 11 to 32. As a result of that settlement the new Rolls-Royce company, the Government-controlled company, took over all the liabilities and obligations arising from the RB211 contract, and it also paid the liquidator—the Chairman of the Committee referred to this—£87½ million for certain other assets, including aero-engine assets, of the old Rolls-Royce company which were considered to be of national importance.

In consequence of that settlement the liquidator of the bankrupt company was able to pay the creditors in full, and I understand that the shareholders of the old, insolvent company were able to receive interim dividends equivalent to about 40p per share. I understand also that there may be a further final dividend, so that at the end of the day the shareholders of the bankrupt company will have received from the liquidator something equivalent to 50p per ordinary share.

To put those figures in context one should remember that on 2nd and 3rd February 1971, a few days before the storm broke and before the public realised that Rolls-Royce was in great difficulty, the shares of the old company were fluctuating on the Stock Exchange at prices between 45p and 35p a share. One can thus say that the shareholders of the old company got back all their money in the sense that they have received, or will receive, sums equivalent to the quoted value of their shares on the Stock Exchange before Rolls-Royce was pronounced insolvent.

What I find especially disturbing in that situation is that many of the shareholders, many of the persons who have been compensated, bought their shares after the news that Rolls-Royce was in great difficulty and when the shares were valued at an extremely low level on the Stock Exchange. They have thus made enormous profits from the liquidation, and many of those shareholders, I understand, are foreign companies or nonresident banks.

Commentators in the financial Press and elsewhere have sought to explain away what must be a rather embarrassing situation by attributing the result to some extent to the financial skill and negotiating prowess of the liquidator. We are told in the papers that he secured a splendid deal on behalf of the creditors and shareholders of the old company. No doubt the liquidator is a man of great skill, but I suggest that he obtained the £87½ million not only as a result of his skill but as a result of wrong and uncommercial decisions made by the British Government in the days immediately following the collapse of the old Rolls-Royce company.

If the Government had approached the matter—this is a personal view; the Committee did not find it—in a commercial way the liquidator, in my opinion, would have received far less than he did for the non-RB211 assets, and the shareholders of a bankrupt company would not have been put back into the position they held before the company was declared bankrupt. The House will wish to know how it came about that the liquidator was able to extract £87½ million from the Government.

The root cause of the difficulty—the Committee found this—lay in the heads of agreement drawn up between the liquidator, the Government and the new company right at the beginning, immediately after the Rolls-Royce collapse. Under that agreement, the Government agreed that if they were able to renegotiate the RB211 contract—the House will recall that they were able eventually to do that and to arrive at a new modified contract—the RB211 assets would be taken over by the Government from the liquidator at the nominal sum of El, ignoring any potential profits, or, more probably, ignoring any losses which might still arise for the new Rolls-Royce company; but as part of that agreement the other aero-engine assets and other profitable assets of the old company were to be transferred to the Government and the new company at full market value and no account was to be taken of any potential RB211 losses in arriving at that market value.

Therefore the receiver got a very good deal from the outset. He was relieved of the onerous RB211 contract with its possibility of heavy losses and substantial payments to be made by way of indemnity, and at the same time he was to receive full market value for the other aero-engine assets. A prudent commercial buyer would hardly have entered into negotiations on these terms and of that kind.

The prospects for the RB211 were uncertain, but the Government agreed with the liquidator to ignore that uncertainty. Any commercial buyer, instead of ignoring it, would have taken it into account in discounting the price to be paid for the profitable assets. That uncertainty should have been a factor in determining the money which the Government were to pay the liquidator for the part of the Rolls-Royce business which was profitable and which would be transferred.

Bearing in mind the constraints which the Government imposed upon themselves as a result of the heads of agreement it would not be fair to say that the figure of £87½ million, which was eventually paid, was not fair and reasonable. I do not have the information on which to base an assessment, but the Committee received a paper, which was not printed, which set out the profits of the profitable assets for 1972. It seems to me, although I am no expert in these matters, that taking one year's profits, it could be said fairly that possibly the Government did not pay too much when they paid £,87½ million. However, the damage was done previously under the heads of agreement, because these should never have provided for the RB211 to be separated from the rest of the business for the purposes of valuation.

As a secondary matter the Committee also found that the Government had paid too much attention when negotiating with the receiver to his claim that there were possibly foreign buyers who might wish to purchase the profitable assets of the Rolls-Royce company. It surprised me to discover, after we had inquired of the Treasury witness and after a paper had been submitted, that the Government do not seem to have any power to prevent non-resident persons from purchasing for cash the assets and businesses of British companies. One always assumes that under the exchange control regulations or under some section of the Income Tax Acts the Government have reserve powers to prevent such purchase if it were considered in the national interest to do so. Apparently that is not the case.

So the receiver was able to use the argument that a foreign buyer might want to buy certain assets in order to push up the price the Government had to pay him. If the heads of agreement had not separated the RB211 from the other assets such an argument would not have been open to the receiver because no foreign buyers would have wanted to buy the RB211 contract with all the complications that involved.

What lessons, therefore, can be drawn for the future from the Committee's post mortem on the purchase of the business and assets of Rolls-Royce by the last Conservative Government? It seems to me that the valuation of assets and the complex business of conducting these negotiations should not be left to hard-pressed Ministers and their civil servants—and I say that with the greatest of respect—but should be entrusted to a body which could build up an expertise in these matters. It may be that the IRC, if it had been in existence at the time, could have conducted the matter in a more satisfactory way, but I do not know because I have no experience of the IRC or of how it works. If we are to set up a National Enterprise Board I hope that it will be given power to conduct negotiations of this kind, to acquire shares and assets and to build up the necessary expertise.

Decisions on whether a company should be acquired in the national interest will always be political decisions and will always have to be taken by Ministers accountable to this House. Once that decision has been taken, however, the only way to deal with the matter is to have a body capable and equipped to purchase the assets on a sound commercial basis. I see no other way in which it can be done.

Finally, I refer to the fact that the Treasury does not seem to have the power to prevent acquisition of assets in this country for cash by foreign purchasers. The Government must look at this matter again. We are now in a world where a few countries, certainly the oil producing countries, seem to have limitless supplies of cash. May be one of these days one of these interests will want to buy in Britain assets which we consider in the national interest should be retained here. The purchaser would not have to borrow money or mortgage shares or come within the exchange control regulations. We all want to encourage investment, but there must be a point at which it would be prudent for the Government to make sure that they have the necessary reserve powers to prevent such an acquisition if that were in the national interest. The Americans seem to have these powers. Therefore I ask the Government to consider whether it would be possible to tighten up the rules to prevent such purchases.

The collapse of Rolls-Royce produced a most complex and difficult situation. It is easy to be wise after the event, but it can be fairly said that the last Conservative Government were not properly equipped to deal with the immediate situation which followed the collapse of Rolls-Royce. Wrong decisions were made at the beginning, and they cost the British taxpayer substantial sums of money, although it is difficult to come to the exact figure of how much was lost.

5.47 p.m.

Mr. John Pardoe (Cornwall, North)

I wish to echo the sentiments of the hon. Member for Llanelli (Mr. Davies) in thanking the right hon. Member for Taunton (Mr. du Cann) for his chairmanship of the Public Accounts Committee on which I was honoured and privileged to serve on this occasion, and to congratulate the right hon. Gentleman on the report he has produced. My absence from the Committee in future will not be because I regard it as work which is not of great importance. I regard it as work of pre-eminent importance, but it looks as though two Finance Bills will be separated only by the Easter Recess and there therefore does not seem to be much time to fit the Public Accounts Committee between them.

We are here discussing an important part of Parliament's most important function which is, I have always been led to believe, the control of the executive. If we were to ask ourselves whether Parliament had successfully controlled the executive in recent years I do not think that in all honesty the answer would be a resounding "Yes". I doubt whether Parliament in its present form is capable of doing so. In our modern parliamentary system the executive is too free—too free to legislate and too free to spend. A by-product of this is that in recent years both Conservative and Labour Governments have found it all too easy to get their legislation accepted by Parliament but have then been unable to get it accepted by the country. I know that controlling the executive is not just a question of controlling money, but I suggest that if we control money and if we control public expenditure effectively success in everything else we have to do in this House might come very much easier. It is true that if we cannot control public expenditure no one—our constituents, the public at large, the Press or the rest of the media—will believe that we are likely to be successful in much else.

This was the first occasion on which I have sat on the Public Accounts Committee. The Committee has, over a great many years, done very good work in ferreting out the odd scandal and those things that fall far short of the scandalous. It is probably a judgment that will be counfounded by events, but I do not think that any of the reports which we are debating today contain any element of the scandalous in public expenditure—wasteful, perhaps, but not scandalous.

No matter how efficiently the Committee does its task, it is inevitably shutting the stable door after the horse has bolted. Lessons can be learned, and I hope that they will be learned. The Treasury Minute indicates that some at least have been learned already. Nevertheless, the power of the Committee to ensure that the enormously increased level of public expenditure is good and necessary, and that the spending is efficiently done, is inevitably limited. However good the Committee or the Exchequer and Audit Department may be, public money will be spent and will be wasted as long as the House meekly assents too easily to almost any tom-fool level of expenditure one cares to put forward. The problem is bound to increase.

The hon. Member for Llanelli spoke in some detail about Rolls-Royce and the RB211, with which we dealt in great detail in the Committee. The pages of the report dealing with the situation after the collapse of Rolls-Royce are an example of what a Government do in an emergency. The right hon. Member for Down, South (Mr. Powell) spoke of what had happened on items of expenditure in Northern Ireland. It is true that the Committee had to look at the items to which he referred—certainly to the last to which he referred. We all came tacitly to the conclusion that what had been done might not have been exactly right but that if we had been in the position of those concerned we would have found that there was no alternative, because there was a gun at their heads. In other words, it was almost blood money. It was certainly civil order money to keep the streets from flowing. Therefore, we had great sympathy with those civil servants who might have stepped outside the normal bounds of financial prudence in these matters.

But it is all very well to use the excuse of an emergency, whether in Northern Ireland or an industrial emergency in Rolls-Royce, for not ensuring that money is properly spent, according to the standards one would normally apply. We are confronted at the moment, in the Press anyway, with the case of a civil servant in the Department of Industry who has filed a memorandum with an eye to a future Public Accounts Committee investigation. I do not want to go into that matter in detail. Whether that civil servant is right, whether the board set up by Parliament to advise the Minister on matters of money and industry is right, or whether the Minister is right, is not the point at present. The Minister may well be right. Hon. Members would be wrong to set their faces against new types of industrial enterprise just because they were new, and to say that no public money should be put into them.

What is wrong is that a Minister, having been advised by the board set up by Parliament to examine industrial grants that a certain enterprise does not merit the expenditure of public money, and having been opposed by his own accounting officer, should still not have to return to the House on the matter. Any measure that allows a Minister to make such a decision without returning to Parliament for a by-your-leave, as the Industry Act does, should never have been passed by the House.

In theory, our control of nationalised industries, of expenditure in industry, or Government participation or intervention in industry, is all quite simple. We do not have the right to question Ministers about the detailed day-to-day management of the industries into which the Government put our money, or of fully nationalised industries. The trouble is that the day-by-day management may well be running up huge debts, and we shall then be asked at some time in the future to write off those debts. That is when public money is spent. We shall be faced with a fait accompli, never having been asked in advance. We shall be in the situation that we were in over Rolls-Royce, and perhaps almost in the situation that we were in in Northern Ireland. We shall have a gun at our head, and shall be told that there is no alternative but to write off the debts of British Rail or the coal industry.

We have no satisfactory control over the use of public money in industry. It is towards achieving such control that we must look when we think about the Rolls-Royce case and much else in the Committee's reports. How can we make sure of public accountability? Labour Members will say that it is easy that we just make sure that wherever the Government put public money we take a share of equity for the nation. But that does not solve the problem. It is right that we should take a share of the equity. My party and I have long advocated that, and I am delighted that the Government are determined to do it. But we should be fools if we thought that it would solve the problem. We have only to see how far the big institutional shareholders have exercised any control over the expenditure of what is, after all, their money in some of the major industrial enterprises in which they have invested, to realise that. The majority of civil servants and politicians have no experience of business practice. There should be far more interchange between the two if we are to go on intervening in industry.

There must be efficiency audits for all nationalised industries and for all Government participation in industry, whether or not fully nationalised. It is not good enough to have a debate once a year on the Committee's reports and to say that certain money was spent wrongly. It is not just a question of how the money was spent. That may not be all that is wrong. Certainly in our deliberations it was often difficult to say not only whether public money had been wasted or should not have been spent but whether it had been spent to its optimum effect.

There are two issues on the control of public expenditure. The first is how much we spend in total, and the second is whether each bit is spent well. The Committee under its present chairman and with the present Comptroller and Auditor General, is well-equipped to carry out the second of those tasks. It is well staffed through the staff of the Comptroller and Auditor General—far better staffed than any other Committee of the House.

The Committee might benefit greatly from more publicity for its proceedings. I do not want to short-circuit the argument about whether we should allow our proceedings in the House to be televised, but it occurs to me that, although some people may think them very dry, some of the exchanges in the Committee and some of the issues we investigated not only merited the probe of the television cameras but would have made good television—although I say it as perhaps one who should not, having been a member of the Committee. It would have enormously concentrated public attention. Of course, that is entirely outside the question of whether we televise the proceedings of the Chamber. There seems no reason for us not televising some of the proceedings of Committees such as the Public Accounts Committee.

In my view, the overall level of expenditure is outside the control of the House. We cannot any longer make any pretence to be controlling public expenditure. The Expenditure Committee is largely ineffectual. That may not be the fault of the members of the Committee. We have an annual debate which is a rather desultory affair. Moreover, unless the Committee is debating, discussing and investigating expenditure in the context of forecasts of likely revenue for at least the same period ahead as it is considering expenditure the whole exercise is futile.

Expenditure and the forecasts of likely revenue have to be examined in the same money terms. There should not be one sort of funny money for expenditure and another sort of money for revenue. There is much merit in the idea—I understand that the Chairman of the PAC accepts this—that we should amalgamate the PAC and the Expenditure Committee. But we need to bring a strongly reinforced forecasting of revenue into our deliberations.

No one ever set out to produce a Government borrowing requirement of £6,000 million but we have it all the same. If we examine the record—

Mr. Powell

Perhaps £4,000 million.

Mr. Pardoe

Perhaps the right hon. Member for Down, South would like to make his point.

Mr. Powell

I was moved to recall that Mr. Anthony Barber set out to produce a net borrowing requirement of £4,000 million.

Mr. Pardoe

I am grateful to the right hon. Gentleman for that remark. I would not have expected him to pass it by.

If we examine the record of the public sector deficit or the borrowing requirement over the past six years it cannot be suggested that it has been determined by logic, reason or economic good sense. It has been determined by too many Chancellors trying to win too many elections in too few years. It is an inherent and natural characteristic of political parties to invent new methods of spending public money. Once the promise has been made in an election campaign or inserted in a manifesto our parliamentary system—this is the nub of the matter—makes it a darned sight too easy to push it through. Once the matter has found its way into a manifesto it is as good as enacted in terms of public expenditure.

Far too little research is done into the items which find their way into party manifestos. That applies to all political parties. Even if we increase the research facilities available to political parties, anyone who has experience—and many of us have—of the problem of trying to stop party conferences voting to spend vast sums of public money by reason, statistics or any other such criteria, will know that if the party gets into power no amount of research will control expenditure.

There is a need for an independent research institute to cost party promises before elections. If that were done we should not be subjected to the charges and counter-charges of Chancellors and Shadow Chancellors about how much each proposal will cost.

This House will never control public expenditure in any meaningful way until the tax system is indexed. "No taxation without indexation" should be the slogan of parliamentarians in 1975. Large sums of public expenditure have been undertaken by Government without the necessity to go back to the House. That is because inflation has whipped up the revenue that the Government receive. It may be that now the Government are suffering what can only be called taxation starvation through almost negative indexation they will be more receptive to indexation.

How can the House control expenditure when the parliamentary and party systems, and the Whip system, make it so easy for Governments to get away with murder? If we wanted to do the job properly perhaps the real answer would be a separation of powers such as the Founding Fathers established in America. Short of that, the only way in which Parliament will be able to control a Government's expenditure in future is by changing the electoral system and ensuring that Governments cannot carry every item of expenditure that they wish.

6.6 p.m.

Mr. John Golding (Newcastle-under-Lyme)

So far the debate has consisted of what is so often the practice on similar occasions—namely, one compliment after another being paid to the Public Accounts Committee. It seems that Select Committees are treated with greater respect than perhaps they deserve and that administrations are treated with less respect.

I was particularly disappointed with the PAC's approach towards Giro cheques. I was disappointed by the spirit of the questioning and by the tenor of the report. I do not like the Treasury evidence either and am critical of the tone of the Treasury Minute which replies to the PAC's report. It is understandable that Conservative right hon. and hon. Members are unsympathetic towards the Giro system. Perhaps that applies particularly to the right hon. Member for Taunton (Mr. du Cann), who refers to himself as a banker when putting questions during the cross-examination of witnesses.

Mr. du Cann

It might be of assistance if I explained that I have never been opposed to Giro cheques. As a believer in the expansion of the banking habit and a believer in savings, I welcome any improvement in the facilities for money transfer. I am exactly the antithesis of what the hon. Member for Newcastle-under-Lyme (Mr. Golding) describes. I am a supporter of the Giro system.

Mr. Golding

I am pleased to have heard that assurance. I am sure that at a later stage in the Session we shall be glad to hear it repeated. I would have hoped that the questioning would have been more sympathetic. As the right hon. Member for Taunton has made clear, the Post Office Giro is a publicly-owned bank. One would have expected the Government and Labour Members to support the extension of the Giro system and its facilities. I hope that the Government will quickly come to the House to ask it to extend its powers so that it can become even more competitive towards the joint stock banks.

To an extent I believe that the inquiry was nit-picking. What does not emerge from the questioning and from the report is that the money that is under examination is all public money. It is not a case, for example, of the Department of Employment or the Department of Health and Social Security dealing with an external, private bank. This is a matter of transfer payments within the publicly-owned sector. All of it is public money. Therefore, to a great extent the work of the Committee would have been better directed towards examining the accounting procedures when public bodies, including the nationalised industries perhaps, are dealing with privately-owned companies. That would have been more to the point than dealing with the question of transfer payments.

We on this side, particularly the Government, should be more aware of the Labour Party's policy expressed in 1973. The policy statement then declared specifically: Labour's Giro is now a major public banking facility. We would ensure that Government Departments and nationalised industries use Giro as extensively as possible for their money transfer business. It is for this reason that I am disappointed that it emerges, from the questioning, the Committee's report and the Treasury Minute, that no directive has yet been given by the Treasury to Government Departments to use Giro more extensively. Indeed, the Treasury witness, in reply to Question No. 1662, said: … it is the intention that there should be fair competition between Giro and other means of making payments, the joint stock banks, the Paymaster Geneal's office, and so on. I would have hoped that a different policy would have been adopted by the present Government. I would have preferred them to have said, as the Labour Party said in 1973, that Government business should be conducted where possible through. Giro.

I believe that this should be done not only because it is Labour Party policy but because the profits of Giro go into the public purse—that public purse which the Public Accounts Committee is supposed to be protecting. The money that goes through Giro is finance available to the State, and is again a saving to the public purse.

Perhaps most important of all, Giro offers better facilities for many of its customers than the joint stock banks do. One witness, Mr. Errington, stated in paragraph 1681: I think that the facilities provided by the Post Office in the way of spread of points of payment, hours of opening, accessibility and so on, probably meet the needs of the majority of our clients very much better than any bank would do. The Government should quickly decide to implement Labour Party policy on this point.

Mr. Pardoe

As the hon. Gentleman has seen fit to suggest that the questioning in the Public Accounts Committee might have been influenced by the fact that the chairman is a banker, would he tell us what his own interest is? I am not at all certain, but I have a feeling that it might be to do with those who work in Giro.

Mr. Golding

I have declared my interest in the House on very many occasions. On this occasion, I do not speak for the members of the Post Office Engineering Union. Usually I do, and when I do so I declare my interest.

Mr. Pardoe

That is an interest.

Mr. Golding

I have declared my interest on every occasion when I have spoken for members of the Post Office Engineering Union. Once again the hon. Member for Cornwall, North (Mr. Pardoe) is nit-picking. The bulk of those who work in Giro are members of the Union of Post Office Workers, and I have no financial or direct interest in putting their point of view. No union has asked me to raise this matter. I am not a member of the Union of Post Office Workers and do not represent its point of view. But if the hon. Gentleman wants me to declare that I am an officer of another union, I do so, as I have done many times before in this House. The hon. Gentleman's intervention is typical of him.

Mr. Pardoe

Sauce for the gander.

Mr. Deputy Speaker (Mr. George Thomas)

Order. Let us get back to public accounts.

Mr. Golding

Thank you, Mr. Deputy Speaker. These interventions from a sedentary position call for rebuke.

I would have been much happier had the Government, in reply to the Committee, said that the Treasury wants to see as much business as possible being conducted through the National Giro because it is a publicly-owned bank which provides a better service to the public than do the joint stock banks.

6.16 p.m.

Mr. A. P. Costain (Folkestone and Hythe)

I am a member of the Public Accounts Committee, having returned to it after an absence of some years. I was a member of it some 10 years ago. Returning to membership of such a committee is like going back to a town one has not visited for years. One probably sees the thing in a clearer light and gets a sharper appreciation of its work.

It is no mere complimentary gesture when I say that my experience leads me to pay particular tribute to the Chairman of the Public Accounts Committee, my right hon. Friend the Member for Taunton (Mr du Cann). I have served on a large number of committees and know how much their proceedings depend on the way their chairmen work. For example, one chairman will decide that his committee is his own prerogative; another will decide to delegate, and thus draw the best from his members. That is the ability of my right hon. Friend as Chairman of the Public Accounts Committee. He has the ability to put witnesses at their ease and, having done so, to get them to talk freely. He gives his colleagues on the Committee the opportunity to question witnesses. The effectiveness of the Committee is also largely in the fact that its members have specialist knowledge of so many subjects.

The hon. Member for Norwich, South (Mr. Garrett) looked at the subject in a rather theoretical way—in the way in which he would if he were a lecturer. I do not know the hon. Gentleman's profession, but I suspect that he was a lecturer and researcher in Government procedures. His arguments were impracticable. He advocated that every Government Department should be controlled by some sort of efficiency firm and that the Comptroller and Auditor General should be an almighty controller of all things, telling every Government Department how to run itself. We have seen how administration of nationalised industries has fallen down in this respect.

I was fascinated to hear the hon. Member for Cornwall, North (Mr. Pardoe) suggest that the proceedings of the PAC should be televised. That was a most remarkable statement. The hon. Gentleman has attended some of its meetings and I think he must have his mind on the Finance Bill rather than on the meetings of the PAC. Does he not realise that of all Committees the PAC is the one in which we expect witnesses to give evidence bearing in mind that, if their evidence is thought to be against the national interest in terms of secrecy, it can be sidelined? If the Committee had not enjoyed that facility in the past, I believe that its reports would not have been so effective.

The hon. Member for Newcastle-under-Lyme (Mr. Golding) at one moment agreed with the hon. Member for Cornwall, North that Parliament must control matters on a basis of efficiency, but in the very next moment the hon. Member for Newcastle-under-Lyme took the view "The dickens to efficiency. I have a constituency problem and believe that we should advocate the use of the Giro regardless of whether it be economic or efficient. It is in our manifesto, so we must support it." When it is suggested that the PAC has a bias against the Giro, we should for the sake of accuracy read its conclusions. In the final recommendation, in paragraph 70, the Committee said: Your Committee welcome the action by DE and DHSS to examine whether DE Giro-cheques can be merged into the DHSS system and we hope that the investigation will lead to an efficient and economical arrangement. If a satisfactory solution is reached we suggest that an extension to include girocheques issued by other Government departments might be explored. As regards charges for the use of girocheques we are surprised to learn that the Treasury have left each department to negotiate separately with Giro. We suggest that economies might be effected if the Treasury undertook central negotiations with the National Giro Service to cover all departments. Is that nit-picking? Does not the hon. Member for Newcastle-upon-Lyme want the PAC to go for efficiency?

Let us look at the benefits of the PAC, whose work I have seen from the inside and whose efforts I also appreciate through my work as a "junior fag" in four or five Government Departments over the years. First, the PAC is one of the most senior Committees of the House—although, looking round the Chamber at the moment, one would hardly think so. The Committee has the advantage of being a long stop for the Comptroller and Auditor General and it provides a means of communication between Government Departments and this House. The Committee's work has the effect that the Permanent Secretary of a Department is in most cases the accounting officer: he is ultimately responsible to the Comptroller and Auditor General.

One of the effects of the work of the PAC is that, if any Minister should decide that he wants to pursue a policy that is contrary to the will of Parliament, for doctrinal reasons or otherwise, the accounting officer has the ability to say "Minister, if you take this action I shall have to report it to the PAC." No Minister has ever appeared before the PAC.

The Committee is also a vehicle through which back benchers can raise questions for investigation. The Committee can investigate virtually anything and has the right to call for papers and persons. It has been a custom of the PAC generally only to call for civil servants and those who are directly in the Government's employment. As we develop these procedures, should we not also consider including other people to give evidence, particularly consultants employed by the Government?

The Committee considered, among other subjects, the Taff Vale scheme, ocean tugs and the development of hospitals, and in all three cases there was direct criticism of the fact that the consulting engineers had not contacted those who were carrying out the practical work. There was a recent Adjournment debate on the subject, and I am glad to see present in the Chamber one of the participants, the hon. Member for Derby, North (Mr. Whitehead). The opportunity was taken in that debate to find fault with a leading firm of consulting engineers. I very much regret the fact that the matter was not referred to the PAC before that debate took place. In fairness to all concerned, it would have been far better had the Committee investigated the matter in detail and taken evidence from both sides before the matter was debated in the House.

Mr. Phillip Whitehead (Derby, North)

I am one of the Members to whom the hon. Gentleman has referred. I am sure he will accept that in the case of the hon. Member for Gloucester (Mrs. Oppenheim) and myself, we raised the matter only after a year had elapsed since the measurement engineer complained to the SWRCU.

Mr. Costain

It would be unfair for me to use this opportunity to debate that case. All I am saying is that when great names and reputations are at stake, as in that instance, it might be better if the PAC were to hear all sides of the question before it is ventilated in the House. We do not know the eventual outcome of the matter since an independent inquiry is taking place, but I believe that it should have been dealt with initially by the PAC.

If we are to control expenditure and are to be able to give a better account of Government expenditure in our custody of public money, there is always need—I said this eight years ago in a similar debate—for a better yardstick to govern the efficiency of each Government Department. Many of the matters raised in the report have been caused by a panic situation. I refer to Rolls-Royce and also to Northern Ireland. It is easy for a Committee with hindsight to criticise a decision made in the heat of the moment. A Committee must criticise, and I hope that it does so constructively, but what we seek to do by our reports is to ensure that mistakes do not recur. I repeat that we still lack some efficient yardstick. I hope that the Financial Secretary will do all he can to give the House a better yardstick to control and evaluate efficiency.

6.30 p.m.

Mr. David Howell (Guildford)

This is a non-partisan parliamentary occasion, and I am very honoured to have the opportunity of taking a brief part in it. I must confess that to talk about public expenditure at this juncture in our affairs in a non-combative way is a bit like standing at the top of an avalanche discussing the beauties of the sunset. However, I shall try my best.

May I begin by associating myself with the remarks of my right hon. Friend the Member for Taunton (Mr. du Cann), the Chairman of the Public Accounts Committee, about the work of the Comptroller and Auditor General and his staff. Like my right hon. Friend, I had the privilege of working with the Comptroller and Auditor General when he was in a previous incarnation. I greatly admired him then. I think that he has filled this office, as a servant of the House, in a way which is a great encouragement to those who want to see Parliament strengthened.

I believe that there have been important developments, on which I shall comment presently, in the work of the Comptroller and Auditor General and the operations of the Public Accounts Committee of a kind which most people would welcome as we stir out of the enormous and ever-growing, ever more complicated executive machine.

I also share in the comments made by the hon. Member for Llanelli (Mr. Davies) when complimenting the chairman of the Committee. If I may speak as an outsider, he seems to have guided the Committee through a very disruptive political period, the summer months of last year, with remarkable skill and has produced a varied and valuable report. Of course those remarks extend to the whole Committee, which did so much work.

May I also put in a word for the Northern Ireland administration? I could not compete with the eloquence of the right hon. Member for Down, South (Mr. Powell) in dealing with the items in the Fourth Report, but, having had a little to do with it, I should like to say in passing that I have nothing but admiration for the remarkable way in which the wheels of administration are kept going in Northern Ireland, whether we are talking about the Comptroller and Auditor General's Department, or the Departments themselves and the senior civil servants. One forgets the appallingly difficult set of circumstances under which these men and women are operating. I have nothing but admiration for the work they do. That is, of course, quite aside from the merits and the content of the matters contained in the Fourth Report.

I was also very pleased to hear the remarks made by my right hon. Friend the Member for Taunton about his ideas of reappraisal. There was a time when the Public Accounts Committee used to be criticised as rather old hat and concerned with candle ends, although those can be very important. The Fulton Committee had some rather dampening remarks to make about the Public Accounts Committee. A number of other comments were made about the Committee's adherence to outdated procedures which in some cases might increase costs rather than reduce them. I think that all that is changing.

The Paymaster-General of two years ago wrote a book in which he said that the Public Accounts Committee should be developed and strengthened so that it could bring to bear its attentions nearer the time at which major investment decisions were being made. He also urged the Public Accounts Committee to grow sub-committees. He also mentioned, as did my right hon. Friend the Member for Taunton, the idea of merging it with the Expenditure Committee.

I would not judge at this stage whether we shall go on to those subjects. I believe, however, if I may say so as an observer, that the Public Accounts Committee has advanced into an area where it is able to comment on and force explanations of on-going situations and the methods by which programmes are being carried out. I think that that is a valuable and a right development and one which is greatly to be welcomed.

Those who always say that Committees of Parliament can probe and demand but can never be responsible are absolutely right. The executive is the body that is responsible. Committees of Parliament, however powerful, are the bodies which force explanations to see that decisions being taken are both defensible and defended if they are claimed to be in the public interest. On that point I part slightly from the views very interestingly put by the hon. Member for Norwich, South (Mr. Garrett), who speaks with authority on these matters and who has written with great lucidity on them from time to time. He seemed to be implying that he thought there was some kind of rôle for Parliament or for a servant of Parliament—I think I understand him aright—who would lay down the actual mechanisms inside the executive by which audit and official management control would be exercised.

I suggest that if we cross that barrier and mix the two parties—those who are in a position to call to account, those who are in a position to demand an explanation on behalf of Parliament, and the public—with those in the executive who have to carry out the management and put in the management structures and organise the control mechanisms, we shall find ourselves in a very difficult situation. Those inside the Government will say "You told us to put in a certain management structure. We were forced to adopt methods with which we do not agree, and we cannot be held responsible for the outcome.

Mr. John Garrett

I was trying to make the point that it is impossible, with the present flow of information from the recipients of public funds to the Comptroller and Auditor General, to monitor the efficiency and effectiveness with which that money is being spent. That requires much more sophisticated accounting and reporting systems.

Mr. Howell

I do not disagree with that. There is obviously the dilemma, which I know the hon. Gentleman recognises as he has studied these points, about how far that monitoring mechanism should operate inside the executive and how far it should be part of the mechanism of Parliament—how far the pressure should be upon the executive from outside to do things differently from the way in which they would otherwise be done by the executive.

All these developments are valuable and I am greatly encouraged by everything I hear. I strongly support my right hon. Friend the Member for Taunton in the way I think his mind is working on these matters.

There are those who say that parliamentary Committees cannot do much more of a job because the great issues must be debated in this Chamber, and voices are raised here on matters of principle. That, of course, is undeniable. However, beneath the great issues there are layers of issues which involve millions and millions of pounds where the lay voice of Parliament is not heard and where it is increasingly essential that it should be heard.

If one is looking for encouragement in the gloom of recent times, one thing that has emerged is that this is no longer the age when everyone is ready to defer to the Government expert, certainly not in the economic field and possibly not in the industrial field. At such a time as this, the contribution which lay parliamentary Committees of political men, and party men, can make in forcing the Government to explain, in language which people understand and comprehend, what on earth they are up to, and possibly making Ministers and officials think again before they plunge on into ever more irreversible commitments, is of vast and growing importance.

I should like comment on one or two of the items in the Third Report before we hear the reply of the Financial Secretary to the points raised this afternoon First, as regards the RB211, this is a famous story which has threaded its way through successive administrations and successive parliamentary reports. I have no doubt that there is much more of this story to come. It was in a way a project which at its birth or christening was attended by a wicked fairy godmother and was cursed by the undertaking that it was in the national interest. In effect, it was declared from the start to be of such importance that commercial considerations, the normal disciplines of cost, should be secondary and that it was the national interest which was paramount. From that moment the poor child was in a situation where it would be denied the normal restraints, disciplines and controls which should attend a vast commercial project.

I make no comment on the technical excellence or the workmanship or craftsmanship or anything else in this complicated piece of equipment. However, once it was declared by the Government of the day—and for that matter by successive Governments—that it was in the national interest, we were immediately facing all the problems and questions not of its commercial worth and whether it would sell but of how to monitor the incredible complexity, how to check what was happening to the costs and who would pay when inevitably it emerged, as the checks began to be made, that the cost and the liabilities vastly exceeded any possible remuneration. All these matters were inevitable from the start, and they were implicit in the worries of the Public Accounts Committee when it was concerned with the setting up of Rolls-Royce 1971 and with the prospect of the liabilities, present and future, of the RB211 once again landing on the taxpayer.

Among the lessons to be learned from this is that we cannot have enough scepticism on these questions—and here I echo that thought of the Paymaster-General, the right hon. Member for Birkenhead (Mr. Dell), in his excellent book about the general arguments surrounding great public projects of this kind. We should, so to speak, reach for our holster when we hear such expressions as "high technology", "national interet", "keeping national teams together" and so on. It may be that they have validity, but the scepticism should be very great. In this case, as the Committee seems to suggest, we should like a very strong reassurance that we are not in for another massive run of expenditure with the RB211–524 and that the methods of cost control will be as tight as possible, constant and regular.

Similar problems are raised on a more domestic scale by the Industry Act. The Public Accounts Committee says that it appears that considerable efforts have been made to establish a sound framework of financial control. Without discussing the merits and operations of the Act, there is no doubt that the Industrial Development Executive was an attempt to balance the need for parliamentary control and proper financial accountability for public moneys with the need, if there is to be intervention, for expertise and for getting to grips locally and regionally with the industries concerned. Again, we want to see in further developments about which we are daily warned in matters like the National Enterprise Board and so on that the balance is not tipped too far the way of the technocrat and that we do not grapple with complexities at the cost of taking the project even further out of public accountability.

I turn now to the Thames tidal barrier, to which my right hon. Friend the Member for Taunton referred and about which the Committee rightly commented in relation to the vast increase in costs. This is an example of the case which I tried to make earlier about the Public Accounts Committee moving into areas where it could comment before the stable door was closed. This is a good example of "a stitch in time". The project is not yet under way. Already, estimated costs have risen from £115 million to between £230 million and £250 million at December 1973 prices. Today the figure is probably about £370 million. It has the look about it of a monster piece of expenditure. It is an enormous enterprise, with costs escalating under a wide variety of central and dispersed authorities. There is a need for very strict measures of financial control. There is a case for the Treasury moving on from the formula that "it will be kept under close review" to one which is more positive while the project is merely in its present form of vastly inflating costs, most of them still on paper.

I say a word now about pre-contract hospital costs. This is a familiar story, and successive Governments have tried to grapple with the need to keep down costs and to increase the standardisation element. I share the surprise of the Public Accounts Committee that we have reached only a 16 or 17 per cent. standardisation element so far. We are told in evidence given by Sir Philip Rogers and Mr. D. Somerville that: … the maximum potential usage will be of the order of 16 to 17 per cent. I should have thought that standardisation could go further, and I sympathise with what was said by my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) when the Committee was taking evidence and he suggested that the medical profession might be slightly prima donna about coming to a hospital design late in the day and saying that all the equipment had been superseded by more advanced equipment which it must have. It may not be a matter affecting only the medical profession. But if we are in an age when we seek greater economies in the public services, such matters will have to give way to greater standardisation and less tendency to insist on the latest equipment at a very late stage in the design. I hope that the pressure for more standardisation will be developed.

The MRCA story is again an enormous undertaking. Fascinating issues are raised. My right hon. Friend the Member for Taunton reminded us of the need to ensure that when the requirements for such an international project are changed after the formula has been agreed and this raises unit costs, it may mean a change in the costs to the various partners. We should like to hear more of the studies which the Ministry is undertaking about the need to control these matters.

I query the point made in paragraph 192 of the report about modifications and equipments not required by all three countries and about the additional development which will be necessary for the air defence version for the RAF. I hope that this is not an example of our own forces requiring special versions, possibly to meet the niceties and perfections of their operational requirements, forgetting about the export and international saleability implications of the project. I hope that there is none of that in these special requirements of the RAF.

Like my right hon. Friend the Member for Taunton, I have some thoughts on the open-ended subsidy element referred to in that part of the report dealing with the Forestry Commission. I hope that the open-endedness will shortly be ended. The Treasury Minute says that arrangements are in hand to give the Commission freedom to negotiate for the land it needs without allowing an open-ended subsidy situation to arise. I hope that is so and that we are at the end of open-endedness, especially in view of the upheaval which could take place in private forestry in the near future as a result of proposals with which the Financial Secretary is familiar. We need to be watchful that the Forestry Commission is not in a position to commit public moneys on an open-ended basis through its land acquisition programme.

Reports of the Public Accounts Committee take us into matters which are out of the limelight. We are in the hinterland of Government administration. However, this is where precedents are set. This is where the big millions are paid out, and it is where inescapable commitments are launched long before they come into the political arena proper and we are told "It is too late. The decisions have been made." The more that this Parliament and its Committees can be reinforced and strengthened to prevent this situation from arising, the better.

It is a counsel of despair to say that we can only shut the stable door after the horse has bolted, because what the Committee is doing proves that that is not so. Policies can be monitored before it is too late and brought to the surface and the light of day, blinking and perhaps protesting and unready to be examined but to be examined all the same. We need more parliamentary endeavour of this kind, and the Public Accounts Committee under its present chairman has made a massive contribution to that effort.

6.50 p.m.

The Financial Secretary to the Treasury (Dr. John Gilbert)

I should like at the beginning to echo the tribute paid by the distinguished Chairman of the Public Accounts Committee, the right hon. Member for Taunton (Mr. du Cann), to the officials who have been servicing his Committee.

I should like also to congratulate the right hon. Gentleman on his chairmanship not only of the PAC but of the Expenditure Committee, where I was happy and honoured to serve under him for the first couple of sessions of the life of that Committee. It was so enjoyable an experience that I often wish I could be in attendance at the third powerful and distinguished committee, not of this House but of his party, which I am sure the right hon. Gentleman chairs with equal grace and distinction.

It is only proper that I should congratulate the PAC on its wisdom and good fortune in having the right hon. Gentleman as its chairman. I am not quite through with my congratulations. The Committee ought to be congratulated also on the width and depth of the work it has done in a quite short period of time under the right hon. Gentleman's chairmanship.

It is an odd experience to be Financial Secretary and attend the PAC. One arrives there for the first session, and everyone is glad. One then disappears, and the members of the Committee are pleased not to see one again until the next Session of Parliament. One has a slight feeling of being something of a cad in keeping off the Committee another Member who might be doing a useful job of work. But so be it. This place moves in mysterious ways, and I am happy to make that minuscule attendance and genuflexion in the nature of the way we do our business here.

This has been a wide-ranging debate, and the right hon. Member for Taunton drew attention to that. I think it may be for the convenience of the House if I follow the course taken by individual Members this afternoon rather than try to deal with the various subjects together.

I should have no difficulty in agreeing with the right hon. Member for Taunton that it is important that the Government do not approve projects unless they are based on realistic estimates of costs, but this is easier said than done. Whichever Government are in power, we all hope that our estimates of costs are realistic, but how can we ever know until we see ex post, many months or years later, how much our prophesies have been falsified? And in the nature of things they will have been disproved in some degree or other.

The right hon. Gentleman drew attention in particular to the MRCA and helicopters and said how easy it was to begin a collaborative enterprise, and how dangerously easy it was to continue with it once it had been started because it was a collaborative enterprise. I am not sure that it is all that easy to begin a collaborative enterprise. In my view there are far too few of them. This country and its allies in NATO could benefit greatly, both economically and militarily, if there were more such enterprises and many procurement arrangements were more standardised among the members of the alliance.

The right hon. Gentleman talked about Rolls-Royce and referred to the Treasury Minute on the subject. He regretted that the Treasury had not commented on the monitoring arrangements that were being proposed and he wanted to know whether they were satisfactory. I am happy to be able to say to the right hon. Gentleman that we believe—I can put it no stronger than that—that the detailed monitoring arrangements for Rolls-Royce are generally satisfactory.

The Department receives monthly divisional reports covering all the major aspects of the business of Rolls-Royce and comparing the achieved results with the budget that has been agreed with the company. There are regular discussions with senior executives of Rolls-Royce. In the longer term, the company's five-year plan is being discussed and there are proposals for looking further into the future. However optimistic it may be, there is a 15-year plan. I hope that these arrangements will commend themselves to the right hon. Gentleman.

The right hon. Gentleman raised specific questions about the leasing arrangements of British Railways. He referred to paragraph 131 of the report and said emphatically that these things should be done in the open. I understand what the right hon. Gentleman is getting at. Where there is a question of Government assistance being made available to a nationalised industry or to private industry it is imperative that this is done in an open and proper manner, but I am sure I carry all hon. Members with me when I say, and I feel certain the right hon. Gentleman will accept, that before one gets to that stage there are often times when it is appropriate for commercial confidentiality to be preserved and that nationalised industries have to be allowed a certain flexibility in making the commercial arrangements that will give them and their customers the best possible advantage.

The right hon. Gentleman spoke about spending on hospitals in his constituency in terms of getting value for money. I am seized of the point. It is often the case that we are afraid to spend enough. Spending less now than we need to is often a false economy, which is the point that the right hon. Gentleman made. It is difficult to know, because all the pressures in terms of House of Commons scrutiny and executive scrutiny are to retrench and to spend as little as possible. However much the results may appear to falsify that impression, all the pressures are there. The right hon. Gentleman has great experience of government and he will know that it is difficult to decide whether the economies that are made will prove to be false in the long run.

I am conscious of the fact, and have been since I came to the House, that hon. Members need to be well informed and have more research facilities at their disposal. I hope that the proposals which the Government have made recently will commend themselves to the right hon. Gentleman.

I thought that my hon. Friend the Member for Norwich, South (Mr. Garrett) made an extremely thoughtful speech. He stirred a certain controversy with the hon. Members for Guildford (Mr. Howell) and Folkestone and Hythe (Mr. Costain). I do not have the experience that the hon. Member for Guildford has in affairs of the Civil Service Department to be able to produce a critique as reasoned as he did, but I can say that a lot of what my hon. Friend said struck a sympathetic chord with me. I think that we in this House should always be alert to see what lessons the experience of other administrations and other ways of doing things have for us in the control of public expenditure and in the way in which we do our business.

My hon. Friend referred to the powers of State auditors in France, Germany and the United States. I am sure that these have been studied by previous Governments and will be studied again by the present Government. I think I am right in saying that though the Treasury has a great interest in these matters they are more the concern of the Civil Service Department than of the Treasury, and I shall see to it that my hon. Friend's remarks are conveyed to the right quarter. Being something of an accountant and an economist myself, I may say that his encomium for the employment of accountants, cost accountants, economists and engineers fell on very fertile ears.

The right hon. Member for Down, South (Mr. Powell) asked various questions on the brucellosis control scheme and discussed the implications for the efficacy of the organisation of that scheme on the present arrangements on the frontier between the Republic of Ireland and that part of the United Kingdom that he represents. I am sure he will appreciate that it is not for me to deal with frontier arrangements. They range far wider than a junior Treasury Minister dare venture in a debate of this kind. However, I shall ensure that his remarks are brought to the attention of my appropriate right hon. Friends.

The right hon. Gentleman asked various questions about the subscription of funds to a certain computer company in Northern Ireland and mocked at the non-disclosure of the name of the recipient company, saying that any intelligent observer could identify the company from the evidence contained in the entrails of the proceedings of the Committee. I have a great deal of sympathy with the right hon. Gentleman, but I am informed that this is not only the normal practice—I should be the last to rest on "normal practice" as an excuse for procedures of this kind—but that it was upheld by the Public Accounts Committee. Of course, all matters should be reviewed from time to time. Being as forthcoming as I can, which is not very much, I hope the right hon. Gentleman will accept that I shall try to get these matters looked at to ascertain whether we can make some progress in future.

The right hon. Gentleman criticised the inadequate time for briefing allowed to the advisory committee regarding the subscription of funds. I am sure he will have noted from the memorandum published by the Northern Ireland Department of Finance that these criticisms were fully accepted. I hope that the right hon. Gentleman will have nothing to complain about in future in this respect.

The right hon. Gentleman asked three specific questions arising from the affairs of the company. I have tried to get answers for him in the short time at my disposal. I will give him the answers that I have. I do not expect him to find them complete or totally satisfying, but my hon. Friend the Under-Secretary of State for Northern Ireland, who has been present on the Treasury Bench throughout the debate, has taken a careful note of the right hon. Gentleman's questions and will no doubt get in touch with him when any further information is available.

The right hon. Gentleman in his first question asked whether the company was moving into a position of profitability and when it could be expected to become profitable. So far as I know, the company is not yet profitable, but we are hoping that the progress that has been recorded will continue along the lines with which he is familiar.

The right hon. Gentleman asked about the American company taking up the option. The Americans have asked to be allowed to defer for a further year the taking up of the option. I have at present no information whether they will be allowed to do so.

The right hon. Gentleman asked about the total public commitment to assisting the company, amounting to £7½ million, and wanted to know on whom the liability for meeting these losses would fall and whether they would be added to the £7½ million commitment. The £7½ million represents the total commitment made to May last year, including the amounts that had already been expended some time before. Part of the £7½ million is still to be made over to the company. There have been and are likely to be adjustments to this arrangement.

I apologise to the right hon. Gentleman that I can be no more forthcoming on this occasion, but I assure him that I shall endeavour to see that he gets a better answer as soon as possible.

Mr. Powell

I am obliged to the hon. Gentleman. I understand that it is necessary that the Northern Ireland Office should in due course deal with the details.

Dr. Gilbert

I am obliged to the right hon. Gentleman for his comment.

The right hon. Gentleman, who was extremely eloquent about the extra-statutory nature of the scheme referred to in Question 550 of the evidence on page 8, asked whether the balance of consideration could possibly have been got right and implied, as it were, that all kinds of considerations might have lain in the balance on the other side. I am sure that it is not necessary for me to take the right hon. Gentleman through the report—he will have read it in great detail—but I think it right to put on record what is in the report in the answer to Question 553: When Ministers decided in April 1972 to take this on, they decided, because of the employment and security situation, that the factory could not be allowed to close". I am advised that that is the nub of the matter. It was not only the security but the economic situation which determined the decision that was made. It is not for me to say whether that decision was right. It was not taken by the Government of which I am a member. Indeed, as the right hon. Gentleman said, how can we ever know what the balance of events might have turned out to be had a different decision been taken? That is often the case with decisions but particularly in the delicate situation referred to in this passage in the evidence before the Committee.

My hon. Friend the Member for Llanelli (Mr. Davies) asked several questions about the handling of the Rolls-Royce affair. I have a great deal of sympathy with much of what he said. Indeed, my hon. Friend made an extremely acute analysis of how the liquidator was able to get £87½ million out of the Government of the day.

My hon. Friend's question about whether it was advisable for the liquidator to be relieved of the uncertainty of the prospects for the RB211 engine was particularly acute. These are not questions for me to answer, but I am extremely well seized of the further point of general principle raised by my hon. Friend about the ability of Her Majesty's Government to prevent foreign acquisitions of United Kingdom industrial assets where the consideration of those assets comes in the form of cash. It may be that we should take a quick and close look at what might appear to be a gap in the armoury of the defences that we have sought to erect for ourselves in this sphere. I undertake to do just that, at my hon. Friend's suggestion.

The hon. Member for Cornwall, North (Mr. Pardoe) started with certain remarks which I thought might be more appropriate to a future debate on a possible future report of the Public Accounts Committee than the report we are considering today. I accept what the hon. Gentleman said about public equity holding of itself not being enough, or not having been enough until now, to make sure that money is used wisely and profitably in the public interest.

However, although I would accept what the hon. Member said on those lines, I suspect that we flagellate ourselves too much about public supervision. It is right to be concerned and alert, but the record of private institutions investing public money often leaves a good deal of room for concern. If private institutions which were investing private savings had been more alert to their responsibilities in the Rolls-Royce case or many others, in my view matters might not in the end have required public money to save a crumbling industrial situation.

My hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) made some perceptive remarks about the standing of Committees and Governments. Far be it from me to echo them, because he then passed to criticism of the present Government and of the PAC, whose members are quite capable of taking care of themselves. But I was grateful to the hon. Member for Folkestone and Hythe for pointing out to my hon. Friend that, although we might not have been moving as fast as he wished, it is not right to say that the Government have been totally inactive in this field.

As my hon. Friend will know, the Department of Employment and the Department of Health and Social Security are still considering whether Giro cheques issued by the former Department, including those issued by the Employment Services Agency and the Training Services Agency, can be brought into the special DHSS arrangements and processed on its computer. Examination has confirmed the oral evidence of officials to the Committee that there are no fundamental technical difficulties, but there are, unfortunately, a number of procedural and financial difficulties. We are looking at these at the moment. If the results are as encouraging as my hon. Friend and I hope, we will be hoping to extend the facility to other Departments.

The Treasury is always discussing with other Departments the possibility of more systematic exchange of information about the use of Giro cheques and their extension to other Departments. It is the individual Department's duty to defend its means of money transmission and it has to take account of its own special needs. Giro is not always the sole or even the best appropriate method, although my hon. Friend and I would share a fundamental bias towards it because it is a public bank. I am glad to note that it has had support, at least in some respects, on both sides of the House. I should always be happy to discuss any detailed suggestions that my hon. Friend might have about any opportunities in this respect which are immediately or quickly available.

In one way, the speech of the hon. Member for Folkestone and Hythe was one of the most refreshing of the debate in so far as he disagreed with everybody else he quoted. After such a Niagara of unanimity and self-congratulation, the robust way in which the hon. Member laid about my hon. Friend the Member for Norwich, South on the subject of management efficiency, the hon. Member for Cornwall, North on the subject of televising the Committe and my hon. Friend the Member for Newcastle-under-Lyme about the arrangements already being made for the use of Giro showed how closely he had been following the debate.

The hon. Member asked me whether we could find a better yardstick for measuring the efficiency of control of various projects in which the Government are involved. I do not know that I can give any assurance tonight. It sounded as though the hon. Member were seeking a simple panacea, but he knows the difficulties, having served two distinguished spells of office on the Committee.

The hon. Member for Guildford, in his usual thoughtful way, paid tribute to the Northern Ireland officials who have to work in the most difficult conditions. I echo what he said. His own experience in Northern Ireland and at the Civil Service Department gives him an invaluable background for evaluating the reports.

The hon. Member talked about the Industry Act and the balance provided by the Industrial Development Executive and cast his eyes ahead to the National Enterprise Board, touching on the subject of public accountability. The object of the NEB is precisely to achieve public accountability where public money is made available to private industry. I am sure the hon. Member appreciates that this applies not only in the narrowest accountancy sense of the word but in the sense of accountability to society as a whole for the use to which that money is put and the investment policies of the firms which are fortunate enough to have access to public funds through the NEB.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

Unfortunate.

Dr. Gilbert

We shall see. There has been no shortage of companies seeking funds from the public purse in recent months. I think that most of them, rightly or wrongly, consider themselves very fortunate when their request for Government assistance succeeds.

The hon. Member for Guildford, citing the Thames tidal defence in particular, argued that it was surely possible to shut the stable door before the horse bolted in some of these huge projects. Doors can always be closed early if the will is there. We are discussing situations in which things have gone wrong, but Maplin is a perfect example of the door being shut before expenditure had taken place. The London ringways are another example of a huge expenditure of public funds in which the decision to draw back was taken at the right time.

The hon. Gentleman talked of the difficulties which arise when changes are made in initial formulae, as in the MRCA project. It is self-evident that changes of this sort are or can be endemic in multinational procurement arrangements, particularly with so sophisticated a piece of equipment with such a long lead time. Startling though some of the figures are, however, the cost control of MRCA—I speak as one who served on the Defence Sub-Committee of the Expenditure Committee—has been extremely good and probably much better than quite a few procurement projects which have been solely the responsibility of Her Majesty's Government. I do not seek to make a party-political point. This is true under both Labour and Conservative Governments. As I said earlier to the right hon. Member for Taunton, I do not think that one needs to take too pessimistic a view of multinational projects in terms of their cost control implications.

The hon. Member for Guildford made some further remarks about the Forestry Commission and about hospital contracts. I was not to clear about whether there was a specific point rather than a general point to his remarks. I think that it would be best if I were to study what he said and possibly write to him if there was anything specific in his remarks.

I am grateful to the House for not pressing me on matters of detail in so wide-ranging a debate. There are lessons for all of us in every debate on a Public Accounts Committee report. The scrutiny involved in producing these reports involves a process of education—education of Members, officials, Ministers and the public. This is a process from which only good can come. I revert again to the remarks of my hon. Friend the Member for Norwich, South. Most of what he had to say was directed to the desirability of getting greater and more detailed scrutiny of every possible way in which public money is spent, whether it is spent by public institutions or by private institutions which have advocated such expenditure.

I am grateful for the absence of partisanship which has characterised the debate. That is to some extent a result of the fact that we are discussing the 1972–73 accounts of the previous administration. I do not delude myself that the debate on every report of the Public Accounts Committee will be conducted in quite so non-controversial a manner. However, having said that, I am happy to advise the House to accept the motion.

Question put and agreed to.

Resolved, That this House takes note of the First, Second, Third and Fourth Reports from the Committee of Public Accounts in the last Session of the last Parliament and of the Treasury Minutes and Northern Ireland Memorandum on those Reports (Command Papers Nos. 5786 and 5823).