§ 3.34 p.m.
§ That this House takes note of the First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth and Tenth Reports and the First and Second Special Reports from the Committee of Public Accounts in the last session of Parliament and of the Treasury Minute and Northern Ireland Memorandum on those Reports (Command Papers Nos. 7402 and 7371).
§ It is an honour to move such a motion for the fifth time. My chairmanship of the Public Accounts Committee has certainly been by long measure the most rewarding and valuable experience that I have had in the House of Commons.
§ The Committee, like this debate, is concerned, or should be concerned, with the pennies and the pounds taken from the public—too many pennies and too many pounds, some may think—in taxation, and with how they are spent. The Committee is, after all, the only Committee of this House charged specifically and exclusively with the supervision of Government expenditure.
§ This House is supposedly the guardian of the public purse, although I have advanced the view, and state it again, with no fear of contradiction, that it is as effective in the control of public expenditure as the great King Canute was in controlling the tide. But I believe —this will be the theme and conclusion of what I have to say—that there is now an opportunity for us to change that situation very much for the better. Whatever the position may be, I hope that the House will think that the work that the Public Accounts Committee does is valuable in the general interest.
§ I believe that it is more important in this debate to make points of a constructive and general nature than to sensationalise. It is always so easy to sensationalise. I am sure that my colleagues who serve with me on the Committee will agree that there are many odd examples of misapplied expenditure, of carelessness 1037 or ineffectiveness, out of which one can make a sensation. I regret that we do not have a Committee of the House to inquire into the good things that are invariably done by the Civil Service and so little noticed.
§ I reflect also that it is the chief purpose of the Public Accounts Committee not to fall into the easy temptation of endeavouring to attract publicity to itself or to its individual members by making a great song and dance about particular examples of difficulty that we may have discovered. I believe that it is much more important that we should make some observations and recommendations out of the very wide experience that we have had, which I hope will lead to a better parliamentary control of expenditure, greater efficiency in the public service, and, from the point of view of the taxpayers, very much better value for money.
§ I hope, Mr. Speaker, that you will think it proper if I say how conscious I am of the debt that I owe to my fellow members of the Committee, a number of whom are present, for their support and conscientiousness. Without in any way displeasing the remainder of the Committee, perhaps I can pay special tribute to my hon. Friend the Member for Folkestone and Hythe (Mr. Costain), whose record of attendance in the Committee and whose record of conscientiousness among a group of Members who are entirely devoted are undoubtedly unsurpassed.
§ I would like also—indeed, I am so instructed, on behalf of the Committee—to thank the many persons who have given us individual help and support. It may be a little old-fashioned to say"Thank you ", but it seems very much in order in the Chamber. I thank the Clerk to the Committee, who has rendered outstanding and competent service to the Committee. In the presence of the Financial Secretary to the Treasury, who is himself a member of the Committee, I ask the right hon. Gentleman to be good enough to convey our thanks to the Treasury witnesses.
§ We are glad to see the right hon. Gentleman present for the debate. The Public Accounts Committee has a strong alliance with the Treasury. It is a most happy arrangement, but that is not to say that we are in any way subservient to the Treasury—very far from it. But 1038 we have a marriage of convenience, which I like to feel—it is for others to comment on this matter—is working particularly well at present in the common interest. I also like to feel that as a result the House is the gainer.
§ I should also like to thank the accounting officers who appeared before us for their invariably willing and ready cooperation. By no means least, I thank the Exchequer and Audit Department and the Comptrollers and Auditors General, Sir Douglas Henley and Mr. Sythes. Both are good friends of the Committee. It is Sir Douglas whom we see mostly. If he will not mind my saying so, or feel that his authority or impartiality is in any way mitigated by my remarks, I would say—I know that this has the support of the Committee—that of the many distinguished servants that that Committee and House have had, Sir Douglas Henley sets an outstanding example.
§ I have noted with interest that other Committees of the House, such as the Expenditure Committee, in its eleventh report, on the Civil Service—I see the distinguished Chairman of the General Sub-Committee sitting in his place—and the Procedure Committee, in its first report for 1977–78, have had a great deal to say about the role of the Comptroller and Auditor General and his Department. The Comptroller and Auditor General himself has commented, in his usual constructive way, on the various recommendations that affect his Department. However, I think it right to remind the House that it is the PAC that has developed, over many years—indeed, over a century—a close and mutually helpful relationship with the Comptroller and Auditor General and his staff.
§ It is no secret that I have expressed certain views about the work of the PAC, which I should like to see extended in the general interest of the House and of financial order and discipline. I know that Sir Douglas Henley has views of his own about the development of his office. It is appropriate that I should mention that the PAC proposes to discuss these important matters with the Comptroller and Auditor General later in the Session. Should it prove possible, and should the Committee agree, it may well be that we shall want to make our own recommendations to the House. I hope that the House will think that appropriate1039
§ Before making some general observations about Government expenditure and its control, and the effectiveness of Parliament's scrutiny of expenditure, I should like to refer to the reports themselves. The PAC, in this Session of Parliament, has had its heaviest ever work load. We have published 12 reports, covering 61 main subjects. I often wish that this was not merely a debating Chamber but was also, in a sense, a lecture room, so that there could be visual displays. When I hold up the reports themselves, it is easy for hon. Members to see the huge volume of work in which my colleagues have been good enough to engage.
§ It is remarkable to examine how the work of the PAC has increased over the years. When I was first elected to this House, in my first full financial year here-1957–58—the PAC published 36 pages of reports to the House, containing 136 paragraphs. This year we are publishing 152 pages containing a total of 491 paragraphs. So it is that the work of the Committee has grown. That is a reflection of one fact and one fact only—the enormous growth in the influence of Government in the daily lives of each of our fellow citizens.
§ As hon. Members would expect, as in former years the Committee has continued to carry out its work in an entirely nonparty spirit. Whatever differences of opinion Members may have on the Floor of the House, in the Committee we are united in our aim of contributing to a better management of our country's resources. The House may like to know that in our probings of the quality of departmental administration we once again had no difficulty in agreeing on the terms of all of our reports, without any formal division in the Committee. I am grateful to my colleagues for that atmosphere and for that aspect of their support for our work
§ Our first special report was a historic one, because after lengthy consideration we decided that strangers should be admitted during the examination of witnesses for the remainder of the Session. Previously—indeed, ever since the Committee was first appointed, in 1861—the Committee had always sat in private. There were differing views about this 1040 issue. Some thought that accounting officers would be inhibited from being as frank with the Committee as they had been in the past if the press tended to headlines and, perhaps, trivialise their evidence, and that consequently the Committee might be less effective. As far as I can tell, those forebodings have not been realised.
§ After an initial burst of enthusiasm from the press and members of the public, their interest in the main work of the Committee subsided—more is the pity, for nothing is more important than watching Members of Parliament and endeavouring to encourage them better to scrutinise public expenditure. But there it is. I report the facts as they are. On some occasions no members of the press graced our deliberations with their presence. But even when they do, I have not been able to detect that accounting officers have been less than normally co-operative in helping us.
§ If our inquiries on a particular subject are likely to extend to sensitive areas of confidential information, the Committee has been very willing to receive information privately, as indeed we have on a number of occasions. Some sittings have, therefore, continued to be held in private; otherwise our examination of witnesses has been conducted in public.
§ I assure the House, as I believe I should, that the PAC has remained as effective as ever in its deliberations. I warmly welcome the decision of the Committee, made, as I have said, after the most careful deliberation, to sit in public. I welcome it for one reason especially, at which I have already hinted; it must be right to endeavour to associate the public more with the work of Parliament and particularly with the control of expenditure.
§ I welcome the decision for a second reason, too. I think that the broadcasting of Parliament has so far been a failure. It has, alas, represented the House in an unhappy and unfortunate light. I regret that particularly because I am a proponent of the broadcasting of Parliament. For the public to have the idea that all that happens in this House is that we are one side against another, in a state of perpetual warfare and fisticuffs, is perfectly absurd. If it is thought right to report this House and its proceedings as fully as possible, I hope that in due time 1041 we shall introduce television into the proceedings. I think that that would give a very much better and more balanced impression.
§ Even so, I regret that the broadcasting has almost exclusively been about the warfare and not at all about the constructive work that has been done in one way or another. I hope that we shall consider—this would be for the Committee and the House to decide—the introduction of television into the PAC on an experimental basis, so that, at the very least, members of the public could see Members of Parliament—their Members—engaged in a very serious examination of the nation's affairs. That would go some way to restoring the balance of opinion that now exists, unhappily, against us through our own fault and through our own timidity.
§ Mr. Michael English (Nottingham, West)
I, too, would like Committee proceedings to be broadcast. Is the right hon. Gentleman aware that, unfortunately, the BBC was violently opposed to having a House of Commons broadcasting unit, yet refuses to put its own equipment in the Committee rooms, wants to use the equipment of a private firm but is often reluctant to pay for it, with the result that hardly any Committees have even been recorded for radio?
One understands the right hon. Gentleman's desire that we should go further, but we need to reform the present system whereby, in effect, the BBC is, for the pettiest of reasons, virtually refusing to broadcast Committees.
§ Mr. du Cann
I was not aware of those detailed points. My colleagues and I in the Committee had thought that we would make an inquiry into the number of times material that we know has been recorded has been used. When we make that inquiry I shall certainly bear in mind what the hon. Gentleman said. I am grateful to him for giving me that information.
I come now to the reports. I said that we had covered 61 subjects. They range, as usual, over a wide variety of departmental activities. If we have thought it right or necessary to be critical anywhere in our reports, I hope always in dignified language—I do not believe that criticism is enhanced by vulgarity— 1042 we have also sought to be constructive in our approach. As in former years, we have been concerned with the improvement of Government administration and the promotion of greater efficiency over a wide field of public expenditure.
As it is bound to do while there is direct rule in Northern Ireland, the Committee has again examined the Northern Ireland accounts on the basis of the reports of the Comptroller and Auditor General for Northern Ireland, Mr. Sythes, to whom I have already paid a tribute with which I know members of the Committee will wish to associate themselves.
Our seventh report dealt with five separate Northern Ireland subjects. I do not think that they call for any special comment from me. I leave it to hon. Members for constituencies in Northern Ireland to comment on those matters if they wish to do so.
The largest groups of subjects that we examined was in the field of the Department of Industry and the Department of Energy, where we looked at 13 matters mainly dealt with in our eighth report. Possibly the most important of those subjects from Parliament's own point of view was the accountability to Parliament of the National Enterprise Board and the British National Oil Corporation. We examined the accounting officer of the Department of Industry and also had the pleasure of having in front of us the chairman of the NEB, Sir Leslie Murphy, who was very helpful to us, and the accounting officer of the Department of Energy. We examined those gentlemen carefully and at some length.
We were particularly concerned with the effectiveness of the current arrangements for ensuring that there was an adequate parliamentary oversight of the vast sums of public money that are being channelled through the NEB and BNOC. I wonder whether the House realises how large those sums are. The NEB received from Parliament an authority to spend a maximum of £1,000 million. Imagine being a director of a merchant bank with a free run on that amount of money. En the case of the BNOC the total authorised by Parliament is £600 million. That may sound much smaller, until one bears in mind the open-endedness of the national oil account and the fact that that huge sum is also available to the Corporation.
1043 I am not arguing whether we were wise to do it, but Parliament in its wisdom created those two new quasi-entrepreneurial enterprises—the NEB and the BNOC. The amount of money that they have to spend is beyond ordinary imagination. That may be very proper and very sensible, but what Parliament did not do—I fault us over this—was to establish an adequate method of supervision and control of that expenditure. That was a deplorable omission.
In our view, the Public Accounts Committee is the appropriate Committee to exercise oversight of the expenditures of those bodies. We were not satisfied that we could carry out the duty satisfactorily without the Comptroller and Auditor General's being granted access to those bodies' books and records. We recognise the sincerity of the opposing views on this important matter—I hope that the House will agree that they are fully, properly and fairly set out in our report—but after carefully weighing the arguments put before us, we recommended that appropriate arrangements for such access should be made.
I was interested to see that a former distinguished Chairman of the Committee, Lord Boyd-Carpenter, whom many in the House will remember with affection, endorsed our views in a recent letter to The Times. I note from the Treasury minute that the Governmentare still considering this matterand will shortly make a statement to the House. I hope that that statement will be positive. A negative response to the Committee's recommendations would not be acceptable to the Committee, and I am sure would not be acceptable to the House, for two reasons.
First, the sums involved are very large. Bodies established by Parliament must be accountable to Parliament for the moneys entrusted to them. Secondly, I do not share a fear expressed by Sir Leslie Murphy, to whom I have already paid tribute and for whom—if he will allow me to say so, and will not think that he is damned by praise coming from my mouth —I have a most warm regard. He believes that if he had to make his books accessible to the Comptroller and Auditor General that would prevent him from operating in the way in which he would 1044 wish to operate, that it would destroy the confidentiality between the NEB and its client customers. I do not believe that that would happen.
Indeed, if hon. Members examine the evidence given to the Committee by the Scottish Development Agency, whose books and records are open to the Comptroller and Auditor General, they will find evidence given by those who have responsibility for that body that the fact that the Comptroller and Auditor General has access has not inhibited their arrangements in any way. What is sauce for the Scottish goose is undoubtedly sauce for the English gander.
I repeat that a negative response would not be acceptable. I must tell the Financial Secretary that should the response be negative this is not a subject that we shall leave alone. We shall return to it again and again until we have our way, in the interests of Parliament and of financial responsibility.
In referring to the industry and energy group of subjects, I should like briefly to mention two further matters relating to parliamentary control of the BNOC's activities. I do this, although they are detailed and complex matters, because they illustrate a trend—a trend that needs to be arrested.
The first matter concerns the participation agreements which the Committee examined in the previous Session, 1976–77, when we found that the statutory control arrangements were not biting in the way that Parliament might have expected, because the control applied to payments of money, whereas the form of State participation had been changed to an option to buy oil. The Department of Energy accepted that Parliament needed to be informed of the arrangements made, and it was doing that by laying copies of the agreements in the Library. We thought—I hope that the House will endorse this opinion—that in such circumstances the Department and the Treasury should have considered the spirit of the statute and should have informed Parliament when the parliamentary control procedures were no longer applicable because of the changed circumstances.
The point is simply put. If Parliament grants the power, authority and money, and if Departments, or the practical bodies operating under the aegis of 1045 Departments, want to change the arrangements, they must tell Parliament what they propose. They must not do what they propose to do in changed circumstances behind Parliament's back, or pretend that they are informing Parliament by leaving a piece of paper in the Library, where one may perhaps blunder across it.
The second matter related to the forward sale of oil by the BNOC to a United States corporation, Brit Oil Incorporated, set up for the purpose of making these purchases by dollar borrowings from the banks. We understand the commercial attractions of those arguments to the Corporation, but they seem to us to circumvent—undoubtedly they did circumvent although, perhaps unintentionally—the limits which the Government and Parliament had set on BNOC's capital financing. We recommended that Parliament's control over BNOC's financing should be restored and that the Treasury should consider the general implications of the case.
Right hon. and hon. Members will see the point. The Corporation was making these commercial arrangements. They were legitimate and valid. Probably they were normal in the oil industry. I am not an expert in that industry, but I am told that they are. However, it meant that the financial limitations announced to Parliament and imposed by Parliament were again being evaded. In our view that was wholly unsatisfactory.
I am pleased to see in the Treasury minute that the Treasury and the Department of Energy accept that any similar future transactions by the corporation should be reported to Parliament and that the Treasury will bear our comments in mind if similar circumstances arise in future with other public corporations.
§ Mr. Peter Hordern (Horsham and Crawley)
Like my right hon. Friend, I noted with interest what the Treasury minute said. But I refer my right hon. Friend to the Committee's eighth report, paragraph 40 of which says:We note that the Treasury consider that there should be strict limits on any further forward sales.This seems to be a very different matter from what the Treasury is now saying in its latest minute where, as my right hon. Friend says, it simply accepts that any similar future transactions by the cor- 1046 poration should be reported to Parliament. This is a regressive recommendation. It seems to me that the Treasury is going back on its previous observation that it would control very strictly the means for financing of this kind by the BNOC. Does my right hon. Friend agree?
§ Mr. du Cann
I had not construed it in that way, but now that my hon. Friend the Member for Horsham and Crawley (Mr. Hordern), with his great experience of these financial matters, makes the point, I shall pay attention to it. It is agreeable that the Financial Secretary has heard this exchange. Perhaps it is a matter upon which he will comment and perhaps, in the light of what he says, my hon. Friend the Member for Horsham and Crawley and I might follow it up in the Public Accounts Committee over the next few months.
I am glad that we have had this small exchange because, at the risk of over-egging the pudding, I repeat that here is without doubt an important point of principle. At all times Parliament must be kept fully informed about expenditure. If Parliament sanctions expenditure of a certain kind, it is unacceptable for the arrangements to be varied without Parliament's permission being sought in advance and without Parliament being kept continuously and fully informed. However heavy the burden of paper on us all, it is better for Parliament to be given an excess of information rather than too little, and it is better that Parliament should be asked continuously for permission than that Parliament should be ignored in the way that has happened in these two cases.
Another matter ejusdem generis, as the lawyers might say, was an important general question which arose from our examination of commercial operations carried on by various public bodies, viz., the issue of comfort letters. Broadly speaking, such letters are issued by a parent body to give some backing or assurance to lenders to one of its subsidiaries. Whatever the measure of comfort so conveyed to the lender—and it was pointed out to us in evidence that such letters did not constitute a legal liability—they must leave the body which issues them in a position of some discomfort. At any rate, if they are issued by a Government Department or public body financed by and trading on 1047 Exchequer credit, it seems to us in practice they must pledge public faith to the full amount of the borrowings which they cover. But apparently, because they are not legal liabilities, they are said to fall outside the category of Government guarantees.
The significance of that is that guarantees count against the statutory limits of public bodies and therefore are subject to parliamentary control, whereas comfort letters do not and are not. The significance of this matter from the point of view of the control of expenditure will not be lost on the House. We are therefore glad to see from the Treasury minute that the Government have recognised the cogency of the Committee's comments and that in future Parliament will be informed of the issue of comfort letters by any Government Department. However, they have not extended this procedure to cover comfort letters issued by other parts of the public sector, and this could be the major source of them.
The Treasury will now require that sponsor Departments should be told of any letters covering borrowings above a specific limit and that the public bodies concerned should treat such letters as legally enforceable contingent liabilities in their accounts.
Those measures are welcome as far as they go. But I have no doubt that the Committee will want to question the Treasury closely on the matter when we take evidence later this Session. Again, I do not know whether it will be convenient for the Financial Secretary to comment on the matter but he, with his sharp mind, will see at once the point that I am making. The issue of comfort letters without prior parliamentary approval is an extension of Government expenditure without the prior sanction of this House.
§ Mr. A. P. Costain (Folkestone and Hythe)
Does not my right hon. Friend, with his banking experience, agree that if a public company issued such comfort letters to its subsidiaries and did not show them in its balance sheet, it might be a matter of some concern to its auditors?
§ Mr. du Cann
My hon. Friend the Member for Folkestone and Hythe, with his experience of commercial matters, is 1048 entirely right. That is a good model for the Government to follow. The whole House may reflect how easy it seems to be for parliamentary limits on expenditure to be exceeded. In every case, I am sure that there were good practical commercial reasons. But whatever they were, it is not good enough and not acceptable. It shows, too, that in this House there is a need for constant vigilance on the subject of commercial expenditure, especially now that the Government are getting increasingly into the practical area of commercial operations.
I turn to another large group of subjects—that of defence. We reported on seven different matters in our third report. I have not the time to refer in detail to certain specific criticisms that we felt it necessary to make of certain aspects of the administration of the Ministry of Defence, including delays in getting settlement of claims for supplies and services and the little matter which attracted some public attention of a tug which cost £3.4 million and then was in harbour more often than it was at sea—HMS"Wakeful ", described by the newspapers as HMS"Wasteful ". There was no intention to sensationalise, but these individual examples are always attractive.
I refer to two matters, each of which involves the use of very considerable resources. The first is the development and production of the Tornado aircraft, referred to in our third report, costing very large sums of money. It was a collaborative venture with our European partners. This aircraft is not yet in service with the RAF, but we have no reason to dissent from the Ministry's views that progress on the project has been encouraging.
Large collaborative projects such as this raise considerable problems which often are difficult to solve, for example, imbalances on the share of costs and work. In this case, the memorandum of understanding between the various Governments had not set out precisely the basis to be adopted for evaluating the work done. I am sure that I speak for the whole Committee when I say that I am glad to note that arrangements for collaborative projects on this very large scale will be kept under review.
It seemed to me and to the Committee that collaborative ventures will 1049 be dominant features of important industrial work in Europe. It is important that we should learn and benefit from experience.
The second aspect of defence involves the refitting of naval vessels in the home dockyards. That is referred to in our third report. An earlier Committee had been disturbed by the dockyards' consistent failures to estimate the costs and times of refits with a reasonable degree of accuracy. I shall not bore the House with the details, but hon. Members would be horrified if I detailed times and figures. Millions of pounds and many years seem to have been spent and passed in a remarkable way.
We were even more disappointed that in the intervening years since the previous report, despite the close attention given to control procedures, there has been no material improvement. We thought that the dockyards were right to give prime importance to realistic work planning and control procedures which members of the Committee saw on an instructive visit which we paid to Chatham dockyard. Another innovation in the Committee is that it travelled to see some of the subjects of its inquiries.
The Committee noted that the dockyard had substantially reduced the estimated work package for Leander frigate major refits. I hope that the Ministry will be successful in realising these projected savings and the projected further improvements to its estimated planning and control procedures.
Apart from saving taxpayers' money by reducing refit costs, the availability of ships for operational service will be increased. I do not think that there is any difference of opinion between the Minister and the Committee about the need to fulfil these aims, but it is disappointing that so little progress has been made. It is disappointing not only that ships are brought back into service as rapidly as they might be but that huge amounts of public money seem to be spent in a way that appears to some extent to be unnecessary. At a time when defence expenditure has been heavily cut, it is more than ever necessary that we should get value for money and that money should not be wasted.
The third group of subjects relates to the revenue departments—the Customs and Excise and the Inland Revenue. The 1050 Committee reported on seven matters. The activities of the taxman and any suggestions for increasing the amounts that he collects might not evoke much sympathy in the breasts of many taxpayers, but it is the Committee's privilege and duty to examine cases of tax avoidance with a view to ensuring that our tax burdens are shared as equally as possible under the existing laws.
We were much impressed by the evidence given to the Committee by the present chairman of the Board of Inland Revenue. At present, 85,970 people are employed by the Inland Revenue. Some time ago I said that there were more people in the Inland Revenue than in the Royal Navy. It has proposed that the number of staff should be increased in the next two or three years to as many as 90,000. The work that is being done and will be done to hold the numbers and perhaps to reduce them earned the Committee's warm approbation.
We made a number of inquiries into the Customs and Excise Department and into the administration of VAT—a bothersome tax—in particular. We look forward to seeing the Customs and Excise report on the possibility of a simplification of the administration of that tax.
Having looked at these subjects with care I am convinced that we must ensure that our tax system is as simple as possible. If there are so many people employed in the Inland Revenue and the Customs and Excise Department it is because of the burden that Parliament so carelessly and so often puts on the shoulders of the body of men and women whom I regard as being competent and devoted. That lesson also came out when we were examining the administration of benefits. The systems are often so complicated that those who administer them cannot understand them.
Health and social security were a fourth group of subjects. The Committee visited the Royal Liverpool hospital. Cost increases for the building of that hospital had been the subject of criticism in earlier years. That hospital project was deemed to cost £12 million. Then it looked as if it might cost up to £50 million and be three years late.
We were able to discuss the subject on the spot with DHSS officers, representatives of the health authorities and senior 1051 managers of the building project. The interviews provided a useful and informative background to our review of the progress made which the Committee describes in the seventh report. The Committee was also able to satisfy itself about measures taken to restore effective financial control over the final stages of the project, including the extensive fire control measures which had to be taken.
I spent time on this matter for one reason alone. Year after year accounting officers from the Department of Health and Social Security have appeared before the Committee. I quoted the figures for the increased cost of this hospital because I am sure that every hon. Member will reflect that each £1 million spent in a way which involves waste, carelessness or incompetence in respect of an existing project, is £1 million denied to another worthy cause in the Health Service.
There is a great demand for additional hospitals in other parts of the country. The fact that so much money has been spent unnecessarily in Liverpool means that other places, including my constituency, cannot have new hospitals, kidney machines, and so on.
That is not the only matter that concerned us. We made further inquiries into steps taken by the Health Departments to impose an effective control over the cost of administrative and clerical staff in the National Health Service. That has been a matter of concern to the Health Departments and to the Committee.
In this case, as in previous cases, the Committee was impressed by the evidence given to us by the present accounting officer who is a man of great determination and competence. We shall continue to watch how effective these measures prove to be in practice.
In the 18 months after the reorganisation of the Health Service the number of administrative and clerical staff increased by 20 per cent., to 97,500. The middle and higher management grades increased by 30 per cent. Those figures show how necessary it is for a Committee of the House to examine these matters with care.
Another matter of concern to the Committee was the high cost of London's undergraduate teaching hospitals. There 1052 seemed to be large unexplained differences in running costs between these hospitals and others. We were surprised that the Department's knowledge of cost of major variations between different types of hospital was not better. It seemed to indicate a lack of ability to carry out effective monitoring of the current situation in our hospitals. I hope that that will be remedied.
A fifth group of subjects involved agriculture. The Committee examined a variety of matters including aspects of the relationship between the EEC arrangements and those of the United Kingdom, measures to combat fraud and exploitation of Community arrangements, and so forth. Whatever differences of view there might be about policy issues in the CAP, which is not the Committee's concern, 1 am sure that we all agree that the United Kingdom subsidy schemes should be efficiently and economically applied.
Time does not permit me to refer to the many other subjects which the Committee examined. The Committee was concerned about the slowness in increasing the tolls on estuarial crossings in order to meet the Government's policy objective of recouping the full costs from users. These schemes were approved by Parliament on the basis that certain revenues would flow. In the event they have not. So Parliament, through the slackness of Ministers, or the lack of proper administrative procedures, is misled. Following our concern about the inaccuracy of the traffic flow forecast for the Humber bridge and the high level of the proposed tolls, I noted that there was a spate of interest in the press about progress on the construction of the bridge. I hope that that is a healthy development.
We examined a weakness in the method of calculating capital grants to housing associations which resulted in overpayments of grants for two and a half years. We expressed further concern about other aspects of these grants on which no less than £1,000 million has already been paid out and which did not seem to give adequate protection to the Exchequer's equitable interests in the future. It seemed to us that there had been considerable slackness in the policing of the affairs of these housing associations and we shall be looking further into controls over them because they presented a very disturbing picture.
1053 Other inquiries ranged over such diverse matters as awards to university students, the financing of the National Union of Students' subscriptions, the operations of the Stationery Office, the Forestry Commission and the procurement of computers. On the particular and major question whether the public sector pension schemes should be financed on a funded or a pay-as-you-go basis, I am glad to see that all this has had a good deal of public debate since we reported. I believe that it has far-reaching monetary, financial and economic implications affecting almost the whole of the public sector. I refer to our sixth report, and 1 am glad to note that the Treasury will be examining the matter and reporting to us further. I know that we are also awaiting the report of the Wilson committee.
The present position, I think, has many Members worried. The implications are very far reaching indeed. There is the cost of public sector pensions and the question whether they should be funded or financed on a"pay as you go"basis or some of each. Not least in our considerations is the fact that the most powerful people, in economic terms, in our nation today are the pension fund managers. This House must decide whether it is appropriate that they should be wholly uncontrolled. I do not doubt that the managers are very competent people. This is a matter that we must discuss together before long.
I hope that no Member of the House, or anyone else, will say that we have been in any way parochial about our investigations. Nor, I hope, can we be accused of having allowed our feet at any time to lose contact with the ground.
I return to general questions. Those who are critical of Parliament's machinery for the control of expenditure argue that the Public Accounts Committee is a mere inquest. So it is; that is what it was set up to be, with its narrow remit. But my argument is that it is indispensable in any effective control system. If it did not exist it would be necessary to invent it. Perhaps there should be other machinery to consider and better to control contemporary expenditure. Even if that is so —and I am one who has argued that—I point out that the Public Accounts Committee is not exclusively concerned with the past. We have determinedly and deli- 1054 berately set out to assist in this matter of parliamentary control by looking at the whole structure of our expenditure in recent years.
We have reported to Parliament about a particular matter which I am sure has the most significant implications for the future working of expenditure in the public service, namely, the relationship between cash limits and Supply Estimates, whereby formal parliamentary control of expenditure is exercised. We have dealt with this in our fourth report. Cash limits now cover 65 per cent. of all Supply expenditure. The system of cash limits has never been debated in the House. Is not that amazing? A new system for dealing with expenditure has never been discussed, nor have we ever given authority for individual cash limits on any departmental or sectional activity. Is not that amazing, also?
What happens is that the Cabinet and the Treasury decide these matters and are decent enough to tell us what they have decided by publishing a White Paper. This is a deplorable state of affairs.
However, in our discussions with the Treasury about these matters, the Treasury put to us two basic propositions. The first was that the price basis for the Supply Estimates should be brought into line with the price basis of the cash limits. We were quite clear that this was much more than just a technical change; it meant that in future Parliament would be asked to vote money at the start of the year for all Government services in terms of the total expected to be spent, after taking inflation into account. Consequently, where cash limits apply, Supplementary Estimates would be exceptional. They would be regarded as such, instead of being what they are, an inevitable result of large pay and price rises during the year. Assuming that we took the necessary steps to do so—I stress this proviso—Parliament would be able to subject the Supplementary Estimates to a much more effective scrutiny. This is what we recommended earlier in our third report of Session 1976–77. We believe that it will restore a most valuable element of parliamentary control as well as promoting a much greater degree of realism in departmental control and management. So far, so good.
I come now to the second proposition, which was that the boundaries of the Vote 1055 and the cash limits should be brought into line right across the board. What this will do will be to put a cash limit tag on Votes covering the greater part of Government expenditure. The Votes related to demand-related services; that means that the open-ended ones, such as social security benefits, to which it would be unrealistic to attach a cash limit, will be separately identified. This should lead to greater clarity and comprehension in the determinants of expenditure and thus further improve control.
However, we have asked the Treasury —I put this in parenthesis, and I am sure the Financial Secretary will agree—to keep under close review the scope of the non-cash-limit linked services, to see whether there is a possibility of extending this. Perhaps there will be scope. Perhaps it will be difficult, and the scope may be small. I do not know. But, with all the emphasis I can command, I beg Parliament to support these proposals in general, because I believe that they will strengthen parliamentary control and will certainly help to keep annual expenditure within the levels decided by Government and Parliament. I am quite certain that the institution of cash limits in 1976, which we in the Public Accounts Committee warmly welcomed—although I have been critical about method, I am wholly in favour of the principle—had a considerable impact at that time in helping to restore a measure of confidence.
Our report stressed that the main controls on public expenditure must be exercised by ministerial decisions concerning the size and growth of the various expenditure programmes. Those who wish to reduce or increase expenditure on particular programmes must first change the expenditure projections set out in the Government's annual expenditure White Paper and accept the consequences of that. I think—and the Public Accounts Committee believes this to be a fact—that we are at a watershed in the matter of controlling expenditure.
The apparatus for enhanced and more effective control—because of the outstanding work that the Treasury has done and because of the co-operation between the Public Accounts Committee and the Treasury—is to hand. If Ministers and Parliament have the strength of will and the 1056 imagination to use it, we shall all be vastly better off. That is the position. The apparatus is here. I hope that Ministers have that determination. I hope with all my heart that the House has that determination also.
The growth in power and influence of Government—whether it is good or not so good is largely a matter of party political opinion—is a fact. So hard has it become for this House to challenge Government, to check Government and to scrutinise what they are doing that we are moving towards a situation in which our democracy is becoming an elected dictatorship. In his Dimbleby lecture, Lord Hailsham called it an elective dictatorship. We need not quarrel about the terminology.
This growth of power is a fact. I hope that I am a strong party man. I shall never apologise for that. Nor could 1 change. Before that I am, I hope, a House of Commons man. The view that I take as a House of Commons man is that the Executive needs to be controlled, to be brought under continuous and effective surveillance. This is our historic duty. It is the constitutional position that we on the Back Benches have the right and duty to control and survey the actions of the Executive. That is what we are entrusted to do by the electorate. We are the guardians of their rights and freedoms. We are the trustees of the electorate and are expected to control the Executive and to survey it in a way which, frankly, we hardly begin to do in the context of the great growth of Government activity.
The best method by which the Executive can or should be controlled is through the control of expenditure. I quote again the man who established the Public Accounts Committee:An excess in the public expenditure beyond the legitimate wants of the country, is not only a pecuniary waste, but a great political and, above all, a great moral evil.Those were the words of Mr. Gladstone. He went on:And it is characteristic of the mischiefs that arise from financial prodigality that they creep onwards with a noiseless and stealthy step, that they commonly remain unseen and unfelt until they have reached a magnitude absolutely overwhelming.If we have a duty beyond all others it is to enhance democracy and its effectiveness.
1057 There are many advocates—loud and strident, some brutal, some secret—of other systems of government. When we became members of the EEC we said that we would give leadership, that we would show by our example how well and wisely we practised our form of democracy. We are falling behind too many other democratic countries.
It is customary for the Comptrollers and Auditors General of the Commonwealth countries to have a conference every two years. This year—as the Financial Secretary well knows, because he went to so much trouble to make them welcome—the Comptrollers and Auditors General of the Commonwealth countries were in this country. I was struck—as I have been over the past few years in my discussions with members and Chairmen of Public Accounts Committees and Comptrollers and Auditors General, not only from the Commonwealth but from Japan, the United States and elsewhere—by how we have allowed ourselves to fall behind.
I shall have the honour, on behalf of the House of Commons, to be in Canada tomorrow. I have been invited to attend the centenary celebrations of the Canadian Public Accounts Committee. I must tell the House that in its methods, ideals, visions of the future, in practical as well as theoretical terms, the Canadian PAC is far in advance of us, as are the Australians and others. The liveliness of the discussion of these matters elsewhere makes us seem fuddy-duddy and out of date. It is high time that we re-examined the narrow remit of the Public Accounts Committee.
I recommend that without delay we should revise and improve the old 1886 Act. It has stood us in good stead, but it is now very much out of date. The man in the street knows that we are not fully doing the job with which he has entrusted us. That is a disgrace. The Public Accounts Committee, in its specific and general ways, and not least as a platform for this argument to which the House has kindly listened, will, I hope, remain true to the tradition of giving effective leadership to the House of Commons and to the nation. I hope that it has done that in the past year.
§ 4.35 p.m.
§ Mr. Hugh Jenkins (Putney)
I begin by apologising to the right hon. Member for Taunton (Mr. du Cann), who has so eloquently and comprehensively introduced these accounts, for the fact that I shall not be following him throughout the whole of his inclusive speech. The House may take some relief from that. It was as well that we were taken through some of the work of the Public Accounts Committee.
I have another apology to make, to my right hon. Friend the Financial Secretary, in that I shall not be here to hear the reply to this debate. The reason for that is that I have a constituency engagement tonight to speak to the Putney Young Conservatives. This seemed to be such a unique opportunity for mutual political education that I could not ignore it, even for the duties and business of this House. Nevertheless, I am grateful for the opportunity of saying a few words.
Because I am a new member of the Public Accounts Committee, I lack the deep knowledge and experience which those who have been members of that body for a number of years possess. Equally, I have something which I am not likely to have again in this respect, and that is the opportunity of seeing the Committee as it really is. After a little while, one becomes absorbed in the procedures of the Committee and begins to love them. We all tend to feel comfortable within procedures. If we are not careful we mistake the form for the substance.
The PAC seems to be good in some respects and less good in others. I will bring out the good points first. The Committee is efficiently and courteously chaired. We examine our witnesses in a reasonably efficient and, I hope, courteous fashion. We range over an astonishing area of public activity. This brings me to the point at which I begin to turn from appreciation and approval into criticism. It seems that our examination is altogether too wide. By endeavouring to spread ourselves over the entire range of public accounts and expenditure, we seem, in these reports which we are presenting, to have dipped into a large number of areas without adequately following through any one of them.
1059 From a study of the history of the Committee before I joined it, it seemed to me that there were occasions in the past, and I cannot satisfy myself that there may not be similar occasions in the future, when the Committee has allowed something to continue which it ought not to have done, had it done its job properly. Its failure springs not from any defect in the membership but from the fact that the Committee's wide range of activity means that it cannot investigate any one subject in any great detail and that it cannot follow through any recommendations that it makes.
Occasionally, the Treasury's comments on the Committee's reports verge on the cursory. The examination the Committee gives to subjects does not receive from the Treasury the sort of response that the Committee is entitled to expect. That is one area where something should be done. The Select Committee on Procedure has made proposals, but I would like them taken a good deal further. I was interested to hear the right hon. Member for Taunton, with his long experience of the Committee, also say that our present set-up is unsatisfactory.
Nevertheless, very good and useful work is done. Take, for example, the question of cash limits. The right hon. Member paid special attention to that. Curiously, in examining it we discovered not only that there was overspending but that there was gross underspending by local authorities on such items as housing and social services.
The duty of the PAC is to restrain profligate and unreasonable expenditure, but I do not believe that that should be its sole duty. It should also have a duty to see that necessary expenditure takes place. We discovered that some local authorities were not spending Government money that was available to them for social services and housing for a political, not an administrative, reason. The reason was that to spend Government money involves local authorities in spending some of their own, which they raise from the rates, and some authorities do not want to spend it.
At that point we begin to verge on to a party political difference of view, and that illustrates one of our prob- 1060 lems. In the PAC for the most part we avoid party political differences, but we do that only by not probing too deeply on many of the subjects we examine. If we went into them in detail, we should discover at their roots party political differences which would prevent us from sustaining the rather urbane attitude with which we approach our problems. We must face this difficulty at some stage. I doubt whether the Select Committee on Procedure has fully faced it in its recommendations, about which we shall no doubt be hearing more later.
There is also a slight tendency for the Exchequer and Audit Department to tell the Committee the things that it thinks the Committee wants to hear. The information that we get on a selection of the subjects we examine is not entirely within our control. But the information that is given to us in good faith is also given bearing in mind the things the Committee will want to look into and the way in which it will want to look into them.
For example it is generally known that the expenditure of the student unions is examined with great care on all sides of the House. We in the Committee were given by the Exchequer and Audit Department an inflated figure showing that student union expenses had jumped by much more than just the increase in the rate of inflation. Possibly this example illustrates the advantages of the Committee, because we subsequently discovered that that inflated figure includes a great deal of capital expenditure. When that was deducted, the increase was not greatly in excess of the general rate of inflation.
That is a minor point. In general the Committee is well and adequately served. My newness to the Committee may lead me to jump to a conclusion, but I am reinforced in my view by the fact that the right hon. Member for Taunton has arrived at—not jumped to—a similar conclusion. While this hallowed Committee, of which I shall continue to be a member if Parliament so wishes, is, under the present procedure, doing its job as well as it can, it is time that we took a new look at this and all other Select Committees to see how they fit into the modern parliamentary and departmental scene.
Perhaps the time has come to have separate Select Committees for each Government Department, each examining in 1061 detail what is happening and, after examination, requiring answers instead of, as happens now, one Committee roaming over the whole area and thus being unable to examine any single subject in the depth that the public interest requires.
§ 4.49 p.m.
§ Mr. Michael Grylls (Surrey, North-West)
I suspect that in its time the House has heard many confessions of a varying degree and nature. However, the confessions of the hon. Member for Putney (Mr. Jenkins) that he will be leaving the Chamber to address the Putney Young Conservatives is one of the strangest confessions that I have heard. I hope that his education will be completed by that experience this evening.
I do not speak as a Member of the Select Committee. I ought perhaps to give a modest indication that there are hon. Members outside the Committee who follow its activities with great care. We feel that the Public Accounts Committee in its work truly represents the House of Commons in trying to control expenditure. My right hon. Friend the Member for Taunton (Mr. du Cann) made that abundantly clear in his forceful speech.
I want to concentrate on the lack of accountability of the National Enterprise Board. It is not my job to try to analyse any of the individual activities of the NEB; another occasion would be better for that. Suffice to say that in general the Board has now had a total of £1,000 million of taxpayers' money, of which it has expended £625 million. As my right hon. Friend said, the NEB is a very big spender. Like the British National Oil Corporation, it has a lot of money. Therefore, as an ordinary Member it struck me that it was and is strange that on two separate occasions—the PAC's eighth report is the last occasion—the Public Accounts Committee has asked in specific terms that the Comptroller and Auditor General should be allowed in to investigate on behalf of the PAC and twice the Government have refused. l understand that they are theoretically considering their last refusal, but from what they state in the Treasury minute it does not seem they will be very forthcoming. If they are, I suppose that the House will be very relieved.
I should like to quote a few lines from the report of the Public Accounts Committee on this subject. It is important, 1062 when we think about the accountability of the National Enterprise Board, to remember precisely what the PAC has written. The PAC, in paragraph SS. states:…we remain convinced that the arrangements for the Board's accountability to Parliament should be strengthened…Without free access by the C & A G to the Board's records we have no independent source of advice on the way in which the Board has discharged its statutory functions or on the matters of interest or concern arising there from; nor, therefore, are we in a position to report in any cogent fashion to Parliament. It is for this reason which goes to the heart of the effective accountability of public bodies such as the NEB, that we have laid such stress on the need for full access by the C & A G.My right hon. Friend the Member for Taunton, as Chairman of the Committee, was rightly restrained in his comments on this matter. But, even for all his restraint as Chairman, I believe that he indicated strongly that the PAC is dissatisfied with the Government's response on this matter. I do not feel so restrained as my right hon. Friend. It is a scandal that the Comptroller and Auditor General is not allowed in. Indeed, it is almost a contempt of Parliament that the Government have scorned the express argued wish of the Committee that this kind of investigation should he allowed to take place.
The National Enterprise Board has said that it wants to operate in an entrepreneurial manner. My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) has described that as punting with the taxpayers' money. We may call it what we like, but it certainly needs controlling.
The NEB claims immunity from parliamentary surveillance. I do not think that is right, and I gather neither does the Public Accounts Committee. I believe that, wherever the taxpayers' money is involved, there should be no immunity from parliamentary control. If the PAC is not allowed to do its job—I believe that the extract from its report which I read is true and hits the nail on the head—Parliament cannot control the large sums of money which are being spent. The NEB argues that Parliament should have no dominion over what it does. But, as my right hon. Friend said, it is the historic duty of the House to get at the facts and figures of what goes on.
1063 The House will no doubt wonder why the NEB fears investigation. It has some very experienced people working for it. It has qualified accountants to look at the accounts to ensure that matters are being conducted properly. It if is confident that all its decisions are well founded, it has nothing to fear. My right hon. Friend the Member for Taunton presides over not a kind of torture chamber to extract confessions from the NEB or any other body, but a very distinguished group of Members of Parliament who comprise the senior Select Committee of the House of Commons which is dedicated to discussing the truth.
§ Mr. Grylls
If not the most senior, certainly a distinguished and important Select Committee, as the hon. Member for Nottingham, West (Mr. English) will, I am sure, agree. That Public Accounts Committee is concerned with discovering the truth about where taxpayers' money has been spent.
I hope that the Minister will tell the House why the Government have so far stonewalled. There may be a very good reason. However, I hope that he will give a better reason than simply saying that it is because the NEB wants to operate in an entrepreneurial way.
If the Government go on refusing, the House as a whole will be driven to doing the fashionable thing and applying sanctions to the NEB. I hope that members of all parties—including the hon. Members for Gloucestershire, West (Mr. Watkinson), for Thurrock (Dr. McDonald), for Putney, who has just left to go to the Young Conservatives, for Gravesend (Mr. Ovenden) and my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop)—when the NEB next comes to Parliament for another £1,000 million of the taxpayers' money, as I understand it will very soon, will say"We are not arguing whether you should have it, but you are certainly not going to have it until we can control it properly and the Comptroller and Auditor General is allowed in to investigate." I suggest that Parliament should apply that sanction.
Parliament has the sanction of voting money. It voted the first £1,000 million, but it should refuse to vote any more 1064 money until the Government agree to let in the investigatory arm of this House—the Comptroller and Auditor General—to report to the Public Accounts Committee. If that is done, then in this respect at least Parliament will be able properly to fulfil its role with regard to the NEB, and the Public Accounts Committee will have the report that it needs from the Comptroller and Auditor General if it is to do its job properly.
It is possible for the Comptroller and Auditor General to prepare reports for the Public Accounts Committee in a confidential way. As my right hon. Friend the Member for Taunton said, it is already done with the Scottish and Welsh Development Agencies. I understand that the Comptroller and Auditor General investigates the Bank of England. Presumably the Bank of England has many confidential matters going on, but it is possible for him to report: therefore, why not the NEB? The stubborn refusal of the NEB, backed by Ministers in the Department of Industry, is to be regretted. I hope that there will be a real change of heart and that the Public Accounts Committee will be able to carry out its role by having proper reports from the Comptroller and Auditor General.
§ 5.0 p.m.
§ Mr. John Watkinson (Gloucestershire, West)
The hon. Member for Surrey, North-West (Mr. Grylls) has proved himself to be a trenchant critic of the National Enterprise Board over a number of years. I am not sure whether his criticism extends to wanting the destruction of the NEB—perhaps it does not—but the hon. Gentleman has made some significant points, and I shall return to them later.
First, I pay tribute to the chairmanship of our Committee by the right hon. Member for Taunton (Mr. du Cann) and also, in his place on occasion, by the hon. Member for Folkestone and Hythe (Mr. Costain). They have both conducted our affairs with firmness and discipline, yet in a friendly and constructive atmosphere. I congratulate the right hon. Gentleman also on leading us in so intrepid a manner down to Chatham dockyard and then up to the Liverpool Royal hospital.
Those two visits were of value to our Committee. Such an occasion enables one actually to see what one is talking about, and in addition, it makes an impact upon 1065 those whom we visit. In an obvious and concrete way, it shows that Parliament is positively concerned with the expenditure of public funds in the areas involved.
However, we should all agree that the Committee must ultimately come back to the figures as they are. It is the figures in their starkness which call for explanation. For my part, in going to Chatham dockyard I could be so blinded by the technicalities and complexity of what is going on there that if I did not have the hard figures to come back to I should find it extremely difficult to cross-examine in relation to the delays in that dockyard. I therefore regard this function of the Select Committee as of importance.
I agree with the right hon. Gentleman in his reference to the significance of the Committee's going public during the course of this year. I do no more than emphasise what he said. In the early days, this procedure created something of a sensation, but, looking at matters realistically, I think that it is not our business, as a Committee, to be involved in headline-seeking or sensation-searching. Our business is to investigate what may on occasion be somewhat dry statistics, and one cannot therefore expect excessive public interest in what is going on.
Nevertheless, the important fact is that the public may now be present at our proceedings. The name"Public Accounts Committee"has a new meaning and significance, in the sense that the public themselves can see their representatives cross-examining witnesses from the various Departments. This is a not-table departure, and I endorse the right hon. Gentleman's suggestion that we may move on now to the possibility of televising the proceedings of the Committee, though I note the remarks of my hon. Friend the Member for Nottingham, West (Mr. English) about the difficulties involved in that.
This has been a year also in which we have to a certain extent considered the role of the Exchequer and Audit Department Acts. Perhaps one should say that the Expenditure Committee has considered these matters in somewhat greater depth than has the PAC up to now, and I have considerable sympathy with certain of the recommendations made by that Committee in its eleventh report.
First, I should say that I am one of those who would support the first recom- 1066 mendation of the Expenditure Committee, that the Exchequer and Audit Department should extend its operation into the spending of all public money, our concern here being not only with Government expenditure but with local government expenditure and the expenditure of nationalised industries.
I think it an unfortunate fact that on the whole—it may be due to the activities of the Opposition—public expenditure has a somewhat bad name in this country. I feel that, through the operation of a constructive audit, we should perhaps be able to bring into our public expenditure new methods and techniques which could be of value and significance in promoting the beneficial aspects of public expenditure.
Having said that the audit should extend into other areas, let me add that the nature of that audit should not be a simple and straightforward financial audit. I think it right that the audit should concern itself at the same time with managerial aspects of public expenditure and with how cost-effective public expenditure is. I note that according to the report of the Expenditure Committee the General Accounting Office in the United States spends 10 per cent. of its time on financial audit, 50 per cent. on considering managerial aspects of public expenditure, and 40 per cent. on cost-benefit analysis. I cannot speak with any authority about the manner in which our own Exchequer and Audit Department goes about its business, but I regard proportions of that kind as important.
On the Public Accounts Committee itself, my experience of its operation is that we spend a great deal of our time talking about aspects of expenditure related, so to speak, to value for money, to ensuring that public expenditure is correctly and properly managed. Although we may not do it in the depth at which an accountant might do it, we also consider the whole aspect of cost-benefit analysis in our deliberations.
If, as the right hon. Gentleman suggests, we should have a new Exchequer and Audit Department Act, and if the Department is to cover a wider range of public expenditure, it is clearly appropriate—this must be so—that we have a larger Department. This matter has been raised in the House on many occasions. 1067 Within our Exchequer and Audit Department only 620 personnel are involved in auditing the vast range of public expenditure, and again this compares very unfavourably, in terms both of numbers and of professional expertise, with the level of personnel available to such an organisation as the General Accounting Office in the United States. I should like there to be an expansion here, especially if the role is enlarged.
The position of the Comptroller and Auditor General himself has been under consideration this year. I know that the Expenditure Committee feels that it is necessary that he be brought within the preview or control of the House of Commons and that he should be directly a servant of the House. There is a great deal to be said for the fact that the Comptroller and Auditor General is a man independent of this place and of the Executive. In my view, this lends a certain authority to his position.
Perhaps I may direct a word here to my hon. Friend the Member for Nottingham, West, having read the recommendation of his Committee. I think it right that a Committee of the House should be in a position to ask the Comptroller and Auditor General to carry out an audit in the area in which that Committee wants such an audit to be undertaken. I believe that the present discretionary powers available to the Comptroller and Auditor General are too limiting, in:elation to the House of Commons, for the proper control of public expenditure.
§ Mr. English
I am grateful to my hon. Friend for his support for the suggestions made by the Expenditure Committee. However, when he says that the Comptroller and Auditor General is independent of the Executive, I hope that he recalls the provisions of the 1921 Act, which provide that the Treasury may direct the Comptroller and Auditor General to audit but also may direct him not to audit—which means, in effect, that by law he is not independent of the Executive.
§ Mr. Watkinson
I am obliged to my hon. Friend for that observation. I believe that there is a statutory duty for the Comptroller and Auditor General to audit the Appropriation Accounts. It is 1068 in relation to accounts outside the Appropriation Accounts that the Treasury may issue directions. Also, I make the point that historically the Comptroller and Auditor General has come from the ranks of the Treasury itself.
§ Mr. Watkinson
He is a former Treasury official. If we wish to extend the operation of the Exchequer and Audit Department and enlarge the role of the Comptroller and Auditor General, it is desirable that we should consider enlarging the field from which that man is chosen. If we are concerned with independence, as the Government claim to be, it is important that the field from which the Comptroller and Auditor General is selected should be as wide as possible.
§ Mr. Michael Spicer (Worcestershire, South)
I wonder whether the role which the hon. Gentleman is identifying for the Comptroller and Auditor General is exactly comparable with that of the Comptroller-General in the United States, where he is appointed, I think, for 12 or 15 years, during which period he cannot be removed, but he is capable of doing things if requested, or, indeed, ordered, by Congress. The hon. Gentleman has a direct precedent for what he is suggesting.
§ Mr. Watkinson
I am obliged to the hon. Gentleman for that intervention.
Our arrangements until now for controlling public expenditure have been somewhat unsatisfactory. None of us, I believe, can feel that real control of public expenditure is available to this House. The public expenditure White Paper enables us to have a general debate about the problems associated with public expenditure but it does not offer us any real control. Until the reforms suggested by various Committees, which have now been accepted by this House, the Estimates were basically unhelpful and uninformative, particularly in an inflationary period.
The cash limit system has provided the Government with a tool of management control but has not provided Parliament with any control. Cash limits have been successful; as has been said, they have been too successful, because there has been considerable underspending. This 1069 has affected the operation of the economy.
I welcome the fact that there will be an assimilation between the cash limits and the Estimates and the Estimates that will now be expressed in out-turn prices. This will mean, as the right hon. Member for Taunton suggested, an added discipline relating to Supplementary Estimates. Meaning will be given to the sanctions imposed, or imposable, by this House.
In terms of control of public expenditure, I support the contention of my hon. Friend the Member for Putney (Mr. Jenkins), although I suspect that the House will never recover control over public expenditure until it has a proper Committee system, covering each Department. Within those Select Committees, it will, of course, be a prime concern that that Committee should relate its work to the proposed estimates of expenditure for that Department and concern itself with the outturn of that expenditure.
There is, I hope, now a consensus that the National Enterprise Board's operations have been worth while and should be continued. I hope that the hon. Member for Surrey, North-West supports that view. There is scope for a board to manage what one might call national disasters, such as Leyland and Rolls-Royce, and to assist with lame-duck industries which may have a future. There may be no dispute on that matter.
§ Mrs. Gwyneth Dunwoody (Crewe)
Would my hon. Friend also accept that there is a great role for the NEB in creating new industries? In my own constituency it is the only source of finance for a new, highly successful and growing industry. If we had more of that investment, we would not be in the kind of difficulties that we face.
§ Mr. Watkinson
I entirely agree with my hon. Friend. Her remark leads me on to the point that I wanted to make. There is a constructive, positive role for the National Enterprise Board in assisting the restructuring of British industry, entering British industry at the sharp end, investigating investment opportunities and directing investment funds to those companies which the NEB considers have a viable role to play within our economy.
1070 The National Enterprise Board has, appropriately, moved in the direction of increased assistance to the small business community. The financial columns of the newspapers have shown the enormous aid being channelled into small businesses in the United States. We should seek to channel aid into our small business sector through the NEB.
§ Mr. Grylls rose—
§ Mr. Watkinson
The hon. Member for Surrey, North-West who seems to wish to intervene, may not like what I say, but there is growing up a significant partnership between the Board and the banking system. The conjunction of the NEB with Barclays Bank and the Midland Bank in providing finance for industry, especially in the regions, is an important development.
§ Mr. Grylls
I did not intend to intervene but I do not want the hon. Gentleman to take my silence as indicating a wide approval of the National Enterprise Board. I was seeking to focus on the single point that the PAC should be able to study what is going on. If the hon. Member were to embark on a wider debate on the merits of the NEB, I would disagree with almost everything he says.
§ Mr. Watkinson
I am not grateful for that observation. In the Public Accounts Committee, we considered the wider role of the NEB. Our study was not related merely to the point he made, but I agree that it is appropriate for the PAC to consider the operations of the National Enterprise Board. The House should follow public funds to see that they have been properly expended and managed.
The right hon. Member for Taunton is right when he says that we have put the arguments fairly in our report. Arguments can be put to our Committee by the NEB with force and consistency over and over again. The view, basically, was that it is through the Secretary of State for Industry in the House that we can get at the National Enterprise Board if we so wish. I am not sure that that is adequate.
As the right hon. Gentleman pointed out, the Scottish Development Agency, a similar organisation, could cope with public scrutiny by the National Enterprise Board in a way which the NEB itself 1071 seems unable to cope with at this stage. I believe in the principle of the matter. In some ways, it has to be put to the test. If the NEB would agree to this scrutiny for an experimental period, and could then show that it had lost contracts as a result, we should have to reconsider. We can go into secret session to consider these matters, so this would not affect confidential relationships or impinge on the investment programmes that the National Enterprise Board was undertaking. I should like some experimental period in which this could be put to the test.
I wish to make two brief comments basically because they have a certain constituency interest. The Public Accounts Committee considered forestry. One of the largest forests in this country, the Forest of Dean, lies within my constituency. The Committee spells out the reality of the situation, that the return on timber growing is very low. Nevertheless, timber is one of our few renewable raw materials. This country, with one of the best climates for growing trees, has one of the smallest acreages of any European country. The contrast is startling. In considering raw materials, we must look at the long term. A gap may emerge after the turn of the century between the supply of, and demand for, timber products. We can expect a significant rise in prices.
I wish to underline two points. The first is that it is necessary for us to consider our forests not only as timber-producing areas but as recreational areas which can give enormous pleasure and satisfaction to people in this country. I was surprised, when the subject came before the Public Accounts Committee, to see the return which was available to the Forestry Commission on its recreational activities. The camp sites in the Forest of Dean, in my constituency, seem to be perpetually filled. I understand also that the log cabins which are being developed by the Forestry Commission are booked up years in advance. I should like to see more encouragement given in this area.
If we, the taxpayers. are to give sup. port to private forestry—and I think it is right that we should—there should be a quid pro quo. Taxpayers should be entitled to go on to those forest lands where their money is being used to develop timber. I make that as a general 1072 proposition. I can see all sorts of difficulties, but I believe that the principle in itself is right.
My next point relates to estuarial crossings. The Severn bridge is a key bridge to my constituency. There has been z great deal of difficulty with this bridge over the last two years. As has been pointed out, the toll system which operates on the bridge has reached a position almost of crisis. The crisis has arisen simply because those who control the increases in tolls have failed to bring about the necessary increases at the right time, so that now, in order to bring the bridge back, as it were. on to financial target, there has to be a very substantial increase in the toll. That is causing difficulty, and because lanes have been closed on the bridge there have been delays in introducing toll increases.
I take the view that the whole operation of tolls in this country involves flagrant contradictions. In my area, we have the Severn bridge with a toll, and just down the road there is a bridge over the Avon estuary with no toll. The Blackwall tunnel, near where I live, has no toll. When I visit my sister in Liverpool, I go through the Mersey tunnel, where there is a toll. There are so many internal contradictions in the operation of the toll service that I would argue that we should do away with the entire toll system.
I believe that the Public Accounts Committee does some very useful work. A few years ago one of our leading national newspapers—I believe it was The Times —calculated that all the wastages and faults that the PAC had pointed out involved the best part of £1,000 million in that year. It will probably be a larger sum this year. It is quite clear that a Committee such as ours does very useful work, and I am proud to be a member of it.
§ 5.23 p.m.
§ Mr. Peter Hordern (Horsham and Crawley)
I join the hon. Member for Gloucestershire, West (Mr. Watkinson) in paying tribute to our Chairman, my right hon. Friend the Member for Taunton (Mr. du Cann). It is true, as has been said, that the reports of the Public Accounts Committee are always unanimous. They are unanimous, but only just, sometimes. The fact that they are unanimous is a 1073 very considerable tribute to my right hon. Friend's many qualities as Chairman.
I agree also with the hon. Member about the effect of holding our sittings in public. As he knows, I was in favour of this from the very beginning. Whatever departmental heads may feel when they come before us—and I recognise the extra difficulties in which they are placed —nevertheless it is a very considerable assistance in the examination of Government expenditure to have the Public Accounts Committee's proceedings reported straight away.
There have been too many occasions in the past when our reports have been buried under problems to do with the Stationery Office and have not emerged until several months after they were relevant. The change which has come about through having our proceedings reported in public has done us a lot of good.
I should like to refer briefly to the position of the Comptroller and Auditor General and the National Enterprise Board and British National Oil Corporation. I think that the case is made out for the Comptroller and Auditor General to investigate the books of the NEB, simply because it seems to me that the position is so unsatisfactory as it stands. There is no exact comparison for this body either in the private sector or in the public sector. It is true that the NEB, like commercial companies, has its own auditors, and it is certainly true that it produces its report and accounts, as a holding company would, but it is not a private commercial company. Indeed, if it were, there would be other considerations—I shall come to them later—which would certainly apply to it and which do not apply to it at present. Nor is it in the position of being a holding company, as is British Petroleum, where the Government have a substantial stake, and where there are Government directors on the board. It has never been questioned that BP should operate in full commercial freedom.
The position with the National Enterprise Board is that there is no Government representation, and there is no representation from this House, so that it is not equivalent to BP. It is not, strictly speaking, a Government Department, as is the Department of Industry, so that 1074 the decisions it makes are not accountable to this House at Question Time or to the Public Accounts Committee. It is a very rare hybrid, and I do not believe that the proper solution to this problem has vet been found.
I would be more disposed to accept the argument that the NEB should operate entirely independently if its record were a good deal better than it is. I shall not discuss whether the NEB should be allowed to exist, because that is a matter upon which the House has made its decision, but 1 do not think that we can continue to allow to pass without comment the sort of intervention which has occurred in the past two years. The NEB has intervened on a number of occasions, and its record has been manifestly disastrous. That alone is an important reason for allowing an extra auditor to come on to the scene, to comment on the decisions which have been made.
I am not talking about the inherited decisions which were, as it were, bequeathed to the NEB. I am not talking about British Leyland, Rolls-Royce, International Computers Limited or some of the other commitments with which it found itself. I am talking about the investments made freely by the NEB and of its own accord. When the NEB and the Department of Industry came before us, I estimated that they had made investments in 10 companies which showed profits and in nine companies which showed losses. The profits came to £1.81 million and the losses to £6.65 million. It might be said that that is just the rub of the green, but I do not believe that there are many commercial organisations which would have such a poor record to show to their shareholders.
I will mention one case in particular. There was a small company called Thwaites and Reed, which manufactured reproduction antique clocks. The NEB was persuaded to take a major stake in this company. It was pointed out to the NEB at the time that the company was bankrupt and had no assets. The fact that this was pointed out by the company's major competitor was, I suppose, a good reason for the NEB to take not the slightest notice. But in due course it appeared that the company, Thwaites and Reed, needed rather more assistance from the Government—probably from the NEB—which it duly received. Later, it 1075 appeared that the position had got out of control. Thwaites and Reed has now been sold to its arch competitor, Elliott and Company. This little incident shows how bad is the management of the NEB. I pass over the dismal stories of Barrow Hepburn and the many other commitments which the NEB has made.
§ Mr. Grylls
My hon. Friend mentioned the warning received by the NEB concerning Thwaites and Reed. The NEB was also warned against Thwaites and Reed by the trade association, the British Clock and Watch Federation. That was an independent warning to which the NEB did not listen.
§ Mr. Hordern
I am grateful for that information. of which I was not aware.
I wish to deal with the financial basis on which the NEB stands. So far it has received loans of £621 million from the Government, and public dividend capital of £510 million. The matter of public dividend capital needs to be more thoroughly aired.
The present position is that the Treasury advances money to the NEB—money which it has itself had to borrow at probably not less than 12 per cent. There is no commercial concern which has money given to it to start operations without any need to make a proper return. Therefore, the return on capital which we are told that the NEB should eventually be able to make namely, 15 to 20 per cent.—is based largely on capital with which it has been provided absolutely free. It has been provided free, not by the taxpayer, who has had to lend considerable sums at a great deal of interest, but by the Government. The return is wholly unrealistic. It is for that reason, and also for the reason that the NEB's investments have turned out to be disappointing, to put it mildly, that the Comptroller and Auditor General shoud investigate the NEB.
There is one resort open to a holding company in the private and commercial sector—namely, to sack the hoard. This happens in business life. It is true that in respect of the NEB the poodle has been shot, but it now has a new chairman. The PAC, as representative of the House, should have detailed information on which it can assess the managerial 1076 ability of the NEB more closely than it now does. Sometimes we can look only with dismay, but usually with awe, at the scale of investment made by the NEB, but surely we should have the power to sack the board if we think that it is doing badly. I think that the evidence is not wholly on the side of the NEB.
I wish to pass now to the BNOC and the forward sale of oil. A great deal of money is involved in this respect. I have already mentioned in an intervention the apparent discrepancy between the Treasury minute on oil sales and the report given to us by the PAC. The Treasury minute said that it accepted that any similar future transactions by the Corporation would be reported to Parliament. I suppose that is some sort of advance, but it is not as good as the assurance we received in our examination of BNOC—namely, that the Treasury would consider strict limits on any further forward sales.
Will the Financial Secretary say what is the view of the Government and the Treasury in this matter? Are they saying that there should be no significant further increase in raising money by these means of the forward sale of oil, or will they simply inform the House when such sales occur? I should like to Know the answer, because this is an important matter. We should understand how BNOC intends to finance its participation in the current and future rounds of licences.
I wish now to deal with the British Rail pension fund. There has been reported to us a large increase in the deficit of the fund. We do not even now know how large it will be, but I understood that four or five years ago the deficit was about £450 million. The latest figure is estimated to be £1,000 million. I understand that the actuaries who look after the fund will be reporting this year. It seems certain that they will be reporting an even larger deficiency than £1,000 million.
I know that the Wilson committee is closely examining the subject of nationalised pension funds, but we should bear in mind the evidence given to that committee by the Government Actuary. He said that, if a nil rate of return were assumed, the proportion which a new entrant to the pension scheme would pay would rise to 32 per cent. He said that, 1077 if a negative rate of return applied, the figure would be about 50 per cent. of salary. For most pension funds, I understand that a negative rate of return has been shown in the past four years. That is a short time in the context of the running of a pension fund, but it is certain that pension funds of every description have had to increase contributions made by companies considerably in the past few years. There is no sign of the position stabilising.
I; we examine the effects of institutional investment as a whole, we see that in regard to the Stock Exchange the institutions held 42 per cent. of ordinary shares in 1972 and 52 per cent. in 1977. I understand that the amount of money spent by the pension funds on property has doubled in the past four years, and is likely to double again in the next four years. We know that many of our city centres have been wiped out and tail office blocks and large shopping centres put in their place. Many of these projects, if not most of them, have been financed by pension funds and institutions of one kind or another. For the most part, this money has come, not from voluntary contributions, but by way of involuntary contributions from pension funds and from the contributions made to those pension funds because of the level of inflation and for no other reason.
The outside observer looking at all these developments might be forgiven for thinking that our country was very prosperous, but that is not true. The truth is that considerable sums of money, which should be deployed in the companies and should be providing employment, are being provided involuntarily to put up new office buildings and shopping centres which depend for success on a fast rate of inflation. In regard to private pension, companies can make their own calculations and are responsible for their own actions. They have always had the alternative, if they so desire, to opt into the State scheme at a later date.
However, the position in regard nationalised industries' pension funds is different and has not been properly recog-nised. Unlike private sector pension schemes, the nationalised industries' schemes are index-linked, as are also all the local authority pension schemes. There is not a company in the land that can guarantee an index-linked pension, 1078 and none does, but I repeat that in every case the nationalised industries' pension funds are index-linked, as are all local authority pension schemes. That would not be so bad if it were the only consideration, but I must emphasise that the deficit on the nationalised industries' pension funds are not made up by contributions from the members or from those who use the services. They are made up by the taxpayer.
Year after year considerable subventions go towards the pension funds via the taxpayer. We are in a ludicrous position when we find that the British Rail pension fund, now financed largely by the taxpayer, is bidding against the British Museum for the bottom half of a silver-gilt candlestick. That means that taxpayers are bidding against each other. It is difficult to see the sense that operation but, needless to say, the British Rail pension fund won. It now spends more money on buying works of art which produce no return at all than do the National Gallery, the Tate or the British Museum.
One wonders how long this state of affairs can continue. The worst of it is that, because these works of art give no return of any kind and property commonly gives a return of about 5 per cent., there is always a deficit that must be financed by the taxpayer. These sums grow ever larger every year.
The Government Actuary reported that, if we simply stopped this operation and paid our pensions on a"pay as you go"basis, we would save £1,500 million a year on the nationalised industries alone and another £600 million a year on the local authority pensions. That would be a saving of £2,100 million a year.
All pensions in France are paid on the"pay as you go" basis. The same is true of Germany. I defy anybody to say that there is any less security for those who work in the nationalised industries than for those who are civil servants. Civil servants have index-linked pensions paid on a"pay as you go"basis. The subject needs further considerable examination and I offer this as my humble contribution to the argument for reducing the public sector borrowing requirement by £2,000 million a year.
That does not take account of the vast sums which have already been paid into 1079 those funds and which properly should be returned to the taxpayer. On other grounds, that might not be so desirable because it would create a precedent which future Labour Governments would only be too happy to follow. However, this is an area which should be looked at very carefully. I look forward to seeing what the Wilson committee and the Treasury report have to say.
The reports of the Public Accounts Committee get larger and bulkier every year. This reflects the ever-growing interest, if not intervention, which the Government show in the affairs of every man and woman in this country. For that reason alone, I would like to see much less activity on the part of the Government and the PAC.
§ 5.42 p.m.
§ Mrs. Gwyneth Dunwoody (Crewe)
The right hon. Member for Taunton (Mr. du Cann) said, in quoting Gladstone, that the Executive needed to be controlled and that we on the Back Benches had that duty to control. He also said that failure to do so led to a great political and social evil. If that is so in relation to a direct Government expenditure, how much more so does it apply to areas of expenditure which are connected with the EEC?
The right hon. Member seemed to suggest that we were falling behind with our auditing and control procedures and that it was since we had entered the Common Market that we had discovered that there were other areas that we were avoiding. He then went on to say that only areas such as the old Commonwealth and Japan had better control over expenditure than we had at present. That argument is very relevant to what I want to say tonight.
Part of the fifth report deals specifically with agricultural expenditure. My hon. Friends have said in the past that they think it is time to consider having the Public Accounts Committee split up to deal with various subject matters. They will see an excellent example of the problems faced by the PAC covering too much when they consider agricultural expenditure.
In the fifth report there is a whole section devoted to food subsidies—in particular, the butter subsidy. The section sets out the history of the butter sub- 1080 sidies, how they were arrived at, and what happened in relation to them. It points out that under the new scheme that is operated now the cost to Britain is considerably less than it was originally.
Under the original scheme the cost to the Exchequer was £204 million, of which FEOGA paid only £50 million. The taxpayer paid an exceedingly high price for butter in the shops.
Only last week in Brussels we were talking, in Committee about the whole problem of butter storage and the excess amount of butter left not only in private storage but in intervention. The cost that that represents to the taxpayer is very great. I would like to see the PAC look closely at the real cost to this country of the amount of money that we pay out in agricultural subsidies. That has never really been done.
I find it vaguely depressing that whenever a Member of the House tries to draw attention to any aspect of our expenditure within the EEC we are told that we are being bad Europeans and misrepresenting the facts.
One Danish Minister actually went as far as to say quite recently that the British were producing a set of figures that had been cooked in order to make it appear that they were paying more than they were. What he did not say was that he had arrived at this figure by adding in the subsidy that the Danish producers get for the food that they unload at subsidised rates on our markets. By managing his arithmetic he was able to prove that we in Britain were paying less towards the overall costs than we actually were.
When one reads the evidence of the PAC, given by the officials concerned, one realises that there is a case for an agricultural Sub-Committee of the PAC dealing with nothing other than the abuse of the entire common agricultural policy mechanism. For example, it was said in evidence that one of the schemes that had to be introduced very quickly in order to cut down the over-production of milk was the scheme for the disposal of skimmed milk powder. We were told that the object of the scheme was to ensure that skimmed milk powder which was taken out of intervention was used for calves and not for animal feed. This was done by adding fishmeal and other delicacies to the skimmed milk powder. 1081 The only hazard about that was that it made the powder inedible for the animals that it was supposed to feed. They refused to have anything to do with it.
We are told that we might have to undertake many things that will become extremely costly; indeed, we are told that this is inevitable. But it becomes inevitable only if we have the total nonsense of the common agricultural policy. It becomes inevitable only when one produces the argument that when we have too much milk powder it must go into intervention, and that when too much milk is produced, it must be made into butter and kept stored away so that no one can afford to buy it.
When we were talking in Brussels last week about the nonsense of paying enormous export subsidies to producers in the EEC in order to sell their butter cheaply to the Russians—more cheaply than it is available in the shops in Britain —we were told that all we needed to do was explain to the population of the nine member States the real reason for doing this, and that then there would be no more difficulty. We were told that once the population understood what the EEC was seeking to do—keep up the producers' income by artificial means—all the difficulties would disappear. Frankly, as I pointed out at the time, if one is in that position, one must either defend the indefensible or change the scheme. If one has no intention of making changes, one should keep one's mouth shut.
The PAC received a great deal of detailed evidence on this subject. I welcome this very much. The Committee has dismissed this evidence rather briefly. I realise that it was trying to cover a great many things in a short period. It dismissed this evidence in two pages. That is not an adequate way of informing the British public of the absolutely indefensible nonsense that goes on from day to day in terms of the common agricultural policy. I know that our fellow Europeans sometimes think that we in Britain eternally talk about the cost of the CAP without mentioning the great benefits that we gain in other areas. That may be so in my case, because I find great difficulty in locating any other area from which we benefit.
If we are to avoid becoming the sort of holiday camp of Europe that many of our European compatriots seem to think 1082 is essential, we must examine the whole problem of expenditure not only in this country but in terms of our contribution to the budget of the EEC.
Hon. Members raised the question of the National Enterprise Board. If there is one thing that is terrifying about the progress of our economy since we entered the Common Market it is the way in which we have provided an easily penetrable and open market for other EEC countries while they have not given us an exchange in terms of trade.
When Conservative Members criticise the work of the NEB they should remember that unless we generate new ideas and new industries, and put more money into them, we shall be not second-class members of the EEC but poor relations waiting at the end of the queue for whatever hand-out it happens to suit the agricultural-oriented Commission to pass on to us as a concession to our consumers. That is the reality of the need for the NEB.
Conservative Members have produced figures about the investments and profits of the NEB. In many entertainment industries, particularly films, investment in new products and the record of the NEB would be regarded as an extreme advantage. We need that sort of investment. It is not coming from the banking system or existing establishments. For that reason alone, the Government should support the NEB in the most active and considered way. In my constituency, the NEB is supporting a new industry and creating new jobs and the firm concerned is growing all the time.
The PAC is doing a very good job, but in a rather superficial manner. I do not blame the Committee, because its problem is of such vast complexity and size that this is almost inevitable.
I ask members of the Committee to ensure that when there are ways of improving their control of expenditure they do not forget that they must control our expenditure in our membership of the EEC. If they do not do that, they will be failing in the task they have set themselves, not only in relation to the taxpayer, but in relation to the procedures of the House.
§ 5.54 p.m.
§ Mr. Michael Spicer (Worcestershire, South)
I was interested in what the hon. 1083 Member for Crewe (Mrs. Dunwoody) said at the end of her speech, particularly her apparent implication that we need a European PAC, though she seemed to be calling for a fundamental change in the PAC's role and was asking it to get involved in questions of policy which are better left to the House as a whole.
I wish to deal with the Tenth Report of the PAC, particularly the part concerning public policy in connection with the purchase of computers and the experiences with International Computers Ltd. It is an enforced limitation of the role of the PAC that it is restricted to a crystal ball that looks backwards, but that is of immense value where experience of the past is helpful in determining the future and avoiding pitfalls.
As my right hon. Friend the Member for Taunton (Mr. du Cann) said, the Committee is not merely an inquest. The problem, however, when considering public policy towards the computer industry is that the industry is in the midst of a revolution. The technology is changing so fast that it is difficult to draw lessons from the present, let alone from the past.
I do not want to bore the House with a catalogue of figures, because most hon. Members know what is going on. For example, the cost of one man hour of computer time, which bought 800 arithmetic calculations in 1940, now buys 250 million instructions. A computer that cost £500,000 five or 10 years ago and took up an entire room now costs a few thousand pounds and can be placed on a desk. A massive technological revolution is going on in the computer industry.
It is difficult to know what to make of the two main criticisms of the treatment of ICL by Government Departments between 1972 and 1978. The first criticism concerns whether a development loan of £40 million should have been paid in full and whether the company should have been allowed to delay the repayment programme. The second set of criticisms surrounds the way in which preferential purchasing policy has been operated in past years, particularly in respect of the purchase of ICL's original 2900 series.
The first set of criticisms touches on the present and future viability of ICL. The second set goes much deeper and 1084 concerns the whole future of Government purchasing policy. The report says:However we find it disturbing that despite the company's successful sales record the Department think ICL is unlikely to meet its aid repayment forecasts for 1977–78 and 1978–79, and we are surprised that the Department were unable as yet to give us any clear estimate of the amount they were likely to receive for those years.That is pretty outspoken.
In recent years, ICL has displayed an impressive growth record. Its turnover has increased from £92 million in 1968 to about £500 million today and the company expects it to grow considerably in future. In recent accounts, the company has shown a reasonable profit and there might, therefore, be a reasonable hope of a repayment of the loan in the near future.
However, the fact that the matter is still in doubt is not a great surprise to some observers. I understand that the computer systems electronics requirement board of the Department of Industry commissioned a study by the science policy research unit of Sussex university. The report has been around for about six or seven months and will be published shortly under the authorship of Ray Curnow and Ian Barren. I have gained permission to quote from the report. I am told that it carries the sentence:ICL with its current product range is becoming increasingly irrelevant to the needs of this country for computer technology.I understand this to mean that ICL remains basically a large main-frame producer, despite its successful purchase recently of a company in the United States called Singer, in an industry where growth is very largely at the mini and applications end.
For example, ICL is not seriously involved in general office applications, with the pickings that exist there for word processers and message switching equipment. Nor is it seriously involved in the marketing of teleprocessing systems at the other end of the computer spectrum. This raises the whole question of whether Governments are best suited to second guess the market place, and, in so guessing, to back their guesses with taxpayers' money in such a high technology industry.
That, of course, is what took place, in effect, with the original £40 million loan 1085 to ICL, and it will be the case, I understand, with the proposed launching aid to the chip and micro-processing technology about which the Prime Minister is, apparently, to address the National Economic Development Council on Wednesday. So fundamental questions are raised by the Public Accounts Committee—although implicitly, perhaps—about the involvement of Government at all these very high technology industries.
The second major question raised by the tenth report from the Committee concerns the whole question of how Governments should operate as major purchasers of computer equipment. It is true that the purchasing by the central Government of computers represents a small proportion of the market. I am told that even ICL sells only about 5 per cent. of its entire turnover to the central Government. But I believe that it is necessary and legitimate to make—and the Committee makes them—two quite specific points about public purchasing in this context.
First the Committee indicates that it is necessary to be quite clear as to the precise natures of the cost of operating a preferential buying policy. As has been shown in the purchase of ICL equipment —and it is clearly shown in the PAC report—it is a matter, not just of initial payment. but of the disruption which goes with the purchase of new equipment bought in advance of its full development. The Committee says about this point, in paragraph 24:CCA "—the Central Computing Agency—explained to us that they had been unable to cost the risks "—of the preferential buying policy—because they could not assess the extent or significance of possible delays which could result from ordering the equipment either from ICL or from alternative sources.In paragraph No. 25 it goes on to say:both they "—the CCA—and the Treasury thought that it would be impracticable to segregate for Parliament the additional costs which were attributable to the preference policy from those which would equally have affected alternative suppliers. We recognise these difficulties. Nevertheless we do not consider that it should be too onerous a task to make a broad assessment of the financial consequences to a department of a manufacturer's failure to meet his contractual specifications or delivery dates.1086 Again, that is pretty direct stuff. The Public Accounts Committee has found it impossible to put a figure to these settling-down costs. But one must hope that the Government take this kind of problem more directly into account than seems to have been the case in the past.
Perhaps more important, it is essential to be clear about the distinction between a preferential buying policy and an efficient procurement policy. Even if the objective of the procurement policy is to sponsor the home industry, it is important to be clear about what an efficient procurement policy is all about. For example, the key element in the American procurement policy is not that it necessarily gives preference to the home Indus-try, but that it buys in bulk, and, of course, it is true in the case of the particular instance referred to in the report, ICL's initial sale to the Ministry of Defence, which is what this whole matter is about, was on a one-off basis, and that is the basis on which the computer industry on the whole finds itself selling to Government Departments.
It is to be hoped in this context that when we start buying on a Europe-wide basis it will be possible to place orders in a rather more sensible way than has been the case when a Government of limited financial capacity are able to place their orders. In that context, also, it is questionable whether ICL, which has been extremely successful in selling to one or two large European organisations—notably the EEC—can continue on a Europe-wide basis without finding European partners with which to sell its wares around Governments and public buyers around Europe.
I believe that it has to be stated that there is a danger inherent in the whole discussion of how much money we should in one way or another give to the corn-West Germany, Japan, France and the puter industry. The Governments of United States are directly involved in sponsoring their computer industries. But the danger is that this whole argument about whether we go on supporting a manufacturing industry distracts from the wider question of whether we should be subsidising a manufacturer of computers or be providing the right environment in which computers should be used and applied in industry more generally.
1087 I return to the yet unpublished Sussex university study. I understand that there appears in the conclusion a sentence that is worth quoting in this debate. It says:Direct support for the supply industry "—it is referring to the computer industry—affects the health of at most 1–5 per cent of the British economy. What is more important is that the other 95 per cent of the British economy is not deterred in its choice of the most efficient computing capacity because computing capacity governs the efficiency of most of today's commercial and industrial operations.The issues involved here go far wider and far deeper than the subject we are discussing. The question is whether it is better to spend taxpayers' money on supplying a particular form of manufactured product, or to use the money to create the environment, for example, in which to lower taxation or increase the levels of skills so as to encourage industry to apply the technology.
Every pound given to the computer industry to make a bit more money has to be taken from some other industry which, by definition, since the money presumably comes from profitable companies which are making money, has the potential to expand and purchase more computers.
Such issues go far beyond the remit of the Public Accounts Committee, and are a matter for this Chamber rather than for the PAC. But it may point to the possibility that the difficulties that the PAC encountered in its extremely valuable consideration of the special problems affecting the British computer industry may be solvable only within the wider debate of the philosophical precepts by which we run this country.
§ 6.9 p.m.
§ Mr. James Kilfedder (Down, North)
There is a number of reasons, all of them related, why the seventh report from the Public Accounts Committee has a special constitutional significance for Northern Ireland, Scotland and Wales. We have had the devolution debates, including lengthy discussion of the links between revenue and expenditure in the context of devolved legislatures and the allocation of funds centrally from London. In the seventh report we have a number of cautionary tales of what can happen or what can go wrong even in the best-ordered bureaucracy—or, perhaps, as I 1088 believe, these things happen because the bureacracy is in control.
In the 38 pages of the report from the Public Accounts Committee dealing with Northern Ireland—and I wish to restrict my remarks to Northern Ireland—we have proof that the present method of governing Ulster is wasteful of money, careless of the taxpayers' interest and irresponsible. First, we are given some details of the disastrous policy which the Department of the Environment allowed the Housing Executive to pursue regarding the rehabilitation of old housing in Belfast and alsewhere in the Province.
One case involved an amount of £14,500 for the renovation of a house. That was a colossal sum for the renovation that was involved and the end product. Another example started at £4,800 in April and four months later, in August, finally cost over £10,000. Like some of the members of the PAC, I cannot understand—and perhaps even now we shall be given an explanation by the Government—why the Director of Public Prosecutions has not instituted legal proceedings against either officials or certain building contractors operating in Republican areas of West Belfast who seem to think that the British Treasury is a gold mine which they can drain at the same time as bombing British institutions in the Province.
The main point here is that the unfortunate accounting officer of the Department of the Environment is held responsible for the malfunctioning of a part of the Housing Executive, which is an independent body. I notice that the accounting officer of the Department of Education was helped, in giving evidence, by a representative from the University Grants Committee. Given the relationships which exist between Stormont Departments and the statutory bodies for which they have responsibility—the health boards, the education boards, the Housing Executive, the airport authority, and so on—does it really make any sense for the permanent secretaries to be held solely responsible for the way in which these autonomous boards spend their money? The fact is that it is not possible for a Department at Stormont to carry out the kind of meticulous financial control of expenditure over these quangos which such a body is able to do for itself.
1089 Indeed, only a few months ago Parliament was told that the Department of Education would cease to have its own auditors for expenditure by education boards. The reform of local government in Northern Ireland has been very costly to the taxpayer and it is very clear that the Department of the Environment, the five education boards, the four health boards, and the 26 practically powerless district councils, constitute a very expensive and hopelessly incompetent system of government. The staff certainly do their best, but bureaucracy has defeated them.
It is worth noting that in Northern Ireland nearly 30 per cent. of the employed population is on the public payroll. That is an extraordinarily high figure. Another 11 per cent. of the population is, of course, unemployed.
We must recognise that only district councillors can be surcharged for wrong expenditure. Until this past year the district councils have been responsible only for refuse collection and cemeteries. They now also have community groups and recreation centres under their control. But the really big spenders are the autonomous boards with their paid chairmen and nominated members. They do not have to be efficient. They do not even have to be bothered about the money they spend, because they are not raising it from the local taxpayers to whom they are not directly responsible—if, indeed, they are responsible at all. These boards simply obtain an allocation of money from Stormont and spend it up to the very last penny. Once Stormont has approved a board's annual budget, the accounting officer of the Department has virtually lost control of that money.
A board can spend some of its allocation of money on activities which are outside its remit and the Department, seemingly, can do nothing whatsoever about it. Where a board enters into a legally binding contract with an employee, a contractor or a voluntary organisation, whatever moneys are due under the contract have to be paid and the Department has to fork out the money, whatever is needed, whether the money is properly spent or not. To me, that is a ridiculous state of affairs.
That is the system that exists. It is open to abuse, as the report shows, and 1090 the system has been abused. The people who are really responsible—in one example that I quoted they are in the Housing Executive, and in another case they are in the health boards—are the ones who should give evidence to the PAC.
The Department's accounting officers are given an unfair burden. The legislation has placed them in an impossible position. They are technically responsible but, in practice, the legislation under which the various boards and authorities operate, since the reorganisation of local government in Northern Ireland, has removed these boards from effective control.
The position of the all-powerful University Grants Committee is instructive. That Committee advises the Department of Education in Northern Ireland, and the two Northern Ireland universities, and its advice has the authority of the Medes and Persians. I do not object to that.
Is there not a lesson in this for the devolved Assemblies of Scotland and Wales? Will not the Scottish and Welsh Education Departments—once the Assemblies are set up, if they are set up—be in a similar position to the Northern Ireland Department of Education? Would it not be simpler and more effective for the various Education Departments simply to hand over to the University Grants Committee each year whatever funds are required by it—in the case of Northern Ireland, for Queen's University and the New University of Ulster? That way, the University Grants Committee would be seen to have responsibility for all British universities.
Certainly I believe that the present arrangement in Northern Ireland is unsatisfactory. It divides responsibility in an area where great expertise is called for and where the national interest is as great as, say, the running of the Royal Navy, the Army or any other large concern.
In this, as in some other matters, I think that we in Northern Ireland should follow the Scottish example and place our universities directly under the University Grants Committee. The revenue needed for Queen's and the New University of Ulster should be handed over each year by the Department of Education in Northern Ireland, as it is by the Department of Education and Science for the universities 1091 in Great Britain. The present system is a nonsense.
I turn, finally, to the Mater hospital and the question of accountability to Parliament. The PAC, inquiring into the expenditure of the taxpayers' money by the Government, while paying a tribute to the valuable service of that hospital, queries why the trustees did not share the cost of urgent and essential modernisation, even as an interim arrangement. The Mater hospital, I should say, was wholly independent of the State hospital system until 1st January 1972 when, by deed of arrangement entered into between the board of management and trustees of the hospital and the Department of Health, it was incorporated into the State Health Service.
The report summarises the position perhaps best at page xiii, where it says:The deed included a provision for the preparation of a ' scheme of initial reconstruction and modernisation of the buildings and facilities of the hospital as at present constituted.' The deed also provided for the cost of ' the scheme of initial construction ' to be met by the trustees; no part of such cost was to be met out of the Exchequer. The trustees later claimed that they were liable only for the cost of new construction and that responsibility for the cost of modernisation and upgrading of the existing buildings and facilities lay with the Department. DHSS held that its understanding of the deed at all stages in the discussions prior to the incorporation of the hospital in the state service was that the cost of reconstructing and modernising the hospital would be met by the trustees, and that the deed was intended to provide for this.Certainly my reading of the debates of the Stormont Parliament, where the deed of arrangement was discussed and the terms of agreement were given to Parliament on 7th December 1971, was that no query was raised by the hospital then or later. But the deed of arrangement was explained to the Stormont Parliament in 1971, when the Minister told Parliament that the costs would not be met from the Exchequer but would be met entirely from the funds of the hospital. That was a pledge given by the Minister to the Stormont Parliament, on a number of occasions during that debate. He was most definite about it.
However, it appears that the Comptroller and Auditor General did not report to the Public Accounts Committee that this pledge was given to the Stormont 1092 Parliament. Certainly I see no evidence that the Public Accounts Committee was informed. So the Committee was not aware that that pledge had been broken.
Parliament voted money for health services on the understanding that nothing was to be spent from that money on these capital works at the Mater hospital. Hence no money was voted for the purpose, yet money was spent on these capital works and it is a question of accountability to Parliament.
Over a period of years up to 31st March 1977, sums amounting to over £500,000, by that date—and more has been spent since—were paid out of money that was not voted for that purpose. During all this time Parliament was not told or given the slightest indication that money was being diverted to purposes for which the Stormont Minister had pledged it would not be used.
It is a sorry state of affairs that, despite the safeguards for the proper use of public money, this diversion of funds in violation of a pledge given to the Stormont Parliament is not even reported. It should have been reported and the matter should have been clarified and cleared up years ago. I am criticising the fact that it was not reported. Of course, we in Belfast all recognise the great service that this hospital provides to the people in its community. However, the question arises: have we reached the point at which such a violation is not even worth a mention and is not regarded as a matter sufficiently serious enough to require it to be mentioned in this House?
It is quite clear that the Department knew what it was doing, because the Comptroller and Auditor General says that the Department paid out the money without prejudice to the claim that it had to recover it eventually. It appears that a new arrangement is being negotiated under which public funds are to bear a large part of the capital costs of the reconstruction at The Mater. The original agreement was approved by the Northern Ireland Parliament on the understanding that no part of these capital costs would be met from the public purse. Now we hear, indirectly and only because the Comptroller and Auditor General has featured the case in his report, that the original agreement is to be fundamentally changed. If the original agreement required the approval of the Stormont 1093 Parliament in 1971, which was to vote the money to be spent under it, why has not this Parliament been notified of such a fundamental change in the arrangement and why has it approval not been sought?
I fear that the additional money which the Government had to find to meet the unexpected and heavy expenditure has meant that other hospitals outside Belfast, such as those in my constituency, the Bangor hospital and the Ards hospital, which are in an inadequate state and do not provide the services that they ought to provide for an area of high density population, have suffered financially.
That is why I bring this matter to the attention of the House and make this protest about it. The people in North Down, as indeed those in Antrim, where their hospitals have suffered, are entitled to a good hospital service. We are told that the money is not available, but it seems to be made available without the approval of the old Stormont Parliament and certainly without the approval of this Parliament. That is certainly not justi-able.
§ 6.25 p.m.
§ Mr. Michael English (Nottingham, West)
I was sorry that I was not able to be present during the latter half of the speech of the right hon. Member for Taunton (Mr. du Cann). I had privately informed him that I had to go and chair the General Sub-Committee of the Expenditure Committee, which he mentioned very kindly in the early part of his remarks.
I understand that in the bit of the speech that I missed the right hon. Member said that it was time that the Exchequer and Audit Acts were revised and that, although we might argue about the details, the principle of their revision was essential. I wholly support that proposition. What the Expenditure Committee has been seeking is that these ancient Acts, one of 1861 and the most recent of 1921, should be revised in the light of modern circumstances.
The whole idea of audit has changed vastly since the first of those Acts. It has certainly changed even in the 57 years that have passed since the most recent Act. The hon. Member for Worcestershire, South (Mr. Spicer) mentioned computers, in another context. I am sure 1094 that he would agree that there is no question that anybody ever thought of auditing anything on a computer in 1921.
Technology alone necessitates a change in these Acts. But there are other reasons. The other reasons were stated in the report which my hon. Friend the Member for Gloucester, West (Mr. Watkinson) very kindly praised in his speech. I should like to refer to that Expenditure Committee report. It is the eleventh report from the Expenditure Committee in Session 1976–77. A whole chapter of it relates solely to our system of audit. It says to begin with:we are of the opinion that by comparison with other countries our system of public audit is out of date.Not only has technology marched on since 1921 but the whole question of the independence of our system of audit is at stake. I am in no way referring to the Public Accounts Committee and the excellent work done by the right hon. Member for Taunton and his colleagues. The Expenditure Committee has never criticised them—although they have been criticised quite recently in relation to the Property Services Agency inquiry of some years ago, an agency which they had to inquire into again in one of the reports that is now before us.
But the main criticism, surely, of the existing Exchequer and Audit Department has been expressed by almost every speaker. The main criticism is of its very limited jurisdiction. It started out with what in 1861 was a very wide jurisdiction. It was almost allowed to audit most things in Government. Since that time the quango, as it is now called, has been typically developed almost to evade the various controls of Parliament, one of which is the control of the Auditor. This applies to the nationalised industries as a whole.
I have one criticism of Opposition Members in this respect. The hon. Member for Surrey, North-West (Mr. Grylls) concentrated solely upon the National Enterprise Board. We shall never get on in this game if we allow ourselves to be split apart as between Government Members and Opposition Members, by concentrating solely on something in which we happen to be interested. The hon. Member for Surrey, North-West happens to want to see the NEB come under the jurisdicition of the Comptroller and 1095 Auditor General and the PAC. So do but I want everything to come under them. The hon. Member will not win his argument by simply singling out one particular organisation.
We said in the Expenditure Committee's report:The Acts should be amended and should state as a principle that the E&AD may audit any accounts into which public money goes…".I am not suggesting that the Comptroller and Auditor General can do a detailed audit of every nationalised industry or every Government Department. We are not suggesting that, although I think that the six accountancy institutes have that worry, to which I shall come a little later. We said that the Department should be able to audit:any accounts into which public money goes even if such public money is not the bulk of receipts into such accounts. Where public money is the bulk of receipts into an account, the E&AD should always audit them, subject only to such specific exceptions as are made in the amended Act.The present situation is deplorable. It is far worse than my hon. Friend the Member for Gloucestershire, West realises, because, as the Procedure Committee said in its report at the end of last Session, the Comptroller and Auditor General is not even independent. When he gave evidence to the Expenditure Committee, he claimed that he was independent, and in one sense he is. He can be dismissed only, as a judge can be dismissed only by the Crown on receipt of an address from both Houses of Parliament. He is personally independent, but his independence as regards auditing, his principal function, is very slight. The Procedure Committee said:That cardinal principle of independence is neither apparent nor, under existing statutory provisions, real.When the Government replied to the Expenditure Committee's report of 15 months ago, they said"No. We cannot possibly accept that the Comptroller and Auditor General should be an officer of the House of Commons, because that would infringe his independence." The present position is that section 3(1) of the Exchequer and Audit Departments Act 1921 requires thatThe Comptroller and Auditor General shall examine, if so required by the Treasury and in accordance with any regulations made 1096 by the Treasury in that behalf, the accounts of all principal accountants and any other accounts whether relating directly to the receipt or expenditure of public funds or not, which the Treasury may, by minute to be laid before Parliament, direct.I consulted an eminent lawyer upon the meaning of that rather expansive subsection. As he put it, its meaning is that the Comptroller and Auditor General can be directed by the Treasury to audit even the accounts of the local cricket club. That is the first side of his independence. He can be directed to audit anything, but only by the Treasury.
The suggestion made by the Expenditure Committee is that it should be possible for the Comptroller and Auditor General to be directed to audit anything by a Committee of the House of Commons, such as that chaired by the right hon. Member for Taunton. We were told that that would be an infringement of his independence. I do not believe that it would. Any citizen has the right to ask a court of law"Will you please consider my case?"That is not taken to infringe the independence of judges. The judge may say"I have considered your case, and you do not have one." That is different.
Representatives of the citizens—Members of this House and its Committees—should be able to say to the Exchequer and Audit Department We think that there is something wrong. We should like you to investigate the circumstances of a hospital in Northern Ireland. the circumstances of a loan by the National Enterprise Board"or whatever. That would in no way infringe an auditor's responsibilities and independence, because he might say"I am sorry, but it is a hare that is not really running. Everything is perfectly satisfactory ", just as a judge might say in a court of law that a complainant had no case.
The second point is much more serious. Section 3(3) of the 1921 Act provides that if, in the course of the examination of accounts,any question arises between the Comptroller and Auditor General and the accountant, it shall be referred to the Treasury, whose decision thereon shall be final.In other words, the Treasury is the only body in the country capable of telling an auditor to chase off, of telling him to go away and play with himself. No company in the country is capable of doing that. 1097 A company can change its auditors, but only after they have reported, as they are bound to do, under the provisions of the Companies Act. I regard section 3 as deplorable.
It is incorrect for the Treasury to claim in a reply to the Expenditure Committee that our proposal would infringe the Comptroller and Auditor General's independence, when it has absolute power to determine any question between him and any person he is auditing, throughout the whole service of Government and even outside it. The infringement of independence already exists in the statute, and it is totally wrong.
I hasten to add that, although the Treasury did not mention it at first—the Expenditure Committee found out for itself, and the Procedure Committee found out from the Expenditure Committee—I have reason to believe that the Treasury is now preparing another memorandum on the Exchequer and Audit Department and the Comptroller and Auditor General's position, a memorandum that I hope it will publish shortly. It is 15 months since publication of the original report from the Expenditure Committee. We have had a specious reply. I hope that we shall have a fuller reply that will deal with this simple question. What is needed is a revision of the Acts.
§ Mr. Geoffrey Finsberg (Hampstead)
Is the hon. Gentleman saying, as I understood him to say, that if the Comptroller and Auditor General and the accounting officer have a disagreement the Treasury can direct the Exchequer and Audit Department to discontinue its work? If so, is there any guarantee under the Act that such action by the Treasury would be publicly reported to Parliament?
§ Mr. English
None at all. The Act is confused. At one point it says that the Comptroller and Auditor General acts on behalf of the House of Commons, but he is not a servant of the House. He comes to the Public Accounts Committee in his capacity as a witness—although a very friendly one—not as an officer of the House. I think that it would depend on the strength of character of the Comptroller and Auditor General of the day whether he chose to make sure that the facts became public. He could do so if he wished, because he is protected from dismissal. But the statute says that he 1098 must refer any disagreement to the Treasury, not to the Public Accounts Committee or the public at large. He must refer it to the Treasury, whose decision thereon shall be final. Some people would interpret"final as meaning that he should not refer it any further once the Treasury had told him to leave it alone. However, it is a matter of interpretation upon which people can differ.
One could not simply give the Comptroller and Auditor General and his staff a wider jurisdiction without dealing with some of the problems that would thereby arise. One problem is the existing nature of the staff. We said in our report:In our opinion the E & AD should change its recruitment policy still further, to provide staff capable of conducting extended audits of the kind we mention above '.Here I make no criticism of Sir Douglas Henley. Policy has changed since 1975, and that is precisely the period during which he has been the Comptroller and Auditor General. But before that, incredibly, our Exchequer and Audit Department was staffed by people none of whom was recruited as a graduate, none of whom was recruited as a professionally trained accountant or anything else, none of whom was given a professional training. Although the staff were given some training, they were not given a training that led to any professional qualification.
In other words, we had a state of affairs totally different from the way in which a Department of State is run. Whereas we know that the whole Expenditure Committee has criticised Departments of State for being a little too elitist in some respects by having first-class or second class honours graduates in charge of them, almost invariably brought in from good universities at an early age, their actions are supposed to be audited by people who have never been to any university and who have never obtained a professional qualification.
I congratulate Sir Douglas Henley on changing this policy since 1975. But the fact remains that the change has taken place only in relation to new entrants, who are graduates and who arc trained in the CIPFA qualification. However, it should be far wider than that. The American General Accounting Office has a staff which includes some people who are trained in almost every conceivable discipline. It has lawyers, for example. The 1099 recent incident with the Crown Agents, where for the whole of its existence the Exchequer and Audit Department had not realised that expenditure by the Crown Agents was totally illegal, illegal for more than a century, surely shows the need for lawyers independent of the Crown to serve any competent audit department and to be able to say"This is the legal position. If you do not agree with us you must go to court."
At the moment, if the Comptroller and Auditor General wants legal advice, he gets it, being part of the Government machine, from the very Government whom he is supposed to be auditing, and clearly it is not very good advice. If he is to look at an education service, he must have some educationists. If he is to look at a hospital, he needs some doctors. He needs engineers if he is to look into the effectiveness of construction schemes. Although he does not need a lot of them he needs some people skilled in a wide variety of disciplines to have an effective modern audit organisation. In that respect, the existing establishment needs to be widened.
I come back to the first point, of jurisdiction. I am sorry to say to the hon. Member for Down, North (Mr. Kilfedder) that, alas, the example of Northern Ireland has not been followed in the Acts for Scotland and Wales. To my regret, although enormous sums of the British taxpayer's money will be given to Scotland and Wales in the event of devolution, the moment it is given to Scotland and Wales it will be audited, under the Acts, by separate auditors set up for Wales and for Scotland by the Welsh and Scottish Assemblies.
We make a rather silly meal of these matters. The General Accounting Officer of the United States can follow federal money wherever it goes. He can follow it when it is given as grants to states. He can follow it when it is given to local governments within the states. He can follow it into private companies. If it is federal money, the auditor can follow it. Surely that is sensible. It does not infringe anyone's constitutional rights. The constitutional rights of the states are protected by the federal constitution, and they are protected far better than the rights of a Scottish or Welsh Assembly. As the hon. Member for Down, North 1100 will know, sub-parliaments in this United Kingdom can be abolished by the stroke of a pen.
In the United States, it is not thought that the auditor is infringing constitutional rights if he inquires into what has happened to some money. We in this country have this extraordinary view that he must not be allowed to do it, otherwise people will become very frightened, and the people most frightened, amongst others, are local authorities. The local authority associations were stirred up by the Department of the Environment to object to our proposals, because we also suggested that the district audit of local authorities in England and Wales, which is far less independent than even the Comptroller and Auditor General, should be taken into this new central audit service that we propose. The local authority associations objected. The only reason for that objection is the feeling that sooner or later someone will put his foot in it and be publicised as being inefficient or, even worse, corrupt. However, in my view we should take a more robust attitude such as is taken to these matters in the United States.
We all know that with audits there are levels and strata. Everyone who has ever been on the receiving end of a company audit knows that the auditor may produce his standard report under the Companies Act as he is required to do but will say to the board of directors"In addition, privately I should like to let you know the following facts at which I think you should look." We know that that happens. It could well happen with local authorities. Indeed, it does. When, for example, inspectors of schools or inspectors of constabulary do their inspections, they do not always publicise all that they may find. So part of the fear of local authorities that they will always be publicised even when there is no need to do so is unnecessary. On the other hand, if an auditor finds actual corruption, why should we be so afraid of this being publicised? If he believes that someone has stolen the cash, why should we be so afraid as to say that it should not be publicised?
I do not see that we should have this limited, hole-in-the-corner attitude that the auditor must not be allowed to have too much jurisdiction because he might spread into areas such as the nationalized 1101 industries which we want to keep away from the prying eyes of people, that he must not be allowed to stray into local government because that might upset a lot of local councillors who happen to belong to the Labour or the Conservative Parties, and that he must not be given an adequate staff.
We were talking about the independence of the Exchequer and Audit Department and about the Government's dislike of the idea that it should come under the House of Commons. I remind right hon. and hon. Members that this staff which was not allowed to have people who had graduated from universities and people with professional qualifications had its establishment fixed and its pay determined by the very Treasury that it had to audit. In my view, this is precisely why for more than 100 years it was kept deliberately, in personnel terms, as a second-rate, second-rank institution. It was to ensure that the audit was not too effective.
That is just what should not happen. The principal reason for putting the auditor under the control of this House is that this House, by the Act that we passed last Session, has for the first time the power to determine the estimates of its own staff. We are not allowed to determine our own pay, but we can determine what staff we have and what they should be paid.
I am sure that if the right hon. Member for Taunton and his Committee were in any way in charge of the Exchequer and Audit Department, they would say that they should be paid not less than the people they are auditing at all levels and that they should be not less qualified than the people they are auditing—in which case I am quite sure they would have been better treated than they have been by the Treasury in the past and later by the Civil Service Department.
In my view, it is of the utmost importance that we should do this job properly. We are playing at it, and we have been playing at it for quite a while. There were times when perhaps Committees and Members of the House had more time.
But several hon. Members have mentioned the National Enterprise Board and the British National Oil Corporation. At one time there was a small contingencies fund which the Public Accounts Commit- 1102 tee in the nineteenth century reduced to an exceptionally small amount. It was initially called the Civil Contingencies Fund. That fund was reduced to a few hundred thousand pounds except during wartime when it was increased. After the first world war it was reduced to almost its nineteenth century level. After the second world war it was reduced again. In 1974 it was increased to 2 per cent. of supply. It now stands at £826 million. It is due to be increased automatically next year. It is a rolling amount.
The custom is that the money in that fund is not used just for relief of earthquake victims in the Falkland Islands or for an unforeseeable act of God. For example the fund was used to set up the BNOC organising committee. That money was spent before the Act had been passed which set up the BNOC.
It is some years since the Public Accounts Committee and the Expenditure Committee investigated this fund. I will certainly suggest to the Expenditure Committee that it should investigate the fund again. I hope that the right hon. Member for Taunton and his Committee, will also examine this enormous sum of £826 million. That money is being used not for unforeseeable contingencies but for what the Government want. That is a different matter.
I fully intend, as I have in the past, to support my hon. Friends in legislation such as that to set up a British National Oil Corporation. However, it is quite different to approve of the Government spending money on it before it exists. In a Parliament such as we have had recently it is not only foolish but arrogant to assume that because a Bill has been given Second Reading it will be passed.
All these matters, important as they are, relate to what we do in situations that exist. I believe that we should have a proper set of departmentally related committees as well as a Public Accounts Committee. We do not want departmentally related committees talking about what should be spent on education, for example, and then next year to audit what they decided the previous year was a good idea.
We need a Committee such as the Public Accounts Committee. In addition to that we need Committees such as those suggested by the Procedure Committee. 1103 We must arrive at decisions about these matters. The Procedure Committee report has not yet been debated. We have not yet received a Government reply to that report. The Government say that they wish the debate to take place first. Let us have the debate soon.
Much of that Procedure Committee report relates to what has happened to the Expenditure Committee report on the matters that we are now discussing. That has not been discussed for 15 months. We have had a reply—which was wrong—from the Treasury. The Expenditure Committee has written a further report pointing out that the Treasury was wrong and we are awaiting yet another memorandum from the Treasury. We have never had a debate on the recommendations on the Civil Service. The recommendations relate not only to the audit but to a range of problems including pensions, mentioned earlier by one hon. Member. About 7 million people are covered by the inflation-proof pensions, he mentioned. One of the Committee's recommendations was that somebody should investigate the discrepancies between different pension funds.
We can leave those matters aside. The first thing that we require is a debate on the Civil Service report. Above all, we require a debate on the audit question. All the Committees which have considered the matter are unanimous. The Expenditure Committee does not always arrive at unanimous decisions, but it did on this issue. The Procedure Committee is not always unanimous, but it was on this issue. The Procedure, Public Accounts and Expenditure Committees say that the system needs revision. The system is based upon two ancient Acts. One is nearly 60 years old and the other is over a century old.
Those Acts must be revised if the public is to be protected adequately. The public must be assured that, although we are all paying our taxes, the money is not being pinched—as it was in the case of the Crown Agents—and that it is not being used totally ineffectively. All we require from the Treasury Bench is for the Financial Secretary to say"Yes, we realise the situation. It might take some time, but we are prepared to initiate the 1104 process of changing the law ". It is time that the Treasury showed willing in that respect.
§ 7.56 p.m.
§ Mr. A. P. Costain (Folkestone and Hythe)
I have listened to every Public Accounts debate in the 19 years that I have been a Member of the House. Today's debate has been one of the best that we have had. It resembled the Report stage of a Bill. The Committee put forward its proposals and hon. Members have added to those in the same way as they would on Report. That is due to the effective speech made by my right hon. Friend the Member for Taunton (Mr. du Cann).
I think that I am correct in saying that the Chairman of the Public Accounts Committee must by tradition be a member of the Opposition. I have sat under five such chairmen. Although my right hon. Friend the Member for Taunton has been one of the best Chairmen of that Committee I hope that by this time next year he will no longer hold that post, because we shall be in Government. If today's speech was his swan song it was effective.
The problem around which the debate has revolved today is one that has been much in mind in the many years that I have been a member of the Public Accounts Committee. The question is whether the Public Accounts Committee controls or scrutinises expenditure. Anybody who believes that a Committee sitting from six to eight hours a week, only when the House is in session, can control the colossal expenditure of Government is kidding himself and is being unrealistic.
The Public Accounts Committee can scrutinise expenditure, providing that it has a known pattern by which to work. For example, the instruction has always been that all Government Departments when spending public money shall purchase at the lowest price, everything else being equal, such as the quality of materials and delivery dates. Now there is a new situation. The Government now say that they will apply sanctions against certain firms because they have broken the pay code. The Government now say that a Government Department can no longer buy goods from such firms. How can the Comptroller and Auditor General decide whether a Department is right to carry out an instruction that has not been 1105 approved by Parliament? I understand that any deviation from the traditional situation must be approved by Parliament. That has not been done. It is the thin end of the wedge. I hope that it will be resolved next year.
If that is to be the situation, what is to happen to a firm that is wise enough to contribute to the Conservative Party? Should such a firm be struck off the register? What about a firm that contributes to the Labour Party? How are we to control public expenditure if accepted procedures are not operated.
My right hon. Friend the Member for Taunton has been kind enough to compliment me on my 100 per cent. attendance record in the Committee. I have found the proceedings there extremely interesting. Over the years for which records are kept it will be seen that I have pretty nearly a 100 per cent. attendance. There are snags attached to this. One of them is that when the Committee is meeting on two afternoons a week it can be difficult to find the time to speak in the Chamber. I make no criticism of the Chair, because I sometimes have the honour of taking it.
If a Member is away from the debate for three or four hours it is unfair on others, who have been in constant attendance, if he is called when he manages to return to the debate. Perhaps the Procedure Committee could consider this point, in the same way as it considered the question of the pink tickets placed upon the Benches, reserving places for hon. Members who were in Committee. There might be some method of arranging that a Member who is serving on one of the many Committees does not lose his place in the queue for speeches in the Chamber.
We ought to appreciate how much the Public Accounts Committee has been of interest and concern to other Parliaments, particularly in the Commonwealth. Some time ago my right hon. Friend the Member for Taunton wrote an article in The Parliamentarian, setting out the work of the Public Accounts Committee. I was fascinated to find that in the October edition there are contributions from the Parliaments of Australia and New Zealand on this issue. An Australian Member of Parliament talks about the attitude of the Executive to the PAC. He says: 1106It must he remembered that departmental advice will be given by the very officers who (if applicable) disagreed with the committee's preliminary conclusions at the in camera hearings. Thus, it is most important that the Executive have a collective will to consider seriously the committee reports. To this end, I suggest that the Chairman of the Committee attend the Cabinet meeting at which the relevant report is discussedIt would be an innovation if we had a member of the Opposition, as Chairman of the PAC, attending Cabinet meetings.
The New Zealand Parliament has some even better ideas. It says:The objective of the Public Expenditure Committee, as the new committee wants to be known, were to ensure that the money appropriated by Parliament was spent as Parliament intended, with the due exercise of economy and without waste or administrative extravagance … the committee he not required to examine any class of Estimates referred to another Select Committee for examination.That answers the point made by the hon Member for Nottingham, West (Mr. English).
In the past Session we had a certain overlapping between the work of the PAC and the Expenditure Committee. I am not sure whether this can be avoided entirely, although it should be if it is possible. Such overlapping wastes the time of Members and, even more important, wastes the time of the senior civil servants who appear before the committees.
The hon. Member for Putney (Mr. Jenkins) explained why he had to leave the debate early—to talk to Putney Young Conservatives. He is a new member of the Committee. During the short time that he has been with us he has made a useful contribution. He pointed out that the Committee does not carry out in-depth investigations. He must realise that a Committee such as this cannot do so. The hon. Member also said that we ought to have a Committee attached to each Government Department. That would be crazy. Let me explain why.
If there were an all-party Committee overseeing a Department, who would take the responsibility? A difference of opinion between a Minister and a civil servant is a well-known occurrence and is catered for in our constitution. If an accounting officer responsible to this House for expenditure disagrees with a Minister's decision he will argue the point. If he loses that argument, the accounting officer will carry out the Minister's policy in the 1107 most faithful manner possible. He has the right to advise the Public Accounts Committee that such a step as may have been taken was against the wishes of Parliament.
If we had Ministers, a permanent secretary and the Committee, goodness knows how any Department would function properly. Can anyone imagine Winston Churchill winning a war with a committee? The same situation arises economically.
§ Mr. English
The United States has won several wars while its congressional committees were carrying out investigations. During the second world war Harry Truman made himself and his committee famous by investigating wasteful expenditure upon armaments. I can also imagine Winston Churchill fighting the last war with the aid of a committee. It was called the War Cabinet. The only question at issue is the nature or type of committee. My hon. Friend the Member for Putney (Mr. Jenkins)—the reason for whose absence amuses us all—was intending to support the recommendation of the Select Committee on Procedure that there should be departmentally related Committees discussing the current activities of Departments. I do not think that he meant—the Procedure Committee certainly did not—to infringe the audit prerogative of the PAC. If the hon. Gentleman is saying that the same Committee could not do both jobs, he is quite right. The Procedure Committee said so.
§ Mr. Costain
I am grateful for that explanation. The fact that something has happened in America does not prove that it can necessarily happen here. The American constitution is different. If there is a Committee of Members of Parliament breathing down the necks of Ministers and permanent secretaries, from whom will it take evidence? The responsibility would be spread too widely.
There is one point which I raised last year and of which not much notice has been taken. I shall go on raising it until something is done. One of the failures of the Public Accounts Committee system relates to those from whom we take evidence. It has been the tradition to take evidence only from the accounting officers, with certain exceptions. We take evidence from some chairmen of new 1108 towns and from university spokesmen. Generally, however, the witnesses are senior officers. It would be better if we could take evidence from the professional advisers to the Minister or the Department. There is always a tendency to say"We employed the wrong consultant and he made a mess of it. We did not find out until it was too late." In fairness, people who are accused of being inefficient should, out of consideration of human or natural justice, at least be allowed to plead.
I want to make a revolutionary suggestion, at which the House will probably laugh. However, two or three years hence hon. Members may take some notice of it. My business experience has been of immense advantage to me on the Public Accounts Committee. I know that the House of Lords is not permitted to interfere in any way in the question of the collection of taxes, but I see nothing against Members there who have had experience of running big business, and who now have more time to spare than MPs, being co-opted on to some of our Committees which are advising upon expenditure and the proper use of money. I know that this suggestion is a complete innovation, but I ask the House to consider it, and not laugh it off.
§ 7.11 p.m.
§ Mr. Gerry Fowler (The Wrekin)
I always think that this is one of the most important debates of the parliamentary year. It certainly should be if the House is concerned primarily with the scrutiny of Government actions and the control of public expenditure.
This has been a very good debate, but it has also been mostly rather poorly attended. That was my experience on the occasion of this debate last year. That factor points to one of the weaknesses in our control of public expenditure: we do not take our duties seriously enough.
There is a further weakness. It is that in two senses we are not allowed to take our duties seriously enough. I will not comment at length on the admirable speech of my hon. Friend the Member for Nottingham, West (Mr. English). I agree with most of what he said. I wish to reinforce his comment about the need for a new look at the Exchequer and Audit Department and the legislative framework within which it operates.
1109 As my hon. Friend said, that Department does not investigate local authority expenditure. That is an interesting aspect, because in 1967 the Public Accounts Committee produced a special report which led to the Committee having access to the books of the University Grants Committee and of the universities. That was done because this House agreed, with almost total unanimity, that the situation could not continue in which more than 80 per cent. of university funds came from central Government, although the House —through the Public Accounts Committee —was denied access to information about how and where that money was spent.
Bearing in mind specific grants to local authorities and the rate support grant, about two-thirds plus of local authority expenditure comes from central Government voted by this House. There is, therefore, no rhyme or reason in the current legal situation. It is high time that we reformed the 1921 Act. The attendance of hon. Members at the debate shows why we do not do that. Insufficient hon. Members put pressure on the Government to ensure that we have legislation to that end.
There is a further reason why our control of public expenditure is weaker than it should be. It is that we are presented with inadequate information by Governments and that often the information, when we receive it, is what I can only call compressed gobbledegook.
An example is the public expenditure annual White Paper. We debate it for much less time than we debate the Budget, which is the raising of revenue. We debate the latter with great care and at great length, but we do not debate the spending of revenue to anything like the same degree. In a public expenditure White Paper debate we concentrate upon the totals of public expenditure. It is another management of the economy debate. We consider whether the Government are borrowing too much money. That has been the core of most recent public expenditure White Paper debates. Yet we should be debating some of the details of public expenditure as set out in the White Paper. We cannot do that because it is almost impossible to make sense of the details given in the White Paper.
1110 Let me give a good example which is public knowledge, because it has been mentioned several times before in the House. In early 1976 the public expenditure White Paper showed totals of expenditure for further and higher education for subsequent years that did not make sense unless one knew that the Government proposed to save £28 million in the academic year 1977–78, and £42 million in the academic year 1973–79, by increasing overseas students' fees.
These figures have been mentioned several times before, so I am not saying anything that I ought not. One could deduce from the White Paper that something odd was up. The figures for expenditure showed a slight decrease in those areas in 1977–78 and yet the text said that the Government expected an increase in the numbers of students in further and higher education. There cannot be a decrease in expenditure and an increase in the number of students unless something rather strange is happening. Yet no one in this House was told how those figures were to be reconciled. How, therefore, could we effectively debate that aspect of the White Paper? The answer is that we could not and we did not.
Every year we are presented with the rate support grant settlement. After months of detailed discussion between representatives of central and local government, we are presented with a document of four to five pages. We debate it for a day and most of us find it difficult, because of its compressed nature, to make much sense of it.
There is a motion on the Order Paper at the moment deploring the way in which certain shire counties have been treated. I note that it began with Cheshire and that hon. Members have added their counties in succession. My county does not yet appear there, and I do not think that it will because I understand that this year it has done relatively well compared with some other shire counties. I understand that from reading my local newspaper, not from any document in this House.
There is an accident of the formula. I mention it because most of our debates on the rate support grant settlement are confused and confusing because through the House not being given adequate detail, including the formula, about how each authority comes to have the money 1111 it has. If we had that the debate would be better informed.
We must begin to demand more adequate information of that sort. Of course, we must also reform our own procedures and Committee structures so that we may examine more closely and not simply retrospectively the spending powers of Government Departments.
We all know that the annual public expenditure survey system begins with a costing of the effect of continuing present and approved policies. That is the base from which one begins. If the Government can begin from that base, I do not see why this House also cannot do that. It would give away no information which should not be available to the supreme legislative Assembly of the land. It would not get the Government into a dialogue with a House of Commons Committee about where cuts or increases in expenditure should fall.
However, it would provide hon. Members with a serviceable basis upon which to consider future policy changes, whether they entail an increase or a decrease in expenditure. Why, then, does that whole process have to take place in secrecy? We have to make sure that that kind of information comes out into the open, and that there is a Committee structure in this House, whether it be an addition or an amendment to the present PAC and Expenditure Committee structures, that enables us adequately to consider such information.
That being said—and I think that it is in accord with the general tenor of the debate—I turn to specific items in the reports. I take, first, the examination of expenditure by the Manpower Services Commission on job creation projects. In this connection, I refer to the fifth report from the Public Accounts Committee beginning with paragraph 34. The examination by the PAC revealed serious weaknesses in the monitoring of expenditure on job creation schemes. Those weaknesses stemmed partly from the haste with which job creation schemes were created, partly from the number of changes and expansions made to the schemes and partly from the inadequacy of the staff of the Manpower Services Commission—inadequacy in numbers, not competence—to monitor and to require detailed accounts for all the projects 1112 which were set up. It is important that should not happen in future.
The Public Accounts Committee states that things should be a little easier under the youth opportunities programme and the special temporary employment programme—STEP—because they are of a semi-permanent nature. I find that phrase interesting. It is one of the clearest ways of saying that youth unemployment will be with us for some time to come without actually saying it.
I question whether things will necessarily be easier in terms of accounting for the use of public funds in those programmes. I do that partly because the youth opportunities programme has already changed and will continue to change its nature somewhat. That is for the simple reason why the Manpower Services Commission necessarily has to stress those elements in the programme where it is most easily successful. Emphasis on work experience schemes has been great, because that is where the Commission has enjoyed the greatest success in placing young people, whereas emphasis on certain other elements in the programme has lessened in the last five or six months. That means that there may be a problem in monitoring schemes and ensuring adequate accountability for the expenditure of public funds.
Another difficulty is the structure through which the youth opportunities programme is administered. As the House knows, it is largely administered through area boards, and those areas are neither fish or fowl. They do not correspond with the Government's regional structure or with the structure of local government. For example, they take in several local education areas.
The difficulty is that each area board is manned by officials who, I gather, are normally headed by officers of only higher executive rank. I come back to the point made by my hon. Friend the Member for Nottingham, West about the Exchequer and Audit Department. I doubt whether it will have enough people of adequate accounting expertise to ensure suitable financial monitoring of every scheme under its aegis.
I hope that the Public Accounts Committee will come back to this theme and will examine carefully whether the Manpower Services Commission has set up 1113 adequate accountancy structures with proper professional staff and has taken action to ensure suitable accountability—for example distributing to those sponsoring projects a model form on which they must account at regular intervals for the expenditure of public funds on those schemes.
I turn now to the ninth report from the PAC. I wish to refer to two elements in the report. They are both concerned with theControl of expenditure on fees included in awards to students.This matter is covered in paragraph 14 and following paragraphs.
First, college fees at Oxford and Cambridge. As the report states, the situation is, we may hope, at the point of improvement. In the past, the colleges of Oxford and Cambridge have set their own fee levels without consulting any public body. Since it was agreed two or three years ago that all students in receipt of mandatory awards should have their fees paid from the public purse—in effect, 90 per cent. from Government funds and 10 per cent. from local authority funds —the bulk of the fee income received by the colleges, which is now greater than the endowment income of those colleges, comes from public funds. It is an indirect subsidy to what claim to be purely private institutions—an indirect subsidy over which the House and the Government have no control. That is an absurd situation. The report suggests that improvements may be on the way, and it describes the scheme which has been discussed between the colleges and representatives of the University Grants Committee. Therefore, the Department of Education and Science would to some degree be able to monitor the public expenditure incurred in payment of fees for students attending colleges at Oxford and Cambridge.
I suggest that the PAC should not fail to look at this issue again in the very near future to see how the new system works. After all, there is an alternative. The colleges can no longer regard themselves as totally independent private institutions when the universities of which they are part receive substantial part of their funding from the University Grants Committee. It may be that the universities should examine a system whereby there is a uniform level of fees —including both university and college 1114 fees—corresponding with the fees charged in other universities. The deficiency in the budgets of many colleges would be made up by the universities and the universities would receive additional grants from the University Grants Committee which would ensure adequate accountability for the expenditure of public funds to the PAC and the House. That would mean a recognition by the colleges that they are indirectly receiving public money, as they are now. I cannot see what crucial change that makes.
The colleges are subsidised in another way. I speak from experience of the university of Oxford. Nearly every fellow of an Oxford college gets two stipends. He gets one as a fellow of a college from the endowment plus fee income of the college. At the same time, he gets a common university fund lectureship, which is a university post funded indirectly by the University Grants Committee. If he did not get that, he could not live. If he could not live, the colleges would not be staffed. Therefore, the colleges are subsidised indirectly in two ways. I do not like hypocrisy built into the system. I would rather have accountability through the PAC to the House for every element of public expenditure. I do not believe that means any kind of interference with the internal academic affairs of the universities and colleges.
The other element in the payment of fees from student grants concerns subscriptions to student unions. That matter is also discussed in the ninth report. I hope that it is clear to all hon. Members that the present system is inadequate because of the wide variation in the fees charged to students for the support of their unions and paid from public funds. That cannot continue. Mr. Trevor Phillips, the president of the National Union of Students, has put forward an alternative scheme to the one discussed in the report. For all I know, it might be viable. But I hope that the NUS will not—as some elements in it show signs of doing—reject any change in the present system.
The effect of preventing change would not simply be to preserve, for the time being at least if the House will not tolerate it for ever, the high level of income of some student unions. It would also preserve the very low and inadequate 1115 level of income of other student unions. The report makes that position clear. In the case of some student unions in further education, the underprivileged sector, the income can be as low as 50p per student per annum, which is far too little.
Preservation of the present system, therefore, through conservatism—I spell that with a small"c ", and I am sure that the NUS would not wish to be described as Conservative—is unjust to the least well off colleges in the most under-privileged sector of education, as well as allowing some other student unions to do quite nicely. In this third instance, therefore, I hope that the Public Accounts Committee will return to its theme if we do not get an adequate solution in the near future.
These reports—I have referred to only three elements in them—demonstrate how valuable an institution the Public Accounts Committee is. However, we ought not to rest on our laurels and, as I suggested at the outset, we must now build upon what the PAC and the present Comptroller and Auditor General have already achieved in improving the qualifications of the staff of his department. We must create a much more effective system for controlling public expenditure and ensuring that there is adequate accountability for public expenditure in the future.
§ 7.32 p.m.
§ Mr. Ivor Stanbrook (Orpington)
I shall refer briefly to that part of the ninth report of the Committee of Public Accounts which deals with housing associations. However, I wish first to pay my tribute to the Chairman and members of the Public Accounts Committee for the sterling work which they do on behalf of us all in the House. When reading their reports, one cannot fail to be impressed by the immense amount of work that they do, by the extremely serious and detailed consideration that they give to every matter coming before them, and by the breadth of their minds and the inquiries that they pursue in cross-examination of witnesses.
I feel that all this work is something that those of us not fortunate enough to be members of the Committee take too much for granted, and I therefore pay my personal tribute to it and offer congratulations to my right hon. Friend the 1116 Member for Taunton (Mr. du Cann) and the members of the Committee on what they do for us all.
Nevertheless, from a reading of any of the reports it is clear that the Committee is only brushing the surface of any problem that is given to it by the House. This is necessarily so. I entirely agree with what was said by my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) about the competence and capability of any Committee, or, indeed, any series of Committees to do more than view the situation from a remote position. But if the Committee is only brushing the surface, at least it is doing so—or perhaps one ought to say that it should be doing so—with a steel brush, not easily fobbed off, and determined, one hopes, to pursue matters that obviously require further investigation.
That makes me think that those who are responsible for investigating public accounts are deprived by us of adequate funds, staff and facilities to do the job properly. In the light of the extent to which public expenditure has risen over the past few decades and the extent to which the Government have increased their share in our national life and the scale of public expenditure, it is obvious that the investigation of public accounts has not kept pace with that growth.
Plainly, greater powers ought to be given, not so much to the Committee perhaps, since it is already a high-level and high-powered body, as to the Comptroller and Auditor General himself, and to his staff in particular. It seems to me clear that his office and his staff ought to be enlarged and be given much greater facilities than those which we at present provide.
My particular concern is related to the reference to housing associations in the Committee's ninth report. It is clear—I welcome the indication already given both in the report and by my right hon. Friend the Member for Taunton—that the Committee will in future continue to inquire into housing associations. I welcome that, in particular, because there is a case in my constituency which in some ways backs up the concern expressed by the Committee in its report.
Basing itself upon evidence taken from a number of witnesses, including the chairman of the Housing Corporation, the Committee says in paragraph 6 that the 1117 two cases of statutory inquiries which it had examinedpresent a disturbing picture which could involve the misuse of public funds ",and it says that it will be inquiring whether prosecutions have been instigated.
Later in that same paragraph, taking into account the role of the Housing Corporation in relation to housing associations, the Committee says:we take the view that, whatever the accountability of Housing Corporation to the Secretary of State for the Environment, the Corporation should be clearly and fully accountable to Parliament for its oversight of housing associations.I do not overlook the fact that in its minute on the report of the Treasury stated, at paragraph 95:The Treasury and the Department of the Environment note the recommendation that the Comptroller and Auditor General should be granted access to the books and records of the Housing Corporation.Obviously, therefore, something fairly big is on its way.
Recognising that about £403 million was spent in grants in 1976–77 alone to housing associations, one realises that in this branch of activity alone there is tremendous scope for inquiry. That is why I wish briefly to refer to a case in my constituency that is giving rise to serious public concern.
That case concerns the Helix housing association, which in 1974, with assistance, took over a large building that used to be a stately home in my constituency and was then crumbling into decay. With the funds provided the association converted it so as to provide a large amount of residential accommodation and flats for elderly people.
That was in 1974. Year after year since then one has asked what has been going on, what has happened to the money, and what progress has been made in the conversion of those premises, but year after year the premises themselves have continued to present the tragic picture of a huge mansion crumbling even further into decay.
It could be, of course, that the Helix housing association is having difficulties in going forward with its original programme. But that association was presumably accepted originally by the Housing Corporation for this work—it obtained 1118 the assistance of the London borough of Bromley for that purpose. If it found that it was no longer able to carry out its plans and programme it should have said so long before now. But here we are, nearly five years later, and not a thing has been done. On the contrary, the deterioration of the premises has continued apace.
One of the advantages in such a situation is that I can speak about it in the House and imply, perhaps, that something is not quite right with the affairs of the Helix housing association. I do not know. All I know is that something is wrong, in the sense that a large mansion in my constituency which could provide accommodation for many people has been neglected and a certain body which appears to be in receipt of public funds has not been doing its duty or living up to the promises it made when it was originally approved for this purpose.
For that reason alone, I believe that it would be right for this matter to be investigated. This is, perhaps, a good example of the need for investigation of money that has gone to institutions of this kind. Housing associations represent a means of providing housing which, in the circumstances of today and of the housing law, has become necessary, but all too little attention has been given to the scrutiny of their operations and particularly to the control of the public money that they receive. This is one case in particular.
I apologise for having intervened in this debate for a limited purpose. I want to do so not only to illustrate that example but to say how necessary is the work of the Public Accounts Committee and how much I congratulate its members on the work they do for us.
§ 7.41 p.m.
§ Mr. Bob Cryer (Keighley)
It seems that the NUJ strike is pretty successful so far as the House of Commons is concerned as we approach 8 p.m.
I, too, pay tribute to the right hon. Member for Taunton (Mr. du Cann) and his Committee. The right hon. Member is one of the shrewdest operators in the House. The priorities he adopts reflect his political attitude. That is no criticism. It is something we should expect from the Committee. We should not be under any illusion that the Committee is some 1119 sort of neutral and impartial body, not examining the things that reflect the priorities, values and attitudes of the Chairman and some of the members of that Committee.
I do not cavil at the Public Accounts Committee. It is an important and useful Committee. I should like to see its use diminished by the Government adopting Labour's policy and requiring public bodies to justify the withholding of information. The PAC tends to go behind the wall of secrecy which, for too long, has shrouded successive Governments.
I remind the Financial Secretary to the Treasury that the Labour Government do not exist just to prop up the traditions of our country. They are there to change things. I know that that is a message that he will want to take to his friends in the Cabinet. If the PAC goes behind the wall of secrecy that makes members of the Labour Party look inward instead of outward, that is the wrong way round. It is about time we got a shorter circuit so that members of the public as well as hon. Members can obtain information from the inside sources that influence the Government.
The PAC has provided in its series of reports a massive amount of information, some very useful. The sixth report reminded me how unfair some members of the Opposition have been over the past two or three years. I refer to the question which has been raised by several Opposition Members, namely social security frauds.
The sixth report provides some interesting comparative material. The Library informs me that the latest figures for the amount lost through social security fraud and the amount of irrecoverable overpayment of benefit as a result of fraud by the claimant or other persons, not employed by the DHSS, after the deduction of any amount repaid, was £3,205,383 in 1976–77. That is a lot of money. Most people would welcome such a figure at the bottom of their bank statement, but in national terms it is tiny.
Yet a great propaganda campaign, aided by such unscrupulous newspapers as The Sun, has been suggesting that large numbers or people who, through no fault of their own, have had to claim 1120 social security funding, have to some degree been defrauding the system. It is interesting to bear in mind that sum of just over £3 million and then to take a look at the sixth report which, in paragraph 39, points out that the Customs and Excise Department supervises the disposal of the duty-free stocks of spirits.
However, it says,under arrangements which have remained largely unchanged for more than 120 years, the Department may allow the proprietors to take samples for trade purposes. The maximum duty-free allowance is one sample of not more than a tenth of a gallon from each cask or vat, and it is common practice for proprietors to take the maximum permitted quantities from stocks of both home-produced and imported spirits. The Department estimate the total of these samples at about 250,000 proof gallons a year, duty on which would amount to nearly £7 million.Paragraph 40 says:The Department have no means of estimating the quantity required for essential tests or other trade purposes. Consequently they were unable to estimate the duty being lost on duty-free samples added to duty-paid stocks, although they were satisfied that it was significantly less than the £7 million a year mentioned above.Paragraph 41 adds:The Department acknowledged that the duty-free sampling arrangements were being abused.Even if one takes 50 per cent. of that sum of £7 million being abused, it in excess of the amount which is lost through fraudulent social security claims.
But the report goes on to say:The Department now intend to stop the abuse of duty-free sampling arrangements.I hope that my right hon. Friend will have some comment to make about what sort of arrangements are being made.
In paragraph 48 the report points out that the arrears of assessed tax due for collection are quite massive. I am not suggesting that there is any fraudulent evasion, but there is a certain amount of laxity in the payment of tax, often by people who could well afford to pay the tax, but the finger of suspicion is never pointed at them. It is always pointed at the section of society that is struggling the hardest, receiving the lowest amount of income and least able to fend for itself in answering the torrent of abuse that stems from the media, inspired by a number of Conservative Members of Parliament.
1121 Paragraph 48 points out:After allowing for amounts under appeal, etc., £588 million was then collectible.That was in October 1976.
There are further nuggets of information regarding the taxation of directors' remuneration. We expect directors to follow absolute probity, but the report suggests otherwise. It points out that, due to the difficulty of making awards to directors, the year end has to pass, and the directors then have to take a decision and vote a certain amount to a director. Hence, PAYE is not levied.
In paragraph 51 the report says:…but in each case there is likely to be an appreciable delay before the liability is discovered and the tax due recoveredIn paragraph 52 it adds:The Department have no means of estimating the tax arrears arising from the failure of companies to apply PAYE to payments on account of directors' remuneration. They accepted that a significant part of the tax liabilities eventually disclosed in PAYE returns submitted belatedly by employers related to directors' remuneration; and the belated returns cleared in the accounting period ended in October 1976 had disclosed liabilities of £80 million relating to 1974–75 or earlier years. The Department told us that 90 per cent. of this would he paid in the year after it was reported; the rest might well be paid in the following year and the amount of tax actually lost might be quite small.But the figures suggested in the report indicate that the amount would be in excess of that lost through social security fraud.
It is very useful indeed for the PAC to make this information available, but I have emphasised—it is now on the record—that there are substantially larger sums of money lost through non-payment of PAYE on directors' remuneration, through abuse connected with the sampling of spirits, and certainly some amount of money lost through delays in collection, far and away greater than the amount the poorer section of society is often accused of getting away with.
I suggest, in reference to my earlier remarks, that the priorities of the PAC seem to be excessively concerned with bodies such as the NEB. It might well be that this represents the political prejudice of the Chairman and certain members of the Committee. I would expect them to have this sort of prejudice. In the past, for example, the Committee has 1122 gone into inordinate examination of the two workers' co-operatives, at Meriden and Kirkby, when the amount of money spent on those co-operatives is minuscule compared with the amount of money poured out to support large chunks of private enterprise. I suggest to the Committee that it might like to examine where some of the money goes to in private enterprise, because there are certainly significant amounts of money involved.
In the eight report, for instance, the Committee stated that it would like to have access to the books of the NEB. The NEB pointed out, not unreasonably, that there might be some degree of commercial confidentiality involved. The NEB might well be on its guard against Conservative Members, who have a string of directorships, serving on the Committee and examining the books of the NEB, with possibly a conflict of interest involved. I do not know whether this has actually arisen because I have not checked in the Register of Members' Interests. Therefore, I am not making any particular accusation. All I am saying is that that sort of position could arise. The NEB might reasonably feel that a Member of Parliament could be placed in a difficult, if not impossible, position.
In any case, if the PAC is arguing that it should have access to NEB books, it seems to me to be entirely legitimate that the PAC ought to argue that there should be access as well to the books of the very large private enterprise companies which receive very significant amounts of public money, running often into hundreds of millions of pounds, over a period of years.
The PAC report points out that the NEB has received several hundreds of millions of pounds. Nevertheless, there is no doubt that large chunks of money have gone into private enterprise concerns. The report points out, for instance, that by March 1978 the NEB had received £545 million, but in 1976–77, £719 million was paid in financial assisstance, under section 7 and section 8 of the Industry Act 1972, and most of that money went into private enterprise.
The Committee has examined the regional development grant system. There is a contrast between its investigation into the RDG system, which seemed to me to be less than comprehensive, and its 1123 examination into the NEB, which seemed to me to be very comprehensive. I wonder if that was the reflection of the sort of priority which the Committee has adopted.
§ Mr. du Cann
I wonder if the hon. Gentleman would be good enough to do his homework more closely. If he did, he would find that, on the occasions when the Public Accounts Committee has wanted access to the books of any company, it has been able to obtain it. As to the choice of subject, if he would be good enough to give the matter a little more thought he would appreciate that the Committee inquires into those subjects which are reported on by the Comptroller and Auditor General to Parliament. It is not a matter of the Committee being selective according to the political prejudices of any of its members. That simply does not apply.
§ Mr. Cryer
I am not saying that the Committee has not examined the RDG system. It has indeed, and it has reported. I am saying that the extent of its examination of the RDG system seems to me to have been less zealous than its examination of the NEB. There was, for example, no examination of the automatic effect of the RDG and of the ridiculous position that, if a company receives RDG and gets into financial difficulties, it can get RDG again only if it is reorganised or taken over by another company.
As the House knows, I had something of a disagreement with the Department of Industry over the Kirkby co-operative, Kirkby Machining and Engineering. Any company which takes over KME will automatically receive regional assistance, and it seems to me patently absurd that the money should go to a re-convened and reorganised private enterprise organisation when the money could go instead directly to the co-operative. Yet that is the position, and it seems to me that it ought certainly to be evaluated.
In any event, one of the points which can be made about the NEB is that it is already subject to very narrow definitions. It is already subject to a greater degree of public accountability than that to which any other form of private enterprise organisation is subject. It is subject, for example, to the representations here in the 1124 House of Commons of the Secretary of State for Industry. It is subject to the National Enterprise Board guidelines. Indeed, it is subject, where the Secretary of State uses section 3 of the Industry Act 1975, that is to say, where he gives a direction to the NEB—which, unfortunately, he has not done so far since the Act was passed—to the advice of the Industrial Development Advisory Board.
Paragraph 33 of the NEB guidelines states thatIDAB will give advice on all applications which might subsequently be the subject of a Section 3 direction to the NEB.In my view, the Secretary of State ought to have given a direction to the NEB when he was approached on the matter by the Committee investigating the KME cooperative, because a great deal of success had been achieved in that co-operative in improving working methods and in working together in a co-operative fashion, instead of under the old private enterprise system.
The hon. Member for Folkestone and Hythe (Mr. Costain) asked why business men should not be co-opted to Committees—the Public Accounts Committee particularly. He added that some people might regard his suggestion as outlandish. He will not be surprised to know that I do. The fact is that business men are already deeply involved in providing advice—in my view, far too deeply. It is reasonable to consult business men and it is reasonable to seek their advice, but far too often the advice of a body such as IDAB to the Secretary of State can be far too crucial.
Let us look, Mr. Deputy Speaker, at the Industrial Development Advisory Board. It is not as though it is devoid of business men. The chairman is Sir Robert Clark. He is the chairman and chief executive of Hill Samuel and Company Limited and certain of its subsidiaries. He is a director of the Bank of England, which is publicly owned, it is said. He is a director of Black-Clawson International Limited. He is a director of British Leyland. He is a director of City and International Trust Limited, a director of Eagle Star Insurance Trust, a director of Eagle Star Insurance Company Limited, a director of Hickson and Welch Metal Industries Limited, a director of (Holdings) Limited, a director of Imperial 1125 Marchwiel Holdings Limited, a director of Parsons and Whitemore Limited, a director of Parsons and Whitemore Lyddon Limited, and so on.
Another member of IDAB, Sir William Barlow, is chairman of the Post Office. He is also a director of Glynwed Limited and of Royal Worcester Limited. The complete list is available, incidentally, in an answer to me from the Department of Industry on 30th November 1978. It makes very interesting reading. It will be seen that there are captains of industry, within the framework of Government, who are now giving advice. Presumably the Opposition would argue that that is fine. But I am not in the Labour Party to prop up the whole of the system, although I recognise that it is necessary in certain industries to preserve jobs, and that we have a mixed economy. If we were to have a sort of frozen mixture, if we were never to change society, of course we would accept that sort of body as giving impartial advice on precisely commercial considerations, but I would not accept that that body would be likely to give very sympathetic advice to an enterprise such as a workers' cooperative.
I would say that the PAC provides a useful body of knowledge, and that the more knowledge we can get, the better, I take the view that the electorate, the people of this country, should be informed as fully as possible. I do not suppose for a moment that any of them will have read this enormous number of volumes of reports from the PAC, nevertheless, the reports make interesting and absorbing reading.
People will draw different conclusions according to their attitudes and values, but this suggests that there are large areas of investigation still open and that such investigation is necessary and important. We may have to debate priorities, but what I should like to place on record is that Labour's policy on the freedom of information should be carried out. This will mean that the lengthy and tortuous procedure of the PAC in hearing evidence from Ministers and powerful permanent secretaries in order to drag information from them, can be used to obtain more information more easily because it is more readily available to the people. We want a better informed and abler electorate. I believe that if members of the 1126 electorate are in that position, they will side with the decisions which the Government can and sometimes do make.
§ 8.1 p.m.
§ Mr. Geoffrey Pattie (Chertsey and Walton)
Accusations by the hon. Member for Keighley (Mr. Cryer) that the Public Accounts Committee is guilty of political bias and prejudice is akin to the pot calling the kettle black. If the hon. Gentleman had carried out his researches still further, as was suggested by my right hon. Friend the Member for Taunton (Mr. du Cann), he would know that on several occasions my right hon. Friend has welcomed worker co-operatives and wished them well. The hon. Gentleman talked of a desire for a more open forum. He will no doubt be aware that in nearly all its sittings in 1978 the PAC, for the first time in 116 years, has been open to the public—a move which no doubt the hon. Gentleman welcomes.
As a member of the PAC, I wish to add my tribute to the excellent chairmanship of my right hon. Friend the Member for Taunton. I wish to comment briefly on the important point contained in the third report of the PAC relating to the development and production of the Tornado aircraft. That project will cost a considerable amount of money. Over the whole period of the programme the cost will no doubt exceed £4,000 million.
Unlike many items considered by the PAC, I must emphasise that this item is by no means a past event. It was as recently as July 1976 that the production phase was authorised. Therefore, there is still time, if the PAC and the House feel that procedures are going awry, for the situation to be improved.
The basic point about the item in our third report is that the common development production costs of the Tornado are shared in proportion to the aircraft ordered by the three partner nations—Germany, Italy and ourselves. Furthermore, the work is handed out in exactly the same proportion. Periodically, there are assessments to see how this is shaping up.
The most recent of these assessments took place in July 1976. I wish to quote from paragraph 23 of the third report, setting out the method of assessment:To monitor the proportionate work and cost shares, the work done and remaining to be done in the three countries is valued in 1127 deutschemarks at pay and price levels and rates of exchange agreed between the Governments.After a time, any assessment worked out on the basis of deutschemark valuations starts to show movements in favour of the Federal Republic and against the United Kingdom.
It is stated in the memoranda on the project that if any of the partner countries reduces the number of aircraft that it wishes to purchase, thereby increasing the cost to the other partners, the defaulting partner, by reducing the size of its purchase, will make good, presumably in cash terms, the costs to the other two partners. That is clearly stated and is an admirable proposition.
When we examine work sharing, we find that because of the movements and fluctuations in exchange rates over a period of time, a certain part of the projects is not being developed and carried out in the United Kingdom. Therefore, there could be a more favourable change of work. It is then often said that it would be uneconomic to make any shift in the working pattern of the project. Since I know something about these complicated advance projects, I subscribe to that point of view. In other words, once the work has been allocated at the start of the phase, it then becomes difficult and non-cost-effective to make a change half-way through the next phase.
In a sense this concedes the point that one partner country may well say"It looks as though the balance is moving against us. Is there any way in which the project could be further reallocated?"The answer invariably is,"It could be done, but it would be uneconomic to do so." It appears that at the end of the development phase there is already an imbalance which would be perpetuated into the production phase, and it is likely to accelerate. This is inextricably connected with the economic performance of this country and that of the Federal Republic and with the exchange rates which obtain between the two nations.
I do not see why it is not possible, at the bench-mark moments, to make an adjustment in cash terms, if cash is to be taken to be a suitable unit of exchange, if any of the Federal Republic's partner countries should reduce their order. By the same token, why cannot the same pro- 1128 cedure be invoked to redress the balance? Although these are relatively early days of the project—it is only two years since the production phase was authorised—I believe that this imbalance is likely to worsen. Therefore, something must be done.
When the PAC had its hearings on the subject I suggested that it might be worth developing in the collaborative project some kind of unit of account which could be special to this project. I know that my right hon. Friend the Member for Taunton mentioned the Tornado project and the need to sort out our procedures and get them right. This kind of project is the only way in which advanced weapons systems can be procured in future. I hope that my hon. Friend the Member for Blaby (Mr. Lawson) and the Financial Secretary will say whether they see anything in this idea of a special unit of account.
I was disappointed that the Treasury minute did not take up this matter. It does not matter whether it is called a black pound or anything else. After the advent of a green pound, perhaps a black pound would be more than we could take. However, we are dealing here with a 20-year time span. During that time there will be considerable fluctuations in currency exchange rates. If we are to have such projects and they are to be conducted in this way, it behoves Her Majesty's Government to think of a more efficient and sensible way of structuring them than is now the case.
§ 8.9 p.m.
§ Mr. Nigel Lawson (Blaby)
In common with my hon. Friend the Member for Chertsey and Walton (Mr. Pattie), I wait with interest to hear what the Financial Secretary puts forward as the solution to a knotty problem on collaborative European ventures. I do not claim to have the answer on the tip of my tongue, but I thought that my hon. Friend provided one possible argument for British adhesion to the European monetary system, which I suspect will not happen during the remaining lifetime of the present Government.
We have had a good debate. There was one jarring note from the hon. Member for Keighley (Mr. Cryer), but we all understand how bitter he fells about the matters that led him to resign from the 1129 Government as a junior Minister. The hon. Gentleman's quarrel is with the Government. Therefore, I shall leave him to the tender mercies of his right hon. Friend the Financial Secretary.
I repeat that this has been a good debate despite the despair of my hon. Friend the Member for Folkestone and Hythe (Mr. Costain), who asked how we could possibly control public expenditure. It is indeed a problem. Perhaps"control"is the wrong word. It is the Treasury's job to control public expenditure, and our job to scrutinise what it and what the spending Departments are doing. Anyway, the debate has understandly demonstrated once again the immense value of the Public Accounts Committee.
My right hon. Friend the Member for Taunton (Mr. du Cann) observed in opening the debate that for most of our fellow countrymen the proceedings of the House of Commons consist of that strange and cacophonous ritual known as Prime Minister's Question Time to which they can listen if they wish to do so—and sometimes by accident—on the wireless on Tuesday and Thursday afternoons. They imagine this to be broadly representative of what the House of Commons is about all the time, every day of the week.
Today we are debating, in the shape of these 12 voluminous and painstaking reports, which cover an astonishingly wide range of subjects, a rather different aspect of the proceedings of the House. Nevertheless, for all the broadcasters' lack of interest and the public's lack of awareness, this aspect is no less important.
My right hon. Friend the Member for Taunton pointed out that an important innovation of the PAC has been to allow the public into almost all their hearings of witnesses. This is a great step forward. My right hon. Friend suggested that it was a little disappointing that the press had not shown much interest in the matter and had not attended in numbers after the initial hearings. The importance of the subject and the value of the work done undoubtedly deserved more interest. But I am not sure that the right solution is to televise the proceedings of the PAC, despite the fact that it contains such photogenic Members of the House.
Perhaps my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) was a little nearer the mark when he 1130 suggested that it was important that the PAC reports should be published more swiftly. I would say that something even more important is needed in order to attract and hold attention to these important Committees. I would like to see the proceedings of Select Committees published the following day, just like the proceedings of Standing Committees. If that were done, and if there were a Select Committee Hansard available the following day, it would make a tremendous difference to the impact that these Committees can make on the interested public.
I join in the customary tributes that have been paid to the Chairman of the PAC and to all his fellow Committee members, a number of whom have made valuable contributions to this debate. They have done valuable work throughout the past year on our behalf, in the cause of trying to ensure that the taxpayer gets value for money in the vast and ever-growing field of Government expenditure.
I join also in the tributes paid to the Comptroller and Auditor General and his staff for their invaluable contribution to the Committee's work. Neither do I forget the Comptroller and Auditor General for Northern Ireland and his staff. In that context I note that the seventh report of the PAC, dealing with Northern Ireland matters, is the only one containing an index. For the benefit of busy Members, Sir Douglas Henley might take a tip from Mr. Sythes.
From time to time in these annual debates there has been discussion about the place of Select Committees in our affairs. The Procedure Committee recently made the important proposal that there should be a systematic reorganisation of the Select Committee system in order to create a committee to scrutinise the work of each Government Department, each separate Committee having adequate staffing and powers. As my right hon. Friend the Member for Cambridgeshire (Mr. Pym) has made clear, we have given a pledge that the next Conservative Government will, in the first Session after the election, present proposals to implement this recommendation. I hope that that pledge, which I repeat from the Dispatch Box tonight, will please the hon. Member for Nottingham, West (Mr. English), who drew attention to the need for this.
1131 We are determined to re-establish the authority of Parliament, however embarrassing this may be from time to time for the Government of the day—even a Conservative Government. Although the Select Committee route is by no means the only route to this end, the work of the PAC is ample evidence of the key part that a well-run Select Committee can play in this process.
In the time available today it is impossible to do justice to the many matters dealt with in the Committee's 12 reports. I shall confine my remarks to matters arising from three of them—the fourth, the sixth and the eighth. I shall take them, like the winners of the Miss World contest, in reverse order.
In the eighth report the Committee makes a strong case, which is supported by the Expenditure Committee, for the Comptroller and Auditor General to have access to the books of the National Enterprise Board. Without such access it is impossible for the Committee to exercise effective scrutiny over the vast sums of taxpayers' money spent by the board. My right hon. Friend the Member for Taunton drew attention to this, and reminded the House that the Scottish Development Agency is already examinable by the Comptroller and Auditor General. The SDA is very much on all fours with the NEB. Forceful contributions to this end were made by my hon. Friends the Members for Surrey, North-West (Mr. Grylls) and for Horsham and Crawley, who catalogued a number of the less successful ventures of the NEB. Indeed, from the Labour Benches the hon. Member for Gloucestershire, West (Mr. Watkinson) also suggested that it was important that the Comptroller and Auditor General should have this access.
The Government's objections to giving this access seem astonishingly unconvincing. They complain that it would require an increase in the staff of the Comptroller and Auditor General to carry out this extra work. That may be necessary and it may be inevitable if the State goes on expanding into new fields and if Parliament is to maintain a proper scrutiny. A number of Labour Members have said —this will be echoed by many on the Opposition Benches—that there is a very real need to look again at the Exchequer and Audit Acts with a view to increasing 1132 the scope of the Comptroller and Auditor General and the Exchequer and Audit Department.
It is ludicrous to object to the examination of the NEB because a few more staff may be needed in the Comptroller and Auditor's General's Department. Of course, there is the question whether the State should be expanding into all these areas in the first place, but I leave that aside for now.
§ Mr. English
We suggested that this sort of individual case should not have to arise because the general jurisdiction should be there. The six accountancy institutes thought initially that the audit department of the State would expand and do them out of business. That was not our intention. The hon. Gentleman will agree that it would be a considerable change if auditors were responsible to the Comptroller and the Auditor General and not to the quango they happened to be auditing.
§ Mr. Lawson
That is a fair point, which is worth considering. The whole question of quangos gives rise to a feeling that the control that Parliament ought to exercise is being steadily eroded before our eyes. Any sensible steps that could be taken to reduce the number of quangos and the extent to which they elude parliamentary control would be very welcome.
The Government's second objection to allowing the Comptroller and Auditor General access to the books of the NEB was that a corresponding increase would be required in the staff of the Department of Industry, which would also have to find out what was going on down at the NEB. I hope that I am not alone in finding a trifle alarming the confession that the Department does not know at present.
The Government's final complaint was that the prospect of interrogation by the PAC, even on a totally confidential basis —which it could well be, and on occasions should be—would destroy the"entrepreneurial character"of the NEB. When I think of the State as entrepreneur, I think first of Concorde. That is not a happy thought.
§ Mr. Lawson
The Concorde project has been conducted and continued by Governments of both parties. There is no party point here. It is beneath the standards that the hon. Member for Nottingham, West usually adopts for him to try to turn it into a petty party point.
The true entrepreneur risks his own money; the NEB is risking the taxpayers' money. The distinction is a vital one, and provides the justification for the PAC's stand on this point.
I must confess, however, that I am less in sympathy with the Committee on two major matters dealt with in its sixth report. Hon. Members have already mentioned public sector pension schemes and the Committee's evident doubts as to the justification for these being funded schemes. My hon. Friend the Member for Horsham and Crawley made a powerful contribution and said that they should be changed into"pay as you go"schemes, though I believe that the effect on the public sector borrowing requirement if that happened would not be quite as he outlined.
§ Mr. Hordern
I did not make the calculations; it was the Government Actuary. My figures were taken straight from the Actuary's report and are entirely factual.
§ Mr. Lawson
I have also read the Government Actuary's report. I think that my hon. Friend has misinterpreted the figures, but we can discuss that matter at some other time.
Certainly, there is big money at stake. According to the Government Actuary's report, total public sector pension schemes have assets of £13,000 million, and the figure is still rising quite fast. The Wilson committee has expressed special concern about the question, and we all await with great interest its report on this subject, which is likely to be increasingly in the forefront of debate.
Pending the Wilson committee's report, I would make just three observations. First, the reasons for continuing with the funding of the nationalised industries' pension schemes, as set out in the Government Actuary department's evidence to the Wilson committee, cannot be lightly disregarded.
§ Mr. Hordern
The department did not come down in that way. It said that, 1134 within the terms of the brief that it had been given, the effect of making the pension schemes"pay as you go"would be to save about £1,500 million on the borrowing requirement.
The department mentioned the security of pensions and other effects, but my hon. Friend and I had better discuss the matter again, because we shall not agree if he says that the Government Actuary recommended that nationalised industries' pensions should not be"pay as you go ", when I firmly believe that he did recommend that.
§ Mr. Lawson
Obviously, my hon. Friend and I interpret the Government Actuary's report differently. As my hon. Friend rightly says, we should discuss the report at greater length, on some other occasion, with it before us, so that we can go over it paragraph by paragraph. As I was saying, I believe that the objections that were set out in the Government Actuary's report cannot be lightly disregarded particularly if the main thrust of policy is—as it should be—to oblige the nationalised industries to stand on their own feet commercially.
In the second place, the real objection to the nationalised industry pension schemes is that they all enjoy full inflation-proofing, whether this is required by statute, as in the case of some funds, or by the rules of the fund, as in the case of others, or is not required at all, as in the case of other schemes. By contrast, in the private sector, as the Government Actuary pointed out, in his evidence to the Wilson committee:A promise to protect pensions in payment against inflation is virtually unknown.I hope that the Public Accounts Committee will, in its further inquiries, concentrate its attention on this aspect.
What seems to me to be wrong is that if the yardstick is to be, as it were, fair competition, on all fours with the private sector, one cannot justify inflation proofing. The nationalised industry pension funds must be actuarially sound without having to rely on the Government for subventions, and that cannot be the case if there is full inflation proofing. My hon. Friend and the Public Accounts Committee are right to feel disquiet, and that disquiet should emerge not from the fact that these are funded schemes, about which there are strong arguments on both 1135 sides, but that they are inflation-proofed schemes.
Thirdly, there is the question of the Government's intentions as to the direction of pension fund investment. The Financial Secretary will recall that, just before the Summer Recess, the hon. Member for Stoke-on-Trent, Central (Mr. Cant), who, I believe, is chairman of the Parliamentary Labour Party's economic group, declared in a debate thatthe disposal of these funds is far too important to be left to investment fund management." —[Official Report, 5th July 1978; Vol. 953, c. 541.]I called then on the Financial Secretary—I hope that he will pay attention, because at the moment he is engaged in discussion with the hon. Member for Nottingham, West—to repudiate the suggestion that there should be State direction of investment, which was what it amounted to. He declined to do so at the time. I call upon him once again to assure the House that the Government have no intention of taking power to decide where and how the people's savings and pensions should be invested.
§ Mr. Watkinson rose—
§ Mr. Lawson
I know that the hon. Gentleman is about to tell me that my right hon. Friend the Member for Taunton made a remark during his contribution to this debate which might have been construed as favouring State direction of investment. Knowing my right hon. Friend, I am sure that he did not mean to give that impression. At any rate, if the Financial Secretary fails at this second time of asking to give the assurance, the House will rightly conclude that State direction of investment is about to become official Labour Government policy.
There is one other matter arising from the sixth report which has not been mentioned in the debate so far, but I feel that it is sufficiently important to mention it now. I refer to the apparently favourable response that the Public Accounts Committee gave to the Inland Revenue's proposal that the 2 million self-employed taxed under schedule D should have their tax assessments changed from a preceding-year to a current-year basis. This is a very important matter, which is causing a considerable degree of consterna- 1136 tion amongst the self-employed, against whom the Government appear to have some sort of vendetta. I hope that the right hon. Gentleman will spell out clearly the Government's intentions in this matter.
We on the Opposition side of the House fully recognise, as did the Public Accounts Committee, that there is one particular abuse arising from the present system in connection with certain partnerships. It is an abuse, and it must be stopped. But this is surely something that can be tackled by specific legislation separately and does not require a total change in the basis of taxation for each and every one of the 2 million self-employed in this country.
At the very least, I urge the Government not to proceed with any such change without first submitting the matter to an ad hoc Select Committee, as was done with the proposed wealth tax.
Finally, let me turn to the fourth report, on Supply Estimates and cash limits. I think that it is largely thanks to the pertinacity of the Public Accounts Committee and, in particular, of its Chairman, that the Government and the Treasury have agreed to assimilate the historic parliamentary system of Supply Estimates with the new but already—I think I can say—proven Treasury control mechanism of cash limits. Starting next year, 1979–80, the Estimates will be produced, as has been pointed out, on the same outturn price basis as is used for cash limits, instead of, as hitherto, at the prices ruling at the time the Estimates were made. It is true that it may not be until the following year, 1980–81, that the Treasury will have fully aligned the structure of the Estimates with the structure of the cash limits blocks, to complete what is the most important reform of parliamentary scrutiny of public expenditure within the lifetime of any of us here today. It is that important.
But, even the first step alone—the presentation of all Supply Estimates, not merely the cash limited expenditure Votes, at the estimated outturn prices used for operational control purposes within the Treasury—is an event of the first importance. It will mean, as I pointed out in the same debate that we had last Session, thatfor the first time within living memory we would have Estimates coming before us which genuinely represented the amount that the Treasury expected to see spent in the coming 1137 year, and any subsequent Supplementary Estimates—this is vital—instead of being, as at present, a routine and meaningless occurrence, would possess the special significance which was originally intended. In other words, the Government would be seeking parliamentary approval for expenditure over and above that originally planned and would have to justify any such excess."—[Official Report, 9th January 1978; Vol. 941, c. 1341.]However, it follows from this that, as the Committee pointed out in the fourth report, once Supplementary Estimates have at long last had their intended importance restored to them, Parliament must devise a means by which these Supplementary Estimates are subjected to a proper parliamentary scrutiny. Although this is ultimately a matter for Parliament to decide, I know that the Minister and the Treasury will have been thinking about it, and I know that the House will expect to hear from the Financial Secretary, tonight, the Treasury's tentative conclusions on this matter.
My own view—I express it as a personal view—is that while the Expediture Committee will, I am sure, rightly wish to conduct this scrutiny and to report to the House, there is a very strong case for a number of Supply days to revert to their original purpose and to be used for debating and, if necessary, voting against, specific Supplementary Estimates. It goes without saying that this process would be greatly assisted by the publication of a Treasury memorandum accompanying each new-style Supplementary Estimate setting out the precise reason why the extra expenditure is being proposed.
At any rate, I am sure that the Committee will not rest until, whether in this way or in some other way—and I repeat the hope that the Financial Secretary will indicate the Government's thinking on this important matter—the procedure for effective parliamentary scrutiny of the new-style Supplementary Estimates has been agreed.
I also hope that the Public Accounts Committee will pursue its exploration of the whole question of cash limits in other directions. Some of these were suggested in an interesting article by Mr. Peter Vinter, a former Treasury official and, indeed, a former chairman of PESC, in the October issue of Lloyds Bank Review, which many hon. Members will have read.
1138 The most important of Mr. Vinter's proposals—although I do not agree with the precise method chosen—was to find a means of making the public sector bear its share of economic fluctuations. That must be right. It is surely unacceptable that at present public expenditure plans once published are regarded as well-nigh immutable, with the consequence that the full burden of economic fluctuations must be borne by the hard-pressed private sector.
What I am suggesting is in practice almost the reverse of the old orthodoxy, that public spending should be automatically counter-cyclical, an excuse which, incidentally, has been one of the main causes of the long-term growth in public expenditure's share of the gross domestic product. I believe it none the less to be imperative, for, as Vinter remarks, the alternative is a wholly unwarranted and highly damaging degree of disruption of the private sector. We have seen that time and time again.
One way of achieving that degree of flexibility might be the introduction of negative Supplementary Estimates, but, particularly as the year nears its end, flexibility will also be required in the context of the coming year's estimates. It would also help towards that kind of discipilne if the cost of debt interest payments attributable to a particular area of Government activity—however hard the precise attribution might be to establish—could be included in the cash limit covering that area. That would at least ensure that it was not the private sector alone that was squeezed by, say, 12½ per cent. minimum lending rate.
In the context of flexibility, too, my right hon. Friend the Member for Taunton referred to the public expenditure White Paper and difficulties arising from it. I entirely agree with my right hon. Friend about that. I have personally come increasingly to believe that it might be more sensible simply to publish in the White Paper years 1 and 2.
It is often thought that the White Paper derives from Plowden. I have the 1961 Plowden report in front of me, but I do not propose to read from it now. The interesting thing is that Plowden said that of course the Government must plan five years ahead, but it did not expect those five-year plans to be published. In fact, it explicitly envisaged their not 1139 being published. Perhaps experience has shown that the decision to publish—taken in 1963 for good reasons, but reasons that did not arise from Plowden—may have been mistaken.
It is also of the first importance, I believe, that we bring together the two sides of the Budget, the expenditure side and the revenue side. When the Committee raised that matter in the course of its general inquiry, the reply from the Treasury witnesses was very superficial. I hope that the Committee will continue;o pursue the matter.
One other important area for further work, if I may be so bold as to suggest a programme of work to the Committee, is the interaction between cash limits and public sector pay, which is a particularly pressing subject at present. I spoke in some detail about this topic in last Session's Public Accounts Committee debate —columns 1343 to 1346 of Hansard for 9th January 1978. I do not intend to repeat myself now, although I stand by everything I said then. In its fourth report, the Committee said:while the Government "—that is, the present Government—do not see cash limits as in any way a substitute for a public sector pay policy, cash limits would not be automatically increased to accommodate the effect of any higher pay settlements than had been expected at the time they were initially settled.That observation must be seen against the obiter dictum of Sir Anthony Rawlinson, second permanent secretary to the Treasury, in evidence to the Committee, when he said:The point of a cash limit system is that if you have got it you cannot breach it.That may be going a little far, but that is what he said. In the light of that and of what the Committee said, I ask the Financial Secretary to tell the House whether, if there is a settlement by the local authority manual workers above the 5 per cent. assumed in the rate support grant—I am not saying whether or not that will happen—there will be an increase in the rate support grant, bearing in mind that it is cash-limited.
It would also be helpful if the right hon. Gentleman explained how the Government intended to reconcile the 5 per cent. in the public sector, which presumably will be written into the 1979–80 cash limit 1140 pay blocks, with the newly reactivated pay research unit, which appears to be suggesting that public sector pay needs to be increased quite substantially on strict"fair comparison"grounds. If that is ideed so, theoretically, I advise the Financial Secretary to regard any such findings with considerable scepticism. As Sir Ronald McIntosh pointed out last year:in terms of job security, conditions of work, and in many cases pay, public service employment is now generally more attractive than employment in a comparable position in manufacturing industry.'Job security is crucial, yet the PRU takes no account of it in establishing so-called"fair comparison." Surely this must be wrong. Again it is notorious that the PRU consistently has allowed far too little for the additional value of public service inflation-proofed pensions.
Nevertheless, at the end of the day there will still remain the probability of a conflict between pay increases indicated by the PRU, even if it arrives at a truly fair comparison, and 5 per cent. I hope that the Financial Secretary will say how the Government intend to reconcile the two, because it is most important.
I warn the Financial Secretary against the most irresponsible course of all, which is a so-called staging of which the Government seem far too fond, under which the so-called pay policy is enforced now, coupled with pledges of substantially greater pay increases and thus greatly increased public expenditure in future years. That really is wholly irresponsible, and I am not surprised that it is rumoured in the press that the Treasury is arguing strongly for a General Election before the 1979 Budget, so alarming is that Budget prospect.
The reason why the prospect is so alarming is the Government's continued refusal to pursue a fiscal policy compatible with a non-inflationary monetary policy and a healthy private sector; in other words, their determination to increase public expenditure still further in the immediate future. That road is the road to perdition, and not the least of the many merits of the 12 reports before us today is that they indicate how retrenchment might be achieved at least inconvenience to the public. For this reason, among the very many others which have been voiced from both sides 1141 of the Chamber, the whole House owes the Committee a debt of gratitude.
§ 8.43 p.m.
§ The Financial Secretary to the Treasury (Mr. Robert Sheldon)
When I listened to the closing remarks of the hon. Member for Blaby (Mr. Lawson), I could not help feeling that he had wandered into the wrong debate, because we should be discussing the very important matters raised by the right hon. Member for Taunton (Mr. du Cann) concerning the close scrutiny of public expenditure and the way in which the lessons which his Committee has brought to light are noted by Government Departments.
I know the work carried out by the right hon. Member for Taunton very well. I note that the hon. Member for Folkestone and Hythe (Mr. Costain) called this the best debate in his recollection. It has indeed been a very good debate. I think that the important thing, as the right hon. Member for Taunton pointed Nit, is that we are concerned not just with an inquest but with the revelation of matters of financial management which should serve as lessons for the rest of Whitehall.
The right hon. Member for Taunton pointed out that this was the fifth debate in which he had taken part as Chairman of the Public Accounts Committee. Most of us were pleased to hear him say that he regarded it as the most rewarding role that he had had in the House of Commons. It is a valuable tribute to the work of the PAC that a right hon. Member who has held so many positions of importance in the House and in the Government can say that.
The right hon. Member pointed out that in controlling expenditure it is important to avoid sensationalism and to seek a constructive approach. We have always regarded this as the hallmark of the Public Accounts Committee.
My hon. Friend the Member for Keighley (Mr. Cryer) might note that there is an important political role for all Parliamentary Committees. There are also essential roles that must be undertaken by some Committees, not least the Public Accounts Committee. I am sure that my hon. Friend the Member for Feltham and Heston (Mr. Kerr) will accept the role that the Committee of which he is chairman has to play. There is scope for examination of the Executive and of what happens in industry generally. When any 1142 Select Committee acts on an all-party basis it reinforces the political process.
The right hon. Member for Taunton asked about the allocation of responsibility. In particular he was anxious about the way in which the Public Accounts Committee is able to extract information from the statutory corporations. He suggested that statutory boards should be accountable to Parliament. That is an important matter of which the Government have taken note. However, there would be difficulty in doing so. The problem arises not only out of the entrepreneurial nature of these corporations but from the confidentiality requirements.
The Procedure Committee took a different view. It argued in its report for greater accountability, but the Committee believed that this should be spelled out in new legislation.
Page 102, paragraph 8.14 of the first report from the Select Committee on Procedure statesthe C & A G may authorise alternative audit procedures in respect of individual bodies to whose accounts he has a right of access.That is an alternative way of looking at the problem. A full discussion in the Public Accounts Committee might not be the best approach to the problem. There could be a third way. The Government are considering this.
We must consider the appropriate form of accountability for trading bodies whose purpose is to bridge the gap between the public and the private sectors.
The purpose of my presence is to hear hon. Members' points of view. My right hon. Friend the Leader of the House has stated that there is to be a debate on the Procedure Committee report which deals with these matters. The debate will take place early in the new year.
The right hon. Member for Taunton asked about comfort letters. The Public Accounts Committee's main point was that where a public body which is dependent on Exchequer credit gives an assurance in the form of a comfort letter there is a pledge of public faith and a contingent commitment upon public funds. I understand that; and the Government certainly agree with the Public Accounts Committee on this. A statement of that implies some level of commitment and the measures that were 1143 announced in the Treasury minute are designed to ensure that in the public sector the giving of assurances of this type is subject to the appropriate parliamentary and Government controls, and the right hon. Gentleman will, I think, take some comfort from that.
On defence, there are rather fewer subjects this year than in previous years, but perhaps I can deal with the questions that were raised by the hon. Member for Chertsey and Walton (Mr. Pattie) and the right hon. Member for Taunton. The hon. Member for Chertsey was concerned with the tri-national agreement between Germany, the United Kingdom and Italy. He pointed out that the costs and the work would be allocated on a basis proportional to the orders placed. The particular problem we had arose from the way in which these were to be de-limited. A sizeable imbalance arising from the development of the production of the Tornado, because these were being assessed in deutschemarks, had been forecast between this country's work share and our eventual cost liability. This was caused by the relative movements in inflation and exchange rates in the three countries concerned. I can tell the hon. Gentleman that this will be further examined in a review of the Tornado programme due to be completed by mid-1980. The United Kingdom will be making an effort to secure the agreement on acceptable measures to rectify these imbalances.
The point the hon. Gentleman made about the currency in which the Tornado sums are due—I give him a short answer —is that the Germans get no advantage from the fact that those sums are calculated in deutschemarks and the United Kingdom suffers no disadvantage. By the same token, using a special unit of account, which is the solution that he proposed, would not give any advantage or disadvantage to any country, though he is right that it would theoretically be possible. If he would like a longer explanation, I should be delighted to give him one if he will let me know. I will be glad to set it out more fully for him because he went into this matter with some care.
The right hon. Gentleman the Member for Taunton dealt with the problems concerning the need to simplify taxation, and 1144 he mentioned, quite fairly, that it is Parliament itself that tends to cause the complications because of our predeliction for equity wherever we see it. Those who receive complaints from constituents that demonstrate how unfairly the taxation system operates try their utmost to transfer those grievances into amendments to Finance Bills, and these amendments cause the complications which we subsequently deplore. I suppose it is asking too much to expect some self-control in these matters, in the light of grievances fairly expressed. Perhaps we have not got the method right in seeking equity through taxation. Other Members might suggest that another Select Committee ought to be involved, but it is not for me to comment on that.
§ Mr. Russell Kerr (Feltham and Heston)
I ask my right hon. Friend to forgive what may be my obtuseness but, referring to the points he made about the speech by the right hon. Member for Taunton (Mr. du Calm), do I understand my right hon. Friend to be saying that the exchange rates, as far as international relations are concerned, are unimportant in this context? Could he be a little more explicit?
§ Mr. Sheldon
It is just the method of calculation. It is de-limited in one currency, but that does not have any special implications for calculation of jobs. There is a mechanism for dealing with this and so perhaps the problems which the hon. Member for Chertsey and Walton mentioned do not exist, although his solution would be another way of arriving at the same end.
The right hon. Member for Taunton referred to the visit to the Liverpool hospital, while my hon. Friend the Member for Gloucestershire, West (Mr. Watkinson) referred to the visit to Chatham dockyards. During my six years as a member of the PAC, before I attained my present role and became almost an ex-officio member, I never enjoyed any of these visits. We did all of our business in Room 16. I applaud the adventurous spirit of those who seek to find out for themselves on the ground. It reminds me of the famous corn oil company in the United States which had a period of critical difficulty, and which found that one of its enormous tanks which held corn oil was empty. It sent its staff round 1145 to put their dipsticks in the other tanks and discovered that they were all empty. This shows the need for finding what is there rather than depending upon figures appearing in some paper.
The right hon. Member for Taunton dealt with the work of the Treasury in assimilating cash limits to the Estimates. This is an important matter, dealt with by other hon. Memers, including the hon Member for Blaby. What we have done here, at the speed with which we introduced the whole concept of cash limits and the enormous detail following—and now the assimilation—is something of which we can be proud. These proposals of ours are to bring together the Votes and the cash limits. The alignment of these two will largely be completed in time for the 1979–80 Estimates. For the remaining small minority of Votes, the aim will be to complete assimilation for the 1980–81 Estimates.
We hope that for the 1979–80 Estimates there will be only three Departments for which cash limits and Estimates are not brought together. We feel that this is a considerable step forward, which will give meaning to Supplementary Estimates, because these will now be Estimates placed before the House covering unforeseen expenditure. This development will help parliamentary control of expenditure. It will be an important simplification of the process, by bringing together the two systems of voted expenditure and cash limits. This will provide a better basis for the parliamentary scrutiny about which we are concerned.
§ Mr. Lawson
The Minister will recall that the Public Accounts Committee said that to make effective this innovation—which I agree is of the first importance —there had to be an opportunity for proper parliamentary scrutiny and debate of these new style Supplementary Estimates. I asked what thinking the Treasury and the Government had given to that point. I should be grateful if the Minister would deal with that.
§ Mr. Sheldon
The first thing is for the Public Accounts Committee and others concerned to see the proposals in greater detail, and we look forward to them. Then we shall be able to determine in which direction we ought to proceed.
1146 My hon. Friend the Member for Putney (Mr. Jenkins) who is not now present—he is with the Young Conservatives, trying to educate them—pointed to the brevity of the Treasury comments. I always feel that this feature is part of our historical pattern. The brevity of the Treasury minute balances the restrained understatement to which we are used from the Public Accounts Committee. I feel that these civilised attitudes conceal the underlying ferment of concern. My hon. Friend, however, puts his points as one coming afresh to the Public Accounts Committee. They were none the worse for that.
My hon. Friend the Member for Gloucestershire, West mentioned the United States practice of looking at much wider matters than simply obtaining value for money, which is what lies behind the PAC scrutiny. There is much greater concern about and interest in these wider matters in the United States, and my hon. Friend's contribution was most interesting.
I note the points that my hon. Friend made about tolls. I am aware of his constituency and personal interest in the matter. He asked what sort of consistency there was in toll charging policy on different forms of highway—whether roads, bridges or whatever. Where tolls are charged we have an attempt at reducing costs. That is a matter upon which the PAC spent part of its time, and it is a subject in which we are interested too.
The hon. Member for Worcestershire, South (Mr. Spicer) raised the question of ICL and, in particular, of the purchase of the 2900. The difficulty that he described was that the £40 million of aid was being paid at a time of transition. The last of the development aid was paid in September 1976, and the first company year in which the repayment formula will operate ended in September 1978. The audited accounts for that year, which will show whether profit reached the level at which a repayment will be due, will not be available before the middle of December. The repayment formula is then intended to operate for a further six years ending September 1984. It is, therefore, too soon to assess the chances of the Government recovering the full amount of their development aid, though we shall be 1147 monitoring the company's achievements and prospects in order in due course to form a clearer view of the repayment prospects.
ICL has shown a most encouraging level of achievement in winning business against international competition, and I am glad that the Committee has acknowledged this in discussing the matter.
The hon. Member for Horsham and Crawley (Mr. Hordern) dealt with the important matter of the pension funds. The hon. Member for Blaby took a different view. Of course, the continuing increase in the pension funds is of enormous importance, but I do not think that I can announce any clear decision here on the question of government direction of investment. The Government made it clear to the PAC that in their view, and subject to the findings of the Wilson committee, which has a most important influence in these matters, a case had not been made out for any departure from the principle of funding as it is now applied in the public sector.
There are important issues of accountability, because the cost of funding is being met by the Exchequer, and the Government are considering the best form of controlling public liabilities in such circumstances. A critical factor in this area is the full examination being undertaken by the Wilson committee. If that committee had not been set up to examine the problem generally, it is clear that the aspect dealt with by the PAC and its repercussions would have been sufficient to require the establishment of some sort of machinery to investigate this question.
I turn now to the points made by the hon. Member for Down, North (Mr. Kilfedder). Many of his points concerned wasteful expenditure arising from the reorganisation of local government, the number of health boards, and the difficulties of the public sector in the Province having such a large proportion of employees there. The hon. Gentleman suggested that many more subjects should come before the Public Accounts Committee. That is for the Committee. I am sure that it will have taken note of the points that he made.
The one matter brought out by the hon. Gentleman for me to answer concerned the Mater Infirmorum hospital. 1148 That hospital entered the National Health Service in 1972. It was provided that the trustees of the hospital would meet the costs of the initial reconstruction of the hospital to bring it up to modern standards. That aspect of the arrangement ran into substantial difficulties, which are set out in the PAC's seventh report. That has now been superseded by an agreement between the Department and the trustees to share the costs of reconstruction. While the negotiations were proceeding, the Department undertook and paid for some urgent and essential minor works at the hospital without prejudice to the question of ultimate financial liability. The PAC accepted that the Department acted prudently in ensuring that that essential work was carried out. I do not believe that it would have been practicable at the time to arrange to share these costs with the trustees. However, they are now included in the total costs of reconstruction which will be shared by the Department and the trustees. I take note of the information given by the hon. Gentleman concerning the standing and importance of that hospital.
§ Mr. Hordern
Is the right hon. Gentleman going to deal with the point which I made about the forward sale of oil by the British National Oil Corporation? The Financial Secretary will recall that the Treasury witness said that there should be strict limits of any further forward sales. We note the statement in paragraph 77 of the Treasury minute:The Treasury and the Department accept that any similar future transactions by the Corporation should be reported to Parliament.I trust that the right hon. Gentleman will now be able to tell the House that any future borrowings by that method will be strictly limited.
§ Mr. Sheldon
Yes. I was proposing to come to that point. I am grateful to the hon. Gentleman for reminding me of it. I think that I can usefully bring it into the debate at this stage.
This arrangement was not devised as a means of getting round the borrowing limit on BNOC which had been agreed by Parliament. The Committee pointed out that it was agreed because of its commercial advantage to the Corporation; but even if BNOC had borrowed a similar amount, the statutory borrowing limit 1149 would not have been exceeded. The Committee's concern about the possible implications of such arrangements for parliamentary control is understandable and right. We shall ensure that the House is properly and fully informed about any similar transactions in the future.
My hon. Friend the Member for Keighley raised an important point. He drew a comparison between social security frauds and not dissimilar amounts of money lost through tax evasion. Indeed, he drew attention to two particular areas of tax evasion. One concerned spirits removed duty free for the purpose of commercial sampling. The other related to the taxation of directors' remuneration.
I have a great deal of sympathy with his point, that we spend a considerable amount of time on one kind of fraud to the exclusion of other sorts. However, that is hardly relevant here, because we are not comparing one type of fraud with a comparable sort. We are not saying that the use of these samples is a form of fraud. Neither are we saying that the taxation of directors' remuneration constitutes another type of fraud. Improvements designed to obtain the revenue to which the Government are entitled in this area are being made. No imputation of fraud arises in this case. I am sure that if my hon. Friend went further into this, he would find other kinds of fraud for which he would have greater justification of complaint. However, I accept the burden of his argument.
Mr. Cryer: I know that my right hon. Friend does not want to diminish the arguments which I adduced, since it is said in paragraph 41 of the sixth report from the Public Accounts Committee thatThe Department acknowledged that the duty-free sampling arrangements were being abused.If they are being abused, there is obviously some evasion of duty, and that could be fraudulent evasion.
§ Mr. Sheldon
Whether we say"abuse"or whether we say that there was laxity—one can employ various phrases—that does not come into quite the same category as the fraud which we were considering. But my hon. Friend could easily have chosen and, I am sure, on future occasions will be able to choose, arguments which will substantiate the main thesis which he wished to advance.
1150 Perhaps I could deal now with a few of the points put by the hon. Member for Blaby. I do not think that I have much to say about who started Concorde and produced the contract to which we are now hooked. That is not a subject for the Public Accounts Committee. It is matter for another debate, and I am sure that we can exchange views on those matters on another occasion. Nor do I regard this debate as the right occasion to discuss pay policy, what we shall do about the wages of manual workers, or pay policy and PRU.
However, I cannot restrain myself from commenting on the hon. Gentleman's version of Plowden—the idea behind Plowden of looking at expenditure five years ahead being that the Government should plan it but ought not to publish it. I am sure that if the Government were planning these matters five years ahead but not publishing the plans there would be an outcry, not least from the hon. Member for Blaby himself, that we were concealing something of major importance from the House. Once we had decided, or once the Government of the day had decided, to plan five years ahead, there was no alternative to publication.
§ Mr. Lawson
I shall then read the relevant passage in the Plowden report on"Control of Public Expenditure ", Cmnd. 1432, published in July 1961. This is from paragraph 17:It is therefore doubtful whether any Government will feel able to place these surveys before Parliament and the public. To do this would involve disclosing the Government's long-term intentions for a wide range of public expenditure; and also explaining the survey's assumptions about employment, wages, prices and all the other main elements in the national economy. It would be surprising if any Government were prepared to do this.That was Plowden's view, and its recommendation is in that paragraph. It is no use the Minister saying that that was not so, because here it is.
§ Mr. Sheldon
I am saying that anyone who assumes that the kind of government which we had then is precisely the same kind of open government as is practised today has got it all wrong. No one today could conceivably imagine a situation in which all Government Departments were busy like mad planning for five years ahead and disclosing nothing of it to the House of Commons. That is inconceivable and, in my view, it would be quite 1151 reprehensible, because we have today certainly a more open style of government than existed then. It so happens that it was a Conservative Government, but I make no point of that. Whoever had been the Government considering that report would have been bound to develop in precisely the same sort of way.
I think we have had a—
§ Mr. English
My right hon. Friend has managed to reply to nearly all the points made in the debate, but I cannot forbear to echo what was said by the hon. Member for Blaby (Mr. Lawson) and point out that there is one matter upon which, I believe, the right hon. Member for Taunton (Mr. du Cann) and his Committee, the whole of the Expenditure Committee and the whole of the Procedure Committee were agreed, namely, that the Exchequer and Audit Departments Acts, out of date as they are, need revision, and my right hon. Friend has made no comment about that. Does he say that they are in need of revision or will he say that these out-of-date Acts should be retained in order to protect the Government from a proper audit?
§ Mr. Sheldon
It was not by oversight that I had not referred to those matters. Plainly, change in the Exchequer and Audit Department merits much wider examination. My own view is that this Act, which has existed since 1866, with subsequent amendments, should continue to stand, and I understand that the Comptroller and Auditor General himself does not wish to see the Act altered. But that is clearly a matter on which the Public Accounts Committee can come to a view.
§ Mr. Sheldon
The Public Accounts Committee should come up with its own recommendation and we shall listen to it with great interest. The Leader of the House would be much concerned about the prospect of further important legislation during the current Session. This is a problem both for the progress of legis- 1152 lation and for the Public Accounts Committee.
§ Mr. Lawson
I asked the Minister a specific question which he has not answered arising from the Committee's sixth report. What are the Government's intentions concerning any change in the taxation of 2 million self-employed on Schedule D from a preceding year to an actual year basis? It is a very important point and he has not replied to it.
§ Mr. Sheldon
The whole point is that there is a study of this in progress at present. The hon. Gentleman knows that. No conclusions have been reached at this stage, but the matter is still being examined. The hon. Gentleman cannot assume that these taxation points are readily soluble by a cursory examination. These are serious and complicated matters. They require the proper process of consultation and examination, and this is going on.
With respect to the right hon. Member for Taunton, his Committee and the kind of scrutiny to which he submits those who come before the Public Accounts Committee, we must understand that the work of the Committee is not fully revealed in its report or even by our examination here. It takes place every day that it has an accounting officer in the middle of that horseshoe table where Whitehall confronts Parliament—or Parliament confronts Whitehall. The awe, respect and, in certain cases, the trepidation with which the PAC is treated is what makes the whole system work. It produces the kind of close examination which this House requires. As a bonus, the members of the Committee and its chairman ensure that care and courtesy is the committee's political hallmark.
§ Question put and agreed to.
§ That this House takes note of the First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth and Tenth Reports and the First and Second Special Reports from the Committee of Public Accounts in the last session of Parliament and of the Treasury Minute and Northern Ireland Memorandum of those Reports (Command Papers Nos. 7402 and 7371).