§ 3.45 p.m.
§ Mr. Edward du Cann (Taunton)
I beg to move,That this House takes note of the First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth and Tenth 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. 6977 and 7017).It is an honour to move such a motion in this House for the fourth time. It is customary for the Chairman of the Committee to open these debates by referring to those who have contributed most directly to the working of the Public Accounts Committee. That may be the convention, but it is not mere politeness. The Committee has had outstanding service and help from a number of people to whom I wish to refer.
First, it has come from the Clerk, Mr. Clifford Heathcote-Smith, who retired in August 1977. The Committee now welcomes Mrs. Irwin. This House always gets extremely good service from its Clerks and certainly the Public Accounts Committee is being, and has always been, extremely well served.
Second, our thanks go to the Treasury witnesses, of whom the principal was Mr. McKean. The basis of the Committee's work is, after all, a partnership with the Treasury. If there is not that, there is nothing and the Committee cannot be as effective as I hope the House believes it to be.
Third, I express our thanks to the Comptrollers and Auditors General, Sir Douglas Henley for that part of the United Kingdom excluding Northern Ireland and Mr. Sythes from Northern Ireland. I think that successive Public Accounts Committees have been remarkably well served by Comptrollers and Auditors General. The help that we received from Sir Douglas Henley and Mr. Sythes was preeminent in that fine tradition.
1270 Fourth, I express our appreciation of the continuing frankness and helpfulness that we have invariably received from accounting officers.
Lastly, I hope the House will allow me to thank my fellow Committee Members for their assiduity and competence and not least for many personal kindnesses to myself and for their unvarying support.
I said that these remarks were no mere politeness. They are not. Perhaps the House will appreciate the strength of my feeling for my fellow Members of the Committee when I say that we have had an even heavier programme of work last Session than we had in the Session before. The 10 reports deal with no fewer than 60 main subjects compared with 43 in the previous Session. I am grateful for the attendance of Members, for their pertinent questioning of witnesses so clearly demonstrated in the transcripts of evidence and especially, if I may say so, for the spirit that existed in the Committee.
As in former years, the Committee has continued to carry out its work in an entirely non-partisan spirit. Whatever differences of opinion Members may have on the Floor of the House—and sometimes they are very keenly felt—in Committee we united in our aim of contributing to the better management of our nation's resources and to obtaining value for money. If the Public Accounts Committee of this House had a coat of arms with a motto beneath it, "Value for Money" would certainly be it.
The House may like to know that, in our probings of the quality of departmental administration we had no difficulty in agreeing on the terms of all our reports without any formal division in the Committee. I hope that the House may think that that work and the spirit in which it was executed was in the highest traditions of this House.
In asking the House to approve these 10 reports, I should like first to mention briefly some of the issues which arose from our work last Session and then later, perhaps, and more importantly make some general comments about the control of public expenditure as exercised by this House, especially in regard to its shortcomings, and perhaps propose some ways in which it might be improved.
1271 As for the style of our reports, whether or not the Committee thought it necessary to be critical—and on occasion obviously we did—we also sought to be constructive in our approach. We have been concerned not simply with individual administrative failures but with the broader lessons for the future of Government administration as a whole. We believe that, even if one stable door has been found unlocked, action should be taken to see that other stable doors are properly bolted.
As right hon. and hon. Members know, this House continues to have responsibility for Northern Ireland, and I am glad to see my right hon. Friend the Member for Down, South (Mr. Powell) and my hon. Friend the Member for Epping Forest (Mr. Biggs-Davison) in their places to attend to this matter. The Committee 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 referred already. We were able to take oral and written evidence from some of the accounting officers for the Northern Ireland Departments. The House will see that our Seventh Report deals with five separate Northern Ireland subjects. I shall leave it to my Northern Ireland colleagues who are hoping to take part in this debate to comment on these various matters.
I make this one observation. We in the Committee were very much struck by the conscientiousness and devotion of Northern Ireland's most senior public servants, working, as they are, in circumstances often of much difficulty. We hope that it will assist them and their colleagues and the cause of public order if we continue to insist in the Public Accounts Committee on the highest standards in that part of the United Kingdom as everywhere else in the United Kingdom.
I should like to comment in some detail if time allowed on each of the 60 subjects upon which we have reported. Each is worthy of its own full debate in this House. But Members of the Committee and other right hon. and hon. Members will no doubt choose their own favourite topics. I shall comment to any extent on three only, and I shall say a sentence or two on a few others.
1272 Apart from these Northern Ireland subjects, I divide our examination under five broad heads. I take first, because it begins with the letter "A", agriculture and food: subsidies, grants and the EEC. Here we were looking at five subjects, and I think that our reports very largely speak for themselves. Then there are the beef support arrangements and the arrangements for the supply of cane sugar, largely misreported in the newspapers, I thought. I am glad that the Treasury has the matter under control. Then we have the Covent Garden Market Authority's financial performance, and then the Central Council for Agricultural and Horticultural Co-operation.
The second group is larger, perhaps more significant and perhaps more immediately interesting. I am talking about the control of administrative expenditure and grants. Under this head, I lump 19 subjects. One was food aid to Lesotho. It seemed a disgrace to us in the Committee that aid, given with taxpayers' money and with the best of good will, designed to alleviate suffering, should very largely have been wasted in this case. I hope that the lessons of that matter have been learned.
The House may remember two matters that we were looking at in regard to the Crown Agents and their affairs. The Crown Agents and their affairs have been much reported on and very much discussed, and I do not suppose that the House will want to go over all that ground again. If I may be allowed a personal expression of view which I tried to express in a letter to The Times recently, I think it most unsatisfactory that we in this House should allow much of the blame for this affair to fall upon public servants. The buck should stop here. It is up to the House of Commons to exercise and to maintain a proper supervision of expenditure, and it is up to us to provide ourselves with the apparatus to do it. That was the fault in that case, in my view.
Going on under this head, we investigated the delay in the receipt of audited statements from overseas in respect of funds from the United Kingdom, supplementation of overseas pensions, accounting arrangements for magistrates' courts transactions. Then we examined the cost of administration of both the Customs and Excise and the Inland Revenue. We 1273 were very much concerned to find that the cost of administration in this connection seemed to compare unfavourably with many other developed countries. I know that there is a great agitation amongst our constituents and in this House for a reduction in taxation. It seemed to the Committee that equally important was the aim for simplification of the tax structures.
Then, lands managed and farmed in Scotland: £500,000 was the net cost of servicing a number of estates in Scotland. The usefulness of this arrangement is long outlived. Then came control of the production of the Concorde aircraft and the effect on staff numbers of cutbacks in the road-building programme. It seemed unusual to us that, though the road-building programme had been cut, there had been no commensurate cuts in the civil servants responsible for it.
Then there were two British Rail matters. One was the grant to British Rail for passenger services and the freight deficit. The other was grants to British Rail to fund pension schemes. I believe that this is a matter that the Committee will wish to examine further. It is doubtful whether it is appropriate to fund schemes in any event. It is probably more appropriate that the pensions schemes for British Rail should be dealt with on a year-to-year financing basis as other analogous scheme are. But it was a great surprise to many members of the Committee to learn that British Rail pension schemes are index linked. It might be to the advantage of this House if a full inquiry were made into exactly how many pension schemes are index linked these days. I do not suppose that I am alone in saying that, however generous one wishes to be to pensioners, it is extraordinary that people who are in receipt of pensions for past services are getting larger increases than many of those who are at work today.
There were several matters under the head of universities. Then there were a number of matters in relation to the National Health Service, the administrative costs, clerical staff, overtime and extra duty payments, and the like. It may shock the House to know, as it shocked the Committee to discover, that some 18 months after reorganisation the administrative and clerical staff of the National Health Service has risen by no 1274 less than 20 per cent. and the higher posts by no less than 30 per cent. We were glad to note that this matter was now being tackled. If ever there was an instance of a case where it is necessary to see that the nation obtains value for money, surely it is in the National Health Service. There is the very greatest need for much to be done. That administration should have been allowed carelessly to grow is a reflection on the supervisory work of this House in general.
Overpayment of social security benefits is another matter that has been spoken about rather too much. But again it became perfectly clear that one of the reasons for overpayment undoubtedly was the fact that the systems of benefit payment were very much more complex than they need be. I hope that that matter is being looked at.
Then I mention employment and training schemes and the purchase of computers for deferred payment. So much for that head.
Thirdly, there is expenditure on goods and services and large capital projects. This includes the allocation of orders to one company for construction of destroyers, ammunition development and urgent works projects. You will be shocked, Mr. Speaker, as we were, to hear about one example at which we looked. It was thought necessary urgently to make some developments at the Devonport Dockyard which were originally estimated to cost some £20 million. Because the work was not properly planned and thought out beforehand, the eventual out-turn was no less than £83 million.
Another example was the Inland Revenue Centre at Bootle. Originally this was estimated to cost £2.6 million, but once again, because the work was not properly planner, the eventual cost was £7.6 million. We made some very strong observations about the need for proper planning in future.
One smaller item was the construction of the fisheries research vessel called the "Scotia", which, when delivered, was found to be quite unsuitable for the work for which it had been designed. Yet the vessel had a full crew who were fully paid for two years while the vessel was lying alongside the harbour wall. Added to which, the crew were given a distant water allowance as well.
1275 There are other examples, such as the yet unfinished story of the Liverpool teaching hospital which was originally estimated to cost £11 million. The likely outturn now is more than £50 million, including—so we were informed at the time, although the Treasury mitigates this point—something around £10 million, originally for fire precautions which were not properly designed in the first place. I am sure, Mr. Speaker, that you will find this as scandalous as we did.
Fourthly, there is control over revenue and public expenditure generally. Here we were reporting on 16 subjects, including two defence subjects. In this House we talk a lot about the cost of defence. Many hon. Members may be interested to know that we make substantial revenue out of defence. Sales of Ministry of Defence equipment netted some £200 million last year. We think that it is appropriate that a formal account should be presented to the House.
On the question of VAT, which comes under this heading, I do not know whether other hon. Members' postbags are as heavy as mine on this subject. There can be no doubt that in dealing with this tax a substantial burden is imposed on traders. VAT has been in operation now for four years and the Committee warmly welcomes the examination by Customs and Excise to see whether the tax can be simplified.
The heading also includes British Nuclear Fuels Ltd., its dividend policy and financing, the National Oil Account and BNOC, the disposal of National Health Service land and accountability in the National Health Service. These last two provided worrying aspects about the way in which this tremendous organisation is administered. However, we were impressed to hear the plans that the Department has for the collection of national insurance contributions.
I come to the accounts of the Manpower Services Commission. The House will be interested to know that the budget for that body has multiplied four-fold over several years to £500 million a year. In the same period its administrative expenses have multiplied 17 times. I am told that the Commission proposes to build a great new headquarters in Sheffield at a time when the IMF diktat has called for a moratorium on all office 1276 building. Of course, maximum attention must be paid to the reduction of the scourge of unemployment, which is a striking reproof to all of us about the way in which we attempt to manage the economy of this country. However, there is no reason why we should not insist on cost effectiveness on the part of the Manpower Services Commission.
Also included under this heading are fees and charges, Inland Revenue—verification of tax returns, the Royal Mint trading fund, the Independent Broadcasting Authority—additional payments by programme contractors and contingent liabilities on public funds from Government guarantees. We thought it proper to examine these guarantees in the aggregate to see exactly the total of contingent liability. We are happy to report that we saw no reason for any particular anxiety at this time.
The fifth heading concerns assistance to industry, including selective assistance to workers' co-operatives, and I, for one, rejoice when that is successful.
We thought, and have reported accordingly, that there should be a review of these regional development grants, because the taxpayers have given £100 million for projects which would have been sited where they were eventually sited, whether the companies had been given grants or not. One happy spin-off item here was that £8 million was prematurely paid, of which perhaps £3 million should never have been paid in the first place, and we got that money back. This showed the cost effectiveness of the Public Accounts Committee.
Another aspect of this very important subject is that one of our major concerns was to examine, on behalf of Parliament, the arrangements for establishing the National Enterprise Board, particularly in view of the very substantial public funds that are being placed at the Board's disposal. About £1,000 million is proposed by Parliament for the NEB, although so far only about £240 million has been issued. These public funds have been put at the Board's disposal to fulfil a function that some people feel is very important to the industrial life of this nation.
It is important to investigate this matter as thoroughly as we can, and it was our concern to look into the Board's relations with and control over its two 1277 inherited major subsidiaries—Rolls-Royce, happily making good progress now under Sir Kenneth Keith, and British Leyland. It was important to take a preliminary look at how the Board made its judgments on new investments in British industry in order to achieve its objective of increasing industrial efficiency. We were concerned especially with the need for proper parliamentary scrutiny and control of the very large funds made available to the Board.
The Committee was not satisfied with the present arrangements for accountability to Parliament in the absence of access by the Comptroller and Auditor General to the books and records of the Board. It cannot be right that servants of the House should be denied access to the books and records of the NEB. We propose to review the effectiveness of the arrangements after a year's experience has been obtained of their operation.
As the House knows, there are many politically sensitive issues involved in the operation of the Board. We are not concerned with those issues today. We know that there are serious practical difficulties, but I wish the Board every success. I am grateful to the Department of Industry for its agreement to keep the House informed about further advances of funds to the British Leyland Company. Persistent questioning by the Public Accounts Committee has achieved this success so far.
I regard the present situation where, however meritorious the reasons, huge investments of public money are made in an existing enterprise which is the property of the State, or in a new enterprise such as Fairey which occurred during the parliamentary recess, without scrutiny by Parliament and without any specific or particular authority in certain cases, as plainly quite unsatisfactory, and we should not tolerate it.
§ Mr. Dennis Skinner (Bolsover)
Would the right hon. Gentleman treat with the same fervour and passion the necessity for Parliament to investigate why a figure of £120 million or thereabouts was supplied by the Government to various financial institutions, in the form of what was known as the lifeboat scheme, to bail out secondary banks and others in trouble? He is well aware of one such organisation that was bailed out and finally 1278 rescued by the Big Four. Does he believe that that expenditure of £120 million should be investigated, and does he think that his Committee is the right Committee, in view of his past association with one of those companies, to be involved?
§ Mr. du Cann
I know that the hon. Gentleman has a bee in his bonnet about this matter. I have no objection in the least if an inquiry of that sort is made. He knows the routines involved and appreciates the way in which the Comptroller and Auditor General operates. If he would like the PAC to make an investigation into that matter or any other, let him please put the matter formally to the Committee and the Committee will decide. I shall be happy if he does so.
§ Mr. Michael English (Nottingham, West)
On a slightly different point, does the right hon. Gentleman agree with the Report of the Expenditure Committee that the legislation relating to the Exchequer and Audits Department should be amended so that the Comptroller and Auditor General should be able to examine any set of accounts of organisations into which public money goes, whether a public or private organisation, and that he should invariably audit any sets of accounts most of the receipts of which involve public money? Finally, does he agree that the Committee should be empowered to require the Comptroller and Auditor General to investigate such a matter as that which the Comptroller, according to his evidence to us, said he was not necessarily asked to do by the Public Accounts Committee?
§ Mr. du Cann
Could we be clear that this is not my Committee but a Committee of the House of which I have the honour, for the time being, to be Chairman. I know that the hon. Member for Nottingham, West (Mr. English) takes a great interest in these subjects and we all know his pertinacity as Chairman of the General Sub-Committee of the Expenditure Committee, and his work in matters affecting public accountability is much admired. I give a clear and unhesitating "Yes" to his question. I have long argued for an extension of the authority of the Comptroller and Auditor General, although whether he and the Exchequer and Audit Department would agree is another matter. I have also argued for a great strengthening of his staff. My views 1279 and the hon. Gentleman's coincide precisely on that matter.
I have said plainly to the House, in a non-partisan spirit, that it is the responsibility of this House not to accept the present position. It is the duty of this House, in our capacity as guardians of the public purse, to insist on closer observation and scrutiny of the activities of the National Enterprise Board. But the massive costs—and the figures relating to the NEB are massive by any standards—are not unique. I refer also to the newly established British National Oil Corporation, which has drawn down sums of money now amounting to more than £600 million. The position in regard to accountability to this House is on all fours with the case of the NEB. Although copies of the corporation's annual accounts are laid before Parliament and fall within the scope of the PAC, I wish to emphasise that the Comptroller has not been provided with the statutory right to access to the corporation's books and records. We in the Committee were concerned that in this respect the Comptroller would be able to give us only restricted assistance, but the Department of Energy and the Treasury were good enough to assure us that if these arrangements proved difficult to operate in practice, they would re-examine the question of the Comptroller's access to such matters.
I welcome this open-mindedness. I am the first to recognise that with such bodies, responsible for investing and disposing of very large sums of public money—and these sums will grow greatly—in a variety of commercial and industrial activities, a reasonable degree of managerial and administrative flexibility and freedom is essential.
However sympathetic one may be to the BNOC and the NEB, the issue of public accountability is fundamental, and the means to secure that end deserve serious consideration by us all.
On reflection, that is putting it pretty mildly. I wish to emphasise that as Chairman of the PAC I am not concerned with political issues one way or the other, but I am deeply concerned to ensure full accountability and parliamentary control of the money that is entrusted to us. I gave the House earlier 1280 some individual examples showing an obvious waste of resources. Therefore, having regard to the great needs that exist in so many places, for example in the National Health Service, not least in the expenditure of further money, and having regard to current levels of taxation, I believe that we must insist on the full implementation of accountability and parliamentary control in practical terms.
I wish now to say a few words about the work of the Public Accounts Committee and its place in the apparatus of financial control. The Committee has a narrow remit which has been largely unchanged for a period of one hundred years. Speaking from the experience which I have been fortunate enough to have had, I wish to make it clear that in my view the work of the PAC has shown its effectiveness in the management of the public sector, and I believe that that rôle must be maintained. This view was strongly confirmed by evidence given to us on certain general issues by senior Treasury representatives last summer, as the Chief Secretary to the Treasury will be aware. There was something of an innovation in the ways in which the PAC and the Treasury work together, and the Committee found this process interesting and rewarding. I shall be grateful if the Chief Secretary will convey to the Treasury officials how much we appreciated their co-operation and helpfulness on that occasion.
The PAC normally proceeds on the basis of agreed and ascertained facts, and can concentrate on examining accounting officers on the inferences to be drawn from the facts and improvements to be made in future. I believe that there will always be a case for the PAC or something very similar to it. So far so good, the House may think. It is agreeable to read consistently in the newspapers from the Sun to the Economist—or should it be the other way round?—and even sometimes in local papers, tributes to the work we attempt to carry out. That is all very gratifying, but the reality is that the work we do is only a tiny fraction of what needs to be done. It is the tip of the iceberg. We have already touched on the subject of augmenting the devoted staff in the Exchequer and Audit Department, but the truth and reality remain that Parliament hardly controls public expenditure at all. The inquests and 1281 post-mortems of the PAC are invaluable and an effective method of improving administration through constructive criticism in seeking to obtain better value for taxpayers' money, but they are hardly an exclusive recipe for a healthy, living, effective democratic process.
The more one serves on PAC the more conscious one becomes of the shortcomings of this House in seeking to control, or even attempting to control, public expenditure. The following words of Tennyson from "In Memoriam" come to mind:So many worlds, so much to do,So little done, such things to be".Surely the chief characteristic of a democracy is that the elected representatives of the people—Back-Bench Members—should control the Executive. This we do not do in this House. The parties have far too much power to allow us to do that. In consequence, we have an all-powerful Executive. I have called it an elected dictatorship. In his Dimbleby Lecture, Lord Hailsham called it an elective dictatorship. We do not need to quarrel over the language, but I argue that if we control carelessness, we can expect and demand efficiency in its place. If there is no control or if the controls are inadequate, inefficiency will follow as surely as night follows day.
The easiest way to control the Executive would be by controlling the purse-strings. Again, we do not do this and, like Topsy, public expenditure has grow'd and grow'd—in absolute terms and as a proportion of GNP. I am not arguing against public expenditure; I am arguing for its proper command and control by the one body in the United Kingdom which is qualified to control it and has a duty to do so.
We hardly use the opportunities for control that we have—and we have them in abundance. Our debates on the Estimates, Supplementary Estimates and Supply have become farcical in the context of control of public expenditure. They are either attended by a handful of specialists or used as an excuse for a series of Adjournment debates or as a platform for set-piece debates on strictly party lines with predictable party votes at their conclusion. So it is that we vote millions of pounds on the nod. In the context of parliamentary scrutiny 1282 of public expenditure, questioning of Ministers and the investigation in depth of what is being done with the taxpayers' money, there is no doubt that our procedures for scrutiny are largely ineffective. Parliament is failing the nation at this time.
Let me give the latest specific and remarkable example of the apparent indifference in these matters The cash limits system was introduced two years ago. The Third Report of the PAC refers to it particularly. The system now covers 65 per cent. of Government Supply expenditure, that is £25,000 million out of a total of £40,000 million. It is remarkable to relate that the system has never been sanctioned by Parliament. The limits have never been discussed in this Chamber either in the aggregate or in their individual pieces. No Back-Bench Member has had the chance to discuss and therefore to decide the cash limits on defence, aspects of the Health Service, agriculture, or any of the 125 items that make up this astonishing total of £25,000 million.
That is the way the Executive treats this British Parliament. That is the contempt it shows for us. There has been only one debate in the House on cash limits in the two years since they were introduced. That was on the Consolidated Fund Bill of 14th December last year, when I raised the matter after sitting up all night in order to do so. It is shocking that we have a purely administrative system introduced by the Government and not subject to formal parliamentary procedures of any kind. Any true democrat must be dismayed at the way we have been so careless of our parliamentary traditions.
The question is what is to be done so that the present situation—which everyone, and especially every commentator, agrees is unsatisfactory—can be changed for the better. How can parliamentary control be improved as a first step towards its full restoration?
I have expressed views on this subject many times in speeches, pamphlets, in this House, in articles, on television and I even had the pleasure of expressing my views to the Select Committee on Procedure to whose report later this year I look forward as, I hope, does the whole House. I have already paid tribute to the hon. Member for Nottingham, West 1283 and to the Expenditure Committee. I hope that the House will think it right that its Select Committees have been busy on its behalf and have made recommendations. Those of the Expenditure Committee will need careful digestion. They go very far and I am not sure that I agree with them all.
Perhaps I may make some recommendations on behalf of the Public Accounts Committee. I refer particularly to our Third Report, which was published nine months ago. It is impossible to overstate the importance of the new cash limits system. By general consent, it seems that they have greatly helped to keep Government expenditure within the limits originally agreed and, through their application to the rate support grant, they have contributed to the welcome restraint on local authority expenditure. The imposition of short-term budgetary cash control on large areas of public expenditure is a welcome development and the PAC certainly welcomed it.
For the first time in my 21 years in the House, we now have a clear analogy with the ordinary way in which any corporation budgets or any family does its budgeting, and that must be a good thing. We also believe—and this was confirmed by Treasury and other departmental witnesses—that the need to work within firm cash budgets has had a marked advantageous impact on the way in which Departments handled their business at all levels. This was admitted more than once, and I found it shocking, because it showed that there was slack in the system which had not been taken up in the past as it should have been. But we gave full credit for what had been done.
The Committee also drew attention to the necessity for improving parliamentary control. I repeat that, however effective they may be, cash limits are a purely administrative system, introduced by the Government and not subject to any formal parliamentary procedure. We therefore recommended that the limits and the system of Parliamentary Estimates and Accounts should be brought together in an integrated and fully effective system. We recognised that, though this objective can be stated simply, it involves a major reform of a system that has been long hallowed by tradition. But 1284 frankly it is of little more than mere historic interest now.
We were glad that the Treasury accepted our view in principle and grateful that when the Financial Secretary met the Committee—he is, by tradition, a member of it—a few weeks ago, he said some further encouraging things in this regard. If we integrated the system, as I believe we must, it would mean, among other things, that Parliament could once again concentrate effectively on the much smaller number of Supplementary Estimates which would come before us instead of being faced, as we have been year after year for several years now, with inexorable demands for very large sums of money to meet pay and price increases.
The Committee has agreed to discuss this subject with Treasury officials in our programme for this Session. We shall undoubtedly wish to discuss a number of other matters which come under this heading, including, for example, whether it is possible to extend the scope of the system. As the Chief Secretary, the Chancellor of the Exchequer and other Ministers know, we shall also want to discuss the rationalisation of the size of individual blocks. It seems extraordinary that we have blocks that can be as small as £5 million or as large as the £5,000 million of the whole Defence Vote. But, most important, I hope that we shall be able to report to the House of Commons within six months from today that the merger of the cash limits system will be accomplished during the financial year 1978–79 and to set out detailed recommendations, of course in conjunction with the Treasury, to that end.
§ Mr. Geoffrey Finsberg (Hampstead)
My right hon. Friend has made the point that control by Back Benchers is being steadily eroded. He has been here three times longer than I have, and he has been a Minister. Does he not accept that in the end the Government Front Bench will always have before it a Civil Service brief which will say "Minister, it is not advisable to tell Parliament quite as much as you would wish"? I respect my right hon. Friend, but how does he believe that any Government will be as open with Parliament as he would wish?
§ Mr. du Cann
I am willing to agree with my hon. Friend the Member for 1285 Hampstead (Mr. Finsberg), whose acumen in these and other matters I greatly respect, that there are immense difficulties. Of course, we have got into certain habits and we are sliding happily down a comfortable slope. There is only one way for matters to be restored. There is only one way to improve the scene and the system. There is only one way in which we can recapture so much of the public confidence that we have regrettably, but deservedly, lost. That way is for Back Benchers—they form an overwhelming majority in this House—to do their constitutional duty and insist upon their rights.
Here is one proposal. If it is the wish of the House, the Public Accounts Committee will produce its proposals in conjunction with the Treasury, whose natural ally we are. I agree that in a sense we are attempting to climb an Everest, but mountains are for climbing and the House may think it important that we should be making a start now for this reason. The Everest that we are discussing is a mere European foothill, for when we have put our own house in order here we have presumably to attempt to put that house in order afterwards, and heaven knows that will be an immense task. I believe that is all the more reason for our beginning now.
I said how grateful I was to my colleagues for their discharge of the duty that the House has imposed upon the Public Accounts Committee. There is, however, another reason. There is one group of hon. Members who are deeply concerned about the effectiveness of Parliament's financial control of the Executive and who are determined to see it improved. If the parties will not lead, we most certainly will. In the end, if our nation is to retain its support for democracy and our processes it must have confidence in them. I have said in another place in a sentence "Parliament must rule—OK." I believe that should now be the slogan of this House.
§ 4.33 p.m.
§ Mrs. Barbara Castle (Blackburn)
The right hon. Member for Taunton (Mr. du Cann) has expressed a natural pride in his Committee, and I am sorry if I shall strike a sour note. I pay tribute to the hard work done by the members of the Committee in very exceptional difficulties. 1286 We have had an indication from the right hon. Gentleman's speech, with its catalogue of work done by the Committee, of the enormous size and detail of the subjects that it has scrutinised. But I cannot follow the right hon. Gentleman in his automatic assumption that where the Committee scrutinises all is well and that there is not enough scrutiny.
I strike this note this afternoon. My anxiety is that the scrutiny by the scrutineers is as thorough and informed as it should be in order to enable justice to be done to those who are scrutinised.
The right hon. Gentleman is fond of giving the House his great panoramic speeches about public expenditure. We all fall for it. He rattles off figures about how estimates have been exceeded, and we all shake our heads. Assumptions are made that there has been the kind of slackness of administration that would not have occurred if only more of us had been doing our duty and keeping watch.
The right hon. Gentleman can get away with speeches like that, sowing doubts in the minds of the public—in my view he does it intentionally—about the desirability and effectiveness of public expenditure. He gets away with it because this is a vast and complicated subject. It is only when a Member of Parliament, doing his or her constitutional duty, takes up a constituency example that he or she discovers that the reports of the PAC may not be such perfect paragons of control as the right hon. Gentleman would like us to accept.
I took down the right hon. Gentleman's words, I think correctly, when he said in a grandiose sweep that the Committee's reports contained agreed and established facts and conclusions to be drawn from those facts. That is why I shall commit the sort of crime that the right hon. Gentleman sneered at a few moments ago. I shall introduce a sort of Adjournment debate note, because it is on the basis of an individual case that I have gone into thoroughly that I find a section of the Fourth Report of the Committee inaccurate, misleading and damaging. I think this may be just one of the creepy-crawlies under the stone. If we were to go in more detail into more of these reports, we might find more.
§ Mr. Michael Marshall (Arundel)
We all respect the right hon. Lady and her 1287 vast experience as a Minister, but is she not prepared to state, before she plunges into an individual case, that it is the backup of particular Select Committees that she, like many of us, is concerned about? My right hon. Friend the Member for Taunton (Mr. du Cann) quite fairly pointed to the failures of his own Committee. Will the right hon. Lady come off the fence before she goes into a particular case and say whether she agrees with the strengthening of Select Committees?
§ Mrs. Castle
I am dealing with this particular Committee and this debate. We are asked to take note of reports by the PAC, the work of which has been extolled to us by the right hon. Member for Taunton as our safeguard. I say this advisedly. Of course I have been a Minister, and of course I have known examples of where waste has taken place. But I have known, too, cases where a generalised argument against public expenditure has been based on examples which really have not been justified. That is why I am giving this as only one example.
I would say this in reply to the right hon. Gentleman's more sweeping arguments. I think that the best form of scrutiny still remains that of the Back Bencher operating on detailed knowledge of examples in his own constituency that no one else can share. That is the best form of scrutiny. I hope that the House will bear with me while I give my example as the reason, because it is not only a case of doing justice on the Floor of the House, where an injustice has been done to a group of people in my constituency—
§ Mrs. Castle
No, I am sorry. I shall not give way.
It is not only a question of that. It is a question of exposing to the House the totally inadequate procedures of the Public Accounts Committee for getting at the facts.
I am referring to the section in the Fourth Report, dealing with ammunition development. Three ammunition projects were examined. I am interested in only one of them—the combined proximity 1288 and point of detonation artillery fuse. Surprisingly, that is of interest to me. Some may think it to be an esoteric taste, until they learn that most of the work done on this fuse was done in the Royal Ordnance Factory at Blackburn, where a number of my constituents work. That Royal Ordnance Factory has long experience of and a high reputation in the manufacture of fuses. Therefore, the House will understand the dismay that was caused among those who work there when the Fourth Report appeared, implying that design mistakes had been made and that considerable time and public money had been wasted because of a decision to make the ROF Blackburn, as the Report says, the sole production authority of the new fuse.
This is another example of where the public should be concerned—nine years wasted, and God knows how many millions of pounds, all because of two things. On the one hand there has been lack of proper care about public expenditure, and on the other hand there is the implication here—it permeates a number of these reports—that the work was being done by a public authority. That comes out time and again.
The right hon. Gentleman said that his Committee was not political and that he himself did not bring any political views to his reports. However, we are all incapable of detaching ourselves from our subjective biases. No one is going to tell me that the right hon. Gentleman is biased in favour of public authorities.
The design fault of the fuse, which caused the strictures of the Committee in the Fourth Report, was the omission of the usual clockwork delay mechanism in the combined fuse which was being developed. The major damage to my constituents in the ROF, whether directors, management or trade unionists, was done in the evidence, in the replies from General Sir John Gibbon, then Master-General of the Ordnance, and Mr. Lord, the Director of the Royal Armament Research and Development Establishment. In the questions put by my hon. Friend the Member for Oldham, East (Mr. Lamond), who, as the House knows, is a member of the Public Accounts Committee, my hon. Friend acted in good faith. He, too, has a constituency interest. He, too, was carrying out his constitutional duty and pointing out that he, too, 1289 has a fuse factory in his constituency—Ferranti—which wanted to be the main contractor for this fuse. However, the fact is that the answers given to my hon. Friend were misleading and in some cases, by implication, downright wrong, and they led to conclusions by the Committee that are totally unjustified.
As much damage is done to the public interest when unjustified attacks and smears are made as when some slackness escapes the scrutiny net. I give the House one example from paragraph 392, when my hon. Friend was cross-examining General Sir John Gibbon and Mr. Lord on the history of the development of the fuse. My hon. Friend referred to what he called the decision of the Ministry of Defence that Blackburn ROF should be the "sole production authority." He added:We can see from the following paragraphs, I think, that this was really a disastrous decision.My hon. Friend's assumption was wrong, but it was not challenged by the Master-General of Ordnance or by Mr. Lord, and so his conclusion was not challenged either.
I have no doubt that General Sir John Gibbon and Mr. Lord acted in good faith too, but they are very busy top civil servants. They cannot possibly carry in their heads every detail of policy. There was no one there from the ROF to give the facts.
A number of other innuendoes went unchallenged too, including the suggestion that the ROF Blackburn was responsible for "a fiasco" and that it would therefore—here comes the point—be desirable to give a greater share of fuse work in the future to private firms. Surprise, surprise. This was reflected in paragraph 30, in the Committee's conclusions, where it said,we recommend that MOD should be more ready to supplement their own resources by using private industry to participate in development projects whenever commercial firms possess, or"—listen to this—have the potential to acquire, the necessary expertise.
§ Mr. Nigel Lawson (Blaby)
I have been reading the report very carefully. Will the right hon. Lady say where she 1290 found the quotation about private firms? I have read the evidence, and it refers to British industry, not to private firms.
§ Mrs. Castle
I have just quoted from paragraph 30, where the Committee concludes that the MOD should considerusing private industry to participate.Private industry is made up of private firms, is it not? Certainly in the evidence there are many references to the use of private firms. Perhaps I can find them quickly. I have so many references marked that it may take me a little time.
§ Mr. du Cann
The right hon. Lady will find one reference in paragraph 339. However, I wonder whether I may put a point to her. If she is saying that the evidence that the Committee was given was wrong, that is a very serious thing to say. I am sure she will appreciate that on occasions of this sort those most distinguished public servants, senior people, who appear before the Committee have the advantage of long notice of the subjects on which they are to be cross-examined, and they also appear with very substantial back-up teams, usually consisting of people representative of many detailed aspects of the departments concerned. It is, therefore, a great surprise to me to hear that the evidence that we were given was inadequate. However, if that is so, we shall consider it again.
§ Mrs. Castle
I have no doubt that the Master-General of the Ordnance and Mr. Lord acted in good faith. I have been a Minister and I know of the massive amount of administrative detail that a Minister and back-up civil servants are expected to carry in their heads. My complaint is that I would not expect my Permanent Secretary to carry in his head every detail of what happened in a local office. If there is to be cross-examination on the work of a specific factory or local office, that factory or office should be represented before the Committee. It is not a question of Sir John or Mr. Lord having volunteered inaccurate evidence. It is merely that my hon. Friend the Member for Oldham, East put certain questions to them on the basis of certain assumptions that he held in good faith. [Interruption.] Perhaps I may be allowed to proceed. I have gone into this matter extremely carefully—
§ Mrs. Castle
No. I do not want to give way and perhaps miss out half the argument. I must be allowed to proceed.
The publication of the report created an outcry in my constituency. Front page headlines were splashed across the local Press—"ROF Blackburn condemned". We cannot play ducks and drakes with people's livelihoods. That cannot be done in what I believe is sometimes a frivolous manner, even by a serious body such as the Public Accounts Committee.
I am glad to say that my hon. Friend, challenged by the ROF workers, agreed to go along to the ROF to conduct a little bit of public scrutiny. We were given a demonstration by the plant director of the construction of the new combined fuse and an account of its history. We were then left with the joint shop stewards committee to hear the point of view of the men, who took a great deal of pride in their work. As a result of our discussion—I am deeply grateful to my hon. Friend for his frankness and courage—my hon. Friend has stated publicly that the Committee was misled. He has been with me to see my right hon. Friend the Secretary of State for Defence to try to put the record straight for the sake of the future work at ROF Blackburn.
Perhaps I should not detain the House with the details at the establishment, but we found that the new fuse could not have contained the clockwork delay mechanism as the fuse was, by specification, too small. Secondly, the decision by MOD to go ahead without the delay mechanism was taken on the basis of failure rates of "early bursts", which the ROF challenged at the time as totally inadequate. However, it was told to go ahead.
Thirdly, the fuse as produced at the ROF met the failure rate. It is a lower failure rate that the MOD specification for the fuse did not and could not meet. Fourthly, Blackburn ROF had never been the "sole production authority". It made only one of the three sections of the fuse. The other two sections were made by McMurdo and Ferranti. Private industry had produced two-thirds of the fuse, yet on the basis of the Public Accounts Committee's report MOD is invited to 1292 place greater reliance in future upon private industry.
Fifthly, the section produced at ROF Blackburn proved entirely satisfactory and is to be incorporated in the new model that is now being considered, which will include an electronic delay mechanism.
Sixthly, contrary to the implications of the report, nine years have not been wasted. No other country has yet successfully produced this combined fuse. Thanks to the work that has been done, including the collaborative work between the ROF and private industry, we have learnt a great deal. We are well ahead and confident that in the light of the lessons that have been learnt we can go ahead and produce the combined fuse ahead of everybody else.
Having listened to us, my right hon. Friend agreed that a misleading impression had been produced and that Blackburn ROF was in the clear. He wrote:I have no hesitation in confirming to you what I said at our meeting, that in the Ministry of Defence's view the task placed on ROF Blackburn as a part of this project was carried out fully as required. In my view no slur attaches to them in any way. The Ministry of Defence has a high regard for the staff at ROF Blackburn and of ROFs in general.There are important future implications. If I had not been able, with the help of my hon. Friend, to put the matter right, Blackburn ROF's chance of future tenders would have been put at risk. The new combined fuse with the electronic delay device is now going out to tender, incorporating much of the know-how developed by the ROF. If it had gone out to tender under the slur cast by the Public Accounts Committee and the open invitation to MOD to give a greater part to private firms in future, there would have been injustice of the worst kind to hardworking and reputable men.
I owe a great debt of gratitude to my hon. Friend the Member for Oldham, East for having had the courage to examine this matter in greater detail at my request and for helping to put the position right. I hope that members of the Public Accounts Committee will take a rather more careful look at the Committee's methods of scrutiny and at putting their own house in order before they engage so busily in condemning everybody else's slackness in scrutiny. When an individual firm or factory is 1293 singled out for criticism in a particular context, it is intolerable that workers and management should not be represented before the Public Accounts Committee. I know that such representation takes time. That is one of the problems. However, having read the report in detail in this case, I have been concerned by how loose and superficial is some of the much-vaunted scrutiny.
§ 4.58 p.m.
§ Mr. John Pardoe (Cornwall, North)
I believe that the right hon. Member for Blackburn (Mrs. Castle) has it all wrong. I say that on two counts. The right hon. Lady is wrong in her assertion that only those who want less public expenditure want efficient public expenditure. Surely it does not matter which side of the political argument is taken about the total level of public spending. Surely those who argue for more public spending have an even greater responsibility to ensure that such spending is efficient. Whether we want more or less public spending, surely we must be in favour of much better scrutiny.
As for the right hon. Lady's second argument, obviously, it is inevitable that sometimes a Committee of this House may get the emphasis wrong in doing its job. It happens that in my opinion a previous report of the Public Accounts Committee got it totally wrong when reporting on a personal business interest. However, that does not invalidate the scrutiny of public spending. Surely what we want is far more scrutiny, not less.
I am with the right hon. Lady in urging that the Committee should ensure that its recommendations are based on facts. I am sure that that is what it endeavours to do. When I was a Member of the PAC I knew only too well how carefully all its Members went about their business. The right hon. Lady should not argue on the basis of one case in her constituency that the Committee should shut up.
We are discussing one of the most important matters to come before Parliament. It has long been my view that our traditional Parliament is ineffectual and feeble as an instrument for administering a modern industrial society. I do not want to amplify that general critique to- 1294 day, but if Parliament cannot control expenditure, it cannot control very much.
The right hon. Member for Taunton (Mr. du Cann) has been appointed by Parliament as its front-line general in command of the troops controlling the effectiveness and efficiency of public expenditure. What message does he send from the front line? It is that Parliament has no control over public expenditure at all. Basically, that is the continuing message that the right hon. Gentleman constantly gives to the House. It is time that all sections of the House took notice of that fact and of that message. I entirely agree with the message that he again brings today. Yet the traditionalists who run this place will go on doing so in the same way that they have always done.
I instance the Lord President of the Council, who has some responsibility for the way in which we conduct our affairs. The right hon. Gentleman's view is that we have handed too much power and scrutiny to Committees and that far more should be done on the Floor of the House. It is impossible to deal with all these items in these reports on the Floor of the House. It is nonsensical to suggest that we can. We must go along the parliamentary Committee path. There is no alternative. It behoves those of us who wish to improve the performance of Parliament to ensure that we get our Committee structures clear.
The right hon. Member for Taunton made it clear that we must change our ways. But it is absolutely certain that we shall not do so. I was somewhat amazed at the right hon. Gentleman's criticism of the party political game in this place. Of course, he did not use those words, but he implied them. The party dog fight is a good deal more amusing to politicians than the serious monitoring of public spending.
One strange thing about this House, which the right hon. Member for Taunton did not mention—but I am sure he has given thought to it in the past—is that Supply Days are not used for this purpose. The subjects chosen—all parties are guilty, although the Liberal Party does not have too many Supply Days to feel guilt about—are of a general nature. They are not, as was orginally intended, dedicated to the scrutiny of Supply, which 1295 is Parliament's first and foremost function.
What about the major recommendations for change that the right hon. Member for Taunton has placed before us, has written about in pamphlets and articles and spoken about in other speeches? I hope that the Procedure Committee will make the recommendations which he wants it to make and to which we must all look forward.
I should like to deal with only two items, because it is impossible to go over the whole range. Other hon. Members will no doubt deal with other matters.
First, I refer to the recommendations dealing with grants to industry, regional development incentives and money for the NEB, British Leyland and other industrial projects. I do not see how Parliament can get this right.
I represent a development area which has had a share of development incentives over the years. But I should be very hard pressed to put my hand over my heart and to say that every pound, or even 50 per cent. of every pound, that has gone in that direction during the last 10 years has been effective and efficient and provided real value for money.
We should be looking beyond the simple regional development incentive. We should be considering the whole question of aid to industry and asking ourselves whether it is possible for the Government to induce investment intentions in any private industry. I doubt whether, by grants or taxation incentives, there is any evidence anywhere in the world that that can be done. It may be possible to change the geographical location of industry to a limited extent, but there is no indication of which I know, either in Department of Industry reports or in any of the academic studies that have been carried out in this country or in the world at large, that it is possible, by Government hand-outs or tax incentives to induce private industry to invest.
Parliament must inevitably accept the view of the PAC that British Leyalnd must improve performance before it gets any more money. But how does one manage British Leyland on that kind of short rein? Michael Edwardes, the new chairman and chief executive, has the 1296 good will of almost all hon. Members in his efforts to turn the tide at British Leyland. It is almost impossible for Parliament to be breathing down Mr. Edwardes's neck at every turn and saying "You must improve performance this week or we shall not give you another pound next week." But unless Parliament does that, we may find British Leyland running away with more and more money. We can only lay down general policies governing the return on money. We must leave our nationalised industries and British Leyland management to get on with the job in hand.
I turn now to taxation, particularly the report on value added tax. I hope that the right hon. Member for Taunton will forgve me for saying that the report seems to raise more questions than it answers, even if one reads all the evidence. The report refers not only to the public finance efficiency aspect—in other words, the cost to the taxpayer of administering it—but to the cost to the trader. I am sure that the cost to the trader in terms of the efficiency of the total economy is more important than the cost of public administration. Indeed, if the public cost is just under 2 per cent., which it is in public accountancy terms, I suspect that traders and industry are in many cases putting a higher proportion of the tax which they pay over to the Revenue into the administration and collection of that tax. Therefore, I hope that in these general inquiries in future into taxation there will be a much greater desire to find out the cost to the taxpayer of paying these taxes as well as to public administraion of collecting them.
Finally, I wonder whether it might be a good idea at some time in future—I know not whether this is within the terms of reference of the debate, but I shall be told if it is not—we could devote a little of the PAC's attention to a success story. It might be helpful to find out how the success was achieved. We appear to spend all our time inquiring why there were failures, why there were lapses and what went wrong.
I should like to give one example. The whole set-up of aid to the Arts in Britain is an astonishing hotch-potch. It is difficult to understand the criteria by which grants are given by the various bodies which have this responsibility 1297 which is shared by many bodies and local authorities. Yet the one thing that we can say about Britain in 1978 is that it is a centre of excellence for the performing arts, whether orchestras, choirs, the theatre or whatever. This has been achieved by a hotch-potch solution of public authorities giving grants in aid or sometimes taking over the responsibility for financing whole operations.
We have achieved excellence in this area. We should know why we have achieved excellence in this area. I suspect that there is a lesson to be learned from the way that the money has been granted and from the partnership that exists between private and public interests. That may lead us to create excellence in other areas.
I welcome these reports, but I welcome even more the determination of the right hon. Member for Taunton to change this hide-bound traditional institution into an effective weapon of modern industrial and economic management.
§ 5.10 p.m.
§ Mr. Gerry Fowler (The Wrekin)
I wish to speak about the first part of the Ninth Report which deals with the University Grants Committee and university expenditure. Both the right hon. Member for Taunton (Mr. du Cann) and the hon. Member for Cornwall, North (Mr. Pardoe), the Liberal spokesman, stressed the inadequacy of our scrutiny procedures. I shall be critical of the report to some degree, but not in a carping spirit. The support and resources at the Committee's disposal are, perhaps, not adequate for it to perform the task which the House lays upon it.
The Ninth Report begins by saying that this is an important area of public expenditure because the total grants for 1976–77 exceeded £60 million. At 1976 survey prices, the correct figure was £844 million. I assume that the figure of £60 million was meant to be £760 million at 1975 survey prices, but I shall pass that by and assume that the error was typographical. But this is, indeed, an important area of public expenditure.
The report proceeds to discuss the impact of recent changes in tuition fees upon the financing of universities. It states that the Department of Education and Science tried to strike a balance between the two extremes of charging full econo- 1298 mic fees and charging none. I do not know what that means, because there has never been a policy of charging anything like the full economic fee. The report says that the revised level of fees would account for about 20 per cent. of total current costs—in line with what was suggested by the Robbins Report. The Committee did not question that assertion.
I raise this matter because the procedures of the Committee are deficient in part precisely because it does not have expert advisers in the specific field into which it inquires. When the Robbins Report was published, the expectation was of a continued rise in university student numbers for a further 18 years—the period of the Committee's review—but the latest figures for student tuition fees fit into the reverse of that picture.
In 1982 the 18-year-old age group peaks; thereafter there is, on present form, likely to be a decline in the absolute level of demand for places in higher education. Unless the phenomenon of this decade is reversed and there is a sharp take-off in demand for places in higher education, this decline will take place. There is no evidence of such a take-off. That is important, because, in a context where continued expansion is expected, it is helpful to institutions of higher education and to the nation that a significant proportion of their income should come from fees so that they are encouraged to take in more students, thereby increasing their income each year. They are encouraged to take more students on the margin, and to cram a few extra into each department.
In a situation where total demand is declining the effect of the same level of fees may be to encourage deleterious competition between institutions which will be to the disadvantage of the weaker elements in the education system. It is no good saying that this is broadly in line with the Robbins Report recommendations. I had hoped that the Public Accounts Committee would probe a little further, as it suggested it would like to do, into the balance of the elements of university financing.
A similar point arises in the section of the report on capital grants and grants-in-aid to universities. The Committee states:We accordingly recommend that future capital grants should be based on a considered 1299 policy and overall programme related to the essential needs of the universities as a whole.Earlier in the paragraph the word "essential" is contrasted with the word "desirable". That sounds a reasonable contrast. We all think we know the difference between "essential" and "desirable". But how do we determine the cash value that we should give to the word "essential"?
First, we must know what is the estimated level of demand for higher education as a whole for which we should provide places, if we are to observe the Robbins principle that places should be provided for those who are qualified for them and who seek them. That is partly within public control. It has been said that it is something that is entirely outside the control of Government, but it is not, because the level of student grants affects it to some degree.
And there is little doubt that if we were to provide a universal system of maintainance allowances or awards for the 16–to–19–year-old age group we should see considerably more working-class students coming forward for places in higher education. That shows that total demand is to some degree within public control.
Secondly, the balance between the universities and the rest of higher education is entirely within public control. The 1972 White Paper "Education—a Framework for Expansion", for which the present Leader of the Opposition was responsible, proposed for 1981 an equal distribution of places in universities and other higher education institutions. My right hon. Friend the Secretary of State recently announced a revised total of places and a somewhat different distribution which was weighted more towards the universities.
One reason for that is that within a lower total number of places it is cheaper to provide some additional places within the universities than it is to expand non-university institutions. Universities in general already have excellent support facilities including libraries and catering. Therefore, it may make more sense, from a simple public expenditure point of view, to spend more money in the university sector than in the non-university sector and so provide the same number of additional places more cheaply. That is because the non-university sector has 1300 some way to go in catching up in the average standard of its physical provision. That aspect of the problem is not mentioned in the report, although it is one of the criteria that must determine what is essential expenditure and what is not.
But is the objective simply to provide a number of places in higher education as a whole at the cheapest possible cost to public funds or are there other objectives? Should we be considering whether we should build up non-university institutions at perhaps a greater cost, which would mean a reduction in "essential" capital expenditure in the universities? There is no clear definition in the report of the criteria for determining "essential" expenditure. Those criteria are more complex than the Committee appears to realise. It is not simply a question of what isappropriate in present economic circumstances.I turn to the next section of the Ninth Report which is headed "Recurrent Grants". Here I want to make a somewhat different point. The Committee says:It seems to us that, in the country's present financial circumstances, grants which have enabled the universities to maintain their expenditure per student at about the 1971–72 level in real terms cannot be regarded as having imposed an unfair burden on the university sector.I do not want to get involved in the argument whether there has been only a minor decline, a trivial decline, a marginal decline, in the level of university support per student from public funds since 1971–72 or a rather greater decline. The right hon. Gentleman has been somewhat embattled on that issue recently. Most of the figures which have been quoted have been less than relevant because they begin from a base line of 1973–74 whereas the right hon. Gentleman's report begins from a base line of 1971–72.
What I am concerned about relates to the whole question of the PAC's examination of the universities. I take the House back to the special report from the Committee of Public Accounts in Session 1966–67–10 years ago—on "Parliament and Control of University Expenditure". The House will remember that before that time the PAC and the C and AG did not have access to the books of the UGC and 1301 the individual universities. Paragraph 20 of the Report states:He"—that is, the C and AG—would not question decisions reached on academic grounds any more than he would, in other fields of expenditure, question decisions reached (for example) on military, medical or scientific grounds. There might in some cases be difficulty in distinguishing the methods by which a policy decision was reached, or implemented, from the policy itself, but this difficulty is a familiar one in many other fields of the C & AG's activity and in practice is always overcome.The Committee went on to say that it did not believe that the new system would do any harm to the proper autonomy of the UGC. I do not want to suggest that there has been such harm. I merely want to draw attention to the fact that 10 years later we have a report before us in which the PAC is expressing a general opinion on a policy issue, namely, whether the support which the UGC has recommended for the universities has imposed an unfair burden on them. I will not take any stand on whether it has or has not. That is not what I am saying. What I am saying is that perhaps the time has come when the House should, 10 years after the introduction of the new system, consider how it has been working and whether the assurances which were then given have been honoured or whether it is necessary for us to look again at the whole question and say that perhaps we were a little too reticent then and that, as we in the House have to account for public expenditure, we should qualify to some degree the assurances we then gave. The same point arises on other sections of the report.
Finally, I want to say a few words about one or two other elements in the same section of the Ninth Report which raise somewhat different points. The Committee spent some time discussing the inter-relationship of the various elements in university financing from public funds. For example, when it is talking about the financing of new residences, it says this:If the £25 million of debts are serviced from student rents, as DES said they would be, the costs could still fall largely on public funds if, as we assume, DES take account of these rents when determining the future level of students' awards. We therefore recommend 1302 that DES and the Treasury should review the merits of the loan-financing scheme.I note that the Committee only assumed that the DES takes accounts of the rents. That is a clear indication that the Committee did not have within its membership—I am not in any sense criticising its membership—or even within its immediate advisers, anyone with expertise in this highly technical area of how the DES sets about fixing student awards. It takes account of the average cost of residence. So to some degree the Committee is right and there would be some effect on the level of student grants, though not necessarily a marked effect upon the level of grant received by those students who are in loan-financed residences. It is a much more complex question than the Committee suggests.
The major point that the Committee is making is quite right, namely, that the elements of university financing interact and if one saves public expenditure in one direction one may increase it in another. As the Committee rightly says, this is partly to do with the definition of "public expenditure".
If I may make a political point, this is often forgotten by right hon. and hon. Members opposite when they cry for a reduction in public expenditure. It is sometimes perfectly easy to achieve an apparent reduction in public expenditure, as happened with the loan-financed student residence scheme. It is no longer public expenditure if universities borrow upon the commercial market. However, as the Committee point out, it may all come back on to public funds in another direction by another route. So one can reduce public expenditure by cheating, but that is not the object of the exercise.
At the end of its report, when explaining the same point, the Committee points out that there are endless forms of Government support for the universities, and that in addition to general grants and grants-in-aid for capital and for recurrent expenditureother forms of Government support include grants and grants-in-aid for expenditure on computers, separate grants for Medical and Dental Schools, and grants and other support from the Research Councils.Then there are tuition fees and the maintenance element in student awards, which is 90 per cent. in the case of mandatory 1303 awards financed by central Government and 10 per cent. by local government.Some of these financial arraneements involve a degree of circularity both in the assessment of grant needs and in the ultimate destination of the grants.The Committee goes on to talk about the subsidisation of residence and catering services as another element of this. I agree with the Committee that there is a crying need for a review of the total system of financing, certainly of the interrelationship of recurrent grant and tuition fees.
My essential point is that it is impossible to look at the universities in isolation. If one were to say that it was absurd to subsidise residences and catering services partly through the student award and therefore question whether it would not make more sense in the case of the universities to provide that subsidy direct from public funds, so that we can account for it more easily, and reduce the student award commensurately, that could not be said of the universities alone. To be logical, we would have to say that about all institutions of higher education. Granted that in the public sector courses of higher education are run at no fewer than 400 institutions, we should be faced with a diabolical task if we were to determine what was an average or fair level of subsidy. If there were to be a varying level of subsidy institution by institution, the administrative cost of such a system would be very high.
I agree with the Committee that this matter should be examined, but I should not want to suggest, as is half implied by what the Committee says, that the present system is entirely accidental and is by its very nature inefficient. It may be the best that we can get, granted that we have a system of student maintenance awards and granted that there are specific elements in the expenditure of all higher education institutions which we need to subsidise.
I believe that the Committee made a mistake in examining university expenditure separately from DES expenditure on the universities and other higher and further education as a whole. I am aware that university expenditure is a separate Vote, but many of the same questions arise, and the public and the autonomous 1304 sectors of higher education interact in such a way that it is almost impossible sensibly to examine the university sector by itself.
For example, one may refer to the final passage in paragraph 18 of the Ninth Report:We accordingly recommend that DES should carry out their review of the problem as a matter of urgency so that any proposed measures"—that is, proposed measures to increase the number of university students who are home-based—to reduce the burden on public funds may be introduced expeditiously.That is splendid. But there is already a higher proportion of home-based students in public sector institutions of higher education than there is in the universities. I am speaking here of those institutions as two total groups, not referring to individual public sector institutions or individual universities.
One might note in passing here that there are dangers in the policy which the Committee blithely recommends at that point. Increasing the proportion of home-based students may well to some extent reduce costs, but it may also have an unfortunate social effect, since the result of doing it may bear more harshly on students from working-class homes than on those from rather more prosperous homes. We cannot, therefore, divorce financial from social considerations in this matter.
But the major question is again what the proportion of home-based students should be in higher education as a whole, not simply in the universities, and to ask that question of the universities alone makes very little sense.
I hope that I have not been unduly criticial of the report. The point which I seek to make is that, while the report goes a little of the way towards a detailed examination of public financing of higher education, it is only the beginning of the task, and the PAC in its present form and with its present support services will not be able to perform the whole task adequately.
§ 5.31 p.m.
§ Sir John Eden (Bournemouth, West)
In his capacity as Chairman of the Public Accounts Committee, my right hon. Friend the Member for Taunton (Mr. du Cann) 1305 has fully earned all the tributes which the House can pay him. He has given clear-sighted and dedicated leadership to work of immense parliamentary and national importance.
It is, I regret to say, the fact that as the power and, with it, the cynicism of the Executive increases, so the need for parliamentary control—effective and efficient parliamentary control—becomes that much more urgent, and I entirely endorse my right hon. Friend's general comment on that topic which has exercised far greater minds than mine in the House over many years. I only hope that the hon. Member for Cornwall, North (Mr. Pardoe), who spoke for the Liberal Party, is not right in his view that little will be done to correct the omission. I say to him, with great respect, that it is the attitude of hopelessness on the part of Back-Bench Members in this case which plays straight into the hands of the Executive.
I wish now to turn to one small but none the less important matter—important for those directly concerned with it—which was considered by the Committee and reported in its Tenth Report. I refer to that part of the report which deals with the Independent Broadcasting Authority and the additional payments to be made by the programme contractors.
I was Minister at the time when the new levy system was first introduced. I say "first introduced" because, owing to the accident of the election which overtook me while I was Minister introducing that particular measure, it was introduced for a second time by my successor as Minister, the hon. Member for York (Mr. Lyon), who became Minister of State at the Home Office and took over what was virtually the duplicate of the Bill which I had previously introduced during the latter days of the Conservative Government.
I have, therefore, had opportunity to recall what took place during the negotiations leading up to the introduction of the new levy system. I must tell my right hon. Friend and hon. Members who serve on the Public Accounts Committee that I find that the substance of their report is hardly supported by the evidence published in the minutes attached to the report. In relation to the Independent 1306 Broadcasting Authority, I believe that the comments of the Committee do not carry a great deal of conviction.
The hon. Member for York, who became Minister in 1974 and who introduced the levy Bill in his day, and I both fully recognise, as did all concerned with this matter in the industry and in the Departments, that there would have to be a review before very long. However, all—I emphasise the word "all"—have been agreed since the introduction of this legislation that the IBA has correctly interpreted the terms and the spirit of the Act and has done its best to accord to the will of the House. This, indeed, was the view of the Public Accounts Committee as expressed in paragraph 50 of its Tenth Report, part of which I now quote:Your Committee accept that the IBA and the Departments have correctly discharged their existing statutory responsibilities; we also appreciate that the IBA has close knowledge of the operation of the programme companies; and we are satisfied that there has been adequate consultation between the Departments and the Authority. Nevertheless"—the Committee goes on—we suggest that the Government should consider, when the new legislation is being prepared"—that is, new legislation to continue independent television after 1979—whether it is appropriate that final statutory responsibility for assessments affecting substantial public revenue, amounting to £48 million in 1976–77, should continue to rest with the IBA alone.The words which I emphasise in that passage are:Nevertheless we suggest that the Government should considerwhether that responsibilityshould continue to rest with the IBA alone.If it does not rest with the IBA alone, clearly, it will have to be with some other body in addition to the IBA, or perhaps even some other body in place of the IBA. I hope to show that that would be a grave error.
First, whatever else may be considered, I very much hope that it will in no way ever be suggested that the Inland Revenue should take over this responsibility. Perhaps I may let hon. Members into a little secret. I think that I am right in saying that, at the time when all this was being discussed, the Treasury officials were not frightfully happy about it. I can understand why. Many had doubts 1307 about how the new levy system would work and whether it would do the job that the House wanted it to achieve. They warned against excess profits, but they have since been proved to be wrong on that count.
I think that I am fair in saying that the Treasury does not like the idea of anyone else doing the job for it. It is rather jealous of its own position in these matters and does not believe that others can do the job as well. But the IBA, in this case at any rate, is a much better policeman than the Inland Revenue would ever be likely to be. The IBA knows what it is doing. It knows what it is meant to do. It has an intimate knowledge of the companies and of the business of making television programmes.
That was borne out by the Minister of State at the time, the hon. Member for York, in the debate on 29th March 1974, when he said:Our experience over the years has been that the IBA carries out its responsibilities efficiently and well and that it has gained the confidence of public and broadcasters. There have been criticisms of detailed programmes, but overall there has been confidence in the IBA. The Government can now accept that we should allow the IBA to have these wide powers in determining relevant income and relevant expenditure for the purpose of assessing profits."—[Official Report, 29th March 1974; Vol. 871, c. 815.]That was also the view taken earlier by my hon. Friend the Member for St. Ives (Mr. Nott), then Minister of State, Treasury, who said:we are concerned here, as I have said before, with an industry which has a unique relationship with Government, through the aegis of the authority. It consists of a very small number of companies, all of which are intimately known to the authority, which is responsible for monitoring and supervising their activities. The problem of potential levy avoidance in such a situation is, in the view of the authority and of the Government, wholly manageable."—[Official Report, 31st January 1974; Vol. 868, c. 642.]So I believe it has turned out to be.
There is no question but that the Authority has done all that has been asked and expected of it. The Authority has an accumulation of knowledge and experience that can be matched by no other body. It would be folly to try to make the Inland Revenue duplicate its work. If that were tried, we should run the risk of another Crown Agent-type 1308 situation. As it is, the solution that was devised in 1973–74 works well and should be left alone.
I turn now to another aspect of the Tenth Report, that part dealing with the question of overseas earnings of the independent television companies. Paragraph 55 says:The IBA recognised that the contractors were in a privileged position at home because of their control of the wavelengths, whereas overseas they were selling programmes in a competitive market which it was in the national interest that they should exploit as fully as possible. The relief given to the companies in respect of production costs which might be attributable to overseas sales, which accrued only if programmes they had made were in fact shown on British television, was in their view a justifiable export incentive.In fact, it was more than the IBA's view. It was not really so much for the IBA to express a view on that point. It is exactly what the House wanted to achieve at the time. It is certainly what the Department of Industry was strongly urging. I remember that during the first debate on the Second Reading of the Bill I was strongly pressed by the hon. Member for Islington, Central (Mr. Grant), speaking for the then Opposition, to give some form of stimulus or incentive to the companies to make export earnings. I was able to tell him:The exemption"—in the case of overseas earnirms—has been made deliberately to encourage the making of British television films for sale in overseas markets."—[Official Report, 31st January 1974; Vol. 868 c. 716.]That has been very successful, as is shown by the fact, brought out in the report, that the companies are now earning £10 million to £15 million a year by this means.
The IBA is carrying out the intention of the legislation, the intention of the House. That was underlined in the evidence of Sir Arthur Peterson, then Permanent Under-Secretary of State at the Home Department. He was asked in Question 3108:Sir Arthur, was this one of the points that you were consulted about?That was a reference to the overseas earnings point. His answer was:Yes, indeed, it was. Our view is that the practice which the IBA have followed is clearly within the terms of the Act and certainly within the terms of the intention at the time when Parliament was discussing this.1309 When the Chairman, my right hon. Friend, put the same sort of question to Mr. McKean from the Treasury, he received a slightly longer and less precise reply. The fact is that the Treasury has long been terrified lest in some way the IBA is lenient to the companies. If that is what it believes, let it say so, and say so clearly. Let it challenge the IBA. It has not done so once. I believe that in truth it has a great respect for the work being done by the IBA.
The new levy system was the product of fairly lengthy discussion and negotiation. In its final form it was an agreed package. It would be unfair to pick out any one aspect of that agreed package and subject it on its own to minute scrutiny. If the system is to be reviewed, as it is right that it should be, it should be reviewed as a whole in the terms in which the negotiated agreement finally took place. The independent television companies did not receive all that they asked for. They received some things that they wanted, and those things which in the view of Ministers of both parties over that period were fully justified, to provide for the necessary incentives to produce quality programmes for both home and overseas consumption.
I hope that the spirit of that agreement will be honoured in the future and that it will not be put on one side. I hope also that there will be no attempt to change back to the old system of a levy on advertising receipts, but that we shall keep to the present system of a levy on profits, which more truly mirrors any changes in the companies' fortunes. It has resulted in increased revenue for the Consolidated Fund and has encouraged exports. It has worked, and it should be left alone.
§ 5.49 p.m.
§ Mr. James Lamond (Oldham, East)
The right hon. Member for Taunton (Mr. du Cann), the very able Chairman of the Public Accounts Committee, referred in his speech to the excellent assistance given by the Press, television and radio to the Committee in its work. This may be true in an ideal world, but there is a great misconception among the public, perhaps among Members of Parliament, too, about the rôle of the Public Accounts Committee.
To give an example, which may have come to your attention Mr. Deputy 1310 Speaker, this morning I was listening to BBC Scotland at 8.40 when there was a political correspondent giving a five-minute talk about the activities of the House of Commons today on its return from the Christmas Recess. This correspondent mentioned that there were 10 or 11 reports from the "Public Expenditure Committees" of the House which would be scrutinised closely, that the right hon. Member for Taunton was in charge of the "Public Expenditure Committees" and so on. If we get this sort of remark from a political correspondent of the BBC I wonder how the general public gets its knowledge of the House.
I take this opportunity to say something about the points raised by my right hon. Friend the Member for Blackburn (Mrs. Castle).
§ Mr. Tam Dalyell (West Lothian)
I, too, heard that broadcast. Is there not an obligation on those who style themselves political correspondents of the BBC, be it in Scotland or elsewhere, to be a great deal more accurate about what happens than was the case this morning—
§ Mr. Lamond
Perhaps I may say that the distress felt by my right hon. Friend the Member for Blackburn arises from what I believe to be rather irresponsible behaviour by the Press. It has received these reports from the Public Accounts Committee and has reported in Blackburn that the Committee has been critical of the Royal Ordnance Factory and certain decisions reached. In fact the 10 reports which we are discussing consist of a part, at the front, which is a report from the Committee and a large part towards the back which is the evidence given to it. The report of the Committee headedClass I, Vote 9, Defence Procurement: Land Systems"—which is the section complained of by my right hon. Friend—does not mention the Royal Ordnance Factory at Blackburn. It does mention the Royal Ordnance Factories collectively but is not critical of them. The reference is to steps being 1311 taken to ensure closer collaboration between the Royal Ordnance Factories and the RARDE. That was a perfectly reasonable step for the Ministry of Defence to take following, not the examination of the Public Accounts Committee, but its own experience with the Royal Armaments Research and Development Establishment.
A criticism made of the Royal Ordnance Factory at Blackburn perhaps arises from the questions which I asked in the Committee. I am sorry if there was any reflection on the able people who work in the Royal Ordnance Factory at Blackburn. I would not wish to be unfair to anyone. The people I went to see with my right hon. Friend were the trade unionists there and the management. Quite clearly, they were blameless in this matter. I support all that my right hon. Friend said. I withdraw any remark which implies that they were at fault and I am sure that no Member of the Committee would wish to blame anyone unfairly. But the Committee does not make any comment about this. It was examining not this one question concerning fuses but three projects in each of which the Royal Armaments Research and Development Establishment had played a leading rôle. It was RARDE which came in for criticism by the Committee, and rightly so, I think.
§ Mr. A. P. Costain (Folkestone and Hythe)
The hon. Gentleman and I were on that Committee. We sat next to each other. We heard all the evidence. I heartily support what he has said. Does he not share my surprise that the right hon. Member for Blackburn (Mrs. Castle)—whose Department when she was a Minister was criticised above all others for gross expenditure on hospital building—should make no reference to that but deal with a little thing like this fuse?
§ Mr. Lamond
I do not complain of that. My right hon. Friend is entitled to raise this matter, which is an important constituency issue for her. She also mentioned that I have a constituency interest, something which would come as no surprise to anyone who read the evidence, because that was the first point I made before I asked any questions.
1312 From time to time there must be questions before the Committee which impinge on an hon. Member's constituency. It would be impossible to avoid such a thing. I also said that any points I made were not made at the request of Ferranti, which had made no approach to me on this matter. All that I was seeking to do was to make sure that my constituents were not unfairly treated but were given the opportunity to enjoy employment like anyone else. If employment is to be judged on the basis of whether people are in private or public employment, it is worth pointing out that Ferranti, which is a fairly large firm only one part of which deals with fuses, has recently passed almost wholly into the ownership of the National Enterprise Board. I am glad to say that it has flourished exceedingly since. It is taking on more people in my constituency. I am glad that the NEB has been set up and is able to carry out this work.
I make this point merely to reinforce what my right hon. Friend has said. I accept her criticism but believe that it is wrong to aim it at the Committee as a whole. In my view the report of the Committee is well balanced. I support it. I learned a great deal more about this matter by going to this factory with my right hon. Friend, at my own expense I might add. That visit showed that if we had the time—I say that advisedly—to go into these matters more thoroughly, we would discover that there was more to them than is made clear in the brief which all Members of the Committee are given.
The Committee has also realised that, because of late it has taken a decision, to which the House has agreed, enabling it to meet in places other than the Palace of Westminster, which was the previous restriction. Now it will be able to go to places such as the Royal Ordnance Factory to discover more about a matter. It will be exercising this new right in the near future. The point made by my right hon. Friend has been met by the Committee.
We realise that there are occasions on which we need more information, and we try to obtain it. As for getting advice, the people who give evidence bring with them a number of advisers. In the past the Committee has been critical of the 1313 number of such advisers. I remember that on one occasion 26 advisers were brought along. We had a quiet word with someone in authority and the numbers were cut down a little in consequence. That may have been wrong. It may be that the case that my right hon. Friend has made today shows that we were wrong to do that. We realise that we cannot always be perfect. I accept my right hon. Friend's criticisms and withdraw any implications against Royal Ordnance Factory workers. I am sorry if this has had any adverse effect on their morale.
§ Mr. Geoffrey Pattie (Chertsey and Walton)
Would the hon. Gentleman not agree that his right hon. Friend the Member for Blackburn (Mrs. Castle) is wide of the mark when she seems to suggest that the PAC is in some way anti-public expenditure and in favour of the private sector? Is it not true that in this case all that we were trying to establish was that the RARDE was at fault in not having sought assistance from two firms in the private sector which happened to have the expertise in question when the Royal Ordnance Factory at Blackburn, possibly through no fault of its own, had not been able to solve the problem?
§ Mr. Lamond
I would accept that to some degree. But as I see it, the Royal Ordnance Factory at Blackburn is in no way involved in the design. The design is all done at the Royal Armaments Research and Development Establishment. The Royal Ordnance Factory merely manufactures the finished design and, therefore, is not involved in the great delay and the great expenditure of money which rightly alarmed the Committee.
This matter, which is fairly complex, becomes clear when one goes to the site. I do not think that we can do it with every project. It is a minor matter within the whole range of the Committee's work. It is a major matter for the Royal Ordnance Factory, but the Committee cannot be expected to go into sufficient detail in its inquiries in order to be absolutely 100 per cent. accurate all the time. Therefore, I still support the Committee's Report. I do not think that it is in any way critical of the Royal Ordnance Factory and I withdraw any implications of my own.
§ 6.1 p.m.
§ Sir Timothy Kitson (Richmond, Yorks)
I should like to start by thanking my right hon. Friend the Member for Taunton (Mr. du Cann) for the way in which he has introduced the debate today and also for the enormous amount of work that he does as Chairman of the Public Accounts Committee. I am also grateful for the civil and courteous way in which he conducts our affairs and for the way in which he is always helpful and gives the Committee opportunities to raise points that it wishes. I am grateful for the general way in which the Committee is run.
I am also grateful to the hon. Member for Oldham, East (Mr. Lamond) for clarifying some of the remarks of the right hon. Member for Blackburn (Mrs. Castle). I was rather surprised that she started her speech by criticising the whole year's work of the Public Accounts Committee and then turned to one small constituency problem. I might add that she turned it into a successful small constituency argument.
In retrospect, I became slightly more confused because having started off by attacking the Committee and finished by attacking the Committee's work, the right hon. Lady in the middle of her speech said that we had got into this muddle because of the evidence that had been given to the Committee. As a former Minister of a Department she must realise as well as any of us that anyone attending the Public Accounts Committee with his advisers is thoroughly briefed before giving evidence to us. All I can say is that I hope that one of the suggestions that I should like to make this afternoon might to some extent stop this similar situation arising.
Looking back over debates in the House on the Public Accounts Committee reports I see that on nearly every occasion not only Members of the Committee but other hon. Members have continually called for means of strengthening the arm of the Committee—indeed, that comment has been made in several speeches this afternoon—so that we can make our work more efficient and be more successful in controlling excessive public expenditure.
We are all aware that in the eyes of the general public careful control of public 1315 funds is essential. In times of high inflation, when people from all walks of life are struggling to make ends meet, nothing creates more irritation than seeing Government Departments squandering money in inefficient and wasteful projects and overspending large sums of public money which, I might add, no individual or private business could do without ending up in the bankruptcy courts.
The Public Accounts Committee each year, with the able assistance of the Comptroller and Auditor General and his office, exposes a number of horrors with regard to overspending within different Government Departments. Each year, although we talk about strengthening the Committee's activities, little if anything is done between debates in the House. Each year the Committee continues with its work and seems to find an ever-increasing number of cases where the original estimates given to Ministers have escalated into serious overspending ventures. It is often difficult to judge how some of these horrific situations have arisen. It must be because on some occasions the original plans were totally underestimated.
Having sat on the Public Accounts Committee for nearly three years I have come to the conclusion that in a number of cases Government Departments get certain projects off the ground when they can have given only half the story to Ministers, knowing full well that if the Minister were confronted with the likely expense, he might well reject the plan. We have often seen situations where once a decision has been taken the Minister gets himself into a position of no return, because having spent a considerable amount of public money he has to complete the project. If any of the Ministers of Transport had originally seen the likely expense of the Vehicle and Driving Licence Centre at Swansea I have no doubt that the initial plan would never have been embarked upon.
Another reason for over-spending—I must say that in my view the Department of Health and Social Security is one of the worst culprits, although I notice that the right hon. Member for Blackburn did not deal with that—is bad planinng at the beginning. There is no better example in any of our reports than that of the Liverpool teaching hospital. How on 1316 earth could a hospital have been designed in which there was an unacceptable fire risk and the local fire authority completely rejected not only the materials used in the construction but also the design and fire precautions? It seems almost incomprehensible in this day and age.
Then there are cases where, because of technological developments, what looked like a fairly simple project has escalated out of all proportion to the original estimates because of improvements and alterations that have had to be made. The Ministry of Defence is often confronted with this situation. I think that most of us recognise that these are exceptional circumstances which are difficult to overcome because of sophisticated improvements in the whole area of weaponry. Some of these difficulties which we have investigated in the past have come under stricter control by the introduction of cash limits. But having said that, looking through the 10 reports that have been published this year, there are still a great number of loopholes that we as a Committee can investigate only after large sums of public money have been spent.
Most of us recognise that the recent discussions over the contracts for the Polish Government to build ships in this country will lead to massive Government subsidies to complete the contracts. I have read a suggestion in The Times and other newspapers that the Public Accounts Committee should investigate these contracts. I do not believe that we have the power to do so. Indeed, I was interested to see a letter from the General Council of British Shipping to Lord Harmar-Nicholls suggesting that it felt that an investigation by the Public Accounts Committee of the Commons would be the best way to investigate these contracts. I have little doubt that in the months and even years ahead, when these ships have been built, the Public Accounts Committee will be taking a careful look at the cost to the British taxpayer. I am sure that we have all seen the suggestion that the cost to the British Government might well be enormous.
§ Mr. Pattie
Will my hon. Friend not concede that there is a case for the Public Accounts Committee carrying out an investigation rather sooner than waiting for some years?
§ Sir T. Kitson
I do not think so. We have the power to see what the contracts are, but I do not think that we can make a full investigation at this stage.
I make these points about investigating now because I believe that it would be helpful to the House and I think that it is a matter we should look at as one of the ways of strengthening our arm.
I think that we might also consider ways of improving our operation by opening our Committees to the public. In the last 110 years, the Public Accounts Committee has always sat in private, taking its evidence and cross-examining witnesses in private. I am told that the Permanent Secretaries of Government Departments rarely enjoy their sessions in front of the Public Accounts Committee, and we all understand that explaining errors and mistakes made by their subordinates cannot be a very happy experience. I believe that it would have far more impact if this evidence were taken in public, with the Press in attendance and possibly with broadcasting facilities there as well. I believe that those on the Committee hold this view, and we as a Committee must decide whether we intend to experiment for a time to see whether this would not draw more attention to the work of the Public Accounts Committee. I believe that the problems raised by the right hon. Member for Blackburn today might very well have been overcome if the evidence that we took on her problem had been taken in public.
Because of difficulties in getting our reports printed in the past year or two, often public interest has been lost because so much time has elapsed between taking evidence and the reports being circulated. If evidence were taken in public, this delay would be overcome and, what is more, our inquiries would become more relevant.
I hope very much, therefore, that we change our methods and sit in public. Anything which may point more attention to the workings of Parliament in investigating excessive Government spending in certain areas will demonstrate to the 1318 public our concern as well as theirs with this overall problem.
§ Mr. Dalyell
Ten years ago, when I was a Member of the Public Accounts Committee, I put forward a rather similar argument and I was shot down on the ground that if the Press were there, and television especially, they would latch hold of some sensational story, but purely from one angle, and that in order to do its job properly the Committee had to have a balance. It was said that the balance would not come if there were that kind of immediacy about it. How does the hon. Gentleman reply to that kind of criticism?
§ Sir T. Kitson
I accent it, to some extent. Obviously, when it comes to taking evidence from the Ministry of Defence, and certainly when it comes to taking evidence on certain industrial matters, we should have to take the evidence in private. This might be for security reasons. At the moment, certain evidence that we take is sidelined in any event. Therefore, in certain circumstances I accept that we should have to sit in private. But I believe that we should start as an experiment taking our evidence in public to see whether it draws more public attention to the problems confronting Parliament on this subject.
§ 6.14 p.m.
§ Mr. William Hamilton (Fife, Central)
I agree with what the hon. Member for Richmond, Yorks (Sir T. Kitson) said towards the end of his speech. I have always been very much in favour of these Committees sitting in public. The same arguments that have been adduced against this Committee sitting in public were adduced against the Select Committee on Public Expenditure sitting in public. I am not aware that those criticisms have been borne out and justified in the event. In my view it is worth experimenting, and I hope that the Government will take account of that.
In view of the fact that we are debating or are presumed to be debating 10 reports it is not surprising that the debate is fragmented and disjointed, each hon. Member naturally tending to speak on the matters in which he is especially interested.
I agree with the right hon. Member for Taunton (Mr. du Cann) that we need 1319 to find some method of getting more control of public expenditure by this House. From time to time and from year to year we have all stated and restated that proposition. We have said that it is highly desirable and highly urgent. Equally, we know that it is highly unlikely that we shall get it, and probably highly impracticable, for reasons that I shall come to in a moment.
At a time when public expenditure is increasing and is likely to increase over the years—I think that all parties, whatever they may say in public, concede in private that that is the case—it is extremely difficult for Select Committees to probe and investigate with a view to reducing it. They would not be all that popular if they came forward with proposals to reduce expenditure when right hon. and hon. Members, individually and collectively, are putting pressure on the Government to increase it.
It is well known, too, that parliamentarians of great eminence sitting on the Front Benches on both sides of the House are violently opposed to the whole principle of Select Committee procedure. I have said that time and time again in these debates. Those right hon. and hon. Members, some of them Ministers at the moment, are very happy to play the general party political game on the Floor of the House where we have the concept of the theatre against the workshop. It is the whole idea of what this place is about. Here, we have to entertain. Those who take a jaundiced view of the operations of Select Committees tend to regard the Floor of the House as the national political theatre where the Press and the public can come to look at set party political pieces in which we paint a black or a white picture, depending on which side of the House we sit. We all know that neither is the truth. The alternative is to regard this place as a workshop where Members of Parliament investigate and scrutinise in depth civil servants and now Ministers in a way that it is quite impossible to do on the Floor of the House in the set debates to which I have referred.
I believe that the nearest approach that we can get to a non-party objective scrutiny and investigation is via Select Committees. They are more effective than most other instruments that I have seen 1320 in other parts of the world and, although they have their disadvantages, I see nothing better anywhere in sight.
Of course, party prejudice is never far from the mind of any Member of Parliament. He would not be here if that were not so. We are all party members who have our party prejudices and, if I may say so, no one more so than the right hon. Member for Taunton. He is as smooth as a can of Esso motor oil. He is highly plausible and an extremely cunning party politician. He will not deny that. In fact, I hope that he takes pride in it. Certainly I do. I am not as cunning as he is. I am rather more brutal and coarse than he is. But we seek to achieve the same objective: he wants to get his party into power and I want to sustain mine in power. In the event of his party assuming office the rôles will be reversed. The methods by which we seek to achieve our aim are different, however. The right hon. Gentleman uses the Public Accounts Committee as an instrument to that end. I shall amplify that and, I hope, in no undue sense of hostility. The right hon. Gentleman knows me very well, and I think that we can talk fairly frankly to each other.
I refer to one example. There is in the Ninth Report a fairly extensive reference to social security fraud. In the Tenth Report there is a less lengthy reference to Inland Revenue staff.
I refer first to the report on Inland Revenue staff. It shows that Inland Revenue staff increased from a figure of 74,171 in April 1975 to 81,524 in April 1976 and that there is a projected increase of up to about 90,000 in April 1977. It also gives the figures of the costs of administering tax. In 1974–75 the cost of collecting taxes was £250 million; in 1975–76 it was £354 million.
There are no very firm recommendations as to whether the staff is too large or too small, and there are no recommendations as to whether the cost of collecting taxes is too great or too small. A total of 40 questions were asked on this whole complicated subject. They were chiefly on administration and not on whether there was proficient collection of tax, or about fraudulent avoidance or evasion.
If we compare that with the section dealing with the abuse of social security 1321 payments we find that, in the latter case, not 40 but 100 questions were asked on fraud itself. The figures involved are quite startling, but let me put this matter into perspective. Each year we pay out in social security benefits of one kind or another a total of £13,000 million. The Committee was told that overpayment in 1975–76 totalled £10.3 million. That sounds a lot of money, and it is a lot of money, but putting it in perspective it means that out of every £8 spent on benefits, one penny is overspent. Of that penny only one quarter is due to fraud. The other three-quarters are due to genuine mistakes in administration, or by the recipient.
The Committee exercised itself rather unduly on this matter, in my opinion, because the right hon. Member for Taunton and some of his hon. Friends thought—and I believe that they were right—that there might be political capital to be gained out of the exercise. It was brought out very clearly in front of the Committee as a result of the activities of the hon. Member for Aberdeen, South (Mr. Sproat) that the investigators of fraud had spent more time on investigating the cases that he put forward than they otherwise would have done. They would have been more effectively engaged in investigating other things than the hon. Member's evidence.
However, the Chairman of the Committee made great play in his broadcast on the radio—and it may have been on television as well—about the element of fraud. He said, fairly, that it was a very small element, but he added—and this is where his cunning comes in—that £10.8 million was an awful lot of money.
When one compares that amount with the £200 million-plus lost by the Crown Agents, for example, one gets it in perspective. Far larger sums of money are lost every year from shoplifting. Also, far larger sums are lost to the Revenue by tax evasion, which the Committee has the power to investigate but never has done so. Why not? Why do not the right hon. Gentleman and his Committee look at tax evasion with the same relish with which they undertook the investigation into social security fraud?
We find that the total number of prosecutions for social security payments was 15,362 in 1975. There is evidence that 1322 there are gangs of crooks operating in this field. As a result, some of the penalties have been extremely strict, and very rightly so. Some of the offenders have ended up getting sentences of seven years in gaol.
On the other hand, convictions for tax evasion totalled only 140 in 1973–74, 123 in 1974–75, and 175 in 1975–76. Therefore, for every 1,000 prosecutions for social security fraud there are 10 for tax evasion. Yet it is estimated that revenue losses as a result of tax evasion are not just £10.8 million but between £200 million and £500 million. That was the range suggested by Mr. Anthony Christopher, the highly respected president of the Inland Revenue Staff Federation. In an article on 24th March, 1977 in The Scotsman, the highly respected Tory newspaper in Scotland—although it has become a "Scot-Nat" paper which is even worse—Peter Dean, of Heriot Watt University estimated that the figure was £1,000 million.
Despite this, the PAC chooses to chase up people who are defrauding social security of £10 million while leaving perhaps £1,000 million unscrutinised and uninvestigated. For every pound lost in social security fraud, £40 or more is lost by the tax gatherers. For every 100 prosecutions in social security there is one by the Inland Revenue.
I do not know whether the right hon. Member for Taunton is resigning or retiring at the next election—he may even lose his seat. Whatever the result of the next election, I hope that he comes back to the House and continues his service as Chairman of the PAC. I hope that he will give a public undertaking that his first priority when the new Parliament begins will be to investigate tax evasion, rather than concentrate his well-known energies and abilities on social security fraud
§ Mr. du Cann
I have been counting the number of paragraphs in our report relating to the two matters that the hon. Member for Fife, Central (Mr. Hamilton) has mentioned. Far and away the smaller number is given to social security fraud—eight as compared with 14 for Inland Revenue matters. The examination of Inland Revenue matters commanded a large proportion of our attention compared with the proportion given 1323 to social security abuse, which I think—and I have said it before—has been overplayed. This comparison is remarkable and distinctive. There is no objection whatever to any subject being looked at by the PAC. It is only a question of time. There is no reason why the Committee should not look at the possibility of investigating tax matters in this Session.
§ Mr. Hamilton
The right hon. Member's smoothness continues. He is as smooth as ever. He knows the attention that his Committee has publicly paid to social security fraud, and the way in which it has ignored the question of tax evasion.
§ 6.29 p.m.
§ Mr. Jasper More (Ludlow)
I also pay tribute to my right hon. Friend the Member for Taunton (Mr. du Cann) for his admirable speech in introducing the debate and his labours all through the parliamentary Session is Chairman of the Committee. I pay tribute also to his fellow members of the Committee.
I have done a rough calculation, and I find that in the last 12-months' Session members of the Committee spent about 1,500 man-hours in the service of the House, and the Chairman spent about 300 hours. We should register our recognition and gratitude for work of that degree.
It is always a disappointing feature of these debates and reports that they do not, in appearance, produce a specific end-result. We must turn our minds in the direction of seeing how we can make them bite more effectively. The ideal would be to invent something in the nature of an annual ceremony centred on a figure who could be referred to as "The Public Accountee of the year". He would be a senior civil servant, of a rank not below Principal Assistant Secretary who would be one of three selected by the PAC as most blameworthy for the largest waste of public money in the previous 12 months.
Lots would then be drawn to see who was elected. The unfortunate person would be put in the stocks on the crest of Westminster Bridge, surrounded by police lights between the two sets of traffic, and perhaps set slightly behind him, at a slightly lower level, there would be a representative of the Treasury, not 1324 below Assistant Secretary level, as the person who should have been responsible for monitoring the money involved.
There should also be a "Roll of Dishonour" for each Public Accountee of the Year put up, first, in the Members' Lobby; secondly, in the ante-room of the Treasury room occupied by the Financial Secretary; and, thirdly, in the Strangers' Bar, which is generally known in this place as the Kremlin. That might remind us each year of the importance of the work of the PAC.
More seriously, I think that the House should turn its mind to seeing whether at some future date there should be a more specific form of debate than the mere take-note debates to which we are accustomed on these occasions. I think that it would be more satisfactory if we could table a motion specifically directed at something which the Committee recommended. For example, we could concentrate on the subject of cash limits, which my right hon. Friend the Member for Taunton rightly selected as one of the most important topics which the Committee has had under review in the past year. We find in paragraph 21 of the Third Report a specific recommendation in that respect which no doubt the Treasury would regard as entirely reasonable. Might it not give point and effectiveness to these debates if we sometimes incorporated a recommendation of this kind in a motion to be specifically discussed by the House?
It is important that we should take such a course if these debates are not to degenerate into party political discussions. Nobody who reads the Third Report and the passage on cash limits could accuse the PAC of having provided any ammunition for such a debate. Clearly, it was an important step forward to examine the matter of cash limits, and I believe that it would be of advantage if the recommendation in paragraph 21 could be carried into effect. The cash limit system has made itself felt in a number of areas, not least in local government, which is of great interest to me because I am a county councillor in Shropshire.
Debates could run the risk of becoming emotive if they concerned themselves too specifically with cases such as the National Enterprise Board. I should be prepared to declare a political interest 1325 immediately as being against most of the operations connected with that Board. Equally, I recognise that Labour Members take an entirely different view.
Whether one supports or opposes that concept, I think that it would be in the interests of both sides, particularly in the early stages of a board operating on this scale, if its operations could be monitored regularly and in detail. Critics such as myself might be satisfied if that were to happen, and indeed supporters of the system might find it an advantage, because it might avoid the risk of the NEB's operations ending in catastrophe and having to be abandoned. Equally, as regards the Polish ships deal, would it not be an advantage when a major project of that kind is launched on public opinion for it to be monitored at an early stage? All too often one feels that the wisdom of the PAC comes too late and after the event.
I do not want to take up the time of the House, because I have never had the honour to be a member of the PAC, but I wish to point out that these debates score only an apathetic response in the House. One could not say that the House has been crowded today, although I believe that this debate has provoked greater interest today than for some years. I take that as a good omen for the future. I take it also as a tribute to those who have done all the hard work. I wish to conclude this short speech by adding my good wishes to the Committee and gratitude for all the hours which it spends on its work.
§ 6.37 p.m.
§ Mr. Tam Dalyell (West Lothian)
I wish to comment on the remarks of the hon. Member for Ludlow (Mr. More) about apathy, and I wish also to comment on the speech of the hon. Member for Richmond, Yorks (Sir T. Kitson). He said that the Press and radio should have access to meetings of the PAC. I intervened in that speech to point out the difficulties I experienced when I put similar ideas forward as a member of the Committee 15 years ago. The view was that if there were to be immediate Press or television comment it might be one-sided, and that any objective view by the Committee would, in a sense, be distorted by the immediacy of the moment. On balance, I believe that the topicality point 1326 is important, but although the House is fairly thin in this debate, one also notices that the Press Gallery is somewhat sparsely attended. It may be that anything discussed today on these reports is considered to be rather stale news and, therefore, of no great interest to tomorrow's newspapers. I come down on the side of those who suggest that there should at least be an experiment in having the Press present when the PAC is undertaking its work.
Those of us who are not members of the Committee should pay tribute to those of our colleagues who work extremely hard for long hours. Often their work is unsung.
I should like to ask one or two questions before I come to the one substantive issue I wish to raise. I wish to ask the Financial Secretary how he sees the work of the PAC, and indeed of the Treasury, linking with that undertaken by the European Parliament. My hon. Friend the Member for Fife, Central (Mr. Hamilton) and I serve on the Budget Committee of the European Parliament. I am the Vice-Chairman of the Sub-Committee of Control, which is the nearest equivalent in the European Parliament to the PAC.
There are a number of overlapping matters to be considered. For example, there is the recent problem about malt, which has concerned our Treasury as well as the treasuries and finance departments of our European partners. There is also the problem of the movement of butter across frontiers. How does the Financial Secretary see the relationship between the House of Commons, its public accountability and the relevant sections of the Treasury? On the other hand, what is his view on the work in this respect of the European Parliament and the Commission, and their relationship, which is a very important one, with the European Court of Auditors? I put that in the form of a question and will be interested in any comment that the Financial Secretary may wish to make.
On another matter, some of us have a high regard for the work done by the tax centre at East Kilbride. It has been much maligned in the Press recently, but I find that whenever I take up a constituent's case the staff at the centre are unfailingly helpful and pretty quick. That 1327 should be said, but I would welcome the Treasury Minute's proposalfor the fuller and more effective use of computers in the Department's work",I turn now to the Flotta terminal in which £21 million was involved. My question, in crude terms, is whether anyone turned a Nelson's eye to the position there before decisions were made. I see the Chairman of the PAC is nodding. He will know a great deal more about the background to this question. I know something of it, but I have not seen the confidential papers that the right hon. Gentleman will have seen. Did anyone turn a Nelson's eye while knowing perfectly well that the Flotta terminal did not qualify for a grant? If so, who was it?
As PAC reports go, the Committee's remarks in connection with this matter were extreme. The report says:The Department accepted that the premises would not have qualified for grant if the marine staff had been included; but were satisfied that it was right to exclude them despite the close relationship between their work and the effective operation of the on-shore facilities. For grant purposes the Department addressed themselves to the concept of 'premises' in a physical sense and the marine staff were excluded because they worked off-shore and not on the terminal premises. Your Committee acknowledge the necessity for working to rules which ensure consistency of treatment for all grant applicants, but we can only comment that qualification of the whole site depended on the Department taking what appears to be a very narrow interpretation of the rules in this case.That was a rather generous way of putting it. The report continues:As grants of some £21 million were involved and because of the marginal qualification on headcount we find it difficult to accept"—when I was a member of the PAC those words were a fairly tough condemnation and I assume that the mores have not changed and that the Committee feels strongly about this matter—that the Department were right not to apply other tests in this instance, if only for comparative purposes.This is a fairly powerful condemnation.
The Treasury minute says simply thatthe Department has taken steps, within the resources available, to prevent similar errors in future".What steps have been taken? There are certain matters which should be pursued. 1328 In the evidence, on page 536 of the Tenth Report, the Chairman says thatyou could very easily have people manufacturing components at Land's End and John o'Groats and they would be an integral part of the process of building the motor car although separated by a very great distance. Is distance really the appropriate criterion, do you think?In my view, that question was only half answered. What does the Financial Secretary think are the appropriate criteria? Mr. Prosser told the Committee:This arises from Section 2 of the 1972 Act and the various orders of general application which have been made and published, as to the way in which we will approach applications.Is the important Section 2 as still as relevant as it once was? What is the Treasury view on that?
Paragraph 2980 reads thatfrom looking at the papers in front of the Committee … the Department did take a very narrow view in the case of Flotta, thereby avoiding disqualifying the whole site. It naturally calls into question the whole approach to this subject. It seems that the headcount test was passed pretty narrowly in all three cases, in fact.I want to know whether this was known before the event and, if so, by whom? Precisely how marginal—to use a generous word—were the decisions?
Bluntly, on the basis of certain Press reports and certain gossip in Scotland, there is a feeling that some people knew from the beginning that perhaps Flotta might not have qualified had not certain criteria and nomenclatures been stretched unreasonably beyond imagination. It is important for us on the East Coast that this whole matter should be put straight. If certain people are getting away with certain things, why should one discriminate against others who may be in a similar position? This is not a matter of the past. It is topical and of the future. Does the Chairman of the PAC wish to intervene?
§ Mr. du Cann
No. I merely wished to indicate my agreement in general terms with what the hon. Gentleman has said.
§ Mr. Dalyell
Later, in paragraph 2980. Mr. Dickson told the Committee:The results of this exercise are being, and will be, carefully appraised and the Department will take technical advice about the proper manning of the schedules. We are being very careful about the service activities.1329 What has the Treasury done to follow up the Department in this matter? May we be assured that, since the Flotta incident, they have been very careful about these service activities?
I have one other general matter to raise. The Committee looked into the Customs and Excise Department. It reported:During Your Committee's examination of the Customs and Excise Department we enquired into the Department's total costs of administration. These rose by 41 per cent. from £123 million in 1974–75 to £174 million in 1975–76, whereas the net revenue collected increased by only 25 per cent. The proportionate cost of collection consequently rose from £1.66 per cent. to £1.88 per cent.It is clear from those figures that Customs and Excise is an extremely costly business. My question, which may have been anticipated by the Financial Secretary, is simple. The time has come to do some calculations about what the Customs and Excise costs would be if there were a frontier running from the Solway to Berwick and a separate Scottish State. The SNP is absent from this debate, but it is fair for me to ask what will happen if it should win an election and set up a separate Scottish State. Hon. Members should make no mistake about this. According to the hon. Member for Perth and East Perthshire (Mr. Crawford), the Scottish pound would float up past sterling, the French franc and the deutschemark to heaven knows where. If we have all that we need a Customs and Excise Department, and it is fair, relevant and topical to raise this question in this debate in view of what is stated in paragraph 39. What calculations is the Treasury making about the costs of Customs and Excise in a separate Scottish State, if that were to be the will of the Scottish electors through putting the SNP into power? This should be known before any of us goes to the polls.
§ Mr. Pardoe
Has hon. Member made any investigation of the costs of tax collection in Switzerland, where 25 self-governing States collect customs and excise and inland revenue duties? Is the hon. Member aware that the cost of tax collection is rather lower there than it is here?
§ Mr. Dalyell
So many things are different about Switzerland. It is a country 1330 that does not even yet have female suffrage, and I do not think that we should follow the Swiss analogy too far. The Swiss are different. They are not members of the Community, and Switzerland's whole tradition is different.
Turning from Customs to the cost of tax collection, the whole issue of the financial administration of the Inland Revenue is dealt with in the Tenth Report on page xii, paragraph 18 onwards. Again I put the question. What would be the cost if a devolved Assembly were to have the kind of powers for which my hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh) will be arguing in tomorrow's debate on devolution? As always, he will no doubt be well briefed. My hon. Friend is seeking in an amendment to the Scotland Bill that there should be a Scottish Consolidated Fund withthree sources of revenue … the proceeds of personal income tax levied upon Scottish residents as set out in Schedule (Income Tax in Scotland) and collected by the Inland Revenue. The Scottish Assembly may vary the rates at which this income tax is levied provided that the standard of rate of income tax in Scotland is not more than 10p in the pound above or below the standard rate levied by H.M. Government".Am I not right in thinking that if such a scheme were introduced for a Scottish Assembly the number of staff required to administer it, which has risen from 74,171 in April 1975 to 81,595 on 1st April 1976, and which paragraph 18 expects to increase to 90,000 by 31st March 1977, would be increased still further? I have given some warning of this question to my right hon. Friends at the Treasury.
To be fair to my hon. Friend, he goes on to say thatfifty per cent of the proceeds of assigned excise taxes levied in Scotland. The assigned excise taxes are tobacco duty, alcohol duty, the duties on hydrocarbon oils and the duties in betting and gaming. The administration and collection of these taxes will continue to be the responsibility of the United Kingdom Customs and Excise and the Scottish Assembly will have no power to alter the rate of these taxes".He also seeksan equalisation payment from the Treasury which will he authorised by the Chancellor of the Exchequer if the receipts of personal income tax and the half share of the assigned excise taxes are together more than 10 per cent short of the Scottish proportion of public expenditure. In calculating whether a shortfall takes place, personal income tax will be 1331 assumed to be levied at the United Kingdom standard rate. The Scottish proportion of public expenditure will be that sum which stands in the same relation to each year's United Kingdom public expenditure as the sum spent on the total of devolved services stands in relation to United Kingdom public expenditure in the year in which this Bill is enacted. If the sums raised by personal income tax (again calculated at the standard United Kingdom rate) and the half share of the assigned excise taxes are together greater than the Scottish proportion of public expenditure by ten per cent or more of that sum the surplus will be paid from the Scottish Consolidated Fund into the Treasury.".This is mind-boggling in its complexity.
I welcome this debate. My hon. Friend the Minister of State, Privy Council Office, has just entered the Chamber at an appropriate moment, because I am seeking to make it easier for him to confront my hon. Friend the Member for Berwick and East Lothian in the debate tomorrow and to reject my hon. Friend's case. I am loyally supporting the Government's case, because, as I have explained, the staff figure could well soar to 90,000 and might well even reach the six-figure mark of 100,000. Therefore, I ask my hon. Friend the Member for Berwick and East Lothian, and others, whether it is worth while, for the sake of the trappings of power—yes, the trappings of power—to put an extra burden on the already overburdened numbers and expertise of the Inland Revenue.
Will my right hon. Friend the Financial Secretary say what sort of set-up the Government would have in mind for a Scottish Public Accounts Committee? Where would the expertise come from, expertise which those of us who have been members of the Committee know resides in the Department of the Comptroller and Auditor General? What would be the cost of some kind of separate PAC organisation in Edinburgh, and what powers would it have over devolved matters in relation to the PAC of this House? These are very significant questions because one of the documents that we are considering concerns Northern Ireland, and I therefore ask the general question whether the Government are clear what items of public expenditure in Scotland would still reside with the right hon. Member for Taunton (Mr. du Cann) and his Committee.
1332 It is fair to ask that in view of the opinion expressed in The Guardian of 16th May 1977 by Sir Basil Engholm, a retired civil servant and former Permanent Secretary to the Ministry of Agriculture. He said:When I first entered the Ministry many years ago there was a notice on the wall of my room which read 'Do not forget Scotland. It will be different.'Sir Basil Engholm went on:Any system of devolution is bound to create work and multiply officials particularly with duplication in the higher grades.I ask the Financial Secretary what use he intends to make of Sir Basil Engholm's experience, and to consider whether in the financial field, as in so many others, relating to devolution, we are in danger of multiplying the number of officials and thereby adding to the burden of the Scottish and the British taxpayer.
§ 6.58 p.m.
§ Mr. Nigel Lawson (Blaby)
The single-mindedness of the hon. Member for West Lothian (Mr. Dalyell) is one of the phenomena of this House and, on balance, provided he does not overdo it, it does him credit. We like him the better for it, although the Minister of State, Privy Council Office, as he entered the Chamber, must have wondered whether we had got round to tomorrow by mistake.
I am grateful for the opportunity to intervene in this most important debate. It is not one of our most electrifying debates, but it is far more important—and pretty well everybody who has spoken so far recognises this—than some of those debates which seem a little more electrifying.
Nobody who reads through the 10 reports of the Public Accounts Committee for the last Session and the minutes of evidence which accompany them can fail to be impressed by the immense amount of work which the Committee does. It is invaluable work, seeking out waste and extravagance over a wide range of Government spending, of which we have already heard, particularly from my right hon. Friend the Member for Taunton (Mr. du Cann), a number of most telling examples. I therefore gladly join him in paying a tribute to the Comptroller and Auditor General and his staff for the vital contribution that they make to the Committee's work
1333 The PAC is not simply our senior Select Committee; it also has the good fortune to be the only one which is adequately staffed. There is not time to discuss the Select Committee system in general this evening, but I must say that I believe that we could do better if we were to have fewer Select Committees altogether and to staff those few that we have rather better than we do at present.
It is also right that a tribute should be paid to those hon. Members who devote quite a considerable slice of their time to serving on the PAC and, above all to their Chairman, my right hon. Friend the Member for Taunton. He combines, as I well know in another context, a mastery of the art of chairmanship—and it is an art—with a passionate and relentless devotion to the cause of establishing a proper control of public expenditure in general and the enhancement of Parliament's rôle in particular. If any hon. Members have not yet read my right hon. Friend's pamphlet "Parliament and the Purse Strings", which he was too modest to give a plug but which I name and which was published last May, I warmly commend it to them.
The debate today is, of course, an annual event, but it is, I think, of rather special and unusual importance because we have before us, in addition to the usual batch of PAC reports on specific items of Government spending, both in Britain and in Northern Ireland—I in no way seek to belittle those specific reports, if I may call them thus—the Committee's appraisal, in its Third Report, of the relatively new system of cash limits, and its proposals for bringing this crucially important innovation in public expenditure control within the ambit of Parliament.
This is certainly a subject on which the Expenditure Committee, through its General Sub-Committee, of which I had the honour to be a member at the time, has also expressed a deep interest and, indeed, has evinced a broadly similar approach in a number of reports in recent years. It is also something to which the Opposition have repeatedly attached a special importance. Therefore, I hope that I may be forgiven if I devote most of my remarks to the Third Report of the PAC.
There is, however, just one question which I should like to put to the Financial 1334 Secretary arising from the Committee's Tenth Report. Can the Minister give me an assurance, when he winds up the debate, that among the options at present being incorporated into the computerisation of PAYE that is at long last under way within the Inland Revenue there will be included the tax credit system? We in the Opposition would regard it as a grave and irresponsible omission were this not so. I trust, therefore, that the Financial Secretary will be able to give me the assurance that I seek.
On specific points, too, it is impossible to overlook the curious contribution made by the right hon. Member for Blackburn (Mrs. Castle), who appeared to blow a fuse. She seemed to think that public expenditure was something so sacred that it should not be attacked or criticised or have any fault found with any part of it in any way, least of all if it happened to take place in her own constituency. I am glad to say that no other hon. Member, from either side of the House, has sought to turn this into a debate in which to make a small constituency point. It is a matter for some shame that it should be a Privy Councillor who did that.
Extraordinary it was, too, since, as the right hon. Lady's hon. Friend, the Member for Oldham, East (Mr. Lamond) pointed out, the offending section came not in a report of the PAC at all but in part of the cross-examination which is appended to it. Whether what the right hon. Lady said was right or wrong—it was a matter of very fine detail—is something on which I do not think that any of us present is qualified to comment, and certainly not those of us who are not members of the PAC and did not attend those particular sessions of evidence. But it was undoubtedly an astonishing contribution to the debate.
In contrast to that, there were some very worthwhile contributions. My right hon. Friend the Member for Bournemouth, West (Sir J. Eden) demonstrated—if it needed to be demonstrated—that the PAC operates in no sense in a party-political manner by complaining about the criticisms made by the PAC of the system of additional payments by independent television programme contractors. If I may say so to my right hon. Friend, this certainly did not seem to me to be a Left-wing complaint, so I think 1335 that that alone put paid to the proposition that the Committee takes a party political stance—although there was one other hon. Member who suggested that it did, the hon. Member for Fife Central (Mr. Hamilton). He suggested in that context that the Committee ought to look into the question of tax evasion.
§ Mr. Lawson
The hon. Gentleman says "Quite right". However, if the PAC were to look into the question of tax evasion in the widest sense, I very much doubt that it would bring the party political dividends to the Labour Party that the hon. Member for Fife, Central obviously thought it would.
I return to the more serious and considered contributions to the debate. My hon. Friend the Member for Richmond, Yorks (Sir T. Kitson), in a very thoughtful speech, was probably right—although it is not for me to say so—to suggest that there might well be a good case for the PAC sitting and taking evidence in public, where that can be done. It cannot always be done. Certainly my experience on the Expenditure Committee bears out that there is a value in doing this.
My hon. Friend alarmed me slightly by his suggestion that it was not within the terms of reference of the Committee to look into something like the Polish shipbuilding deal at present. If that is so—I am not at all sure that it is so—it is a very grave defect in the terms of reference. I hear my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) saying that it is not so; in other words, that it is within the remit of the Committee. I suggest that it is something which would certainly merit investigation. In general, the tendency to look into things very much sooner and very much earlier in the day might well be a great benefit and improvement in the valuable work that the PAC already does.
§ Sir T. Kitson
I do not wish to create any discord between myself and my hon. Friend the Member for Horsham and Crawley (Mr. Hordern), but the PAC looks only at money which has been spent, and I think that it is the Expenditure Committee that should look at money that it is intended to be spent.
§ Mr. Peter Hordern (Horsham and Crawley)
I hope that my hon. Friend the Member for Richmond, Yorks (Sir T. Kitson) and I will join together in explaining the Polish shipbuilding proposals when the Department of Industry comes before us for its examination in the next few months.
§ Mr. Lawson
As I understand the matter, the PAC can look into something as soon as one penny of public money has been spent, and it does not have to be the whole lot for a particular project. Therefore, as soon as one penny of public money has been spent, the issue concerned can be looked into. But, at any rate, I am sure that if it cannot be looked into, then, as my hon. Friend rightly says, this is something that the Expenditure Committee might want to look into.
My hon. Friend the Member for Ludlow (Mr. More) also mentioned the Polish shipbuilding contract, and he echoed what the Chairman of the PAC said about the very curious state of the National Enterprise Board and its lack of accountability to the House of Commons, and similarly with the British National Oil Corporation. These are matters which should concern us all as Members of Parliament because we are not, as Members of Parliament who ask the PAC to act on our behalf, acting in any party-political sense. We are acting as the legislature seeking to check and scrutinise the Executive. It is a job of the most fundamental importance.
My hon. Friend the Member for Ludlow spoke also about the importance of the cash limits report. I wholly agree with him and I intend to devote most of my remarks to that report. However, before I do so, it must be said that we have read in the Press that the public expenditure White Paper will be published later this week. Perhaps the Financial Secretary will be good enough to confirm that that is so. It would have been more courteous to the House if a statement had been made in the normal way today.
I see on the front page of today's edition of The Times an apparently well-informed prediction that the White Paper will show a planned growth of public expenditure over the quinquennium of 2 per cent. a year. I assume 1337 that that is in volume terms. If that is so, and because of the well-established tendency of public sector costs to rise faster than prices as a whole—the notorious relative price effect—it means a real rate of growth of public spending of well over 2 per cent. a year. If that is to leave any significant scope for tax cuts, the economy as a whole will need to grow at between 4 per cent. and 5 per cent. a year, and nearer to 5 per cent. The economy will have to grow at that rate for the same period.
What has been the average annual rate of growth over the past decade? It has been well under 2 per cent. a year. That is less than the projected rate of growth, so we are told, of public expenditure over the next quinquennium. On both sides of the House we all hope that we can do better in the future than in the past, and certainly better than in the past four years of Socialism when the rate of growth has been precisely zero.
But Governments of both parties should have learnt from the experience of the past 10 years the disastrous folly of assuming a marked improvement in economic growth and of then basing spending decisions on that pious assumption. If the Government wish to have any hope of introducing worthwhile tax cuts in the years ahead, I must tell them that there is no room for any planned growth of total public expenditure in real terms. It will have to be at least held steady at the present level for some years to come.
When the White Paper is published in a few days we shall know more and we shall be able to comment. However, whatever emerges from the White Paper, it is clear that, the more necessary it is to curb the total of public expenditure, the more important it is that the taxpayer should receive value for money within that total. As my right hon. Friend the Member for Taunton said, value for money is the motto on the shield of the Public Accounts Committee.
In that context I turn to cash limits. There can be no doubt that the introduction of cash limits in 1976 has so far proved successful. They have introduced a long overdue measure of financial discipline in the areas where they apply. I know that there are those who argue that the degree of under-shooting proves that the system has failed. I reject that inter- 1338 pretation whether it comes from hon. Members or from the economics correspondent of the Financial Times.
The amount by which central Government cash-limited spending fell below the cash limits in 1976–77 was only 2½ per cent. That is not too bad. For the first half of the current year the margin of under-shooting seems to be slightly larger—about 3¼ per cent. However, much of that increase is likely to be made good in the second half of the year. In any effective system of financial control—for that is what we are talking when speaking of cash limits—there is bound to be a margin of safety. That is precisely what has emerged. It may be that the margin is slightly larger at present because the system is still relatively new.
§ Mr. Hooley
Is the hon. Gentleman aware that what he has airily dismissed as a margin of safety represents uneployment for thousands?
§ Mr. Lawson
I totally disagree with the hon. Gentleman's economic analysis. I seem to remember that it was pointed out by the present Prime Minister in a notable speech at the Labour Party conference of 1976 that the idea that the country can spend its way into full employment by increasing public expenditure is folly and the road to disaster. The argument that the hon. Gentleman is making is the argument which was put down by the Prime Minister on that occasion.
Cash limits have proved remarkably successful. It is fair to say that they have proved more successful than the Treasury expected when they were first introduced. The Third Report suggests various extensions and improvements. It is suggested that the larger cash limit blocks should be divided up. The Expenditure Committee, in its recent and most valuable report on the Civil Service, has been even more precise and has recommended that the blocks be broken down to coincide with the individual accountable units within each spending Department. Surely that must be the right direction in which to move. However, as has already been indicated, any final decision on the reconstruction of cash limit blocks is bound to be profoundly affected by steps taken to merge cash limits with the Estimates into a single system of parliamentary and Treasury control. I shall turn to that aspect in a moment, which is vital to the 1339 future of Parliament. But before doing so I shall comment briefly on a number of other points arising from the Third Report on cash limits.
Given the success of cash limits, it is highly desirable that they should be extended, during the coming year, to cover a large number of items of expenditure which, out of a natural caution and, to some extent, political decision, have hitherto been excluded. For example, assistance to industry, or many forms of it, is one obvious candidate. Secondly, it is most unsatisfactory, and also unfair to the good local authorities, that the sole cash limit control of local government current expenditure should be a cash limit for the total rate support grant for the country as a whole. Thirdly, the PAC seems to be clearly right to question the wide range of so-called revaluation factors used by the Treasury to translate the White Paper volume or funny money figures into cash limit or real money terms.
The table on page 100 of the Third Report shows that the revaluation factors for last year ranged from minus 12.8 per cent. for land to plus 83.5 per cent. for postage. There was an enormous spread in between. No well-run organisation in the private sector observing such a vast variation in the various cost trends would dream of ploughing on regardless as the Treasury does at present, as if nothing had happened. Any organisation in the private sector would quite rightly reappraise its plans and at least at the margin change its input mix. These dramatic variations in relative prices make a considerable difference to what is the best and most sensible use of resources. If changes are not made, it means that there is no proper control of costs.
I shall devote the remainder of my remarks to what seem to me to be far and away the two most important issues raised by the Third Report. The first is the reform of parliamentary procedure in the light of cash limits. The second issue is public sector pay.
Anyone looking dispassionately at the manner in which we conduct our affairs in the House could not fail to be astonished by the way in which we insist on the most detailed and lengthy scrutiny, 1340 surveillance and control of taxation yet blithely forswear any effective scrutiny let alone control, of the public expenditure that has necessitated that taxation.
I do not deny for one moment that the primary direct responsibility for the control of public spending must rest with the Treasury. However, Parliament, historically and potentially, has a vital and proper rôle to play. The fact that we have not played that rôle during the lifetime of anyone now in this place has contributed in no small way to the loss of Government control over public spending in recent years, and the systematic miseducation of the public, whom we represent, about the economic facts of life.
One obviously desirable reform is to enable both Cabinet and subsequently Parliament to consider both sides of the Budget—spending as well as taxation—at the same time, conscious of the inexorable connection between the two. It should not be beyond the wit of man to devise the necessary change in the fiscal timetable to accommodate such a procedure.
But it is not merely a question of the timetable. The two factors would need to be expressed in the same sort of money—namely, real money, as taxation is already expressed. At present, as has already been stated, and as my right hon. Friend the Member for Taunton pointed out in the debate on the Consolidated Fund Bill to which he has alluded—we owe him a debt of gratitude for having brought up this subject on that occasion before Christmas—we have public expenditure presented to us on three main bases: the funny money PESC figures of the Public Expenditure White Paper, the most misleading and artificial of the lot, the least relevant to financial control and the only ones that we debate at all; the antiquarian prices of the Estimates, which are virtually useless in an inflationary age, and which in any case we pass on the nod, having long since transformed Supply Days into occasions for general debate; and now the cash limit figures, which alone represent the true amount that the Treasury expects to see spent on the various heads over the coming year and which thus constitute the only true system of financial control—and these, of course, do not come before Parliament at all.
1341 Therefore, it is most encouraging to learn, again partly through indirect means—so I hope that the Financial Secretary will confirm this when he winds up to-night—that the Treasury has accepted the recommendations of both the PAC and the Expenditure Committee that the Estimates and the cash limits should be merged and hopes to be able to implement this merger some time next year. Thus, once this is done, for 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 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.
Two practical problems arise from this highly desirable reform. "Reform" is perhaps an understatement. Since it would be a reversal of half a century of parliamentary decline in this area, it would constitute almost a revolution.
At any rate, there are two practical problems. One, which seems to worry the Treasury particularly, concerns what would happen if inflation happily turned out to be significantly lower than expected, with the result that the amount of cash voted by Parliament proved excessive. Technically, this could hardly be a new problem. It must have arisen 50 years ago under the traditional Estimates system when prices were falling. I do not know what they did in those days. Perhaps the Financial Secretary can research the matter and let us know. The short answer seems to be that, in these somewhat unlikely circumstances, the Treasury would adjust the cash limits downwards during the year. I assume that is what would happen now under the existing cash limits system. If, beyond that, parliamentary approval were needed for this change, it would presumably have to take the form of a kind of negative Supplementary Estimate.
The signs are, however, that the Treasury's preferred and characteristically ultra-cautious solution would be slightly different. It would be to present 1342 only, say, three-quarters of the cash limit for parliamentary approval at the start of the year, leaving the rest for approval later when the rate of inflation was more or less known.
Obviously the Public Accounts Committee and the Expenditure Committee will want to discuss this matter with the Treasury at the meetings which I hope will shortly be taking place. But, for my part, at first sight at any rate, I am not at all enamoured of a device of this kind. It seems to me that, in order to guard against a somewhat rare eventuality, it would greatly diminish the authority of the annual cash limits and, perhaps even more seriously, do much to destroy the vital distinction between the main Estimates and the Supplementary Estimates which it should be one of the main purposes of the reform to recreate.
§ Mr. Norman Tebbit (Chingford)
Is my hon. Friend perhaps a little too worried about the unlikely event of inflation being considerably less than the Government expect? After all, the House only gives permission to the Executive to spend money; it does not give an instruction to spend. Therefore, if the Executive do not spend all the money, there is, so to speak, no harm done and no constitutional crisis should arise in that happy event.
§ Mr. Lawson
My hon. Friend the Member for Chingford (Mr. Tebbit) is, as ever, spot on. He is absolutely right. I raise this matter because the Treasury is worried about it. I am afraid that, ostensibly in order to meet it, the Treasury may take the wrong turning, which would weaken the potential improvement in parliamentary control.
The second practical problem which is of real concern to Parliament—I agree with my hon. Friend the Member for Chingford that the first is mainly of concern to the Treasury—is the procedure for debating the new cash limit Estimates. There is little point in implementing this great merger only to allow the new-style Estimates through on the nod just like the old ones. That would not be much of a reform. It might be of some little help, but not much. I would hope that, on such an important matter as this, it would be possible for the Procedure Committee to lose no time in making proposals for meeting this need. Speaking 1343 purely personally, I should have thought it reasonable for both the Government and the Opposition to give up some of their time for this purpose.
Contrary to the views of the hon. Member for Cornwall, North (Mr. Pardoe), who is always so gloomy and defeatist about everything, I believe that we have a real chance of seeing—
§ Mr. Lawson
My hon. Friend is quite right—in the years ahead a parliamentary renaissance. Certainly, the next Conservative Government are committed to doing what they can to bring this about.
The reform about which I have been speaking is not enough on its own. We must also restore a measure of parliamentary control over monetary policy. But it does, none the less, represent a potential change of the very first importance.
The other big issue raised by the Third Report is that of public sector pay. Pay accounts for roughly half the total of central Government cash-limited expenditure. It is obvious that, so long as there is a rigid incomes policy rigidly adhered to, the task of setting those cash limit blocks, which are largely composed of pay, is greatly simplified.
The PAC rightly addressed itself to what would happen to cash limit control in this important area when there is no longer a rigid incomes policy rigidly adhered to. No practical man, with any experience of industry and any understanding of the economic history of the past 20 years, can possibly want to see a formal incomes policy in the private sector. Certainly the Opposition do not wish to see one.
I was interested to note that Sir Ronald McIntosh, who has been a long-standing advocate of incomes policies over many years, came to the reluctant conclusion, in his final speech before resigning as NEDO Director-General a few days ago, thatover the years incomes policies have not on balance brought any net benefit to this country and may indeed—through their effect on industrial relations and incentives—have done more harm than good.1344 Of course, over and above the immense economic costs, to which Sir Ronald alluded, there are the equally immense political costs. On the other hand, however, no Government can escape responsibility as employer for determining the pay of their own employees, nor for the public expenditure implications of pay elsewhere in the public sector. It is the apparent dilemma between these two propositions that presumably, at least in part, accounts for the complete mess that the Government have now got themselves into over pay policy.
On 20th July the Prime Minister announced to the House that free collective bargaining was being restored. I well remember the rejoicing in Parliament on that occasion of the right hon. Member for Down, South (Mr. Powell). Although he is not in his place, I shall quote from what he said:it is free collective bargaining for good now. The world is safe for free collective bargaining. That is the new policy. That is the revolution of this last weekend."—[Official Report, 20th July 1977; Vol. 935, c. 1660.]It was a revolution that did not last very long—just long enough for the Financial Secretary to inform an Industrial Society conference on pay policy on 1st November that a formal incomes policy was now in the process of being unwound, but not much longer.
We now learn that stage 4 is on the way, that the Chancellor believes in a permanent incomes policy, and that the whole apparatus of relativities boards and all the rest is on the way back.
The only reason for this, according to the Chanceller of the Exchequer in his interview in the current edition of Socialist Commentary, is thatto have a pay policy for the public sector and a free for all in the private sector can be very unfair to the public sector.If we are to talk about unfairness—and none of us is in favour of unfairness—I would not have thought that the public sector had much to complain about. Compared with the private sector, average pay in the public sector is now higher; in recent years pay has risen faster, unemployment is lower and job security is higher.
Odder still perhaps, in the same article the Chancellor of the Exchequer suggested that comparability with private sector wages could be the main basis for 1345 deciding public sector pay. Yet the logic behind the notion of comparability is that the private sector sets the going market rate for the job. It is then obviously wasteful of public funds to pay over the going rate and hard to recruit and retain labour without paying the going rate. What makes no sense is for the Government then to turn round and say "But of course we—or some committee of wise men—will determine what the going rate should be."
In a real sense free collective bargaining in the private sector is essential for the rational fixing by the Government of pay for their own employees. In the light of this, of overall public spending constraints and of their estimate of the numbers of staff required in each case, the Government would then fix the pay block cash limits for the coming year. Public sector pay negotiations would be conducted within the framework set by the cash limits, just as private sector pay negotiations are conducted within the framework of what a firm can afford to pay.
The Expenditure Committee was absolutely right to say in its recent report on the Civil Service thateffective cash limits should be fixed before pay negotiations are entered into.I stress the word "before". Negotiations would thus largely concern the trade-off between rates of pay and the numbers employed. This is something that the trade unions fully understand.
It is interesting that in its very last bid before deciding to call off its strike the Fire Brigades Union talked just this language and proposed the deferment or even abandonment of the proposed shorter working week, and the consequent recruitment of 5,000 extra firemen, in return for higher pay now. That was the tradeoff that it offered the Government. Only time will tell whether it would have been sensible for the Government to accept that offer. But the point is that in this way the cash limit system remains viable in the crucial area of public sector pay even in the absence of a formal pay policy—and, indeed, becomes in a sense a more flexible substitute for such a policy.
This was clearly what Sir Leo Pliatzky had in mind when he gave evidence to the Committee on 15th June, and said: 1346We are not thinking in terms of a breakdown of the cash limit system in the coming year, whatever happens on the pay front.That is to say, even if there was a total return to free collective bargaining.
Of course, it is true that setting pay cash limit blocks will be a little less easy that hitherto since each will have to be assessed on its own merits. But it is unlikely that the Treasury will have to contend with a degree of uncertainty as great as that implied by the massive variation between inflation rates in the non-pay blocks which the Treasury seems to be able to take in its stride.
More important still, there is no sensible alternative to this course. If any Civil Service union leader imagines that control of public expenditure can be relaxed to the point where staff numbers are not affected by rates of pay—that is to say, where there is no real control over pay block cash limits at all—he is living in Cloud-cuckoo-land.
In the debate just before the Christmas Recess the Minister of State—whom I congratulate on his elevation to the Privy Council in the New Year's Honours List—gave a curious reply. He complained that the combination of reforms we have been discussing would mean that Parliament would in effect, subject to the flexibilly of numbers, be voting for a kind of proxy incomes policy for the central Government sector—as if this were none of Parliament's business. I hope that the Financial Secretary will not have the nerve to raise that extraordinary objection tonight.
It is fashionable to believe nowadays that all power resides with the Civil Service and none at all with Back-Bench Members. Anyone who has listened to this debate or read the reports of the Public Accounts Committee will recognise that that modish assumption at least needs modification. I hope that in future years, following the implementation of the fundamental reforms that we have been discussing today, that will become progressively less true and Parliament will once again regain its rightful rôle.
§ 7.38 p.m.
§ Mr. Frank Hooley (Sheffield, Heeley)
There are many inherent contradictions in what the hon. Member for Blaby (Mr. Lawson) has said. I shall not ramble 1347 into his arguments, a great many of which seemed to be out of order.
I am sorry that I was not present to hear the opening speech of the right hon. Member for Taunton (Mr. du Cann), but I was involved in a deputation to the Department of Trade which concerned Sheffield. The right hon. Gentleman has many interesting ideas about parliamentary control and the scrutiny of expenditure and appropriation, with some of which I have a certain amount of sympathy.
Some hon. Members have criticised the Public Accounts Committee on the ground that it has wandered into fields of general policy without taking expert advice. Of course, the function of the PAC is an audit one. I do not see that we shall be able to dispense with a Committee of this House which has an audit function. It is clear that public accounts should be audited and that Parliament should have a rôle in looking at the consequences of that audit. But that function is different from that of looking at policy matters. I suspect that one cannot avoid tripping over the line from an audit function to policy implications.
Those hon. Members who have said that the Polish shipbuilding deal should be investigated are mistaken both ethically and in their general approach in suggesting that the PAC should examine the deal. It is a matter which should be investigated, if at all—there might well be a case for examining its implications—by a Select Committee—perhaps by the Expenditure Committee or one of its sub-committees—or by another Select Committee of the House, possibly the Select Committee on Nationalised Industries. However, it is not a matter which it is appropriate for the PAC to deal with at this stage of events.
The answer to the problem lies in expanding the rôle and system of Select Committees so that we create a coherent committee system in place of the weird hotch-potch of Standing Committees, Select Committees, Public Expenditure Committee and Public Accounts Committee, which at present exists and which is clearly totally inappropriate in modern times to exercise parliamentary control over expenditure and appropriations. I understand that the Select Committee on Procedure is examining this whole ques- 1348 tion, and I hope that it will come up with some sensible suggestions along these lines. The House must create an efficient committee system. Until its does so, we shall not be able successfully to challenge the Treasury on matters of expenditure and appropriations or, indeed, of accounts.
I think that there is an overwhelming case for the PAC to conduct its affairs in public. I am a little surprised that it does not conform with general Select Committee practice in this matter. I do not think that there are such grave objections to following this course as would make it either impractical or undesirable. The more publicity in these matters the better.
In the Eighth Report there is a study of the accounts of British Nuclear Fuels Limited. In paragraph 2 the PAC says this:In our 1975–76 Report we noted that BNFL had paid no dividends and at 31 March 1975 profits totalling £11.534 million had been retained in the business. We observed that this was equivalent to the provision of interest-free advances of capital by the Exchequer and we noted that the policy on dividend payments was to be re-examined.I have always understood that it is sensible and prudent commercial policy to retail profits in a business, but following this course carries implications. The defence of this practice advanced by the Department of Energy is contained in paragraph 3 of the Report where it is said: "they"—that is, the Department—pointed out that in the particular case of BNFL payment of a dividend would entail additional borrowing by the company for their investment programme and that the whole of the company's expenditure was subject to Departmental scrutiny. The Department thought the dominant factor was the very big investment programme which lay ahead and they were unable to say which way the decision on a dividend for 1976–77 would go.The PAC contested the validity of this argument by stating—I quote from paragraph 4:The size of BNFL's investment programme is not, in our opinion, a convincing reason for retaining all profits in the business, since the effect is to provide interest-free Exchequer advances, with possible effects, in certain circumstances, on the company's pricing policy.I repeat that I see nothing wrong in terms of prudent management of the company in reinvesting profits in the business, and particularly so when it is a public business of importance such as 1349 BNFL. However, it has important implications for the calculation of the cost of nuclear power. Hon. Members will be well aware that the question of the cost of nuclear power as compared with the cost of electricity produced by coal-fired or oil-fired power stations is a matter of acute public controversy at present and has a bearing on the whole argument whether we want a nuclear power economy.
Therein lies the importance of the question of interest charges or paying dividend on capital in relation to nuclear power. That form of power relies largely on massive capital investment and rather less than in the case of oil and coal on fuel costs. Fuel costs in the case of nuclear power are relatively small, but the capital costs of providing such a form of power are very large. Into those capital costs must be reckoned the cost of enrichment, reprocessing, fabrication, and so forth, of the nuclear fuel itself which is the business of BNFL. If BNFL is being supplied with capital on which it is paying no interest or dividend, clearly this will be reflected ultimately in the cost calculations per kilowatt hour of the nucclear electricity produced by BNFL some time hence.
The matter is the more important because the House has recently passed an Act under which the Government are entitled to guarantee capital expenditure lending up to £1,000 million eventually if BNFL or the nuclear power industry generally wishes to borrow on that scale. If, over the next few years, BNFL is to borrow several hundred millions of pounds for its various proper activities, but on that money pay no dividend or interest at all, this clearly represents a subsidy in the provision of nuclear power which one may or may not regard as appropriate according to one's view of that form of energy.
However, it is important that the PAC has brought out this point and made it clear that, potentially at any rate, so long as the policy exists of not requiring BNFL to pay any dividend or interest on the massive borrowing it will undoubtedly have to engage in over the next few years if it is to proceed successfully, this represents a nuclear power subsidy and should be calculated when comparisons are being made of the relative costs of nuclear 1350 electricity and electricity provided by oil-or coal-fired stations. Obviously there are direct subsidies in the two latter cases, but at least they are obvious and public and we know about them, whereas but for the report of the PAC we might have been unaware of this hidden subsidy in the case of BNFL.
I turn now to a point relating to overseas aid which arises on the Fifth Report. Apparently in 1973, under the previous Administration, the Government supplied 5,000 tons of grain to the small African country of Lesotho. According to the PAC Report, the Government of Lesotho had not asked for additional food aid. It was a slightly odd decision for the Government of the day to take, but if the PAC's comment is correct—I take it that it is—this allocation of food had not been requested by the Government of Lesotho.
Not surprisingly, the Government of Lesotho, not having asked for the grain, apparently were not able to make use of it. I quote from paragraph 3 of the Fifth Report:In October 1975 a Ministry harvest adviser reported that he believed the wheat was an embarrassment to Lesotho, occupying valuable storage space and probably deteriorating fast from rodent, insect and mould attacks.The Committee went on to comment perfectly fairly:We attach considerable importance to the need to ensure that aid given can be, and is, used effectively by recipient countries.It seems to me that food aid of that kind given when the country concerned has not asked for it is not likely to be used effectively, and it is rather curious that it was given at all.
But a more important point emerging from this inquiry is the suggestion by the Public Accounts Committee that that particular aid might have been routed through the World Food Programme, which apparently operated a large aid programme in Lesotho. Oddly enough, the Ministry could not say why it had not done that for the aid to Lesotho, and that seems to me to be a rather poor answer to the criticism. I am pleased to see that the PAC recommends that in future there should be maximum use of the facilities of the World Food Programme in such forms of aid.
I regard this matter as highlighting the value of the international agencies which 1351 operate in the distribution of aid. I am glad that it is currently the policy of the Ministry of Overseas Development to make greater use of multilateral agencies and to channel resources through them. To that extent, I am wholly in support of the Committee's findings and recommendations on this matter, and I hope that the message will be well heeded by the Ministry of Overseas Development in its future administration of the aid programme.
§ 7.52 p.m.
§ Mr. Peter Hordern (Horsham and Crawley)
I add my congratulations to the many already given to my right hon. Friend the Member for Taunton (Mr. du Cann) on the admirable way in which he has chaired our Committee in all its proceedings. He has, if I may say so, borne the brunt of the work. He asks, I believe, the majority of the questions, not, I imagine, because of any desire on his part so to do but simply because he is more expert and experienced than we are in so many of the matters which come before us. I think that my right hon. Friend has not only carried the work of the Committee into greater and greater public regard and respect but his proposals for reform are very interesting and have met with a wide measure of agreement. I shall address myself to some of those matters later.
First, I follow the hon. Member for Sheffield, Heeley (Mr. Hooley) in his comment about the Public Accounts Committee and its ability to examine some aspects of public expenditure, especially current expenditure. The hon. Gentleman had a word to say about the Polish shipbuilding deal. Whatever one may think about the specific issue of the Polish shipbuilding subsidy, I have no doubt that the Department of Industry will be appearing before the Public Accounts Committee at some time during the next few months. As it will be that Department, either through the Aircraft and Shipbuilding Industries Act or the Industry Act 1972, which will be advancing money for the Polish ship contract, I think it undoubted that Members of the Committee will be able to examine and cross-examine officers of that Department about the aid for this project.
1352 I depart from the hon. Gentleman, however, in his argument about the desirability of so doing. I think it most desirable that the Public Accounts Committee should be able to act at short notice in any matter which appears to it to show a prima facie case of a new departure in public expenditure or an addition to public expenditure beyond the Votes which Parliament has already accorded. But I agree with the hon. Gentleman that our main function, which is the audit of public expenditure, must remain with the Public Accounts Committee. There can be no doubt about that. It is an essential job which has to be done, and I do not believe that in any suggestions which have been made for reform of the work of the Committee there has been any idea that that important function of public audit should in any way be watered down.
I turn now to the question whether reform of the Public Accounts Committee is necessary. I have no doubt whatever that it is. Naturally, we are concerned with excess expenditure and with questioning Departments on large or small excesses, but those of us who take particular interest in these matters know that the nature of public expenditure has altered out of all recognition from what it was 10 years ago or even five years ago. This has been so, first, because of the growth or public expenditure in cash terms, and second, because of the extension of public ownership and interest into so many different fields. There is far more Government intervention in industry, in regional development and in the employment offices than there was five years ago, and all these departures require careful monitoring.
As regards the first—the growth of public expenditure itself—I think that the House has universally welcomed the system of cash limits. But I would say that cash limits, though an invaluable aid to control, are only an aid. Nor do I think that the cash limits are as comprehensive as they might be. It is recognised that they cover about 60 per cent. of public expenditure now, and I am well aware of the difficulty in covering transfer payments because of the nature and number of people who might be unemployed, but I believe that the system could with advantage be applied to the National 1353 Enterprise Board and BNOC, both of which are exempt from it at the moment.
All the same, cash limits, if they are incorporated, as I believe they should be, with expenditure estimates, are the best potential support for the Public Accounts Committee, and we must continue to ask each Department for information about its expenditure under the cash limits during the course of the year. We should be quite clear about this, because the Treasury's White Paper on cash limits has erected a system of profiles for each Department to be filled on a monthly basis. It is our practice at sessions of the Committee closely to question Departments when they come before us about their current expenditure under the various heads, and it would certainly be in order for us—it would be a departure from our existing practice if we did not, in the absence of the information being provided—to be able to ascertain what the expenditure was compared with the monthly profiles set for Departments by the Treasury. I therefore trust that there will be no difficulty in our obtaining this information.
I turn now to the question of our hearing evidence in public. Again, I agree with what was said by the hon. Member for Heeley as well as by my hon. Friend the Member for Richmond, Yorks (Sir T. Kitson) about the desirability of our hearings being conducted in public. Naturally, I recognise the argument of those who say that accounting officers will be less free with their comments in such circumstances, but I do not believe that that is a valid argument. When the reports are published, they are always very ably introduced by my right hon. Friend the Member for Taunton at a Press conference, and it is just as likely that the Press will make instant judgments then as it would in reporting proceedings of the Committee itself when they were being conducted.
It is not possible to claim that the reports which the Press makes after the Press conference so ably conducted by my right hon. Friend are any less sensational because they are reports relating to meetings which took place many months previously. I do not, therefore, feel that that argument holds water. It seems to me that there is great advantage in having our proceedings reported as they go, since that would make them contempor 1354 ary and immediate and likely to carry greater weight with both Press and public.
Some years ago, public expenditure could be carefully monitored by the PAC because inflation was not an important factor and because the Government had not extended their influence into so many different fields. Now, however, the situation is quite different. One has to ask whether the Public Accounts Committee as it is today is competent to monitor public expenditure. I know that the hon. Member for Heeley argues that that is not its task and that its real task ought to be confined to accounting for excess expenditure and reporting. But, surely, it is the task of Parliament to monitor Government expenditure and Government activities, and this cannot be done, it seems to me, without enlarging and widening the rôle of the Public Accounts Committee.
It is not enough to argue interminably in the way it is put in so much of the evidence which is brought before us that Parliament authorised Government Departments to do this or that. That is frequently an argument presented to us, especially by the Department of Industry when it is trying to defend some indefensible proposition. Parliament must have the information to know whether a Department has or has not acted wisely. It needs to have the power, first, to find out what Departments are doing; secondly, to discover whether it needs to be done at all and, thirdly, to see, if it must be done, whether it can be done in a better way.
The Exchequer and Audit Department is simply not equipped to do that job at present. The terms of reference of our Committee are too narrow and the work of the Department is too restricted. I understand that it has 622 members, of whom nine are qualified accountants. If my information is correct, that is eight more than the number of accountants in the whole of the Treasury—and I understand that the accountant in the Treasury is there only on a temporary basis, so I do not think that we can rely on him for too long. I believe that there are only 377 accountants in the whole of the Civil Service.
Parliament cannot request the Comptroller and Auditor General to make a survey of any particular matter that it would like to have surveyed. As our rules stand, 1355 he must come forward on his own initiative. That is wrong. The Exchequer and Audit Department should be the servant of the House. The Public Accounts Committee should have the same terms of reference and carry out the same practice as the General Accounting Office in the United States, which devotes only 10 per cent. of its resources to financial audit. It devotes 50 per cent. to management audit and 40 per cent. to cost-benefit analysis. It has 5,300 staff, of whom 80 per cent. are professionally qualified. Those 5,300 compare with 622 in the Exchequer and Audit Department. There are 2,700 accountants—as against nine—584 business administrators and 106 actuaries. They carefully measure the results of their efforts, and can point to savings of $532 million directly attributable to the work of the General Accounting Office in 1976, compared with operating expenses of $169 million. The O and M Department in the United Kingdom can investigate Government Departments only at the request of the Departments. I do not think that it should surprise us that those requests are not made very often.
Of course, we must welcome the improvement in the system of cash limits, but if we ask ourselves "Are the Government Departments operating efficiently?" we must come up with a different answer. It is well known, for example, that the Internal Revenue Service in the United States has fewer employees than the Inland Revenue has, for a country four to five times the size of ours.
What about the social security administration? That in the United States has a staff of 77,920 in 1,300 field offices. They make 32 million monthly cash social security payments, pay 23.7 million retired workers and 3.2 million disabled people, and pay 4.3 million supplementary benefits. We have 80,000 civil servants in 900 local offices in the Social Security Department of the Department of Health and Social Security.
§ Mr. Hooley
Is the hon. Gentleman distinguishing in his figures between Federal and State officials?
§ Mr. Hordern
Yes, indeed. I have made a careful examination of the part played by the State figures. State relief varies from one State to another but does not account for more than 10 per cent. Of 1356 total social security support, Federal and State. It is minimal compared with the amount of support given by the Federal agencies in the United States.
§ Mr. John Garrett (Norwich, South)
The hon. Gentleman has been comparing the efficiency of tax collection in the United States with that in this country in terms of the number of tax officials employed, but the United States depends heavily on self-assessment, which leads to an enormously inflated private accounting industry.
§ Mr. Hordern
I am well aware of that. I believe that self-assessment would be a very suitable system in this country, too. Of course, it means an extra burden for the taxpayer, but I believe that it would be perfectly possible to start such a system here. The savings in manpower would be immense. The growth in the numbers of the Inland Revenue is such—the numbers have risen because of the number of thresholds, and because the number of people who exceed them is rising each year—that if things go on as they are those employed by the Inland Revenue will exceed 100,000 in a relatively short time. This is a very serious matter.
I was talking about the number of people employed in the Social Security Department of the DHSS. The computer centre in Newcastle employs 13,000 people. It is scarcely credible that any computer centre could employ so many people. I do not think that anywhere in the world is there so large an accumulation of people in one computer centre.
§ Mr. Hordern
I think that it is larger even than Swansea. The staff there pay one-tenth the number of pensioners that are paid in the United States and about the same number of supplementary benefits.
One of the disturbing matters in the evidence to us was the growth in the Departments. We discovered that in 18 months after the so-called reform of the Health Service, from April 1974, the number of administrators and clerical staff increased by 20 per cent. to 97,500, of whom 1,600 were allegedly for improved financial control. Labour Members always become very excited over criticism 1357 of the reform of the Health Service, which was carried out by the last Conservative Government. Before they do so on this occasion let me say that I do not accept that reform of any service need carry with it an increase in the number of staff. That was never the purpose of the reform as I understood it. The increase shows lax administration, very largely by the present Government. I do not think that it was of the essence of the system that administrative numbers in the Health Service should grow. It was poor control.
So far as I can tell, there is no machinery to monitor, let alone control, the growth of the Government machine. Cash limits cannot do it, because they assume that current expenditure makes sense. But it does not. This is what the Central Policy Review Staff should be doing, but it gets side-tracked into making inquiries about the rôle of the Foreign Office, how many Etonians it should have, and so on. Instead, it should be asking the following questions. First, are we raising revenue in the cheapest possible way? Secondly, are the methods by which we relieve poverty and distress the most effective and least expensive? Thirdly, how many people are employed in carrying out these functions, and is it possible that some other method, with suitable computer systems, could do the job better?
The growth of the Inland Revenue and the social security staff of the DHSS has been so great in the past three years that in 60 years' time, at the same rate of growth, half the population will be in the Inland Revenue and the other half in the DHSS paying out the benefits to pay the taxes. Perhaps that is what the Government mean by full employment in the long term.
Is it sensible to keep national insurance contributions in respect of the DHSS and PAYE under the Inland Revenue? Why do we not combine them under the Inland Revenue, using its new computer, about which the Minister will no doubt be telling us? Why do we not incorporate unemployment benefit with them as well, for that matter?
The Government are not only prodigal in manpower but seemingly ineffective. During 1975 the DHSS, with 350 special investigators in post, found fraud in 13,307 cases out of 28,625 examined. The Department of Employment, with 50 1358 investigators, found evidence of fraud in 3,439 cases out of 6,169 examined. The Inland Revenue, with a field force of 185, examined a 4 per cent. sample of PAYE returns and found that 40 per cent. were unsatisfactory.
However, we regard those figures—and the hon. Member for Fife, Central (Mr. Hamilton) who spent some time on this was not persuasive because it is not right to point to the small sums of money which have been found to be in excess considering the size of the sample taken—the fact is that in the case of the DHSS about 45 per cent. of cases examined proved to be fraudulent. In the case of the Department of Employment more than 50 per cent. were found to be fraudulent while in the Inland Revenue the figure was 40 per cent. These are high proportions.
I do not think that this should cause us concern only because of the scale of fraud. We ought also to be concerned about the inadequacy of the system which employs so many people so ineffectively. The question is what can be done about it? It is certain that the Central. Policy Review Staff does not carry enough clout in the Government. The Treasury is not cut out for this sort of review. Why do we not have a new body, either under the Exchequer and Audit Department or within the Department itself, to report direct to the PAC and thus to Parliament about the way in which public expenditure is carried out or should be carried out, with the alternatives set out? I cannot believe that Parliament would allow the continuation of the job centre policy or the professional and executive recruitment services, costing £319 per place filled, if the alternatives were properly set out.
I recognise that Governments must legislate for those matters which appear in their election manifestos. I wish that that was not always the case, but I recognise that it has to be so. But there can be no reason for persisting with a policy that makes no sense whatever to anyone such as, for example, some acquisitions of the National Enterprise Board. I am personally sorry that Lord Ryder has gone in that my fox has been shot. But he was too expensive even for this Government to carry. It was certain that he had to go.
1359 We have spoken about the composition of committees and the rôles which they play. I would like to see a much enlarged rôle for the PAC, taking with it some of the sub-committees of the Expenditure Committee. On the other side I would like to see an important committee looking at the whole range of economic policy, fiscal and monetary. I would not go so far as my hon. Friend the Member for Blaby (Mr. Lawson) in suggesting that this House or Parliament should have control of monetary policy. In that respect at least, I feel that the fewer experts there are the better. It is surely in the national interest that there should be some body that can examine in as detached a manner as possible the effects of Government expenditure and policies and suggest alternatives.
For too long government has been a matter of short-term expedients and palliatives. Parliament owes the nation the duty to count the cost and to suggest remedies. We are not at present equipped to do that. The Exchequer and Audit Department, considerably strengthened and staffed, is the body to do this.
§ 8.13 p.m.
§ Mr. Hal Miller (Bromsgrove and Redditch)
My hon. Friend the Member for Horsham and Crawley (Mr. Hordern) will, I hope, forgive me if I do not take up his argument, although I very much support his plea for a more effective means of control. I agree with his remarks about the value of the work done by the Public Accounts Committee and the service rendered by its distinguished Chairman, my right hon. Friend the Member for Taunton (Mr. du Cann), who has attentively sat through this debate.
We need to consider what effective forms of control there are for dealing with various areas of Government expenditure and policy. I wish to deal briefly with the controls that we currently have over the National Enterprise Board and British Leyland. Here I refer to the Eighth and Tenth Reports of the Committee. The trouble is that we do not know how to deal with this animal, British Leyland, and we do not have the equipment to deal with it, even if we knew what we wanted to do by way of control. The Minutes of Evidence in the Report reveal this clearly.
1360 The Department was claiming that it would approve individual major constituents of the corporate plane, maintain a close interest in performance, plans and prospects, and make frequent appraisals. It said that the Minister would be willing to answer questions dealing with matters on broad general or strategic points and also matters of day-to-day management when issues of public importance had emerged. That is clearly quite impossible and was obviously very much resented by Lord Ryder, when Chairman of the NEB, who made it plain that his colleagues would not be willing to work under such a system.
However, even at the moment we are confronted by a situation in which the work force of Leyland, its suppliers and dealers have been thrown into a great deal of uncertainty by leaks of changes to be made in the Ryder plan, which was the basis on which this House voted for support of the operation in the first place. If that basis is to be changed, presumably we in this House have to go back to the drawing board and reconsider the matter. We do not seem to be able to exercise any control over the process. I imagine that the PAC will have great difficulty in trying to monitor what actually took place. This is a serious matter because of the confidence of the parties to whom I have referred being so severely affected. It would be quite unreasonable to expect any hope of a change in attitude, for instance, in the work force, towards increasing productivity sufficiently to meet the benchmarks which the Government set as a means of trying to establish control.
As I understand the position—and I hope that the Financial Secretary will be able to refer to this when he replies—the Government set the benchmarks against which further instalments of money might be released. That has clearly never been the case, on the evidence before the PAC. In October, part of the money voted by the House for capital expenditure was released for current commitments, wages and suppliers. I should have hoped that there would have been some proposal in the intervening period to put that right before any further releases for capital expenditure were considered. Otherwise there simply is no basis of control, despite the benchmarks, despite the National Enterprise 1361 Board, despite the Department of Industry.
Suppliers have asked me whether the Government will guarantee the debts of British Leyland. I refer the Financial Secretary to Appendix III, paragraph 10, on page 393 of the Eighth Report. Some assurances were given in March 1976. I do not know whether they constitute an on-going commitment, although the PAC in its report considers that the Government would have to accept that responsibility even though it had not been clearly established. The Government relied on paragraph 10 of the NEB guidelines, which referred to practice in the private sector.
These are some of the difficulties that have confronted us all in trying to deal with an operation the size of British Leyland and to control expenditure. We have to go back to the beginning and rethink what we were trying to do. Only then can we institute a proper method of control. I suggest that we must accept a longer time period than the Government originally envisaged over which an operation would be supported and that the time period and the amount of money should be defined. There would be a cash limit as urged by my hon. Friend the Member for Horsham and Crawley. It would not be open to other parties during that period to call in question what is being done, otherwise there is simply no hope of the firm being able to manage its affairs.
We have seen already the great difficulty caused by the frequent media reporting of any slight hiccup in the progress or transformation of British Leyland whereas similar attention is not given, for instance, to difficulties with Ford or Vauxhall. We even have a situation on Merseyside at the moment—an area of high unemployment—where the refusal of one of those other company's employees to work a night shift has cost about 3,000 jobs. This situation has already been going on for four months. It is simply unrealistic to expect that this House can control operations of that sort which even companies in the private sector have very great difficulty in managing.
We should not try to get ourselves involved here in model policies for cars, for instance, or in detailed management or industrial relations problems or other difficulties of that sort.
1362 I make a plea that if we rethink the British Leyland exercise we could, on that basis, reinstitute some more effective form of control than we are attempting to operate at present. Frankly, we are not giving confidence to the workforce at all. Every time questions are asked in the House it reverberates around the workforce as further uncertainty which creates more confusion and lessens productivity. It does nothing to help the suppliers of the company. Indeed, they and the dealers are at the moment wondering whether or not their debts are to be guaranteed.
Perhaps through the medium of the Public Accounts Committee we need to work out a more satisfactory basis for controlling Government investments of this nature and set ourselves a more realistic set of benchmarks for exercising our control.
§ 8.23 p.m.
§ Mr. Geoffrey Pattie (Chertsey and Walton)
Before turning to my main remarks, I must make a reference to the contribution—I cannot call it any more than that—made earlier by the right hon. Member for Blackburn (Mrs. Castle) when she suggested that the evidence given to the Public Accounts Committee had been completely misleading. I can only suggest that this was a comment totally unworthy of her as a former member of the Government. The right hon. Lady is someone whom I should have thought would know better.
The right thing to do was done by the hon. Member for Oldham, East (Mr. Lamond), namely to read the report and not to be taken in by the local Press comments. If there is any particular villain in this situation it is the local Press in Blackburn, which chose to lift out of an exchange in the questioning between the accounting officers and the hon. Member for Oldham, East the inference that the Royal Ordnance Factory at Blackburn was to blame.
What the Public Accounts Committee was examining on this occasion was the fact that £3 million had been spent, that many years had elapsed, and that still this desired project had not appeared. It would have been a great dereliction of duty on the part of the Committee if it had not investigated that matter. If the right hon. Lady chooses to take offence 1363 because of a particular Press report, it behoves her at least to establish the facts with the Minister of Defence and to satisfy the House that she has not made an unreasonable criticism of the way in which the evidence was presented to the Public Accounts Committee.
I should like to pay my tribute to my right hon. Friend the Member for Taunton (Mr. du Cann) and to the Comptroller and Auditor General, both of whom have been personally kind and helpful to me in the course of the sittings that we had in 1977.
The reports, as they are presented, reveal the thoroughness with which the Comptroller and Auditor General and his staff carry out their work. I shall not deal with any of the particular cases in detail because the debate is already well advanced and many of my colleagues and speakers on the Labour Benches have dealt with cases which they believe deserve further mention.
I believe that the time is long past when the House of Commons must consider proposals for radical reform as indicated by my hon. Friend the Member for Horsham and Crawley (Mr. Hordern). The House of Commons has its legislative function, and also its overseeing function—the need to have an oversight of the function of the Executive.
Nothing in what I am about to propose implies any criticism of the Comptroller and Auditor General's Department. I think that it does a splendid job. It is merely that Parliament in 1861 established the Public Accounts Committee which is still using the machinery and the method of the quill pen in the age of the laser. Something has to change.
The whole of this debate goes far beyond various suggestions that have been made from the Government Benches that some members on the Committee are interested in greater Government expenditure, while some are interested in less. I should have thought that any Government would be interested in an efficient use of public money.
Nowadays, we have the estimate system. It is terribly archaic in both its concept and its operation. Budget options are not presented for consideration. The United States Congress receives documents with the budget options for forth 1364 coming fiscal years, which enables the legislature there to examine what options are open to it. Government programmes are never evaluated for performance. In addition, there are vast areas of public expenditure which are outside the remit of the Controller and Auditor General.
Surely Parliament in this day and age ought to be vitally interested and involved in the whole area of local government expenditure, the expenditure of the nationalised industries and expenditure of what are called QUANGOs. In addition, there is no way in which Back-Bench Members of Parliament can act as they should in order to do their job properly. This is because of the absence of adequate back-up support and staffing facilities such as those which are enjoyed in the United States.
The first thing that I should like to see is the establishment urgently of an inquiry into the control by Parliament of public expenditure. This would examine especially the working of the Exchequer and Audit Acts. This will be a test of the Government. Even the present Government, who have shown themselves quite enthusiastic at times about levels of public expenditure, must have an interest in eliminating waste and the efficient use of public money. Any Government will be interested in assessing whether Government programmes are achieving their objectives and whether those objectives could be achieved at lower cost.
Last year, my right hon. Friend the Member for Taunton told the House that the Public Accounts Committee was dealing with hundreds if not thousands of millions of pounds. This is all money which is misspent annually. Surely it is worth spending time, effort and money in trying to move the Public Accounts Committee system into the twentieth century at least.
The ramifications are considerable, as will be the repercussions. At issue is nothing less than the relationship between Parliament and Government, and the whole matter goes well beyond questions such as ensuring that the Comptroller and Auditor General has more highly qualified staff. I thought that my hon. Friend the Member for Horsham and Crawley made a good point in this respect. However, it is not at the centre of this debate. We are not simply talking 1365 about whether the Comptroller and Auditor General should have 4,000 staff and whether they should be highly qualified. If we are to expand the role of the Exchequer and Audit Department as I suggest, we shall have to do these things.
Nor will it be quite as simple as borrowing the experience of the General Accounting Office in the United States. In my view, that would over-simplify the situation here, even though the working of the General Accounting Office and of the Congressional Budget Office hold out much food for thought for us. I have visited both the GAO and the CBO in Washington and had quite extensive discussions with officials there. In the United States, although some Government activities are specifically excluded from the GAO's jurisdiction, basically the GAO is authorised and directed to investigate all matters relating to the receipt, disbursement and application of public funds. That is a beautifully simple formula and helps to explains why the GAO employs more than 4,000 professionally qualified staff.
Although the budget for the United States has more noughts on the end of it than has ours, there is no reason why we should believe that it is any more complex than the British Budget. We owe it to our constituents to see a monitoring and scrutiny machine established here which is at least as good as that in the United States. We may be destined to become a nation of rustic tourist guides, but we do not have to act like that just yet.
It has to be appreciated that the operations of a GAO-type body, if such were developed here, would be far beyond the present scope of operation of the Comptroller and Auditor General. There would be a strong case in organisational terms for separating that department from the Treasury and making it directly part of the services of the House.
It is interesting to note that the word "audit" as it is used by the GAO in the United States goes far beyond financial operations. It goes into questions of legal compliance and includes audits of efficiency and economy of operation and of programme results.
That brings me to a point which is related to the present working of the Public Accounts Committee. Despite the 1366 comparatively congenial nature of our examinations, which is due largely to the chairmanship of my right hon. Friend the Member for Taunton, the fact is that to appear before the Committee indicates some form of departmental omission or error. Obviously there is a certain degree of opprobrium attached to appearing before the Committee. If evaluation procedures were included in future, Departments would have to appear before a reconstituted and expanded Public Accounts Committee quite frequently. Often they would receive a clean bill of health. Therefore, the automatic appearance before the Committee would not carry that present feeling of opprobrium.
We might, for example, look at the National Enterprise Board and ask various questions about how it was operating. We might ask how successful it was in accomplishing the intended results set out in the legislation which established it. We might ask whether the Board was succeeding within its anticipated costs. We might ask what those costs were, and what were the benefits. We might ask whether the Board was producing benefits and detriments not contemplated when it was established. We might ask whether Parliament was receiving adequate accurate information from the Board to enable us to monitor its results efficiently. If evaluation procedures are introduced into the workings of the Public Accounts Committee it will enable Parliament to do one major thing that it cannot do at present, and that is to monitor or inquire into current expenditure.
The demands for investigation that have been made by some hon. Members, for example into the Polish shipbuilding deal, are an example of what cannot be done now, but what could be done. My hon. Friend the Member for Surrey, North-West (Mr. Grylls) asked some weeks ago whether the Public Accounts Committee could investigate that deal. This kind of request indicates the growing demand from hon. Members on both sides for a body that is able to investigate existing expenditure, and not necessarily something that relates to past history only.
The Expenditure Committee was called into being to address itself to this problem. In my view, it fluffed its chances by going in a variety of directions. I do 1367 not want to debate tonight the type of committee structure that we should have whether it should be an amalgamation between the Expenditure Committee and the Public Accounts Committee, or whether we should change the PAC's structure. However, we should expect the PAC to be alert to the opportunities to extend its influence.
I hope that in future when the PAC meets it will be in public. I do not think that that would be a particularly earth-shattering procedure. At present we have our findings published a few months later. Therefore, why should there be any objection to allowing the Press and the public to attend our meetings? Of course there might be certain key matters which are particularly sensitive issues, and these could always be considered in private.
It is clear that Parliament vitally needs new machinery and resources to do the job for which this House was originally called into being, which is to scrutinise and act as a vital and important check on the Executive.
§ 8.33 p.m.
§ Mr. John Garrett (Norwich, South)
In the four years that I have been in the House I have made it a practice to intervene in this debate to criticise the Public Accounts Department and auditing system and call for the wholesale abolition, or at least reform, of the Public Accounts Committee. I have not changed my mind, but I now detect that the tide of reform in public accountability is moving in the way that I and other hon. Members have been advocating for a long time.
More and more hon. Members are becoming concerned about the lack of control that we have over the Executive. In fairness, I must say that the present Chairman of the PAC sees the need for wholesale modernisation of our system of State audit. In the last couple of years public accountability has become quite an issue. It is interesting to compare this debate with earlier debates on the PAC reports. Many more hon. Members have stood up today and called for reform and modernisation of our system rather than simply selecting from the pile of reports particular issues of overspending, extravagance or waste.
The Public Accounts—Exchequer and auditing system in this country has been 1368 rightly described as the weakest State audit in the Western world. My right hon. Friend the Financial Secretary and I were the authors of a Fabian pamphlet saying precisely that and pointing out that it was high time that a massive reform was undertaken in this area. Our system is fundamentally weak because it covers less than half our total public expenditure. It is still primarily concerned with the historical task of looking for irregularities in expenditure—expenditure that has not been properly authorised by Parliament. In later years it has also undertaken the job of looking into areas of waste and extravagance, but it has not been concerned with the efficiency and effectiveness of State funds.
The Public Accounts Department has not had sufficient professionally qualified people on its auditing staff. Until recently it simply took on A-level school leavers and gave them in-house training in the Department. Now it is beginning to recruit graduates and a number of the staff have qualifications in accounting or will be obliged to obtain them in the future. The staff were never professionally qualified to inquire into the management of State funds. That was no accident. It happened that way because the Treasury wanted it. It did not want to have at its elbow a strong countervailing power. Even today of 620 staff in the Department, only nine have accounting qualifications.
More ominous is the fact that the Exchequer and Audit Department is too closely controlled by the Executive. The Comptroller is appointed from the higher ranks of Civil Service mandarins. In my view he should be appointed from outside, or should be able to apply from outside. His staff are appointed at a ludicrously low status by the Civil Service Department and the Department also decides their number, pay and grade different from the level of other State auditors.
The Treasury prescribes the form of accounts audited, and our public accounts are notoriously uninformative. The result is that the PAC reports are esentially superficial and our audit is little more than a book-keeping exercise. It mainly concerns cost over-runs and is not about the effectiveness of management or the performance of the spenders of State funds in the public interest.
1369 On other occasions I have drawn attention to the inferiority of our State audit compared with the systems operated in other countries—such as those in Germany, France, and particularly in the United States where the General Accounting Office employs several thousand staff, all professionally qualified as economists, accountants, analysts and engineers who evaluate and report on the objectives of expenditure programmes, the costs and benefits of programmes, the quality of management of programmes, and possible alternatives. I know that the Chairman of the PAC would like to see our State audit system develop in this way.
§ Mr. Garrett
In my view, we need a new Exchequer and Audit Department Act to redefine the area of inquiry of the Exchequer and Audit Department, to make public accountability coterminous with public expenditure and to encompass all organisations that spend State funds—Government Departments, public bodies, the 700 QUANGOs, as they are called, as well as the private contractors who receive State moneys.
We also need a reconstituted PAC with powers to appoint its own Comptroller, to decide its own staffing requirements, and to push outwards into management as well as financial audit.
The relationship of such a body to the Expenditure Committee would have to be redefined. Already the PAC is beginning to operate in the same field as the Expenditure Committee itself, or its Sub-Committees. We can observe that from the fact that both Committees have produced reports on cash limits. My solution lies in combining those Committees, and in spreading over the reconstituted committee system the staff budgets of the Exchequer and Audit Department.
Primarily, we need reform of the structure. Structure is a means rather than an end. We need total reform of the kind of information that is delivered to the PAC and the other parliamentary Committees by public bodies. We need a wholesale review of our accounting and information routines which are becoming progressively more elaborate and remarkably uninformative. They now confuse rather than enlighten.
1370 We have the Supply procedure, involving Estimates, Votes and Appropriation Accounts—a system invented way back in 1866 and virtually unchanged, since, except in a minor way in 1921. On top of that we now have cash limits. On top of that again we have the public expenditure survey system, which is on an entirely different basis of classification from the other two, and finally on top of that yet again we have certain areas of management accounting and trading fund accounting. However, nowhere do we have the information that we need to be able to call the Executive properly to account.
We cannot establish who carries the can, and what he carries the can for. We need information which will answer the following questions for every spending programme in every Department: what is the cost of the organisation administering the programme, and who is accountable for it? What is the objective of the spending programme, and how can we tell when the objective is met? At what problem is the programme aimed? What is the problem of the community with which the expenditure is supposed to deal? Why has that programme been chosen to meet that problem, rather than some other route? What is the efficiency of the programme management? How effective is it? How does it relate to other programmes?
The House should oblige the Government to set in train a reform of our hopelessly out-dated national accounts so that we can ask these essential questions of public accountability. The PAC, worthy though it is, just is not in that league. The cause of democracy demands that this massive change takes place so that we can enforce public accountability and call to account the spenders of State funds.
§ 8.46 p.m.
§ Mr. David Crouch (Canterbury)
I have followed the hon. Member for Norwich, South (Mr. Garrett) in these debates before when I have spoken as a member of the Public Accounts Committee. The whole House always listens to his constructive contributions with great interest, but I do not go very far with him on this subject. This has been not so much a debate as a seminar. I always think that 1371 the Public Accounts debates will be similar to taking part in Beethoven's Choral Symphony, but they never are. They are rather like singing Schubert's Lieder on one's own in a small drawing room.
All that I have heard in the debate has been constructive and valuable and has shown the concern and anxieties of hon. Members, whether Members of the PAC or those reflecting on the work and the reports of the Committee, that we must tighten our control of Government expenditure. We must exercise the restraint on the Executive which it is Parliament's duty to do. There are many ways of doing this and I was not joking when I said that the debate was similar to a seminar. I was complimenting the small number of hon. Members in the House because they have been reflecting and putting out ideas which I hope will be picked up by both Front Benches. We had a good and valuable contribution from my hon. Friend the Member for Blaby (Mr. Lawson), supporting the outstanding survey by my right hon. Friend the Member for Taunton (Mr. du Cann).
When I say that I do not follow the hon. Member for Norwich, South, I am parting company with my right hon. Friend the Member for Taunton. I do so with some hesitation because I do not wish to be seen as a hidebound old Conservative in these matters. I am sometimes split between two parts of the House—the Chamber and the work in the PAC—and I sometimes find it hard to know whether the Committee or the Floor of the House should take precedence in my priorities. In the past, the Chamber has held prior claim in an hon. Member's duties, but perhaps things are changing. What has arisen out of the debate is that perhaps we do not need just one debate every six months on a number of reports from the Committee, but rather a Green Paper to study the whole question of the control of the Executive by Parliament.
I am concerned about the progressive ideas that have been advanced because I fear that we might lose rather than gain from them. There has been much talk in recent months about the possible amalgamation of the Public Accounts Committee and the Expenditure Committee. I do not support the idea, at least not yet, because we must retain and secure the 1372 effective audit of Government expenditure, hitherto the task of the Public Accounts Committee. I want Parliament to retain policies and procedures for calling to account the accounting officers of the Government Departments. It would be wrong to lose that. If the PAC were to move into another area—that of policy as distinct from practice and the management steps the Government take in the implementation of their policy—there is a danger that we might lose the baby with the bath water.
Perhaps I am being old fashioned and hidebound in thinking that that could occur. But I am speaking only a word of warning from my experience of seeing the Committee at work. I do not agree with the hon. Member for Norwich, South that the Committee is all that weak. I wish that he were a member of it—he would add strength to it—and I think that he would then see that it was not weak.
I am interested in his thoughts about the qualifications and the grading of the 622 persons who serve in the Comptroller and Auditor General's Department. I think perhaps the House has been concerned to think about these criticisms. I repeat, however, that as it is at the moment the PAC is not necessarily weak.
I want the Committee to retain its strength as the inquisitor of departmental inefficiency. Admittedly it is spotting inefficiencies and mistakes, and the failure effectively to control and manage, after the event. We can point to very large sums of public money that have been wasted by such inefficiency and we are looking at the stable after the horse has bolted. But it is most important to spot that the horse has bolted and find out why it happened.
There has been a lot of talk this afternoon and on other occasions to the effect that it would be a good thing for the Public Accounts Committee to step into the modern world and allow its hearings to be published and, if Parliament agreed that this place should be put on the radio and television, allow itself to be put before the public in that way, too. I used to subscribe to that theory. I am a strong advocate of this place being publicised on radio and television, but I question now whether we would gain by putting the PAC before the public in that way. I believe that in the PAC we gain in our inquisitorial process by hearing evidence 1373 in private. I may be considered old fashioned and not progressive in holding that view, but if the Press and broadcasting media were introduced into the PAC I believe that the whole character of its work would change, and not for the better or for the public advantage. I believe that the attitude of the important witnesses who appear before us would also change, again, not for the better.
Perhaps I may now dwell briefly on some aspects of the Ninth Report which deals with the references to the management of the Department of Health and Social Security in the administration of the Health Service. I rapidly declare an interest. I am a member of a regional health authority and have been a member since reorganisation. Before that I was a member of a regional health board. The Ninth Report contains the remarkable case of bad management in the building of the Liverpool teaching hospital when costs escalated from an original estimate of £11.8 million rising eventually to over £54 million. Some mistake! Some bad management! I think we would all agree about that. What a very revealing thing to unearth. It is some horse that has bolted out of those stable doors.
What we have to learn—and this is where the PAC makes its contribution to Parliament's study of Government activity and Government inefficiency and departmental inefficiency—is lessons from these mistakes. Although the PAC finds out these things after the event and although we say "Is it not terrible? Another £40 million more than originally planned"—I hasten to say that much of that is due to inflationary factors as much as to mismanagement, but nevertheless the figures are very frightening—we have to show how we can prevent it happening again. The PAC, backed by Parliament, must say to the Government "This must not happen again, and we are making certain recommendations as to how to prevent it."
What did we find? We found, for example, that when the original board of governors, of the Liverpool group of hospitals embarked on this scheme, before the reorganisation of the Health Service in 1974, it attempted too much. That is now admitted by the Department. It was more than the client, the consultant architect and the contractor could accom- 1374 plish. It was beyond their management capacity. We found that project management was poor, that the management of industrial relations was poor and that productivity was extremely low. These are all criticisms of management.
Regional health authorities and area health authorities throughout the country should take note of and digest these grave warnings of where the deficiencies arose, because they can happen again. This message of the mistakes that have been revealed must be learned, and learned very severely by the Department. It is not enough to have a smooth answer from an able Permanent Secretary. We must see that the answers that we get from the accounting officers are causing action to be taken down the line so that the mistakes do not happen again.
In the case of hospital buildings, the Department has said that it acknowledges that it itself, in Alexander Fleming House, at the top of the pyramid of the DHSS, this vast health provision industry, should have played a more direct part in management. We have seen that the board of governors in the old organisation simply did not have the capability to carry out such supervision and to prevent mistakes.
The Department has also now admitted that there is a need in the new organisation of the NHS to break down large schemes into more manageable parts, where mistakes can be spotted in time and where there is not one amorphous mass of work going on, and where the building of a hospital, which is a complex matter, can be seen in its small parts.
Above all, there is a need for full preparation in all of these massive capital projects such as building hospitals and in the Health Service generally before tenders are even invited, so that it is known beforehand exactly what is entailed in a vast amount of work and so that the contractor can make a tender which is nearly accurate. Of course, there is also a need for post-contract control and the monitoring of costs and progress.
However, the lesson that I am trying to draw out of all this is that there has been a need in the past few years for a considerable improvement in the management of the NHS and the large amount of public money that it controls. Since 1375 the reorganisation of the National Health Service the DHSS has told the PAC that there have been major improvements in the management of building work and capital projects such as hospital building. It has reported to the Committee that this is in some measure due to the reorganisation of the NHS.
It is easy for us or for those outside Parliament to speak of top-heavy management in the administration of the NHS. However, management is necessary if we are to avoid mistakes in capital projects such as the building of hospitals. Managers are necessary for the administration of such large amounts of money and in building and engineering work. Managers are necessary to control finance and resources of all sorts. Management is a part of good patient care in the Health Service and the provision of health care.
We know that the percentage of revenue for management within the Health Service—I refer to the administration side—is about 6 per cent. Surely that is not excessive. I am not trying to make an excuse for what has happened in the NHS with the increase in the number of managers and administrators in the past four years. Perhaps too many have appeared, but I am suggesting that there were reasons for improving management in respect of money and other resources. Something had to be done to improve management control, and that meant some increase in numbers.
There is something else that has happened in the service that has been touched on this afternoon—namely, that it is suffering under cash limits. I am not advocating that they should be removed. I see from outside the House in my work in the service the fierce working of cash limits. I would say that they have been having a savage effect on decision making. The operation of cash limits means the wholesale closing of small hospitals. It means the closing of wards in hospitals. It means the closure of whole areas of wards and bed accommodation in hospitals. That is because hospital accommodation requires revenue funding. That will be the fierce effect of the cash limit system so long as we are working within cash limits. Sometimes that is forgotten as 1376 we work towards the good economic goal of living within our income, with which I agree.
However, we must recognise the very strong effect that working within cash limits is having in the areas of health and social services. We must ensure—this is what must result from the PAC criticisms of inefficiency within Departments—that within the DHSS the area and regional health authorities and the district management teams, the three tiers of management, become more efficient. They must seek the right priorities and work to them, giving low priority to areas of expenditure that are not so essential and concentrating on others. Above all, they must do their best—this is pointed out in the Ninth Report—to realise the assets that they have. Where they can realise those assets they can obtain some funds for themselves.
I do not believe that there has been anything like enough effort and incentive to sell land owned by the National Health Service and the Department, and the regional and area health authorities and the district management teams under them. We must make the regional and area health authorities appreciate that the days are gone when they can expect a generous handout from the Government. That is because cash limits are operating. The generous handouts that prevailed for so long and to which they became accustomed, the days of built-in annual increments, have gone for a long time. If they are faced with limitations on their revenue and capital programmes, they must look to their own resources. The fact is that they have many land resources. They must speed up the process of realising those assets. The proceeds may be used for priority spending within their own areas. That will not happen unless they create for themselves and for the people administering the disposal of such land real incentives to get on with the job.
Some of these schemes for the disposal of land have been dragging on for years. There is no reason why they should not be completed within a year. But there must be an incentive—the realisation that in this way they can get money for essential projects.
One psychiatric hospital in my constituency which has plenty of land desperately wants to sell that land for which 1377 there is a fixed price. If the entire proceeds could be retained by that hospital, it could build a new nurses' home and thereby increase recruitment in an essential area.
As things are, if a hospital sells land, it does not necessarily retain the proceeds. They are used elsewhere in the area. We cannot expect people to get on with the job of selling land on the market if they feel that it is being sold for someone else's benefit in their area or region. Therefore, if the Health Service is to enjoy the benefits from the sale of land, it should be allowed to enjoy the whole of the benefits, not see them dissipated elsewhere.
The PAC discussed the accountability of the DHSS for its administration of the National Health Service. There was a suggestion that the accounting officer might not always appreciate what was going on in Liverpool, in Swansea or in the fringe areas of England and Wales. One suggestion was that there should be some fragmentation and that the accounting unit should be the region. I do not agree with watering down to a regional basis. I believe that there must be one accounting officer, one Department chief and one Department at the top that can be called to account by Parliament. The administration of the NHS may be top heavy, but that is no excuse for allowing the Department to escape its responsibility for efficient management. I do not want to see any development which would mean fragmentation of the Department's control of such a large amount of public money.
§ 9.7 p.m.
§ Mr. Robert Taylor (Croydon, North-West)
Before the House adjourned for the Christmas Recess it expressed its concern about the lack of public control over the finances of the Crown Agents, particularly the secretive way in which they had invested the money of their principals in property and secondary banking activities. As the House now knows to its cost, the principals had assumed that at the end of the day the Crown Agents were backed by the Government, and therefore taxpayers' money was eventually needed to ensure the continuity of the Agents.
The Eighth Report voices a warning. It warns the House that the National Enterprise Board is similarly spending taxpayers 1378 money without the scrutiny of this House. In my view, unless the House accepts that Report and instructs the Government to give the Public Accounts Committee the right to full access to the individual companies in which the NEB has invested public funds, eventually the losses incurred by the Crown Agents will be as petty cash compared with the sum of the liabilities of the companies in which the NEB has invested. Just as the principals of the Crown Agents regarded their money as safe in the belief that it was backed by the Government, so will those who trade with the companies in which the NEB has an investment consider that those companies have bottomless pits of Government finance behind them.
Paragraph 37 of the Eighth Report specifically denies that the NEB is liable for the debts of its subsidiary companies, but paragraph 38 draws the attention of the House to thede facto Government commitment … to creditors of the NEB".Even at this early stage in the life of the NEB the House has no idea of the liabilities which have already been incurred.
I turn to another aspect of the Board's activities. In paragraph 49 of the same report reference is made to the entrepreneurial rôle of the NEB and it is confirmed that the NEB claims to have such a rôle with taxpayers' money. Again, the parallel with the Crown Agents is worthy of note because it is almost invariably the case that entrepreneurs who gamble with other people's money are prone to disaster. The meaning of the word is to take risks, but it is one thing to risk one's own money and be a genuine entrepreneur in that sense and another to take risks with other people's money. The taxpayers have an absolute right to demand that risks taken with their money are scrutinised by their representatives in the House.
Many centuries ago, as all our history books tell us, the nation was told "No taxation without representation". These are hallowed words in the English vocabulary. But what is the use of representation today when the Government appear to be determined to ensure that the people's representatives are denied access to vital facts?
1379 One specific case of entrepreneurial investment by the NEB is referred to in paragraph 40 and Appendix IX of the Eighth Report. I draw the attention to the investment of taxpayers' funds in the company known as Thwaites and Reed. The report suggests that before making a controversial investment in a small company the Board should have adequate consultations with the relevant trade as a whole.
In the Committee's deliberations of 28th March a fair amount of time was spent discussing the investment in Thwaites and Reed. This was an extraordinary achievement for the Committee because it was discussing the matter in a void. It did not have the accounts of the company in front of it. The questions put to Lord Ryder and his team were derived from reports in the Financial Times and other newspapers that were read by members of the Committee. Certain facts were not in dispute. It was indisputable that the company had been established for many years.
In reply to Question No. 1748, Lord Ryder referred to the company'ssnob appeal of back history—Big Ben and Fortnum and Mason.One wonders whether it was the snob appeal that recommended the investment to the NEB. It could hardly have been the financial successes of that company because they are notable by their absence. For snob appeal or any other reason the Financial Times suggested that the NEB was sufficiently excited by the prospects of this company to provide it with £240,000. It also suggested that the money was used to pay off a debenture to Lord 'Tanlaw and to pay off a bank guarantee. According to Lord Ryder'. assistant, Mr. Gregson, three-quarters of the £240,000 was for the provision of new plant and machinery.
In answer to Question 1755, Lord Ryder declared that the NEB does not guarantee banking facilities to companies in which it has an investment. On a consideration of the facts this presents an extraordinary situation. The NEB provided £240,000. We are reliably told that £180,000 went on new plant and buildings and with the balance a debenture was repaid and an overdraft 1380 paid off. Yet the NEB will not guarantee the bank facilities.
Where, then, is the extra working capital to come from? Obviously it is needed now that the bank loan has been paid off. The Financial Times reported that the NEB intended to raise the turnover from £200,000 to £3 million to £4 million. If the NEB refuses to take a part in a guarantee, where is the cash to come from to produce this startling figure? The bank will certainly require a guarantee from such a private company and the one director with a shareholding—Mr. Buggins—retains only 10 per cent. Ninety per cent. is in the hands of the NEB. This is an example of lack of parliamentary control.
To reach the turnover that Lord Ryder set as the task for the company, I estimate that the working capital must be at least £500,000 and more likely £1 million. If a bank provides that amount of money to the company it will be only because it relies on the fact that the company is 90 per cent. owned by NEB which will be responsible for any liabilities in the event of a failure.
The Comptroller and Auditor General should be permitted to see the books of all companies in which NEB has a stake. In that way the House would be able to understand the total liabilities with which the NEB may be faced. In my constituency there are two manufacturing companies in the horological trade. Both are successful. Both manufacture high class clocks. Because of the corporation tax that these successful companies pay, companies which are competitors and which have an abysmal financial record such as Thwaites and Reed will be kept in being to compete with them. Those who work in the successful companies in my constituency are not fools. They know that their jobs and their future are uncertain if they have to compete with loss-making firms which are propped up by the taxes they pay.
In reply to Question No. 1677 on 23rd March, Lord Ryder reported that the NEB referred some firms which approached it for money to agencies such as Equity Capital Organisation and Finance for Industry. Presumably those referred to such agencies must be exciting and viable firms, otherwise it would be a waste of time referring them to the 1381 private sector. Other companies will continue to be dealt with by NEB. This is what worries me because the total sum of the liabilities must be enormous. The noble Lord said this:But I think the word is getting round—this is why we have got the queue at the door".
§ 9.18 p.m.
§ Mr. A. P. Costain (Folkestone and Hythe)
I have sat here since half-past three and listened to every speech which has been made in the debate. Much that I intended to say has already been said far more eloquently and with greater effect than I could have commanded. Consequently I shall not detain the House for more than five minutes.
Having served on both the Estimates Committee and the Public Accounts Committee since 1962, I have listened to every debate which has taken place in the House on those two Committees.
The speech of the right hon. Member for Blackburn (Mrs. Castle) contained a revelation. It is only necessary to listen to the right hon. Lady to understand why Select Committees are not as effective as one would like them to be. As my hon. Friend the Member for Canterbury (Mr. Crouch) so clearly pointed out, one Department has been criticised year after year in reports from the Public Accounts Committee. I have said many times that when a Department makes a mistake one year, that is something to be deplored; when it makes a mistake in the second year, something has gone seriously wrong; and when it makes a mistake in the third year, somebody ought to be sacked.
As my hon. Friend the Member for Canterbury said, the National Health Service has made three big boobs, each involving about £20 million. Yet we now have the example of the right hon. Lady the Member for Blackburn, who was Secretary of State responsible for that Department, coming to the House not in sackcloth and ashes and at least apologising for not having read the earlier reports, and learned something from them but making a stupid speech saying that the evidence given to the Public Accounts Committee was wrong and that therefore we ought not to have made the report which in fact we made. Indeed, she went on to say that the Permanent Secretary should not have given certain 1382 evidence and he did not know what he was talking about—or words to that effect.
Does not the right hon. Lady realise that if someone giving evidence to the Committee does not know the facts, he simply has to ask the Chairman for permission to put in a note? That permission is readily given. It is the normal procedure. Further, does not the right hon. Lady realise that when the Minutes of Evidence are prepared they are passed to the person giving evidence and, if he is not satisfied with what is recorded or if, on further reflection and research, the evidence which he gave has been shown to be wrong, he has only to appeal to the Chairman and ask to put in a note? The Chairman is only too delighted for that to be done. The purpose of the Public Accounts Committee is not to mislead the House or anyone else but to get at the truth, and the truth can be got only in that way.
The hour is late and I shall not labour the matter, but I must put this to the Financial Secretary. These things go on year after year. When will something be done? When will more evidence be produced to show that the Government intend to give the Committees of the House the power to which they are entitled? I do not go the whole way with those hon. Members who seem to think that the Public Accounts Committee should be some sort of efficiency body or high-powered organisation giving audit and management instructions and advice. The Public Accounts Committee, as has rightly been said, is basically a Committee of shareholders working on the criticism of directors as given by their auditors. That is what it is all about. That is where it all started from.
Now, however, other Committees are being formed. There are the Estimates Committee, the Select Committee on Nationalised Industries and so on. There must be some co-ordination, because we have had example after example of two Committees working on the same subject. Is the Financial Secretary prepared to give a commitment that we shall have more co-ordination of Committees so that we may get on with the job?
§ 9.23 p.m.
§ The Financial Secretary to the Treasury (Mr. Robert Sheldon)
The debate has not followed the normal pattern save in 1383 one respect, and that is in paying tribute yet again to the right hon. Member for Taunton (Mr. du Cann) and his indefatigable Committee. As one who sat for six years on the Committee, I know full well the demands which it makes on each of its Members to read reports, to attend assiduously and to take note of the enormous amount of reading matter which pours on to his table. But, of course, on no one does the burden fall more heavily than on the Chairman himself. It is he who not only has to understand the often very complex matters which come before him but has to maintain the consistent line of argument and disentanglement which alone will produce understanding as to where administration has gone wrong and where it may be improved. Although each other Member of the Committee must play his or her part, without the dedication of the Chairman the untangling of that skein will not be effectively done.
Therefore, we are grateful to the right hon. Gentleman for these 10 reports, which are very voluminous, comprehensive and, as usual, very thorough. The right hon. Gentleman talked about the partnership with the Treasury and I am delighted to accept that phrase. The work that the Treasury does is made much easier by the independent control that the Public Accounts Committee exercises through its members and the Exchequer and Audit Departments.
The right hon. Gentleman spoke of the control of public expenditure by Parliament. The hon. Member for Richmond, Yorks (Sir T. Kitson) and others questioned the Committee's impact. It is easy to sit on the outside of the horseshoe of seats in the Committee room and wonder about the feelings of those called to sit within it. I know that it is an unnerving experience for those accounting officers who come before the Committee. Although it is hard for hon. Members asking the questions to know their impact, one thing is clear—that appearing before the Committee has the salutary effect of making those who give evidence unwilling, to put it no higher, to come on a light errand. Therefore, in the Committee those who appear to give evidence are being educated in the need to take 1384 strongly into account the views expressed in the Committee.
The control of public expenditure by Parliament has been weakening for some time in a number of respects. The blame can be laid only at the door of hon. Members, including ourselves. The set-pieces of Supply Days have been mentioned. For failure to use them there is nobody to blame but successive Oppositions, who have preferred the confrontation form of debate to the rather less exciting scrutiny of expenditure. Such scrutiny is becoming a little more fashionable. There are fashions in these matters, and from time to time on Supply Days a number of hon. Members read the Order Paper and, seeing the vast sums that they are being asked to vote on the nod, have twinges of conscience and raise certain mere routine matters before moving on to the normal business of such a day.
The raising of such matters does not last long, for two reasons. First, the Opposition want to make the most of the political opportunities given them by Supply Days. Secondly, when I hear the speeches made on those occasions I come to the conclusion that that kind of forum is not necessarily the best for such scrutiny. Although they last for only 15 minutes or 30 minutes, the speeches give us the flavour of the kind of debate that would normally have taken place if the day's debate had proceeded along those lines. We understand the reasons why Oppositions have tended to use such opportunities for their present purposes, but it is not sufficiently understood what would have happened if the debates had retained their original purposes, to discuss and comment on the investigation that the Public Accounts Committee carries out.
The right hon. Gentleman talked about the need for parliamentary scrutiny, questioning and investigation in depth, and he spoke of our present procedure being ineffective. This ties up with the work of the Expenditure Committee, and no doubt we shall be debating that in due course. The Expenditure Committee is not concerned so much with control of expenditure, which is the province of the PAC, but it was hoped that its work would have some bearing on this matter. Its main work must concern the selection of subjects and an understanding of 1385 the system. This is done through the General Sub-Committee.
The hon. Member for Cornwall, North (Mr. Pardoe) talked of the way in which the PAC ought to deal with successes as well as failures. Oddly enough, this was a matter put to the PAC when it began hearings into whether it should make an examination of the work of the University Grants Committee. One of the members of the UGC, Lord James, said that he looked forward to the UGC coming before the Public Accounts Committee so that the success story, as he saw it, could be made known. He was instructed by the then Chairman, Lord Boyd-Carpenter as he now is, that the PAC does not deal with success stories. Successes do not appear before the Committee. Although the point made by the hon. Gentleman has a certain validity, by its nature the Committee can attempt only to put right what is wrong, rather than announce to the world that which is right.
The Committee not only tries to put right what is wrong, but tries to announce to the world of Whitehall where things are wrong, and to point to the changes which should be made so that Whitehall can understand what it is that Westminster feels to be wrong and can know in advance that such matters will be put to its representatives forcefully if they are called upon to enter Committee Room 16.
I am not sure about the structure of Committees. This debate has not followed some previous debates of this kind which have examined the structure of Committees. We have to find a solution through Committees of one kind or another and get some body which can undertake the in depth examination which Parliament alone can carry out. These are personal views arising from my background in the PAC as well as being sometime Chairman of the General Sub-Committee of the Expenditure Committee.
The hon. Member for Cornwall, North talked about VAT, which is dealt with in the Fifth Report. It is a useful Report, which I read with great interest. VAT has been operating now for just over four years, and it is right that we should examine its methods of control. The principal Customs and Excise means of control remains visits by Customs and 1386 Excise officials to traders for verification purposes. With more detailed information it is now possible to refine this programme to make more effective use of our resources. This means that we can start arranging that certain traders will be visited more frequently than once every three years, and others less frequently. It means that we are able to distinguish between those two types of VAT traders.
With regard to arrears, control accounts are now being maintained by Customs and Excise, and have been maintained for some time. One now finds that enforcement action is overtaking the build-up of arrears. In the next report we hope to show the amounts outstanding for the whole of the four-year period as at 31st March and on 30th September.
One of the outstanding problems is simplification of VAT. We have been giving considerable thought to this matter. We have introduced a number of special schemes for retailers. I do not think that there is scope for many more special schemes, because I think that we can confuse as we try to devise them. However, within the context of the minimum change, we have made sure that beneficial results will come to a number of small retailers.
I come to the review of VAT procedures. This is a matter which I mentioned previously. A Press release was issued on 18th August inviting anyone with an interest in the possibility of annual accounting for VAT, or wishing to put forward suggestions for improving any aspect of the VAT system, to send in written comments. We have had a number of meetings with trade organisations within Customs and Excise, and the results of the representations that were made are now being assessed. I hope to be in a position to make a statement in due course. In the Budget Statement in the spring the Government hope to comment on this matter.
My right hon. Friend the Member for Blackburn (Mrs. Castle) and my hon. Friend the Member for Oldham, East (Mr. Lamond) brought to the attention of the House a dispute concerning certain aspects of a defence contract and where it should go. It is not my intention to involve myself in this argument, except to say that this kind of forum is not an unacceptable one for this kind of 1387 debate. The points put by my right hon. Friend and my hon Friend are rightly matters which can and should be aired in this context.
§ Mr. James Lamond
I should like my right hon. Friend to bear in mind that there is no dispute about where the contract should go. My right hon. Friend and I saw the Minister concerned, and we were both satisfied with the answer that he gave us in that regard.
§ Mr. Sheldon
I am delighted to hear that. Perhaps I can therefore move on to the next part of the debate and the problems raised by my hon. Friend the Member for Fife, Central (Mr. Hamilton). My hon. Friend dealt with revenue collection costs and the problem that arises there. This matter was also referred to by the hon. Member for Horsham and Crawley (Mr. Hordern). My hon. Friend contrasted the expenditure on raising taxes with the loss through the DHSS, while the hon. Member for Horsham and Crawley was concerned rather more with the costs of the Inland Revenue. He put forward the possibility of some form of self-assessment and some way of reducing the cost of each pound of tax collected. He might be aware that an examination is being conducted into certain aspects of this issue.
Self-assessment, as carried out in the United States, requires such large powers of investigation and control that the experience which we in this House had two years ago makes it highly unlikely that the House will accept it for some time to come, if ever. There are special problems, but these might be made easier by the necessary computerisation and an examination of certain aspects of self-assessment in certain areas.
Any comparison that I make needs to take fully into account the fact that in this country we have quite a de luxe system of collecting tax from the ordinary taxpayer. Four people out of five need do nothing at all. Year after year tax is raised from them, and the computations, assessments and, if necessary, refunds are made without requiring anything from them. Like any de luxe system, it has to be paid for. Most of the other countries with which we make comparisons requires far more information direct from the taxpayer; and, at the 1388 end of the day, more powers of control, investigation, record keeping and penalties. So we are really in a position of having to choose. What we are doing at this stage is no more than the initial investigation. As soon as the Government have anything to report, we shall try to keep the House as fully informed as we can.
§ Mr. Lawson
Will the right hon. Gentleman answer the question that I put to him and give an assurance that one of the options incorporated in the computerisation for PAYE which is under way at present will be the tax credit system?
§ Mr. Sheldon
No, I cannot give any undertaking of that kind. We are at far too early a stage in the examination to say what are the costs of keeping certain options open and how far we can keep open as wide a range of options as we might wish. This will be examined when we come to consider the problems of computerisation in due course.
My hon. Friend the Member for West Lothian (Mr. Dalyell) asked a number of questions, including one about Flotta and the problems there with the payment of regional development grants up to the end of September 1977. I assure him that these grants have been paid only provisionally, as the law envisages, on the understanding that the terminals will become qualifying premises for grant purposes. If grant qualifying status is not reached, the grants will be recoverable.
My hon. Friend also asked about a Scottish Public Accounts Committee. I think that I can be excused from speculating about the sort of body that that might be, but I assure my hon. Friend that, as the previous examination has shown, the institution of a Scottish income tax, or a Scottish surcharge on income tax, would be a very expensive operation, as I think he envisages. This matter has been considered in some detail but, knowing the kind of income tax that we have, it will not be a surprise to anyone to note that any further complexity of a major kind in this area would prove extraordinarily difficult to work in practice.
§ Mr. Dalyell
Really, this will not do. In Clause 43 of the Scotland Bill, which we shall be discussing tomorrow, there 1389 is reference to a Scottish Comptroller and Auditor General, and there are many references to a Scottish Consolidated Fund and a Scottish Loans Fund. For any Government Minister to say that we can only speculate about a Scottish Public Accounts Committee seems—
§ Mr. Deputy Speaker
Order. I think that the hon. Member for West Lothian (Mr. Dalyell) is speculating on what may or may not be discussed tomorrow. If he has a point to make, which I am sure he has, will he relate it to what the Financial Secretary has been saying?
§ Mr. Dalyell
I asked in my original speech for the Treasury thinking about the establishment of a Scottish Public Accounts Committee. Where will the expertise come from to form a Scottish Comptroller and Auditor General Department? We who have served on the Public Accounts Committee know that considerable skill and expertise reside in this Department. Where will it come from? I see that the Chairman of the PAC is approving my question.
§ Mr. Sheldon
It will come as no surprise to my hon. Friend to hear that these matters have not been determined in full. There are many aspects of the operation, following the setting up of the Assembly in Edinburgh, which will be the subject of further determination, and which will not necessarily be determined well in advance. Detailed discussions of these matters will continue.
§ Mr. Dalyell
The more we learn about the Assembly in Edinburgh, the more manholes are uncovered, the more problems come to light and the less viable we find the whole preposterous scheme.
§ Mr. Sheldon
My hon. Friend rarely loses an opportunity to make that point. The whole House will have heard it, and will realise that it has been made once again.
The hon. Member for Blaby (Mr. Lawson) dealt largely with the Third Report of the Public Accounts Committee. He also dealt with pay policy at some length. To the ingenious, it is always possible to debate a matter that is not strictly being considered as a prime factor before the House. Tonight we heard the ingenuity with which the hon. Gentleman related his comments on pay policy generally to this debate. I do not 1390 think that anyone objected, because this is a wide-ranging debate. I know where the hon. Member found his reference, but he will not expect me to comment upon it in a debate on these 10 reports.
I shall deal with two aspects of the speech of the hon. Member for Blaby. The first concerns the absence of debate in this House on public expenditure matters. The hon. Gentleman looked forward to a happy future when we could have such debates, and he believes that there will be more interest in them when they are related to cash limits. I do not wholly share his certainty on these matters. Many problems that we have about interest in and control of public expenditure will still be with us even if cash limits are assimilated into the Estimates.
The major question that the hon. Gentleman put was also on cash limits, and here there is a closer relationship between his view and mine. Cash limits, he pointed out, have been very successful. There has been a reduction in overspending during their period of operation. In fact, there has been considerable under-spending in some cases. This is not due to the fact that this is just another means of screwing the lid on public expenditure. It is largely due to the fact that each accounting officer is trying to keep his budget within a limit, and he knows that if he overspends there will be unpleasant consequences. If he underspends, the consequences will be less severe. The ideal is to limit expenditure to the amount allocated, but in the real world that is rarely completely possible. What happens is that Departments tend to underspend, and some of the underspending has been fairly considerable. Therefore, we have the margin of safety to which the hon. Gentleman referred.
When the hon. Gentleman speaks of the control of public expenditure, I see the two main bodies concerned in this House as the Expenditure Committee and the PAC. The control of public expenditure is obviously undertaken by the Treasury, the PAC and by Parliament.
We must also consider the matter of choice. Who chooses increases or reductions in public expenditure in real terms? At present, this task is undertaken by the Cabinet, the Public Expenditure Committee and Parliament. We need to get the control and choice functions working 1391 more effectively. Many of us looked to the question of choice as being assisted by debate, argument, representation and even by pressure from the Expenditure Committee. We know that that has not happened in the past, although there are encouraging signs of moves in that direction. I hope that this proves to be so, and I look forward to seeing that happen in due course.
Let me say something of what the Government intend to do about cash limits. There was an occasion not long ago in parliamentary terms when Supplementary Estimates used to be rare and even extraordinary events. Now, as a result of inflation and our procedures here, they are standard parts of the financial calendar—regular and certain. Cash limits had to be based on those Estimates. When we approve Estimates, we are approving the pattern of expenditure for the year ahead. The PAC has stated that eventually it wants to see complete unification of the Estimates, and also of cash limits. The Treasury accepts that this eventual assimilation is desirable, and it accepts the need for such a process if it can be worked through to a successful conclusion.
There are a number of problems involved in this process, some of which were de-detailed by the right hon. Member for Taunton, and some of which were instanced by other speakers. The right hon. Gentleman said that cash limits accounted for 65 per cent. of the total of public expenditure, and he added that these cash limits were not discussed. There has been no debate on cash limits, apart from that which he initiated on 14th December.
Many problems arise in tying in Estimates to cash limits, which the right hon. Gentleman regards as an essential process for control purposes. Let me give some examples. The cash limit for defence expenditure covers 10 Votes, and is the largest of all. It has been said that this should be broken down, but that was not the view of the Expenditure Committee in its Eleventh Report. One can see two basic reasons operating in slightly different ways which led to different conclusions in this respect. If one breaks down these large sums one will obtain greater control, but as one does so, so one gives less 1392 freedom to make savings. For example—and this might be a poor example—a decision might need to be taken by somebody or other whether to spend more money on tanks or on men in the Armed Services.
Perhaps the best way to handle such a decision is to tie down those who are to make the decision. Perhaps the better way to deal with the problem is to leave it to those concerned and to say "What is it you want? Where do you think you can obtain the most effective use of your money if it is taken over a wide enough range of Votes?"
What has happened time and again is that Governments have decided to give the Ministry of Defence this wide range of Votes so that it could make the decisions. This has been felt to be wholly right, for a number of years. Before we brought about changes in control, there would be a number of obvious implications which it would be foolish to ignore.
Then there is the question of survey prices and forecast outturn prices. When using these, one must decide at the beginning of the year what one would like to see. That is how many people organise their own expenditure, If it is too much it has to be cut, and that is how expenditure decisions are frequently made. The survey prices produce a general decision as to which way one is going. Estimates therefore provide for the pattern of expenditure, and cash limits provide a ceiling. One therefore has a ceiling and a floor, and between them one should be able to obtain some control. If inflation expectations are too high, I am not too worried about some of the problems that have been mentioned of too much money being spent. I believe that we could still exercise control over that.
The Treasury will be going back to the PAC and the General Sub-Committee of the Expenditure Committee in a month or two—I cannot be sure of the time—with examples of assimilation to carry on this important discussion. I hope that some success might be possible here in assimilating these two forms of control. I wish to place on record our indebtedness to the efforts of the Public Accounts Committee in this matter.
§ Mr. du Cann
I should like to place on record the gratitude of the Committee 1393 for the constructive things that the Minister is saying, and the constructive attitude which he has adopted throughout his speech. I am sure that it is greatly appreciated by the whole House.
Can he go a little further and say whether it will be possible to co-ordinate cash limits and existing Estimates and Supplementary Estimates during, for example, the fiscal year 1978–79?
§ Mr. Sheldon
It is much too early to be thinking in those terms. We need an appraisal of the way in which we can get this new type of control without losing what we have at present. There is always a danger that when moving from one form of control to another there may be a gap. We have to jump the gap between the two.
The reports which we have debated show the work of the Public Accounts Committee and it is to be complimented on its effort and for the fact that its impact has not been diffused by the voluminous nature of its papers. I look forward to its work continuing. There will always be a rôle for the PAC acting in the way that it acts at present. I offer my thanks for another year of successful work.
§ Mr. Dalyell
Can my right hon. Friend give an undertaking that tomorrow morning he will see certain senior officials in the Treasury who have to deal with these matters and ask them about the Scottish Comptroller and Auditor General? How 1394 many staff will be needed in his Department compared with the existing Department? I am sure that it will be more than the one-eighth, one-tenth or whatever the proportion of Scotland's population is to the rest of the United Kingdom. Can my right hon. Friend find out precisely how costly a Scottish Comptroller and Auditor General's Department would be, what control it would have over non-devolved areas or the scheduled tariff, which is a grey area? Can my right hon. Friend, before 3 p.m. tomorrow, come to the House and give us the information on this gentleman who will be brought into being by the Bill that we shall be discussing tomorrow?
§ Mr. Sheldon
If my hon. Friend gets in touch with my office tomorrow, I shall give him as much information as is available to me.
§ Question put and agreed to.
That this House takes note of the First, Session of Parliament and of the Treasury Eighth, Ninth and Tenth 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. 6977 and 7017.)