INDEPENDENT BROADCASTING AUTHORITY BILL (Hansard, 29 March 1979)

§ Dr. Summerskill
On the terms of the amendment moved by my hon. Friend the Member for Nottingham, West (Mr. English), I am satisfied that the proposed application by the Authority of up to a total sum of £10 million from the current surplus on any of its television services branch reserves to meet any expenditure does not and cannot have the effect of contravening section 29(1) of the Independent Broadcasting Authority Act 1973.
On the general point made by my hon. Friend, he will have received a letter from my right hon. Friend explaining the position on delay. My right hon. Friend has recently acknowledged to the chairman of the Authority that the delays in publishing in 1977–78 accounts were to a large extent due to factors beyond the Authority's control, but he is sure that in future publication in the autumn must be the aim.

§ Mr. English
The organisation is small in numbers of people and in terms of money. Why must it take so much longer to produce its accounts than great multinational companies that normally consolidate their accounts from subsidiaries all over the world and publish them within three months? The delay may be caused by the Home Office, but why must we be so inefficient in Government?

§ Dr. Summerskill
The Home Office will make every effort that the accounts should be produced by the summer, but to be absolutely safe I would say the autumn. We have taken note of what my hon. Friend says.

§ Mr. English
I beg to move amendment No. 5, in page 3, line 13, at end add— '(8) All expenditures of money under this Act shall be subject to audit by the Comptroller and Auditor General'. Hon. Members will understand my concern and that of the Expenditure and Procedure Committees of the House about the audit of public money. We have had experiences such as those with the Crown Agents that show that our system of audit is not wholly satisfactory. In the 1940s there was a long argument whether nationalised industries should be audited by the Comptroller and Auditor General and his exchequer and audit departments or by private auditors. It was then decided that nationalised industries should have private auditors.
The IBA, however, is not a nationalised industry in that sense. Independent television is not a nationalised industry and the IBA is in modern terms a quango. It is a fairly small licensing and supervisory body, and is not to any great extent in the market economy. There is no need for it to be excluded from the purview of the public system of audit. That system needs revision, and that is being studied by the Treasury, but there is no need to exclude quangos. I can see an argument why British Rail or the Central Electricity Generating Board should be excluded, but not a small licensing and supervisory body of this character.
In the last debate I quoted from the statement of the auditor that was appended to the accounts. It mentioned the historic cost convention. I said that 677 that was a qualification. The director of finance of the IBA asked me to point out that qualification in its technical sense is not what I meant. What I meant—and what is not pointed out in his letter—is the present argument between these bodies, their accountants and the Treasury on how to provide for the depreciation of assets.
Prosperous organisations such as the British Gas Corporation wish to make more provision than less prosperous organisations. It puzzles me that the IBA, which one would think is in the prosperous sector, is on the side of depreciating by historic costs. The auditors singled out historic costs although I believe the IBA may make other provision as well. In the light of recent discussions between nationalised industries, quangos and the Treasury, it is puzzling why the IBA should wish to act as if it were a poor authority rather than a rich one. I wonder if the Minister could answer both those points.

§ Dr. Summerskill
On my hon. Friend's second point concerning quangos, I do not want to go into their definition, but it would not seem appropriate for a broadcasting authority any more than for a nationalised industry such as British Rail. Broadcasting authorities are there to provide services. The BBC provides such services itself, whereas the IBA does so by entering into contracts with individual television and radio companies. Both carry out their duties in accordance with the terms of their covering instruments. For the most part they carry out their functions quite independently of the Home Secretary.
A further point that is particularly relevant in the context of this amendment is that the IBA is financed not by the Government but by the rentals that it is empowered to raise from ITV and independent local radio companies.
I cannot accept my hon. Friend's amendment for the purposes of auditing. It appears to distinguish between one part of the IBA's accounts and the remainder.
The effect of the amendment would be to make the IBA accounts referable to expenditure under this Bill subject to the Comptroller and Auditor General's 678 audit, with the remaining accounts being audited by an appointed private firm.

§ Mr. English
I am grateful to my hon. Friend, who is always kind and courteous in these matters, but she must be aware that I had to phrase my amendments within the scope of the Bill as she had approved it. If she is saying that she will lay an amendment widening the scope of the Bill, I will willingly widen my amendment to ensure that the Comptroller and Auditor General audits all the IBA's accounts.

§ Dr. Summerskill
Obviously this will be considered when the major Bill comes forward. We see no reason now for interfering with the present process by which the Authority's accounts are audited by an independent firm of auditors. A review of the Exchequer and Audit Acts is currently being undertaken and this will consider the general question of the Comptroller and Auditor General's powers. It would be inappropriate at this stage to consider any departure from current practices.

§ Mr. English
I intervene briefly to ask just one question. On Second Reading we did not have the accounts of the Authority available. They came the day after. I observe that in this clause and in the principal Act, money is being lent by the Treasury at a rate of interest agreed by the Treasury. I take it that that is a higher rate of interest than that at which the Treasury can borrow. My point in asking this is that I trust the Treasury is not subsidising the IBA. On certain previous occasions the IBA has incurred a deficit—in setting up local radio stations, for example.
One can imagine public subsidies to certain types of organisation. Most railways throughout the world are subsidised by the public. It has been the policy of this Government to ensure that nationalised industries and others are not subsidised by the taxpayer where this is not necessary. The previous Government went to the extent of forcing nationalised industries to run into debt so that they were, in effect, subsidised by the taxpayer. Can my hon. Friend assure me 679 that it is not the intention to have a public subsidy to a private industry? The IBA's charges are primarily provided for by the rentals that they charge the various private companies. Some of those companies are small, but some are very large and profitable. There is no real reason why the taxpayer should subsidise them. Will the Minister assure us that there will be no such subsidy, even a concealed one, by way of a cheap rate of interest?

§ Dr. Summerskill
I can assure my hon. Friend and the House that the Treasury will not subsidise the IBA in any way. The rate of interest will be the normal one for any Government loan.

§ Mr. English
I take up the Minister's last point in which she said the normal one for any Government loan. But the Government are a more creditworthy borrower than many people. Does she mean by the "normal rate of interest" one that is just sufficient to cover the Treasury's costs in borrowing, or does she mean a rate of interest that is equivalent to the market rate for a private sector organisation?

§ Dr. Summerskill
The Home Secretary, who knows about these matters, informs me that it is the latter.

§ Mr. English
Thank you.