PUBLIC ACCOUNTS

HC Deb 01 May 1980 vol 983 cc1644-58

Mr. Andrew Faulds (Warley, East)

Further to the point of order, Mr. Speaker—

Mr. Speaker

Order. I will call the hon. Gentleman to make his point of order, but that will be a little untidy because I had already called the Clerk to read the Orders of the Day. I did not notice the hon. Gentleman rising to speak. I shall, as an exception, take the point of order so that the hon. Gentleman should not feel any sense of lack of fair play.

Mr. Faulds

Since I can pursue the matter with you privately, Mr. Speaker, I will hold my peace on this occasion because, as you said, I rose after the Clerk had read the Orders of the Day.

Mr. Speaker

I am much obliged to the hon. Gentleman.

4.41 pm

Mr. Joel Barnett (Heywood and Royton)

I beg to move That this House takes note of the First, Second, Third, Fourth, Fifth and Sixth Reports, and the First and Second Special Reports from the Committee of Public Accounts in the last Session of Parliament, and of the First, Second, Third and Fourth Reports from the Committee of Public Accounts in this Session of Parliament, and of the Treasury Minutes, and the Northern Ireland Department of Finance Memorandum on those Reports [Com-ands. 7631, 7788, 7787, 7824 and 7882], and of the Fifth, Sixth, Seventh and Tenth Reports from the Committee of Public Accounts in this Session of Parliament. I begin by expressing my appreciation of the great honour that was done to me in my election as Chairman of the Public Accounts Committee. I am most conscious of the influential position of the Committee and its Chairman. It has always had a very influential position under a whole series of distinguished Chairmen over more than 100 years. I therefore greatly appreciate the honour that has been done to me in my election to the post.

As a former Chief Secretary to the Treasury, I know that it might have been thought that there would be some conflict between the position of Chairman of the PAC and that of Chief Secretary—a sort of gamekeeper turned poacher. In practice, I see nothing of the sort. That thought could be anything but the truth, because I see both tasks as being similar. Both are concerned with ensuring that we get value for money and effective spending of public funds. I certainly therefore see no conflict between the two posts. Indeed, I hope and believe that my experience as Chief Secretary will not be unhelpful to me in my post as Chairman of the PAC.

I have a feeling that when the witnesses have come before the Committee and have been subject to my questioning, they have been not unaware of my former position or of a little of the knowledge that I have had in putting those questions to them.

The chairmanship is a demanding task, and I can promise only to do my best and to follow the excellent example of my predecessors. At this stage, I should like to pay tributes, and I start with one to my immediate predecessor, the right hon. Member for Taunton (Mr. du Cann), who did a first class job, as everyone who knows anything about the matter will be aware. He will be a very difficult Chairman to follow. I hope that it will be understood if I do not attempt to emulate his style—I shall have to follow my own inimitable style in these matters—but I should like to try to emulate his success in the manner in which he chaired the Committee. I know that all members of the Committee appreciated the excellent job that he did.

I also pay tribute to the Committee members on both sides who equally do an excellent job in coping with the Committee's work. I thank them publicly for their help and support, particularly in the early period of my chairmanship, and I know from my experience of them that that will continue. I take this opportunity also of paying a personal tribute to the work of the Comptroller and Auditor General, Sir Douglas Henley, and the Northern Ireland Comptroller and Auditor General, Mr. Sythes, and their staffs. They do a first class job throughout the year, and have done for many years. They greatly deserve any tribute that I can pay to them.

That applies, too—and I am sure that my predecessor will agree—in respect of my Clerk, Mrs. Irwin, and her very small staff. The manner in which she serves the Committee and the public at large is one for which we on the Committee are very grateful. I pay a final tribute to the witnesses, who do not have an easy task in coming before the Committee. I include among them Mr. Carey from the Treasury, who is always there as a witness. He has equally been excellent in his service to the Committee.

The main work of the PAC and of the Comptroller and Auditor General who reports to it is set out in the new document issued recently by the Government on " The role of the Comptroller and Auditor General", Cmnd. 7845. On page 7 we are told that their work covers a financial and regulatory audit, a value for money audit and an effectiveness audit.

Mr. Michael English (Nottingham West)

My right hon. Friend will of course be aware that that Green Paper is inaccurate in that it mentions the audit functions of the Comptroller and Auditor General but omits his functions as comptroller. For example, he is the person who has to authorise the expenditure of Government money such as we were discussing a moment ago.

Mr. Barnett

I am happy to say that I am not responsible for that document. I look forward with great interest to the reply of the Financial Secretary on the point in question. As far as I am concerned, it is a Green Paper—a consultative document—on which my hon. Friend the Member for Nottingham, West (Mr. English) will have the opportunity to comment. If an occasional dot and comma in it are incorrect, I would personally not take too much objection to that.

Mr. English

It is more than a dot and comma.

Mr. Barnett

Well, I do not object even if it goes a little further. I do not wish to pursue the matter with my hon. Friend because, although this is a fairly quiet debate, it is an important one and we have large numbers of reports to comment upon. I shall make one or two comments later on the document to which my hon. Friend referred.

May I comment at this point on the general control by the House of Commons of the very large sums of public expenditure with which we have to deal? I have never doubted, whether I have been in Government or out, that control of public expenditure by the House of Commons is wholly inadequate. I doubt whether any hon. Member would argue that the way in which we control these huge sums of money is adequate. We all know that Estimates for billions of pounds still go through on the nod, in spite of the many excellent reforms we have had. The control will therefore remain inadequate for as long as that situation applies.

I had the privilege, as Chief Secretary, of introducing the assimilation of cash limits and Estimates. That was a useful move.

On 9 January 1978, the hon. Gentleman who is now Financial Secretary said: 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. I agree entirely. The PAC recognised the problem that exists where there is no rigid or formal incomes policy. The hon. Gentleman went on to say: The Expenditure Committee was absolutely right to say in its recent report on the Civil Service that ' effective cash limits should be fixed before pay negotiations are entered into.' I stress the word ' before'."—[Official Report, 9 January 1978; Vol. 91, c. 1342–5.] The PAC had a further look at the problem this Session, which is dealt with in the fourth report on Civil Service pay estimates. The Treasury and the Civil Service Department claimed that they could not provide, in the 1980–81 main Estimates for each Government Department, any provision for pay increases for non-industrial civil servants which could be negotiated in February-March 1980 to take effect from 1 April. They sought the views of the PAC, the Treasury and the Civil Service Committee on a proposal to provide one lump-sum Estimate for those pay increases and for increases for industrial civil servants, which could be assessed in February 1980 when the results of the Pay Research Unit investigation were known. That lump sum would be redistributed to individual Departments' Votes by means of revised Estimates before the Appropriation Act was passed, when the new pay scales had been determined after negotiation with the unions.

The PAC recognised the practical difficulties, but considered that parliamentary control had overriding importance. I hope that the hon. Gentleman agrees. In future years, if not for 1980–81, full provision should be made in each Department's main Estimate on the basis of the Government's considered judgment of the amount available. My Committee felt that it would be a retrograde step to revert to the earlier arrangement of making no Estimate provision for expected price and pay increases. That appears to be in line with the hon. Gentleman's remarks, which I quoted. I hope that he can therefore assure us on the matter.

I turn briefly to comment on some of the other reports, although I cannot comment on everything contained in them. The programme of the 1978–79 Public Accounts Committee was cut short by the Dissolution. That Committee submitted eight reports to the House which have not been debated. In the motion, they are referred to as the first to the sixth reports and two special reports. The right hon. Member for Taunton hopes to participate in the debate, so I shall refrain from commenting on those reports and leave it to the right hon. Gentleman.

Our 1979–80 Committee only started in July 1979. We have already published seven reports, plus one on excess Votes, and five more have been approved and are at the printers. I hope that we shall have them before too long. I shall comment briefly on a few items in the first seven reports. I wish to relate my comments to the wider issue of the role of the Comptroller and Auditor General and the Public Accounts Committee and the political and policy conflicts that may arise from the work of a Committee which is essentially a non-Party Committee—a necessary requirement if its work is to be effective.

The right hon. Member for Taunton once said that if the Government decide to build greenhouses on the moon, they are entitled to do so. The PAC can only ensure that the Government build them effectively and get value for money. That is an amusing way to define the issue, but I do not entirely agree with the definition. The work of the Public Accounts Committee and the Comptroller and Auditor General is bound to impinge on policy. That cannot be avoided, especially if the PAC goes into the whole question of control of public expenditure. The PAC may come to the conclusion that it would be preferable to build those greenhouses either in Taunton or in Heywood and Royton, which would be an essential difference in policy. There are other issues where the Committee is bound to become involved in policy if it is concerned, as it should be, with value for money and the use of public money.

In our first report this year we deal with EEC agricultural problems. Whatever one's views about EEC agricultural policy, while it exists we have what is referred to in paragraph 8 as the EEC farm and horticultural development scheme. The PAC wishes to prevent large numbers of farmers from being wrongly admitted to the scheme. That is an example of a matter on which there is no party-political conflict. It is straightforward. The PAC wants to ensure that such expenditure is properly administered and that those who are not eligible under the scheme are not admitted.

That same report deals with the Polish shipbuilding order, where clearly there are major political differences of opinion, as illustrated by a Conservative Member during Question Time the other day. However, we are an all-party Committee, and we should remain as non-party political as we can. In paragraph 84, we state that we accept that the Government needed to take the circumstances of the United Kingdom industry in 1977 into account in accepting the first Polish shipbuilding order. They rejected the second. Some people believe that even that first order should not have been taken because it was not cost-effective. The PAC was pleased that the Government did not proceed to a second order. Another view is taken by those representing shipbuilding areas or who are concerned about unemployment in their constituencies. They would be willing to take even the second order, regardless of price. The Public Accounts Committee has to try to avoid the most direct forms of party-political intervention in order to make the Committee more effective.

The matter would have become highly controversial had the Government decided to take the second order, despite the high cost. What should the PAC have done? It would have commented only on the narrow value for money issue and the effectiveness with which the order was carried out. The PAC is bound to consider that in the wider context. I do not see how it can avoid doing so. It must consider that question and many others and ask whether the cost will be £20,000 a job or £40,000 a job. For example, in some recent evidence in a Northern Ireland case we found that there was substantial cost in a shipbuilding order. In such cases not only is there a high cost per job, but the jobs are temporary, anyway. Clearly, that is a factor that the PAC must look at, particularly if it gets involved in a wider context. It will have to examine closely the cost-effectiveness of public spending.

The work of the PAC is very difficult and delicate. Inevitably, it impinges on social and political policies and the consequences of a particular piece of expenditure. In an all-party Committee where members will have widely-differing views on these and other issues, it is clearly very difficult to get a balance. I shall certainly try to ensure that we negotiate that path without becoming too overtly party political. However, this is a tricky problem and, when we consider the Green Paper, we shall have to bear in mind the whole question of widening the scope of the work of the PAC and the Comptroller and Auditor General.

I turn now to the second report, in which there are five matters relating to Northern Ireland. In the past there has been a sort of tradition that such matters are left to Northern Ireland Members to comment on. I hope that I shall be forgiven if I follow that tradition, although I make it quite clear that there are many very important issues raised there with implications stretching far wider than Northern Ireland. But, given the pressure of time, and the fact that we are considering 14 reports, I hope that I shall be forgiven for not commenting on all these matters.

The third report exposes a different type of conflict. It concerns the off-shore supplies interest relief grants. Again, there are no political differences on this occasion. The grants were introduced under an Act of one Government in 1973, and continued by another Government. There was little disagreement between the two major political parties about the fact that the grants helped to obtain a considerable number of orders in the United Kingdom which might not otherwise have been obtained. On this occasion, the criticism was different. It was a question of what might be called a PAC-type issue of poor administration. The issue was overshadowed by unfortunate errors by the accounting officer who, throughout a long and distinguished career, has otherwise given fine service, not least to the PAC over many years.

Nevertheless, I hope that the experience with the evidence given by that accounting officer on that occasion will not be lost on others who give evidence to the PAC. In fact, I would be very surprised if it was lost. I note that a Treasury minute assures us that every effort is being made to see that officials are fully briefed. I shall be interested to hear whether anything new has emanated from the Treasury to other accounting officers in this respect.

The real conflict in this case was different. It exposed the importance, on the one hand, of keeping the rules laid down by the Treasury for the disbursement of large sums of public money and, on the other hand, of not totally destroying the initiative of civil servants. That is a very difficult balance. In this case, comparatively junior officials saw that the guidelines had to be exceeded on a time basis. Had they decided immediately to get authority to extend the time from three months to six months, there would have been no problem and they would not have been subjected to criticism. Instead, they decided on their own initiative to breach the guidelines. They thought that that was the sensible course. Perhaps it was, but there is still a very important issue at stake. On this occasion, it cost the public no money, but there could be other occasions on which such a breach could cost money. If those guidelines were not necessary, they would not have been laid down. If guidelines are laid down in conjunction with the Treasury and they are ignored by officials, clearly it is an important issue, but I would not want to see it resolved in such a way as to deaden the initiative of civil servants.

A further serious concern that arose from that occasion was the question of internal audit. We found that the internal audit concerned in this case did not throw up what the Comptroller and Auditor General himself found later. Questions of internal audit are of paramount importance, not only in that Department but in many others. We recommend that there should be a review. We have had a note from the Treasury that the Department of Energy is considering again the resources that should be available for internal audit. I hope that the Financial Secretary will tell us more about that because I consider it to be a most important matter. Internal auditing should not be weakened by rightful concern about an excessive growth in staff. This is not an area which should be reduced in size because of the general need to curtail expenditure on the staff side. It is important that any Department should have the necessary resources to ensure a full and adequate internal audit system.

Mr. John Bruce-Gardyne (Knutsford)

I am very interested in what the right hon. Member says about the affair of the interest relief grants. He has conceded that the stretching of the guidelines was perfectly justified in this case. It worries me that the way in which this issue was treated and the publicity that it received will result in precisely what the right hon. Member expressed an anxiety about—a feeling throughout the administration that any degree of individual initiative is dangerous. I believe that the PAC should bear that consequence in mind.

Mr. Barnett

With respect to the hon. Member, who is a distinguished journalist on a Sunday newspaper, I am not responsible for the way in which the press treats a piece of evidence. I regret anything that harms the desire of civil servants to take initiative in a proper way. But that does not mean that I can condone the breaching of properly laid down guidelines. That could well result in serious breaches occurring involving the unintended expenditure of substantial sums of money. That was not the case here. But it could happen on another occasion. Therefore, I do not think that the matter should be treated as such a minor issue as the hon. Member suggests. It is not a minor issue.

Of necessity, I have to deal very briefly with many of the important matters raised in the various reports. Some matters I have not been able to deal with at all, but I know that a number of hon. Members will want to comment on them. The real trouble stems from the limited opportunities that we have in this House to debate reports from the PAC. The last debate that we had was in December 1978. We now have these 14 reports. If any hon. Member wished to speak on all of them—which he would be perfectly entitled to do—the Government would have to apply a guillotine. Otherwise, we would never reach other business.

There is a serious problem, and I recognise that no Government could find enough time for us to debate all the reports of the Select Committees. Now that we have a considerable increase by the addition of the new Select Committees, the position will, inevitably, get worse. If it has taken as long as this to debate the reports of the most important Select Committee of the House, when on earth will we get round to debating the equally important reports from the other Select Committees? I do not blame the Government in this matter. Any Government would find it impossible to allocate enough time to debate Select Committee reports.

I suggested in the Liaison Committee that a possible reform would be to have debates on Select Committee reports in the style of a Grand Committee debate. Not everyone will like that proposal. Many would prefer that the reports be debated on the Floor of the House. However, that choice may not be left to us. It will not be a choice between whether we debate the reports on the Floor of the House or in Grand Committee. It will be whether we debate them in Grand Committee or not at all.

We all know that the likelihood is that report after report will come from the various Select Committees and will not be debated, or, if they are debated, it will be in a year or two. That is wholly unsatisfactory, and we must do something about it. I hope that serious consideration will be given to the issue. I do not suggest that my idea is necessarily the best; there may be better ones. I want to make it quite clear that I welcome reforms by way of new Select Committees. I am not sure that all present Ministers and their officials welcome them, and I can understand why they might not.

The reforms which I hope will come as a result of the Government's Green Paper on the role of the Comptroller and Auditor General, and the possible reforms of the PAC, mean that there will be an increasing demand for time on the Floor of the House. I have thought about the matter, and I cannot see how as a House we shall find the time for such debates.

It would be foolish of the Chairman of the Public Accounts Committee—and certainly for a former Chief Secretary to the Treasury—to say that he was satisfied with the control being exercised now through the PAC and the Comptroller and Auditor General. I am certainly not satisfied. Nobody can doubt that it would be possible to do better, though I imagine that Departments already feel that the PAC investigations are tough enough. In fairness to the Departments concerned, if any organisation, public or private, large or small, were to be subjected to a PAC-type investigation, there is no doubt that waste would probably be exposed to an even greater extent than is discovered during our investigation of Government Departments.

When huge sums of money are spent, it is inevitable that there will be waste. Indeed, there is often waste when small sums of money are spent. There was waste in the public sector before Sir Derek Rayner appeared on the scene. There is waste now that he is on the scene, and there will be waste when he has left the scene. I do not say that cynically or to criticise his work. As far as I can see, he is doing a first-class job.

Our problem as a House—certainly the problem we face as a Public Accounts Committee—is that cutting waste can sometimes have political connotations. Indeed, the Government found that with sub-postmasters, where, in order to eliminate or change a method of administering something in order to save money, there were party political or apolitical repercussions. In other words, we have learned—if we did not know it before—that one man's waste is another man's living.

There is a problem in eliminating waste and making more cost-effective the spending of large sums of money. The problem arises when one attempts to do the job without incurring opposition on the grounds that decisions are party political.

I have sympathy with anyone seeking to make savings in the administration of a particular scheme. If one can save £20 million, that money can then be made available for more important use. I am not opposed, therefore, to saving money on administration. The task of the PAC has always been to eliminate waste and to do so, as far as it can, without being party political. Wherever possible, we wish to see public expenditure made more cost-effective and efficient. We wish to get the best value for money.

I know that there are some hon. Members—my hon. Friends among them—who think that cutting out waste and getting value for money is synonymous with cutting public expenditure. I had some experience of that activity, and I know that that was the way it was seen. That view, however, is wrong. It does not follow that cutting out waste and ensuring efficient administration of public expenditure inevitably means that public expenditure is cut.

On the contrary, it can mean that money saved is spent more cost effectively in order to maintain a particular level of public expenditure. I therefore hope that those of my hon. Friends who from time to time expressed a modicum of disagreement with me when I was Chief Secretary to the Treasury will at least agree with me in recognising the need to eliminate waste and achieve the most efficient system of public administration.

My hon. Friend the Member for Norwich, South (Mr. Garrett), who takes a great interest in these matters, cannot be here today, and he has asked me to apologise on his behalf. He is in his constituency at the local elections. I should like to have been at the elections in my own constituency. I know that my hon. Friend wishes the work of the Exchequer and Audit Department to go much wider than it does now. Let me make it clear that I agree with him.

In the debate on 9 January 1978, my hon. Friend, talking about widening the scheme, said that he would like to have 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."—[Official Report, 9 January 1978; Vol. 941, c. 1369.] That is a sizeable proposition, and we should not underestimate what it means. My hon. Friend was, of course, referring in this context to the work of the GAO in the United States, which is a wholly different organisation from our Exchequer and Audit Department. My hon. Friend usually combines his constructive views—whatever we feel about them, they are certainly expressed constructively—with a criticism of the Exchequer and Audit Department which I feel is unjustified. I agree with his desire to widen the scope of the work, but that desire for a new and extended role—if it was eventually provided for—is not a reason for critcising the valuable work being done by the Exchequer and Audit Department as currently devised.

Misunderstanding of the Exchequer and Audit Department arises among many people when they compare the number of qualified accountants in the Department with the number of qualified accountants in a private firm. What is not generally understood is that in many of the large firms of accountants the people doing the nitty gritty work of detailed audit are not accountants at all. That work is the last thing in the world that qualified accountants would be doing. The people who do that work are usually articled clerks or unqualified audit clerks.

In practice the work done by the Exchequer and Audit Department with—I am happy to say—a growing number of qualified staff can be done equally well by people without a specific qualification other than the qualification of a vast amount of experience on the job. Often it is not possible to do better than to have somebody with experience doing a job.

Mr. English

I do not wish to enter into an argument about accountants, since my right hon. Friend is an accountant. However, he is a little unfair. My hon. Friend the Member for Norwich, South (Mr. Garrett) and I criticised the Comptroller and Auditor General's intake of staff before the present Comptroller and Auditor General was in post—before 1975—basically because we were making comparisons with the Civil Service which his staff audits. The Civil Service is headed by first-class or high second-class honours graduates. Before 1975, the Comptroller and Auditor General was not allowed to employ graduates or professionally qualified people. That was rather odd when their job was to audit the work of people more highly educated than they were.

Mr. Barnett

I hope that I shall not offend too many fellow accountants if I say that the audit work done by the Comptroller and Auditor General's department and by private firms is frequently done just as well by people without first-class honours degrees as it is by those with them. The sooner we stop thinking that the job of an audit clerk, or any other job, depends upon a degree, the better. We should not regard the problem in that way. More and more, my profession is becoming a graduate's profession. I do not object to that and I do not object to graduates. However, the idea that a non-graduate is somehow inferior is unacceptable.

I take the point made by my hon. Friend the Member for Nottingham, West (Mr. English). He implied that he is now much happier with the staffing of the Exchequer and Audit Department. I am sure that the Comptroller and Auditor General, Sir Douglas Henley, wants a steady improvement in the quality and quantity of his staff. There must be an improvement over the wole range if the scope of the Department is to be widened, as my hon. Friend the Member for Norwich, South suggests. I am sorry that he sometimes includes in his justifiable and constructive comments on the need for reform a blanket criticism of the work done by the Exchequer and Audit Department and its staff who, in my experience, do a first-class job.

Nobody, least of all myself, pretends that the present position is even remotely perfect. I look forward to a substantial improvement in the roles of the Exchequer and Audit Department and of the Public Accounts Committee. I accept that we have an inadequate system of control over public funds, but I believe that the work of the PAC, under many distinguished predecessors, has given great service to the House. I shall try to continue that service. I hope that we shall produce a report on the Green Paper fairly quickly. However, I read in a newspaper recently—and I know that I should not believe all that I read in newspapers—that the Government plan in their next legislative programme a Bill to reform the old Acts. It would be surprising if they did that in advance of receiving our report. I am sure that the Financial Secretary will be able to tell us what they have in mind—or what he has in mind, which is not necessarily the same.

Whatever we do about the Green Paper, I am sure that the objectives of the Government and the PAC are the same. We all want to ensure that we get value for money and achieve the most efficient and effective method of conducting public expenditure. In the interests of that, I ask the House to note the vast number of reports before it.