§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Berry.]2.30 pm
§ Mr. Tony Durant (Reading, North)
I wish to raise the subject of the merger of the Liverpool and Reading equipment accounting centres. I am glad to have the opportunity to do so. I succeeded in an application for an Adjournment debate on 2 April, but on that day the House lost its business and I lost my debate. Since then, there has been a change of Ministers.
I am concerned with the transfer of the Ministry of Defence accounts 46 from Reading to Liverpool. The office is located in Market Place House, Reading, and involves 35 people. The work is of equipment accounting which necessitates visits to defence establishments and to contractors. It began its work in 1972 in the wake of complaints here that there was no equipment accounting for Navy items on loan.
A unit was established—accounts 46—and at that time there was also the audits section, accounts 30. In 1976, the accounts 30 audit department was disbanded and accounts 46 took on the role of audit. This led to the setting up of teams entitled "inspection and management". That continued until 1980, when a study team produced a report which recommended the merging of the Liverpool and Reading offices. The report concluded that the merger would result in savings and yield an improvement in control and management.
The trade union side received the report. At a joint meeting on 16 February the unions registered disagreement with it and presented a paper. A reply to the unions was given on 9 March. It confirmed the amalgation. The union was asked to discuss detailed implementations of the report. As far as I know—certainly up to 30 April last—it has not replied to these discussions.
I oppose the move on grounds of jobs—there has been a sharp increase in unemployment in Reading recently—of cost, and because it is contrary to the recent policy of bringing provincial offices back to the London area. Obviously, as the local Member of Parliament I am anxious to preserve every job I can for my constituents. On costs, I should explain that accounts 46 deals with southern establishments. It travels to defence establishments and to contractors, usually taking only one day to do so. That is not so expensive as it will be if those concerned have to travel from Liverpool. I believe that there will be a substantial increase in costs. A rough estimate has put the figure at £2,199, arising because the establishments visited included those in Bristol, Gloucester, Cambridge, Basingstoke, Cheltenham and Plymouth. This, therefore, could be an expensive move. It would also mean a remoteness from these establishments, and remoteness increases inefficiency.
On the question of the recent policy to move offices back to the London area, my hon. Friend the Member for Beckenham (Mr. Goodhart), the Minister who wrote to me, said when in Opposition in 1978:Then there is the operation of the Location of Offices Bureau. Surely this whole story reads like a script from that long-running BBC series, 'The Men from the Ministry'. First, the Location of Offices Bureau was set up to encourage firms to move out of London. Now, at double the cost, it seems, the 1204 Location of Offices Bureau is encouraging firms to move back into London. But whilst one arm of the Government, the Location of Offices Bureau, is encouraging firms to move back, another branch of the Government, the Civil Service Department, is enthusiatically insisting that unwilling Londoners are moved out of the capital.My hon. Friend the Member for Chislehurst (Mr. Sims) and the hon. Member for Woolwich, East (Mr. Cartwright) attacked aspects of the Hardman report. They referred to the move of certain defence installations up to Glasgow at a cost of some £20 million. But that, of course, even in defence matters, is only part of the story. Thousands of civil servants from the central part of the Ministry of Defence are to be dispersed to Cardiff and Glasgow. There can be no doubt that this will cause massive personal disruption to thousands of families. There can be no doubt that it will cause substantial dislocation in the working of the Ministry of Defence itself. There can also be no doubt that will be extremely costly.It has been estimated that the full cost of dispersing the Ministry of Defence will come to about £300 million. That was the original estimate. Since then, it is thought that the cost of dispersal will come closer to £600 million. This is a crazy expenditure of public money, and I beg the Government, in the face of demands from the civil servants and their unions and the mutterings in the Ministry of Defence itself, to have another look at this. The employment position in Greater London has been transformed since the Hardman committee reported."—[0fficial Report, 1 August 1978; Vol. 955, c. 478–9.]So even my hon. Friend, when in Opposition, felt that it was not a good idea to move people in this way.
As the previous Minister, my hon. Friend the Member for Beckenham has been very helpful. Following my lost Adjournment debate we corresponded and he sent me a letter dated 30 April. I was not entirely happy with it, but I was somewhat reassured and I should like to quote the final paragraphs of the letter. My hon. Friend wrote:I am very aware of the strength of feeling amongst some of the staff at Reading against the closure of the office and I can understand their concern over their future employment. In order to achieve the objective of concentrating the equipment accounting function at Liverpool and at the same time to honour the assurances that have been given that the transfer will be geared to staff wastage at Reading, it is the intention that as members of the Reading staff leave on retirement, transfer or for other reasons, an appropriate block of work will be removed and will become part of the Liverpool office commitment. The blocks of work to be so moved will in the main be those accounts which are nearer to Liverpool. The dividing line between the areas covered by the two offices will therefore gradually move south, until the Reading office becomes responsible mainly for the accounts maintained in the south-east and the southern counties.This process may take several years, and the moves will be closely managed by the senior staff of the Accounts Directorate. It is then possible that the viability of the Reading Office will be reviewed and a fresh examination of the division of responsibilities between Liverpool and Reading undertaken in the light of circumstances at that time. Should it prove sensible to maintain the Reading office at its reduced level then that would be a possible course of action. But there would be difficulties of servicing, supervising and recruiting staff for a small and isolated unit, detached from the office where the main activity is concentrated.In adopting this gradual and staged approach to the merger it is not the intention that staff will be arbitrarily moved from the Reading office purely to accommodate the process; our plan is that wherever possible the work will move to Liverpool as moves of staff arise in the normal course of events.That gave me some reassurance, but since then I have heard from the unions that they have been told in a letter that this move now has "ministerial approvement" in a circular which was sent to them. I understand that some transfers are already being planned, some to take place as early as the end of July.
The staff at Reading, justified or not, feel that this move is a takeover bid by Liverpool and that Liverpool wants to 1205 get its hands on this work. They also feel that Liverpool must be overstaffed if it can easily absorb the work from Reading. I urge the Minister to think again.
The experience of establishments, public or private, is that amalgamation rarely saves much more. That is also my own experience having been involved in a number of amalgamations. Large organisations generally become more inefficient because of their size. I already mentioned the cost of travel, which will mount, and the distances will make for less scrutiny.
I urge the Minister to think again about these matters. I shall listen to his reply with some interest.
§ The Under-Secretary of State for Defence Procurement (Mr. Geoffrey Pattie)
Following the loss of this debate on the date originally set for it, my hon. Friend the Member for Beckenham (Mr. Goodhart), whose responsibility it then was, wrote to my hon. Friend the Member for Reading, North (Mr. Durant) setting out the main points that he had intended to cover in the debate. I am glad of the opportunity now to explain to the House in more detail the Ministry's intentions for the future of the equipment accounting centre at Reading.
The Directorate of Accounts (Bills) has three main functions. They are: authorisation and payment of bills submitted by MOD contractors who supply stores and services to the Ministry and the three Services; claiming and receiving money due to the MOD for goods and services supplied to foreign Governments, and United Kingdom customers; and monitoring the store accounts maintained by the Ministry's contractors who are custodians of Ministry property.
The bill-paying operation has a turnover of about 750,000 bills a year, to a total value of more than £4,500 million. It deals with about 10,000 contractors and there are almost 100,000 contracts open at any one time. About 770 staff are employed, about 500 of whom are involved directly and indirectly in the bill-paying activity, and about 200 on the invoicing and receipts operation, which brings in about £1,000 million a year.
The equipment accounting office at Reading, to which my hon. Friend has referred, together with its counterpart at Liverpool, is therefore responsible for supervising the control and usage by MOD contractors of Government-owned equipment and material which they hold on loan in support of Ministry contracts. The value of the stores at contractor's works which are examined by the two offices is put at £1,500 million. As part of that task, the staff of the two offices make inspection visits to some 500 contractors each year.
The work is divided between Reading and Liverpool. The geographical dividing line is drawn somewhat arbitrarily through the Midlands, though some accounts and inspections in the South are, for sound administrative reasons, monitored from the Liverpool office. As a direct result of their inspection the ministry recovers about £5 million a year from these contractors and the total costs of the inspection organisation is about £600,000 a year.
In comparison with the Liverpool office of the directorate, with its strength of about 750 staff, the Reading office consists of 14 executive grades and 10 clerical grades supported by one messenger. The executive staff ensure that adequate instructions are issued to contractors to enable them to account correctly for MOD property. They exercise control by creating auditable 1206 equipment accounting systems at the contractors' works and are responsible for the management and audit of these systems. Approximately 60 per cent. of the time of the executive staff is spent at contractors' works. There is also a considerable clerical oversight of these contractor accounts which includes the receipt of vouchers detailing the movement of equipment, stocktaking certificates, scrutiny of new contracts, claims on contractors, and the,. progressing of queries.
The present proposal to close the Reading office and transfer the functions to its counterpart at Liverpool derives indirectly from a study of the Liverpool bill-paying arrangements, which was undertaken in 1979. This was one of six studies put in hand by the Secretary of State as part of the Government's review of Civil Service activities announced on 11 June 1979 which was reported in column 68 of the Official Reportfor that date.
The recommendations made in the report of the bill-paying study indicated that substantial savings of staff could be achieved by 1983 by streamlining checking and payment procedures. The report was accepted by the Defence Council and major changes have already been introduced.
The results of the study were put to the trade union side of the MOD on 23 November 1979 with the added comment that consideration should be given to mitigating the foreseen job losses at Liverpool by transferring work presently done in the South of England. The trade union side did not respond to the invitation to comment. In March 1980 a further consultative paper was sent to the trade union side setting out in more detail the Ministry's thinking on the possible transfer of work to Liverpool. The paper identified the Reading accounting centre as a firm candidate to move to Liverpool, subject to more detailed study.
The study, which was finally completed in November 1980, concluded that the transfer of the Reading function to Liverpool would result in direct savings in costs and would yield benefits from improved control and management of the tasks and from its closer integration with the remainder of the accounts directorate. The possible alternative of leaving some of the work at Reading was examined, but the report concluded that it would detract from the advantages to be gained from complete merger of the functions and a small residual office would be difficult to maintain as a permanent arrangement. Because of the effects of closure on the Reading staff, the study report recommended that the transfer of work to Liverpool should be geared as far as possible to staff wastage in the Reading office.
The trade union side was provided with the report in November 1980 and told that the directorate proposed to accept its recommendations, subject to discussion with the trade union side.
§ Mr. Durant
Will my hon. Friend ensure that his point about the slower handover is implemented, as that is one of the anxieties?
§ Mr. Pattie
My hon. Friend who was then responsible for those matters wrote to my hon. Friend the Member for Reading, North saying that we intended, as far as possible, to link the transfer to natural wastage, and that remains our intention.
A meeting was held on 16 February 1981, when the departmental trade union side registered its disagreement 1207 with the proposed merger and presented a paper containing its comments and observations on the study report. A detailed reply was given to that paper on 9 March 1981. That confirmed the view of the directorate management that the decision to proceed with the merger should be taken, but invited the trade union side to discuss the details of implementing it. The trade union side replied only a few days ago to that letter.
In addition to the conclusion that there are very important administrative advantages to be gained from moving the office from Reading to Liverpool, the report said that a net saving of £10,000 per annum could be achieved. I shall deal with this aspect in greater detail in a few moments.
I am aware of the strength of feeling among some of the staff at Reading against the closure of the office, and I can understand their concern about future employment. However, assurances have been given that the transfer of functions to Liverpool will be geared as far as possible to staff wastage at Reading—that is, on retirements and the normal turnover of staff to run down the numbers. I am glad to give my hon. Friend that assurance again.
For example, in the next two to three years some executive and clerical staff will reach retirement age. The 14 executive grades involved are, of course, liable to geographical transfer by their conditions of service. Consequently, some will become due or request moves for career development purposes. In the case of the 11 clerical and messengerial staff who are locally recruited, we expect to be able to absorb them without great difficulty into other establishments in or near Reading should it eventually prove necessary to do so. By adopting this gradual and flexible timetable for the transfer of work, it would seem that there will be no more than one or two cases of difficulty in the executive grades to which we shall need to give special consideration.
As I mentioned earlier, the equipment accounting operation is divided between the Reading and Liverpool offices on a geographical basis. To achieve the objective of moving the task to Liverpool it is the intention that, as members of the Reading staff leave the Reading office on retirement or transfer, an appropriate block of work will be removed to and will become part of the Liverpool office responsibility. Obviously, the block of work to be so moved as opportunity presents itself will, in the main, be those accounts which are nearer to Liverpool.
Over a number of years the dividing line between the areas covered by the two offices will, therefore, gradually move South, until the Reading office becomes responsible mainly for the accounts maintained in the South-East and the southern counties. This may take some time, and the moves will be closely managed by the senior staff of the directorate. It is then possible that the viability of the Reading office will be reviewed and a fresh examination of the division of responsibilities between Reading and Liverpool undertaken in the light of circumstances at that time.
Should it prove sensible to maintain the Reading office, that would be a possible course of action to be taken, but it must be obvious that it may prove difficult to service, supervise and recruit staff for such a small and isolated unit detached from the office where the main activity is concentrated. it must be emphasised it is not the intention that staff will be arbitrarily moved from the Reading office 1208 merely to accommodate that policy. Wherever possible, the work will move to Liverpool as moves of staff arise in the normal course of events.
The directorate was authorised to inform the trade unions that ministerial approval had been given to these arrangements. This was done in a letter of 19 May 1981, which again invited the trade union side to discuss implementation. Its reply to this letter was contained in the recent correspondence to which I referred earlier.
Meanwhile, recent or imminent moves of staff from Reading have made it possible to reallocate to Liverpool about 200 man days of inspection out of the total of 1,300 man days currently allocated to the Reading office. This change will take place from 1 August in line with the gradual process that I have described.
My hon. Friend referred to a number of points on which the trade union side has disagreed with the conclusions of the co-location study. It has been suggested by the Reading staff that the study report understated the extra travelling costs likely to be incurred by concentrating the inspection task at Liverpool. The trade union side has claimed that the extra travelling costs could be as high as £15,000 a year compared with the study team's estimate of £12,000. The trade union figure assumes that the past patterns of inspection would be maintained with the extra costs of travel for Liverpool added. In practice, however, the level of the travelling commitment and the costs incurred are variable, depending on the programming and grouping of inspections. The study team recognised this in making its estimate. We have accepted its figure as no more than an indication of the order of costs involved in relation to a total current travel budget of £73,000 a year.
In operating the inspection task from a single office with a combined and more flexible staffing level, we shall be looking for means of gaining the maximum advantage from the merger. The functions will be reappraised on the basis of both manpower and travel costs incurred and the results achieved. The management of the accounting directorate has, in effect, imposed a cash limit for the current year by committing itself to a programme of work which will ensure that the travelling costs for last year will not be exceeded in 1981–82.
In its examination of the study team's overall cost statement, the trade union side disagreed with the conclusion that there would be a small net cost advantage of £10,000 a year. The difference was due largely to the disputed saving of two posts, with an annual cost saving of £12,000, which the study team had said would result from the merger of administrative support functions. Our further examination of the facts has confirmed that the staff savings will be achieved as a direct result of co-location.
It is also worth mentioning at this point that the Liverpool office is currently engaged on a thorough review of its procedures in general, and is introducing new systems and techniques which so far have reduced its staff numbers by almost 60. It is expected that a similar reduction in numbers will be achieved in the next two years or so. It is therefore fairly clear that the equipment accounting operation will be set in an environment where methods and procedures are critically examined for cost effectiveness, and it is expected that the equipment accounting activity will also contribute some savings.
As my hon. Friend is no doubt aware, the original arrangement, with a certain number of these offices scattered throughout the country—inherited from the days 1209 of the Ministry of Supply—has over the years seen a reduction of the centres, leaving Reading as the only centre in the country, apart from the head office at Liverpool, still in existence. My hon. Friend will also be aware that it is part of current Ministry of Defence policy to try to move the emphasis not only of the monitoring of contracts but of the adequacy of proper accounting procedures on to industry, therefore requiring less detailed monitoring and policing.
The overriding consideration in proceeding with this transfer has been the administrative and management advantage to be gained from bringing together the two accounting offices with the remainder of the directorate concerned. Apart from the benefits from the functional point of view in the greater co-ordination of our business with defence contractors, there are also advantages in staff management terms. Recruitment, training, interchangeability and more flexible deployment of staff can be arranged more efficiently within the larger complement and wider range of work available at Liverpool. The combination of these factors will allow better integrated and more efficient management of the directorate's resources than is possible at present. The marginal savings 1210 in staff and costs which we have identified are useful bonuses, but would not in themselves justify the disturbance of the present arrangements. But, given the important advantages that I have mentioned, it would not be sensible to forgo them merely to avoid disturbing the present arrangements.
This does not mean that we are insensitive to the human element of such proposals. Indeed, we readily appreciate their anxieties. But I hope that I have shown that we are not implementing arbitary moves and are proposing a gradual transfer of work linked to staff wastage at Reading which will be carefully supervised and managed, and that where personnel difficulties arise they will be given special consideration. The trades unions have been fully informed of our proposals throughout, and I hope that they will feel able to accept our long-standing offer to discuss their future implementation. However, I cannot offer any hope at this stage of changing the objectives of our proposals, which offer considerable administrative and management advantages.
§ Question put and agreed to.
§ Adjourned accordingly at six minutes to Three o'clock.