§ [Relevant documents: 1st to 17th Reports from the Committee of Public Accounts in Session 1980–81, and the 1.st to 5th Reports in Session 1981–82, and the relevant Government Observations.]
§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Cope.]
§ 4.1 pm
§ Mr. Joel Barnett (Heywood and Royton)
The reports of the Public Accounts Committee that we are debating are extensive. We are debating the first to the seventeenth reports for 1980–81 and the first to the fifth reports of 1981–82. I am sure that the House will forgive me if I do not refer to every one of them.
§ Mr. Barnett
If my hon. Friend were to insist on a reference to all of them, I could attempt to do so.
It is traditional to begin these debates—the fact that it is traditional makes it none the less important—by thanking a number of individuals, especially colleagues on the Public Accounts Committee who always give me the most valuable support, both in Committee and on the Floor of the House. I am most grateful to them. I wish also to thank the Clerks that the PAC has had. I think particularly of the former Clerk, Mrs. Irwin, and the present Clerk, who is John Rose. We have come to expect invaluable service from them and we have not been disappointed either by them or the small staffs that assist them—the Assistant Clerk and the young lady who assists in typing the reports.
I thank the former Comptroller and Auditor General, Sir Douglas Henley, the present holder of that office, Gordon Downey, the Northern Ireland Comptroller and Auditor-General, Mr. Calvert, and their staffs, who help to give our work the importance with which it is received both in the House and outside. Equally, I thank the former Treasury witness, Mr. Carey, and the present one, Mr. Judd, who gave and who give the PAC invaluable assistance. The same goes for all the Treasury witnesses, the accounting officers and other witnesses who gave evidence to the Committee.
As I have said, I cannot refer to all the reports that we are considering, but the reports to which I refer have a common thread because they all deal with waste, extravagance, cost-effectiveness and efficiency, value for money, financial control and accountability. All those general issues were at the heart of our major report in the first special report of 1980–81 on the role of the Comptroller and Auditor General. I do not wish to debate that report again today as we debated it as recently as 30 November, when it was virtually unanimously received by the House. Indeed, the Committee condemned the Treasury response, again virtually unanimously, and was supported by nearly 300 Members on both sides of the House in an early-day motion. Since then we have been promised a rather better response from the Treasury, and I hope that we get one. I am sure that the House will want to see a better response.
30 We were promised a better response by the former Leader of the House, who has been moved on to higher things. I hope that the present Leader of the House will be able to ensure that there will be no further delays on the part of the Treasury. I hope that the Financial Secretary to the Treasury will be able to give us that assurance. There have been indications that there are to be discussions with the Leader of the House and the Treasury on the new response that we are to expect, but in advance of that meeting I want to express some concern about the reply that was given on 6 April to a question tabled by my hon. Friend the Member for West Lothian (Mr. Dalyell). My hon. Friend asked:Ought the Public Accounts Committee to have access to British Leyland books?That was a fairly simple and straightforward question of the sort that my hon. Friend is adept at asking. I do not wish to refer to British Leyland but I am concerned about the Prime Minister's response. She said:The Government's view is this. The PAC has access to all those papers to which Government Departments have access and for which Ministers are responsible to Parliament. It is our present view that if the PAC were able to call for all papers in respect of public enterprises in regard to commercial contracts or commercial details, that would make it difficult to make those commercial decisions. It would also be extremely difficult to get anyone to run those undertakings."—[Official Report, 6 April 1982; Vol. 21, c. 822.]I consider that reply to be important and serious.
Neither I nor members of the PAC wish to make difficult commercial decisions more difficult. Nor do we want to make more difficult the task of Governments in finding the best possible people to run public enterprises. However, there are two major fallacies in the right hon. Lady's reply. First, there is the fallacy that the way in which the Comptroller and Auditor General and the PAC would deal with these matters when he and it has the access that has been requested would create the difficulties to which she was referring. That is a serious error on the right hon. Lady's part and on that of the Government. There has been much experience about the way in which the Comptroller and Auditor General and the PAC work. That evidence is that there is no reason to hold the fears that the right hon. Lady expressed.
The second and most important fallacy was the right hon. Lady's total failure to recognise the underlying importance of accountability to Parliament. I understand that it can be something of a nuisance and could create some difficulties, but I hope that all hon. Members will agree that it would be better to be something of a nuisance and to create some difficulties for public industries than to continue with the present system, which provides totally inadequate parliamentary accountability.
§ Mr. Tam Dalyell (West Lothian)
It was a considered reply because as my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) will recollect, as soon as the question was tabled I sent a long letter to the Prime Minister explaining the background to the question and giving substance to the rather artless question that I asked. I sent copies of that letter to my right hon. Friend and to the right hon. Member for Taunton (Mr. du Cann). It was a reply that the Prime Minister and her civil servants and advisers had presumably been able to think about for 12 days.
§ Mr. Barnett
I am obliged to my hon. Friend. I am always grateful to him for his courtesy in letting me know 31 when he wishes to raise such issues. When my hon. Friend put his question to the Prime Minister it was at a moment when I think he would have preferred to be putting questions on the issues of the day. However, that does not alter the fact that it was an important question.
As my hon. Friend rightly said, the Prime Minister has had time to consider her reply. It is sad that she appears to have taken the views that I assume have emanated from the Treasury. I hope that the Financial Secretary will be able to tell us today that, in the light of the clear views of the House, as expressed on 30 November and in an early-day motion, we are entitled to some clarification of the Prime Minister's reply. If we are to have serious and meaningful discussions with the Chancellor and the Leader of the House, I hope that they will be serious and meaningful. I hope that the Government's mind has not been closed in the way that the Prime Minister seemed to indicate.
In her reply the Prime Minister used expressions such as the Government's "present view". I know how carefully such words are used. I hope that that means that the discussions with the Chancellor will be genuinely open. Perhaps the Financial Secretary can confirm that the Government's present views do not exclude important changes that could go a long way to meet the views of the PAC and a large number of others hon. Members.
I turn to specific reports that highlight the important issues dealt with in the general report. I hope that, as usual, it will not be thought disrespectful to the serious and important problems of Northern Ireland if I do not refer to the seventh report. It has become the custom to leave such issues to Northern Ireland Members. I am happy to leave the matter to the right hon. Member for Down, South (Mr. Powell).
§ Mr. J. Enoch Powell (Down, South)
It is always welcome to Northern Ireland Members if right hon. and hon. Members representing other parts of the United Kingdom show an interest in the affairs of that Province.
§ Mr. Barnett
We are dealing with a huge number of reports—17 in one year and five in another. I should like to deal with the issues referred to in the seventh report, but we dealt with them extensively in Committee. I hope that the evidence that we took and the report show how much we concern ourselves with Northern Ireland matters.
§ Mr. Barnett
I have never thought of Northern Ireland as anything other than a part of the United Kingdom.
I wish to deal with the cost-effectiveness and efficiency of a Department that is frequently discussed by the PAC—the Ministry of Defence. It has been reported on critically by successive PACs for 30 years. I refer specifically to the third report of 1980–81. For three successive years—1978–79, 1979–80 and 1980–81—it has exceeded its cash limit. We are well aware of the difficulties of managing development programmes, particularly for sophisticated military equipment. There are great problems. The Comptroller and Auditor General tells us that there are more than 20 projects with costs in excess of £500 million, which highlights the startling size of projects within the Ministry of Defence. There are 32 bound to be unforeseen difficulties and escalating costs, but the Ministry of Defence constantly and seriously underestimates them. Would many of the huge projects have been started had there been a more realistic cost estimate?
The sixteenth report of 1979–80 looked at the costs of the Sting Ray torpedo, which were remarkable. Development and production costs at September 1981 prices totalled £1,211 million. When the project was first mooted in 1969 the estimated cost was £74 million. Of course inflation has been substantial between 1969 and 1981, but it is not unusual in such large projects for the costs to escalate vastly. One wonders whether the Treasury would have agreed to the project had it been suggested that the cost could escalate to that extent. It might have considered a different project or buying a system off the shelf from the United States.
In the early stages of such a project, when the technical task was considered, there should have been a thorough study, but there is always great urgency to get projects under way. The Sting Ray project started in 1969 and is not yet in full service, yet there was great urgency to get it under way. The PAC was not convinced that curtailing feasibility and project definition studies saves time in the long run. It certainly does not save money.
Another consideration must be whether it is possible to incorporate incentives to efficiency into contracts for development projects. It is a great problem. I welcome the Ministry of Defence proposal for a measure of joint funding with industry, where possible. Can the Financial Secretary tell us how such joint funding projects are progressing? How does he see them injecting greater incentive for cost-effectiveness?
I wish to put a topical question in relation to the Ministry of Defence's current cash limit. I do not wish to see our task force to the Falkland Islands restrained by a financial limit, and I doubt whether any other member of the PAC would, but the House is entitled to know how additional cash expenditure will be met. Is the Ministry's cash limit to be wholly suspended or will it be maintained with cuts elsewhere within its budget or with any overspend coming from the general contingency reserve?
I wish now to deal with financial control and accountability and particularly with the ninth report of 1980–81 on internal audit. To put it mildly, the PAC found the Comptroller and Auditor General's findings disturbing. The overall standard was substantially below what was needed to ensure that departmental systems were operating satisfactorily. Secondly, the audit of computer-based sytems was widely inadequate. Twenty-eight small departments and other bodies with a total voted expenditure in excess of £450 million had no internal audit system.
Some of the points raised by the Comptroller and Auditor General about internal audit are very interesting. Paragraph 12 of the report sets out clearly some of the reasons that led the Comptroller and Auditor General to be concerned about the internal audit within Government. The Public Accounts Committee felt that the review was a most useful exercise. It was also welcomed by the Treasury and the Civil Service Department, which have now initiated energetic programmes. Will the Financial Secretary tell us what progress has been made?
The fourteenth report of 1981 about the carry-over of cash limits at the end of the financial year was raised by the Treasury, which was interested in the proposition and 33 which put forward some methods of dealing with the problem. We have heard some of the special problems, especially in relation to the Ministry of Defence. The Public Accounts Committee recognised that there were strong arguments both for and against the idea of dealing with the problem of carry-over of cash limits—problems of accountability and control within any Department that had such a carrying-over. With a budget, such as the Ministry of Defence has in 1982–83, of about £14 billion, there will inevitably be problems of carry-over at year ends. Any scheme must be strictly limited to maintain effective financial discipline.
The Public Accounts Committee favoured a controlled experiment to see whether an effective system of carryover could be allowed for a Department such as the Ministry of Defence. Eventually, we were told that the Treasury had turned down the proposal because it would require the provision of an extra £250 million in 1982–83. The Treasury hoped that it would still be possible to bring the matter forward again, as it said, when financial circumstances permit. What are the prospects for bringing forward an experiment in the near future?
Another major Department where financial control is of concern is the Department of Health and Social Security. The Committee dealt with various aspects of that in its seventeenth report of 1980–81. It referred especially to control of National Health Service manpower. I stress again that the Public Accounts Committee does not express a view about the total expenditure or total manpower, but believes that, whatever total is decided by the Government, it should be efficiently spent and properly controlled.
The Committee saw some startling figures. Since 1948, the number of employees in the National Health Service has doubled to more than 930,000. Between 1971 and 1979 there was an increase of 174,000. The number of professional and technical staff in England and Wales rose by 47.4 per cent. and in Scotland by 72.6 per cent. Those NHS increases are astonishing.
Reasons were given to us by the Department's witnesses that in some ways are understandable. First, there is unlimited demand for health care. Secondly, the growth, range and complexity of treatment demands constantly increasing costs. Thirdly, there has been a growth in the elderly population and, fourthly, and rightly, there have been improvements in conditions of service for the staff. The DHSS took the broad view that adequate control of manpower against that background was best achieved by the use of cash limits.
As one who introduced or extended the system of cash limits, I am, naturally, not opposed to their use, but the Public Accounts Committee feels that we should explore the feasibility of more detailed controls and targets for administrative and clerical staff rather than just try to control expenditure by cash limits alone. There is a danger that, while keeping within a cash limit, one might seriously distort the size of medical and non-medical staffs and therefore the balance between the two. The Treasury minute in reply to our report states that the Government are inquiring into the causes of growth in administrative and clerical staffs. Perhaps the Financial Secretary will give us whatever information he has about the progress that has been made to date.
The Public Accounts Committee also considered regional and geographical variations in the National Health Service. We all know those variations because we 34 find them in our own constituencies. Paragraph 19 of the report refers to the Comptroller and Auditor General's views and the statistics that he presented to us about the widely varying staff numbers in relation to apparent work load. We recognised that uniformity of staffing levels is not a practical objective. However, we were surprised that the Department disclaimed responsibility for making regional comparisons. That must be surprising, because who can carry that responsibility other than the DHSS? Overall, the Public Accounts Committee expressed deep concern about the slow progress in developing a fully effective system of manpower planning and control. What further action will now be taken?
I could have chosen many more reports and examples of our concern for value for money, efficiency and effectiveness in the spending of scarce public resources. I have limited myself to comparatively few reports in order to shorten the time that I shall speak in the debate. However, I wish to mention an unusual part of our expenditure which involved the first case of the Public Accounts Committee travelling abroad. It did so only because of the importance that it attaches to the matter. I refer to the fifth report of 1981–82 where we considered expenditure in the EEC and the control exercised by the Court of Auditors. We felt that the Court of Auditors was of growing importance to British taxpayers, given what we know of the lack of efficiency in spending within the EEC. So we took views—they did not wish to call it evidence—from the Court of Auditors and the Commission. We are grateful to them for their cooperation.
The Court of Auditors was established only in 1977 and we recognised that difficulties with the Commission have arisen. There is a problem of overlap between the two bodies, and there is clearly a need for the powers and functions of the Court of Auditors to be unambiguously defined. Therefore, we recommended that much greater attention should be paid, especially by the Government, to the Court of Auditors' report. But whatever view we take of the level of public expenditure, relatively high levels of expenditure will continue within the EEC and the United Kingdom. There will, therefore, be a constant need for greater efficiency and effectiveness in the spending of public money. The same point applies to better financial control and accountability.
I hope that the reports that we are debating today, and the continuing work of the Comptroller and Auditor General and the Public Accounts Committee, will help to achieve more effectively the objectives that we all share.
§ Mr. Peter Hordern (Horsham and Crawley)
It is a privilege to follow the right hon. Member for Heywood and Royton (Mr. Barnett). I very much enjoy serving under his chairmanship of the Public Accounts Committee. He always asks the most penetrating questions, and he allows his colleagues on the Committee extensive freedom to ask questions—even though to other colleagues they may appear to be rather too extensive—and I am grateful to him for that.
The right hon. Gentleman mentioned the difficulty which the Comptroller and Auditor General found in getting at the affairs of British Leyland and, I think, of Rolls-Royce. It has always seemed strange to me that the 35 Comptroller and Auditor General should not be allowed free access to both bodies, as he has to the nationalised industries.
The Comptroller and Auditor General has access to the Department of Health and Social Security and to the Department of Education and Science, so that in regard to contracts which those Departments may have with the private sector for the building of hospitals or schools, he has a perfect right to see papers at any stage, but if British Leyland or Rolls-Royce has a commercial contract with another body, he does not have the same right of access. He has access only to whatever papers might be in the Department of Industry relating to those projects. I do not see why that anomaly should exist.
I know very well that those who serve in British Leyland and in Rolls-Royce regard themselves as somewhat different beings from those who are employed in the public sector, but inasmuch as public expenditure is directed at those bodies, they should be every bit as responsible to this House as are the DHSS and the Department of Education and Science.
I do not think that the Comptroller and Auditor General would or could operate to the disadvantage of either British Leyland or Rolls-Royce in carrying out its commercial judgement. Indeed, we found that there was every reason for the Comptroller and Auditor General having early access to the papers of the National Enterprise Board. I do not like to think that the House might in future be ill-served as a result of the Comptroller and Auditor General not having access to the papers at an early stage because considerable sums of public money might be involved.
Another matter touched upon by the right hon. Gentleman was the procurement policy of the Department of Defence, and he mentioned the Sting Ray project. I remember it very well. He said that the sum involved in the Sting Ray torpedo was about £1,200 million. With the rapid technological advance in these weapons, the cost increases are such that, inevitably, expenditure on more conventional weapons within the Department is cut—and cut sharply. I have noticed that in the case of one company in my constituency, MEL. It has found, not that the naval programme has been cut back very much in general, but that in particular, because of the increasing sophistication of weapons, expenditure has been directed elsewhere.
In the case of Sting Ray—and also in regard to a heavy weapon development of some kind—it seems likely that expenditure will rise even faster than anything that we have known so far, and that expenditure on conventional weapons may decline because of that factor. That policy could damage our defence requirements.
I know that the House will not expect me to pass by the 17 reports without having something to say on the state of the National Health Service, which always features in our reports. In the two and a half years since the last general election, the number of National Health Service staff has increased by about 67,000. That figure came not from the DHSS but from an announcement in a Government publication, dealing with economic trends, from the Central Statistical Office in January of this year. I rather suspect that the Central Statistical Office knew long before the DHSS how many people were employed in that Department. Indeed, I think that that has been the case for a long time. I believe that even now the Department knows 36 only the number of people employed in the NHS as at September last year. The reason is that the Department does not think it is important that it should know how many people are employed within the NHS or what they are doing.
The central criticism that the Committee has had for a long time in regard to the NHS is that the Department, because of its policy of decentralisation, has judged that it is none of its business to ascertain what the regions are doing, and still less what the districts may be doing and who they might be recruiting.
The result is that health policy has not been worked out from the centre. There has, as far as I can see, never been any health strategy as such. Policy has been determined by blocks of money which have been allocated to the regions from time to time, and which they have been told to spend as they think fit. We can judge only by the results—it is not up to us to criticise the policy—but we have noticed that in the NHS by far the largest growth in expenditure within personnel has been in the number of administrators, technicians, secretaries and clerks.
After the last reorganisation of the NHS, the number of administrators grew by about 20 per cent. within the short period of 18 months, and the NHS continues to follow that policy. The latest figures, to the year ending September 1981, show a further increase of about 3,200 in the number of administrators. That is the largest growth in any year since a staggering growth of over 7,000 was achieved in the year ending September 1976. It is not satisfactory to allow expenditure to go on rising in that way without there being any central accountability within the Department.
We are not concerned here with policy, but I do not think that successive Governments can be faulted in their allocation of resources to health over the many years since the war. The expenditure devoted to the DHSS by successive Governments has been admirable—the proportion of gross national product accounted for by health services has increased regularly year by year—but I cannot say the same about the performance of the NHS.
In our report in 1980–81 we stated that there were nine new hospitals in England and, three in Scotland which could not be used because there was insufficient revenue to run them. They could not even be opened. A year later we are happy to see that there has been an improvement, and that the figure of 3,000 beds unused has been reduced by 632. It is extraordinary to build hospitals which cannot be used because there is not the revenue available to run them.
It is common knowledge that the hospital waiting list has decreased in the last two years. It is now 628,000, but that number is higher than it was in either 1977 or 1978. Again, we have figures only for 1980, which in itself is a commentary on the state of efficiency in the National Health Service. They show that the number of cases dealt with has increased in almost every category of health, yet demand is still growing, as is shown by the size of the hospital waiting list.
The figures also show that despite the hospital building programme there were fewer beds available in every category, whether acute, geriatric, young and disabled, obstetrics, mentally ill or mentally handicapped. It is time that the Department came to a proper strategic decision about the health of the nation. Is it right so to decentralise the expenditure of the Health Service that the Department 37 is not aware of what the regions are doing? Is this the best way of obtaining the maximum use of the considerable resources that are devoted to the Health Service?
After considering the results, the increase in the number of administrators and the cost of running the service, the cuts that have had to be made in hospital building programmes and the inefficiencies that have been drawn to the Committee's attention, not once, but in every year in which we have sat, the judgment must be that the running of our Health Service is bad, and it is high time that it was improved.
There is a misconception about the position of the Health Service, in particular on pay and salaries. The National Union of Public Employees and the Confederation of Health Service Employees are preparing to take industrial action because they do not agree with the pay formula that has been judged right for them of 6½ per cent. for nurses and 4 per cent. elsewhere. However, to draw a comparison with the outside world, the 6½ percent. limit there would mean that in cash terms there would be no expenditure greater than 6½ per cent. at the end of the year than it was at the beginning.
In the public sector, 6½ per cent. does not mean the same thing. It certainly does not mean that with the National Health Service, because the amount taken up in wages and salaries forms a fairly constant proportion of all expenditure incurred in the service. That comes to roughly 70 per cent. As the block grant is considerably more than 6 per cent. for the pay factor alone, it is almost certain that the sum that will be spent in wages and salaries in the NHS, because of recruitment on almost every category, will be at least double that pay factor.
We know that in 1980–81 the cost of wages and salaries rose by £1,200 million, or 31 per cent. Had the same proportion been taken up—that is to say 70 per cent. of the total amount available for the NHS—in wages and salaries, the increase last year would have been about 15 per cent., and not the 6 per cent. guideline.
Therefore, the NHS is different from the private sector. When we talk about controlling the cost of wages and salaries in the NHS we do not mean what we say. We merely mean that we shall recruit an unquantifiable number of extra people but that the payment that they get is to be confined to 6½ per cent. for nurses and 4 per cent. elsewhere. That is not the language that the private sector understands. There must be a more effective limit on wages and salaries than has so far been exercised.
During the previous Session we also had a report on the efficacy of regional investment aids. I wish to remind the House that the judgment, after a survey that took about 18 months or two years, was that it was impossible to determine whether regional aids were beneficial. Judgment was suspended because it was too difficult to say, because of a number of difficult factors, whether they had been of any benefit.
We know that direct regional development aid has increased, substantially in some years, virtually every year. We also know that unemployment in the regions has increased. I do not say that there is a direct connection between the two—I am sure that there is not—but I observe that whereas the Department of Industry here employs about 9,000 people, there is no Department of Industry in West Germany.
What occurred to the Committee, and what we put in our report, was that it might be worth while looking at other ways of achieving the same effect—regeneration of 38 economic activity in the regions—not by direct aid of this kind, but by other means. Whether it should be done by a differential reduction of corporation tax or in the same way as it is done in Ireland or the United States, I do not know. They do it by having a foreign trade zone, as they have in Maryland for example, into which goods may be imported duty free and products assembled and manufactured, but duty is paid only on the foreign content. These routes should be examined.
Apart from that, we have also to take into account what one must see as the obstacles to growth that have occurred in our development regions over many years. For example, in Glasgow, because of the policy of successive Glasgow councils, the rates levied on commercial and business properties are a good deal higher than in any other part of the country. For example, Marks and Spencer's published a report the other day that said that its rates for its store in the high street of Glasgow were higher than in Oxford Street. If this goes on, it stands to reason that the amount of business and industry available in Glasgow and other capital cities will decline, just as it has in other capital cities throughout the world—for example, New York.
The Government, in framing their policy on local government expenditure, must come to a decision on whether a local authority should be allowed to charge the commercial and industrial businesses within its areas whatever rates it likes, when those businesses have no voice in the determination of the rates. The Government will have to do something about that.
There is one other factor about regional development upon which I wish to touch. So far, 35 districts have published land registers showing that there are 22,000 acres of development land that are unused within those areas. In addition, there are another 330 authorities to report. That land is undeveloped largely because of the price paid for it some years ago at the height of the property boom.
Local authorities have the notion—I do not know whether it is correct—that they cannot sell development land at less than the price that they paid for it. However, as the price that they paid for the land was driven up by the force of inflation, it stands to reason that the only way in which development can ever take place is if further inflation is sufficiently fast to bring the land back on the market.
It does not make sense that local authorities should be able to act differently from the way that any private business would have to act in similar circumstances. All that is happening is that the debt charge and the interest charge have been rolled up year after year, making it ever less likely that the land will be brought into development. Therefore, the solution must be that local authorities should be instructed to offer this land for development now at the current market price.
That is the way to get development going. It is absurd that development is being held up simply because local authorities have the impression that they cannot sell at less than the price that they paid for the land. It is an absurdity that is holding up a great deal of economic and construction development, and it should be changed.
I wish to refer to another of our reports dealing with the private financing of the nationalised industries and the public sector in general. A well-known thesis within the Treasury is called, for want of a better term, crowding out. There is an assumption that a finite sum of money is 39 available for financing investment generally, that the public sector has control of the sum, and that whatever the expenditure, and for whatever purpose, the Goverment must not borrow more than a certain stated amount. I recognise this as a powerful factor. I believe that the Government's ability to borrow has a significant impact on the market and on interest rates. It is an important and, indeed, determining factor upon the course of the economy. There seems all the more reason, therefore, that those parts of the industry now within the public sector should be carefully examined to see whether they could be taken out of the public sector, not wholly, but at any rate in part.
I accept that funds available for investment are limited, and that if it were thought that the public sector was behind investment in nationalised industries and that there would always be a Government guarantee for that borrowing there would be a total drain to that extent upon private resources. It is right, therefore, that the Government should continue with their policy of privatisation. I welcome the steps that have so far been taken, but I believe that there is considerable scope for more to be done.
I would hope to see not just part, but 51 per cent., of British Telecom sold to the public generally. Institutions have for a long time had to decide where to put their funds. In telecommunications, their only choice has been American Tel and Tel in the United States or Hong Kong Light and Power. Because telecommunications in this country is nationalised, all institutions are debarred from investing in British Telecom. That does not seem a sensible proposition, considering the potential for telecommunications and the big investment prospect in that industry. I hope that the Government will speed up their policy of privatisation, permit at least 51 per cent. of British Telecom to be offered to the public and allow it to stand the test of the market.
There are other areas. British Rail has an engineering company that employs 35,000 people. I see no reason why it should continue to remain within the public sector. I make no judgment about whether the public sector is better. I have no ideological reasons for saying that it should be in the private sector. My argument is simply that if it can operate better within the private sector, this should happen. It creates jobs and economic progress. I see no reason why British Rail's engineering company should not be privatised to the extent of 51 per cent.
I come, finally, to internal audit and staff inspection, on which the right hon. Member for Heywood and Royton touched. We found, as the right hon. Gentleman stated, 28 small departments and some other central Government bodies that had no internal audit of any kind. We found that 47 accountants were supposed to be covering the work of more than 1 million civil servants. We found a general lack of professionalism within the internal audit system. I hope that my hon. Friend the Financial Secretary to the Treasury will inform hon. Members about the present position on the internal audit. This is one of two ways in which Government expenditure can be checked. The other is staff inspection.
Our report on staff inspection produced findings even worse than those on the internal audit. We discovered, in respect of one Department, that it would take seven to 28 years for a staff inspection of that Department alone to be carried out. The staff inspection and the internal audit were 40 found to be the only checks upon Government departmental expenditure of any kind. This is a very serious matter. It is not satisfactory to say that ministerial responsibility deals with the situation. In the days of effective ministerial responsibility, Departments were far fewer and significantly smaller in relation to the number of people that they employed.
Ministers are busy people. They are working on the contents of their red boxes long into the night. How much time is available to them to examine matters of departmental administrative detail? They leave these matters—as they think—to the permanent secretary of the Department. However, the permanent secretary is much too busy to deal with these matters and leaves them to officials at a much lower level. The idea of ministerial responsibility is nothing but a myth. The truth is that Ministers do not know what is going on in their Departments in respect of administrative efficiency. I am not talking about policy. They can therefore scarcely be held responsible for what is happening, whatever the fictional notion.
The question that faces hon. Members is whether this unsatisfactory situation should be left as it is. Is it right that the public service, which is so large and so varied, should have such an extraordinarily inefficient monitoring system? Hon. Members who are responsible to the House for making these reports, and who are served so well by the Comptroller and Auditor General, have the final responsibility, whatever the fictional notion of ministerial responsibility, for public expenditure. What the Comptroller and Auditor General has unearthed is deeply disturbing. I have yet to hear from the Government any satisfactory assurance that the position will be properly dealt with. I do not think that it can be dealt with, unless there is a change in function.
It is not right that the Civil Service Department should be solely under the wing of the Treasury. I believe that the Department that is responsible for recruitment and so on should also come under the direct authority of the Prime Minister's office. My right hon. Friend is, after all, the First Lord of the Treasury. Without that kind of authority, I do not think that there will be proper and sufficient examination of the work of the various Departments of State. I hope that my hon. Friend the Financial Secretary will deal with the proposition that I have put forward.
Over the years there have been many reports dealing with the shortcomings of various Departments, and I have no doubt that there will be many more. I am certain of one thing. Unless the efficiency of Departments is examined much more seriously, and unless the machinery for doing so is changed, irrespective of whether the Prime Minister becomes more responsible or whether greater powers, as we suggest, are given to the Comptroller and Auditor General, something must be done. Otherwise, the faults will grow ever more serious and more damaging to the economy and to the country.
§ Mr. J. Enoch Powell (Down, South)
In his admirable opening speech, the right hon. Member for Heywood and Royton (Mr. Barnett), the Chairman of the Public Accounts Committee, forswore any intention to refer to the seventh report which is among those before the House, although, in answering an interruption on my part, he drew attention correctly to the amount of time and effort that the Public Accounts Committee devotes to considering the 41 reports of the Comptroller and Auditor-General for Northern Ireland on the Northern Ireland accounts. It was, indeed, a beneficent decision when in the life of the previous Parliament the Public Accounts Committee was given the task of including the Northern Ireland accounts and the Comptroller and Auditor-General's report upon them in its purview. That is a matter for satisfaction and gratitude on the part of those who represent Northern Ireland constituencies, and I am grateful to the Northern Ireland Office for having ensured the presence of a Minister during this debate. Not having given notice of the points to which I intend to refer, I would quite understand if I received reply more by way of correspondence than in the wind-up speech. I add to that an apology, should I not be able to be present during the wind-up speech of the Financial Secretary to the Treasury.
I shall use this opportunity briefly to give local colour and emphasis to four of the matters that were traversed in the seventh report and in the memorandum on the second and seventh reports, which embodies the reply of the Northern Ireland Department of Finance to the observations of the Committee.
The first of those four subjects is under Class VI, Vote 1, dealing with water and sewerage services. The Committee was stringent in its criticism of the extent to which an-ears of payments for water services had been allowed to grow and of the relative inefficacy of the methods which had been used to bring those payments up to date.
There is involved here, as in many other of these expenditure matters, an element of fairness as between one citizen and another, which should not be absent from the mind of the House in considering these reports. Arrears on the part of one user of water represent an unfairness borne by other users of water in the same area. In Northern Ireland, where it can be said, with but little exaggeration, that everyone knows everyone else's business, that sense of unfairness, if there is visible slackness on the part of the Government, in exacting arrears that are due, is a very real one and not merely a theoretical, logical consequence of the existence of arrears.
In the context of water and fairness, I draw attention to the spread of metering for agricultural water supplies. Until recently, a great deal of agricultural water supply has not, in practice, been metered. It is gratifying that the Department of the Environment is now taking steps to provide as rapidly as possible for the metering of those supplies; but metering is still in many areas extremely patchy. From that again arises a natural sense of unfairness between two farmers in the same area, both aware that they have agricultural access to the water supply, and both aware that one is being metered for that supply and the other is not. Therefore, to the encouragement that the Committee gave the Department of the Environment in pressing on with methods of minimising arrears, I add a plea to press on with the provision for metering water supplies, both industrial and agricultural, wherever metering is statutorily appropriate.
§ The Under-Secretary of State for Northern Ireland (Mr. John Patten)
Before the right hon. Gentleman leaves that point, may I say that we shall, of course, look into metering in the agricultural sector? I reassure him that the considerable efforts of the Department responsible have led to a reduction of the number of people in arrears for six months or more from more than 3,500 at the end 42 of 1979 to just over 2,000 at the end of 1981. We are continuing to reduce the numbers of those in arrears for lengthy periods and we intend to continue with those efforts.
§ Mr. Powell
I am obliged for that intervention. It illustrates a difficulty under which we always labour when debating these reports, in that necessarily we are debating facts at a time lag of 18 months, or, in many cases even more. It is, therefore, gratifying when we have evidence on the nail, so to speak, of reaction to the reports in the very debate in which those reports are being considered.
I pass to sickness benefit and detection of fraudulent claiming, dealt with in paragraphs 75 and following of the seventh report. I can understand that the Committee was shocked when it learnt that an effective method of proved efficacy for dealing with fraudulent claims had, on the instructions of the Department, been reduced to the "absolute minimum". It was with some relief that one noted that, in the comments of the Department of Finance in the memorandum, there was a very different picture, and that a different approach breathed through the wording employed. Once again, this is a matter not merely of financial control and avoidance of fraud, but of fairness between one citizen and another. In Northern Ireland, the suspicion—often ungrounded but nevertheless real—that the State treats differently those who are classified as belonging to different communities, renders specially important every measure that can be taken to show that the pursuit of fraud or alleged fraud in claiming of benefits is both even-handed and effective. One will look forward to seeing under the same head in next year's report the results of the exchange which took place between the Committee and the Department of Finance.
My third subject is Class I, Vote 3Fisheries Grants and loans for the construction of fishing vessels.I do not propose to go into detail on the matters—largely bound up with European Economic Community provisions—with which the Committee deals in that section. There is, however, a general factor that ought to be taken into account in the matter of grants for building fishing vessels. It is of both economic and financial importance.
Recent studies have shown strikingly that the depression of our fishing industry throughout all its sections has, paradoxically and ironically, been partly due to the encouragement to building and, consequently, the encouragement to increased efficiency of catching given to the various fishing fleets of the United Kingdom by the Government subsidies that have been available over the years.
It is a solemn reflection that we might, by that system of subsidising the construction of new boats, have been contributing to unemployment and recession in the very industry which the subsidies were intended to help. We might even reflect, sardonically, on the fact that at this moment in Northern Ireland we are paying out subsidies both for the construction of new vessels and to the owners of existing vessels who cannot make a livelihood under present conditions from their current operations. That leads me to feel that there should be some more direct relationship between the system of construction subsidies and the prospective volume of work for the industry in the years ahead. I suspect that there has been an undue 43 separation between the consideration of subsidy for construction and the consideration of the future fortunes of the industry.
Perhaps in the years through which we have just lived that was not surprising. He who would have forecast 10 years ago the devastation which the British fishing industry has undergone would have been regarded as a Cassandra-like pessimist. That devastation has had more than one cause; but had we been able to foresee the course of events, we would certainly not have put into the construction of new fishing vessels anything like the amount of subsidy that did go into it during those years.
I have it in mind, then, that we should be encouraging improvement in the quality and efficiency of the fishing fleet, but that in so doing we should not be expanding its capacity above the level likely to correspond, either in terms of conservation or—alas!—in terms of our situation within the European Economic Community, to the prospects for fishing capabilities and fishing income which lie before the industry. This could be even more important in its financial consequences than the important matters with which the Committee dealt in that part of its report.
My last observation relates to Class 1, Vote 5, dealing with forest and forest recreation area charges. The section begins by recalling that in Northern Irelandthere are 14 major forest recreational areas (including seven forest parks).I wish that I could convey to the House some impression of what lies behind that bald statement and bring to the realisation of the House how remarkably successful and valuable are these parks and recreation areas and what a tremendous experience it can be to see, as I did over the bank holiday weekend, the volume of people using those parks in precisely the ways for which they were intended. People drawn from all sections of the community throughout the Province can be found taking the opportunities for enjoyment which in those areas are combined with the proper economic pursuit of forestry, in an atomsphere of total relaxation and absence of tension.
The forest parks are among the most remarkable administrative achievements of past and present Northern Ireland Governments. Everyone who has experienced them will wish to see the high standards which they have attained maintained in the coming years. I believe that the maintenance of those standards will have much to do with the finances of those parks and recreation areas, and that the finances will in turn have much to do with the system of charging. Unless the charges levied for caravans and cars—as well as for individuals, although those are relatively small—which use those parks and forest areas are maintained fully on a level not merely with inflation but with the cost of maintaining the parks and improving them beyond their present standard, there will be a reaction from the level that has been attained.
I was glad that the Committee, like the Comptroller and Auditor General, was sceptical of the notion that an appropriate increase in the charges to match rising real costs and inflation would result in a reduction in the use of the parks. I am prepared to support the view that there need be no hesitation in matching rising costs and inflation with charges, on the ground that the use of the parks would diminish. I venture the prediction that the use of the parks will increase exponentially unless and until there is some falling off in the standard to which they are maintained, 44 or in the warden service or the general attention given to them. Therefore, as a representative of a Northern Ireland constituency, I make no apology for asking that my constituents who enjoy those facilities should be charged in full what is needed to maintain those facilities in the manner in which they at present enjoy them.
§ Mr. John Patten
I am grateful to the right hon. Gentleman for giving way to me a second time and letting me try to hit the nail on the head a second time in responding to the very hard hitting points made by the Committee.
The responsible Department has as its main aim in 1982 to move to recovering approximately 80 per cent. of the full costs. By March 1983, it hopes to be in a position to move to recovering 100 per cent. of the full maintenance and other attributable costs. I share the right hon. Gentleman's feeling on this. I do not think that those splendid forest parks will suffer in terms of the number of people who visit them.
§ Mr. Powell
My last remark will therefore be that at least one compensation to the House for a Northern Ireland interlude in this debate on the Public Accounts Committee reports is that members of the Committee have been able to see there, with a shorter lapse of time than usual in the wider context, that their work has borne fruit.
§ Mr. Michael Morris (Northampton, South)
Before commenting on a number of the reports I wish to make one or two observations on the central question of the role of the Comptroller and Auditor General, and in particular on the first special report, as the Chairman of the Public Accounts Committee, the right hon. Member for Heywood and Royton (Mr. Barnett), did in his introductory speech.
Reflecting on the very slow progress since that report was issued and the Government response last year, I believe that it is time to consider the three areas pinpointed by the Public Accounts Committee in which progress should be made.
The first is local government. In a sense, I think that we put that third—certainly I do—in terms of priority. Through the good fortune of parliamentary business, however, it was the first of the three issues to come up for debate on the Local Government Finance (No. 2) Bill. Just a few days ago we received an undertaking from the Minister of State on this matter. Although he could not at that stage accept an amendment tabled by hon. Members from across the whole spectrum in the House, he nevertheless gave what I understood to be a firm commitment that in another place the Government would table an amendment which would meet the spirit and to a large degree the contents of the amendment that we had tabled. I welcome that commitment, and we shall watch carefully for the amendment to be tabled in another place. I took that as a genuine offer and I view it in that light.
Of the other two areas, like my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) I take a particular interest in the Department of Health and Social Security. Of all the areas of Government expenditure, I view with some incredulity the fact that this Department, in all its elements, is not audited by the Comptroller and Auditor General and his staff. We never have any shortage of questions for that Department, but there seems to be a 45 great dearth of information in the replies. Moreover, whenever we question that Department there seem to be horrendous financial problems.
Although I understand that the Government have put forward, and are indeed implementing, the suggestion that there should be a number of what I believe are termed experimental outside audit exercises in a limited number of district health authorities, this seems a slow and inadequate response. Although it seems perfectly proper for the Comptroller and Auditor General to have some overview, just as we envisage him having some overview with the Audit Commission, my hon. Friend the Financial Secretary should be worried about the lack of control in the Department of Health and Social Security, especially on the health side.
There is no great necessity to experiment. The problem is there to be seen, and it has been there for a long time. I suggest that my hon. Friend should involve the Comptroller and Auditor General, either directly or indirectly, via these outside accountants. Certainly there should not be a long-term scheme of extensive trials in two, three or half a dozen districts. The problem is urgent and should he tackled quickly.
The third area is the nationalised industries. As I understand it, the Government's view is that the Monopolies and Mergers Commission is the right vehicle to investigate the efficiency of nationalised industries. The tempo has not exactly been exhausting, but there is evidence of an acceleration, and in the coming 12 months we should see more investigations by the commission.
In recent weeks proposals have been made that outside consultants should consider certain aspects of some nationalised industries. I have no quarrel with the ability of the consultants—I recognise that they are experienced people who are likely to investigate in depth and to make proposals—but to whom are they reporting? Are they reporting to Ministers? Are they reporting direct to the Cabinet? Are they sending individual reports to the Prime Minister? This is a crucial question. Would it not be better if those experienced consultants reported to those who have had an oversight of the whole spectrum of Government expenditure and who can consider the reports objectively in a non-partisan manner?
Presumably the consultants are considering not the political aspects of the nationalised industries, but the value for money or the effectiveness of their industries' performances. Therefore, why should it not be the role of Parliament to receive the reports? The vehicle for receiving the reports should be the Public Accounts Committee. We have some expertise. One would not put too great a store on it, but hon. Members who have been on that Committee for a long time have developed the ability to analyse material in an objective and non-partisan manner. On the whole, I believe that the Committee is a great credit to the House. I am sure that the consensus in the House is that the reports are objective, thorough and good value for money.
One or two of the reports contain suggestions for the running of the Government. I shall merely add one or two comments to those already made by my hon. Friends and by the right hon. Member for Heywood and Royton. In dealing with the third report, on the Ministry of Defence, the right hon. Member for Heywood and Royton rightly emphasised that in studying the report—which is particularly poignant now—no one on the Public Accounts Committee wished to undermine any of the commitments 46 given on the task force, the back-up forces or any dimension of the situation in the Falklands or anywhere else that there might be trouble.
I am not an accountant—if anything I am an administrator—but it is a sad reflection on the Treasury, as the purse keeper, and on the Ministry of Defence, that between them, for three years running—1978–79, 1979–80 and 1980–81—the Ministry of Defence overspent its cash limits, not by the odd £1 million, but by tens of millions of pounds, even after receiving a Supplementary Vote. It is not that the Department found at the end of the year that due to unforeseen circumstances it had overspent. It received a Supplementary Vote halfway through the year. Although there are protestations that action is being taken in the current financial year and that before the current difficulties it was estimated that the Department would be within its budget, that is not acceptable.
I urge my hon. Friend, and others in authority, to look at some of the detailed areas that we considered in the PAC. The right hon. Gentleman raised one or two of them and I shall deal with one small aspect, in financial terms, that is symbolic of the whole problem at the Ministry of Defence. I refer to the provison of small arms ammunition. This could be of great importance at present.
We found that there was over-production of small arms ammunition and that the stocks held by the MOD were far higher than it had laid down as its requirements. Moreover, we found that the Department had given instructions to the royal ordnance factory for incorrect requirements, and naturally the ROF had met those requirements. However, despite the overstocking, we are still short of some calibres of ammunition. In this day and age, with such a large Department playing an important role in our national lives, such a situation is not acceptable. The ROF should receive early investigation. Indeed, I suggest that there could be some privatisation.
The ninth report, on which the Chairman of the Committee laid great emphasis, relates to the internal audit in central Government. This is probably the most important report that we undertook in 1980–81. When I joined the Committee in May 1979, I did not realise just how abysmal was the level of internal audit in central Government. Having come up through local government, I had fondly assumed that every Department of State had a qualified accountant. I did not consider a qualified accountant in every Department of State to be a particularly advanced level of staffing, but we found that in 28 small Departments there was no internal audit. Only 47 qualified accountants were involved in internal audit, concentrated in only 11 Departments.
This is the most worrying report that I have seen in a long time. In summarising the problem the Comptroller and Auditor General raised three points that are worth emphasising. First, he said that senior management did not appear to appreciate the benefits of modern, efficient internal auditing. Secondly, he said that there was a general lack of professionalism. Perhaps that is not surprising when one reflects on the numbers that I have just given to the House. Thirdly, he said that there was little central co-ordination, and that what there was was weak.
I have had some correspondence with Baroness Young, who has overall responsibility for the recruitment of accountants in the Civil Service. The tenor of that correspondence to date is that the strategy of the Civil Service Department appears to be not that we will carry 47 out an active recruiting drive for qualified accountants, but that internally we will train people who will specialise in accounting, although we will not require that they be qualified accountants. If we are to have a professional internal audit, and, almost by definition, if the people in that role are to have the status due to them, we should in this day and age encourage qualified people to take up these positions.
The Government, of all people, should set standards to which the outside world should try to aspire. Instead, there is the danger of continuing to have second best in the public service. My hon. Friend should draw it to the attention of those involved that this is an ideal time to carry out such a recruiting drive. There has probably never been a better time to get qualified accountants into the public service, because of the current state of the labour market. I very much hope that my hon. Friend will draw the attention of the Civil Service Department to that fact. I also hope that we shall see some real signs that the Government take internal auditing seriously and believe that this is an area in which there should be substantial progress.
The eighth and eleventh reports both affect the Department of the Environment. I wish to draw the attention of the House to two points arising from those reports which cover the spectrum of activities within the Department. On the eighth report, I draw the attention of my hon. Friend to something that should cheer him up a little. Class VII, Vote 2, relates toDelays in the receipt of final claims for housing subsidies and other associated grants".Local authorities are given some grant on credit, so to speak, and make a final claim, supposedly within nine months of the end of the financial year in which the housing subsidy is applicable.
I say "supposedly" because very few authorities reach this supposed level of efficiency. Indeed, as at March 1980, no fewer than 28 authorities had not submitted their final claims for the year 1975–76—five years before the date of our report. We are talking not about the odd thousand pounds, but about several millions of pounds. It is a poor reflection on the role of the district audit. Presumably the accounts are closed, because I am not aware of 28 authorities that were outstanding on their district audit at that point. Therefore, we can safely assume that the district audit had been carried out but that this dimension of the district audit had been left hanging in the wind.
I appreciate that the Treasury minute response gives some up-to-date figures which suggest that we are making progress in getting the laggards up to date, but to have more than one or two local authorities more than a year behind schedule is completely unacceptable. I suggest that my right hon. Friend the Secretary of State for the Environment should look askance at the fact that although the district audit has been carried out, all these claims are still outstanding. It was particularly alarming to discover that the Department of the Environment and the district audit service could not agree how the system should be applied. Someone should have banged some heads together to deal with that dimension at an earlier stage.
The eleventh report deals with the Housing Corporation and the administration of housing association grants. I declare an interest as one of the honorary board members 48 of the Greater London Secondary Housing Association. The Committee welcomed the removal of the duplication of checking, which is what the report is basically about.
In paragraph 4 we wondered whether the time had not come when the Housing Corporation should be financed by grant-in-aid. We said that we would wish to review that at a later date. I should welcome any comment that my hon. Friend can make this evening about whether the Treasury's view has changed and whether it believes that we are making good progress towards that goal.
The twelfth report deals with the Inland Revenue and again covers a whole spectrum of activities. The one on which I principally want to comment is the taxation of casual and agency workers. Here again, I hope that the Minister will be able to respond positively.
The report showed that the Manchester office of the Inland Revenue had done some experimental work within the hotel trade, the licensed trade and the press. In relation to casual workers, it found that the loss of revenue in terms of income tax was about £30 million from the licensed trade andestimated the overall annual tax loss from all irregularities relating to casuals at not less than £100 million.That was the figure then. We can assume that it is now considerably more. Here again we are talking not about small amounts of money, but about significant amounts across a limited number of areas of activity.
In a parliamentary question that I asked the Chancellor of the Exchequer, I drew my hon. Friend's attention to the situation in the United States, where the nearest analogy would be our 714 certificates for the building trade. If someone in the United States wants to work in a motorside restaurant, a pub or a bar, or to do any other kind of casual work, he must present a certificate that proves that he has been paying taxes regularly over a certain period. It is a simple method that works well. It is not seen as Big Brother looking down on people. It seems to work smoothly.
The response that I received from the Treasury was that this was an interesting idea that merited further attention. What further attention is being given to it? I very much hope that we shall see a positive response to the problem of casual and agency workers, because this loophole ought to be closed. I understand that it has been closed for the press and I see no reason why we should not make progress on other fronts.
The seventeenth report deals with the NHS. The Committee and the House should be grateful to my hon. Friend the Member for Horsham and Crawley. I know of no one who asks more penetrating questions about the NHS and he has done a better job of controlling the service than successive Secretaries of State of both parties. The DHSS must have a file on my hon. Friend and I suspect that it learns more details of the numbers employed in the NHS from his questions than we learn from the Department.
My hon. Friend mentioned hospitals that had been built but not opened. I cannot describe my feelings about the fact that hospitals are standing empty and idle. It would not be so bad if I felt that the problem would be dealt with in a year or 18 months, or that someone had made a major error and that it would be possible to correct it after the current financial year, but that is not the case.
During the Committee's proceedings I asked when the Nottingham hospital, which has, if I remember correctly, more than 350 beds, would be opened. I was told that it 49 would not be until 1985. It is not acceptable that large sums of public money should be used to build capital structures that are left idle for years.
Perhaps the Trent regional health authority does not have provision in its budget to give priority to the opening of the hospital, but heads need to be banged together and someone needs to be told that the hospital must be opened in the next 12 months—along with every other new hospital that is vacant. If money has to come out of contingency funds, so be it.
Thanks to my hon. Friend the Financial Secretary to the Treasury's prudence and close control of expenditure, borrowing last year was £1,000 million under budget and I suggest that a little of that should be set aside for opening new hospitals.
Appendix 8 shows that I asked a few questions about direct labour in the NHS. I received in reply a long document setting out the normal provisions for tendering within the NHS, but there was little information about what I really wanted to know, which was how direct labour tendering in the NHS compared with that in the Department of the Environment.
The permanent secretary told the Committee that the DHSS broadly followed the directives of the Department of the Environment. Since the Department of the Environment has changed its requirements for direct labour, particularly on maintenance work—at least one-third of projects costing less than £10,000 must go out to competitive tender—will my hon. Friend the Financial Secretary ensure that the DHSS sends out a similar directive through the regions to the district health authorities? If that is right for public sector works within the responsibility of the Department of the Environment—mainly council housing—it is right in the NHS.
I quiver every time DHSS officials come before the PAC, not because I am afraid to ask questions, but because I am afraid of the answers that I will get. There is less financial control over the DHSS than over any other service in the public sector.
I emphasised earlier how eagerly members of the PAC were awaiting the Government's revised response to the role of the Comptroller and Auditor General. My hon. Friend the Financial Secretary ought to recognise that that feeling is not confined to members of the PAC and the 287 hon. Members who signed the early-day motion. It must be shared by many more hon. Members, including PPSs and, I suspect, many Ministers.
I hope that my hon. Friend will recognise that it is not sufficient for Sir Derek Rayner to be used as a fireman to investigate various problems. Parliament should have overall responsibility for public expenditure. I urge the sceptics—presumably there must be some in the Government—to look at some of the PAC reports on sensitive issues, including ICL, public purchasing and the Ministry of Defence, where much of the information was classified. They will see how the PAC handles such difficult matters.
I have said to the Chairman of the PAC that if the Committee has a weakness it is that we do not go back often enough to check on the progress made in Departments that we have investigated. I suspect that we will view with less than generosity Departments on which we have made critical reports reacting like the usual Treasury minute, when it says:The Treasury note the views of the Committee.50 If we find that there has been little progress three years after the PAC has made a critical report about a Department, parliamentary pressure to ensure a greater role for the Comptroller and Auditor General will become irresistible. It would be better for the Government to make progress now on the three dimensions that we have talked about than that the matter should blow up and be less easy to handle in two or three years' time.
§ Mr. Barry Jones (Flint, East)
I am glad to speak after the hon. Member of Northampton, South (Mr. Morris). He made some justifiably complimentary remarks about his hon. Friend the Member for Horsham and Crawley (Mr. Hordern), but the hon. Member for Northampton, South is no slouch on the PAC himself, and he may even end up as chairman of the 1922 Committee.
I wish to comment on the fifth report of the PAC and to deal with regional development aid and inward investment. I will not take up the comments of the hon. Members for Horsham and Crawley and for Northampton, South about privatisation. They are in favour of it, and gave some of their reasons. I suppose that I am ideologically opposed to privatisation.
We had an interesting note from the Department of Industry about the sale of British Aerospace shares. The number of people who held up to 99 shares in British Aerospace on 18 February 1981—that is, immediately after flotation—was 44,062, whereas by 7 January 1982, the number of such shareholders had declined to only 3,279. On 18 February 1981, only one organisation held 1 million shares or more, whereas by 7 January 1982, 13 organisations had 1 million shares or more. That is an interesting and unusual set of figures. From the evidence given to our Committee by the Department of Industry, one could adduce a strong case against privatisation. One could certainly assert that taxpayers' money was not best used in the British Aerospace flotation.
The hon. Member for Horsham and Crawley spoke about regional development aid. He said that in West Germany there was no Department of Industry. as we know it. He seemed to approve of that. If there were no Department of Industry in the United Kingdom there would not be many jobs in Wales or other deprived regions.
In taking evidence from the Department of Industry about regional incentives and their effectiveness and costs, we considered a memorandum. Sadly, it became obvious from the evidence and from the detail in the memorandum that no attempt at comprehensive evaluation of regional policies has been conspicuously successful. From the methods used in the study we found no precise information about the nature or scale of the effects of regional policies. We could not assume the costs that might have been imposed in other areas of the United Kingdom which were not subject to regional policies and incentives. We learnt from the memorandum and from the evidence of the Department's officials that most industrial countries gave preferential treatment to their deprived regions and that there was widespread competition among the nations to attract mobile industrial investment to those areas.
Later, in the evidence given to us by the Department we learnt, in answer to a question put by our chairman, my right hon. Friend the Member for Heywood and Royton (Mr. Barnett), that between 1971 and 1981 approximately £5 billion was expended by the Department on regional 51 aid. I welcome that expenditure, even on such a huge scale. Without inward investment and without generous regional aid, Britain would be in dire economic straits. There are at least 3 million people out of work, and our shipbuilding, steel and textile industries have contracted or declined. Since 1945, our country has lost 3 million manufacturing jobs, and the smaller number of manufacturing jobs that now remains has to carry non-wealth-creating jobs—the extra 2 million service industry and white-collar jobs that have been created. Britain desperately needs more, not less regional aid, and more, not less, inward investment.
The studies on inward investment that have ben put in hand show that companies from abroad perform better, on the whole, than native United Kingdom establishments. It is said that they tone up the area in which they are located and the region concerned. The studies also show that inward investment was important in the 1970s. Ford and Sony are but two examples. Companies which are the result of inward investment are frequently well managed, have high productivity and comparatively low unit costs. The studies imply that the host regions for inward investment are well pleased with the location of these factories. It could be said that Wales, Scotland and the North have been hugely improved by the location of factories inspired by inward investment, and that the range of grants and loans under the Industry Act that is available to the Welsh and Scottish Secretaries of State, together with the powers of the development agencies in Wales and Scotland, have been significant in attracting inward investment.
The Committee was also told in evidence by the Department of Industry, that competition is strong in Western Europe for any footloose investment that might be available from Japan, the United States, West Germany or Switzerland. My constituency is one of a number of United Kingdom locations now competing inside the United Kingdom for the proposed Nissan car factory. There are 9,000 people out of work in my area, and the rate of unemployment is 20 per cent. In 1980, we suffered Europe's largest closure, when the BSC Shotton works shed some 7,000 steelmaking jobs between New Year and Easter. At the same time, our textile mills were contracting, slowly but all too regularly.
My constituency stands to gain hugely from an active regional policy. It stands to gain even more if there is real value for money from regional aid and investment. In the knowledge that £5 billion worth of investment occurred in the decade 1971–81, it is sad that as yet no one knows—certainly not the Department of Industry—how much money was spent in that decade on attracting inward investment into the United Kingdom. Nobody yet knows to what extent the generous grants and loans made under sections 7 and 8 of the Industry Act have attracted new companies and new jobs. So far, it is impossible to be certain how decisive is a reputation for good industrial relations in attracting inward investment.
It was clear from the evidence given to us in the Public Accounts Committee by the Department of Industry and those officials responsible for the stimulation of the economies of the deprived regions, that nobody could say for certain to what extent a pleasant environment and good 52 motorway connections are decisive in getting the United States, Japan and West Germany to locate their factories in the deprived regions of Britain.
Notwithstanding the £5 billion outpouring of regional aid, it is disturbing and surprising that the Department of Industry cannot tell us with any certainty what the impact has been on the areas not receiving large-scale regional aid, or the scale of the effect on those regions getting regional aid. Neither the Welsh Office nor the Scottish Office could tell us.
In so far as inward investment is likely to increase, and is desperately needed by a nation suffering grave industrial decline, and in so far as Britain's regions are competing hard against each other for inward investment, clearly more research, information and study is required by and from the Department of Industry and the Departments in the Welsh and Scottish Offices.
It is difficult to believe that the Government have no role in the location of inward investment. Projects on a vast scale, such as the Nissan project, might involve £180 million to £200 million or more in grants and loans. That is clearly big money. It is not convincing for the Government or the Department of Industry to give evidence to the Public Accounts Committee, having said that the Government are prepared to give so much assistance, that they are not prepared in any way to give advice or to attempt to steer such a large project to any one of a number of deprived regions to provide employment in the United Kingdom.
I want to see more not less regional aid. With 3 million people out of work, with hundreds of thousands of bored and aggressive teenagers on the streets, with 1 million long-term unemployed middle-aged men on the scrap heap, we must have more regional aid and more inward investment. In addition, the development of regional policies must be backed by more insight, research and factual information as to the consequences and the nature of the investment and its location in the various areas of Britain.
Like my right hon. Friend the Member for Heywood and Royton (Mr. Barnett), I view with alarm the huge rise in defence expenditure which is not accompanied by value for money. Like other right hon. and hon. Members, nothing that I am seeking to say now is in any way intended to undermine the venture to the Falkland Islands that the House has recently been debating. My right hon. Friend referred to the Ministry of Defence. There is colossal expenditure by that Department. This coming year it will perhaps be some £14 billion. There is a strong suspicion that value for money for expenditure on such a gigantic scale is frequently not obtained. The Department and the procurement executive frequently come before us apologetically and sometimes indecisively. They frequently do not give convincing evidence that they are in complete control of the vast projects that they and their officials and the armed services have sought and initiated. Given Britain's huge problems—its economy and massive unemployment—that is very disturbing. I think that much of the nation's current oil revenue is being earmarked to cope with future massive Ministry of Defence expenditure.
One of the saddest occurrences in the Public Accounts Committee was when the Defence Ministry and the procurement executive gave evidence on the Sting Ray torpedo project. It appeared that in 1968, or thereabouts, the go-ahead was given to what was thought to be a £60 million project. We learn that that one project today has 53 accounted for £923 million of the nation's wealth. It has not yet entered service and it may go beyond the £923 million to more than £1,000 million. Nobody has yet been able to convince the Public Accounts Committee that sales of that weapon can be made to other nations. Nor has it been demonstrated conclusively that that weapon, which has cost so much of the country's wealth, is any better than a cheaper weapon available from another allied nation in the western hemisphere. That is clearly disturbing.
The Ministry of Defence says—I think truthfully—that it is constantly seeking to tighten up its control of expenditure. However, if constituencies such as mine are to see more cash and regional development aid poured in, in order to get rid of horrific mass unemployment, clearly the Ministry of Defence and other big spenders in Whitehall have to do better than they are in controlling their projects and programmes.
The controversial and massive Trident missile project should not go forward. Conventional defence expenditure should have greater consideration. If Sting Ray has been able to get out of control, who can say that the Ministry of Defence will keep the £8 billion Trident project under control? I oppose Trident. It may not be limited to £8 billion. It may go the way of Sting Ray. If it does—as is likely—it will have injurious consequences for all those in the regions who seek a decline in mass unemployment and an increase in inward investment and regional development incentives.
I hope that the Committee and the House will come back to those issues in the months and the years immediately ahead. If we cannot control defence expenditure, I suspect that there is no way in which we can reduce mass unemployment.
§ 6.9 pm
§ Sir Albert Costain (Folkestone and Hythe)
It is a great pleasure to be called once again in a Public Accounts Committee debate. Over the years, I think that I have attended every one. When I went through my notes over the weekend I found it difficult to make any fresh comments. History seems to repeat itself time and time again.
I should like, with all sincerity, to pay a special tribute to our Chairman, the right hon. Member for Heywood and Royton (Mr. Barnett). He has a difficult job to control what may be described as all colours of the spectrum of the political landscape, and he does it extraordinarily well. It is always a privilege, when we have a Public Accounts Committee debate, to welcome one or two strangers. I am sorry that they have not been called to speak. I do not criticise the Chair. It just happens to fall in that way. Almost inevitably, people from outside turn up.
I very much support the Chairman's praise of the staff. They do the work well, are always available to be consulted by members of the Public Accounts Committee and are only too willing to give us their advice. It is appropriate to pay tribute to Robert Taylor, who departed this life during the last Committee session. He did a remarkably good job. He was always very keen on his questioning and did his work very well. We miss him greatly. Fortunately, we are always able to replace even the best Committee members and we have a new hon. Member to carry on his tradition.
In opening his remarks the Chairman referred to the Prime Minister's statement and to whether the Comptroller and Auditor General should have more power to 54 investigate, in particular, nationalised industries. I am one of the few Committee members who did not sign the early-day motion. The Chairman has been perfectly charming to me about it. I refused to sign it, not because I was in general disagreement with the principle, but because I was extremely worried about the situation. Nationalised industries are enormous organisations, with very high turnovers. We have to find people to manage them at the very highest level and they are not used to being criticised by what they consider to be amateurs. Indeed, some hon. Members are amateurs.
The heads of nationalised industries are worried that they may be criticised by those who are not in a position to do so. I know of two very capable people who were offered jobs as chairmen of large industries but who refused and unofficially told me at CBI meetings and on other occasions that they had done so because they were worried by the fact that certain hon. Members took a delight in nit-picking about the way in which the organisations were run. They pointed out—it is not a complete parallel—that members of the Cabinet and Ministers have a 30-year secrecy rule. Indeed. some Ministers supervise Departments that are smaller than the nationalised industries that they control. Those two capable men could not see why the secrecy rule should not apply to large nationalised industries.
Too often a newspaper or journal, such as the New Statesman, will publish an article that is proved, on investigation, to be wrong. Such papers criticise a Department, the sale of arms or bribery. Opposition members take such suggestions up—as they tend to do on reading such articles—and there is a good deal of publicity before there has been any opportunity to investigate the matter properly. That discourages leaders of industry from giving up their time. They lose their enthusiasm for the job because some hon. Members feel, in all sincerity, that it is their job to criticise and to look for newspaper articles that will reveal the sensational. That is a problem. Therefore, I have more sympathy than has the Chairman of the Public Accounts Committee with the Prime Minister's remarks.
§ Mr. Joel Barnett
The hon. Gentleman need not apologise to me for not having signed the early-day motion, because it only supported the report of the Public Accounts Committee, which he signed. Indeed, I was very grateful to him for his agreement. I agree that some people in industry feel that they do not want to be badgered and bothered by ill-informed Members of Parliament, or, frequently, by ill-informed Ministers. However, I am sure that the hon. Gentleman will agree that our reports and evidence show that the Public Accounts Committee and the Comptroller and Auditor General do not fall within that category. As I pointed out only today, we well understand and appreciate the problem of getting the best people. I am sure that the hon. Gentleman will further agree that we are well capable of taking account of the worries expressed by the Prime Minister.
§ Sir Albert Costain
I am grateful to the right hon. Gentleman for those comments. I said that the report was unanimous and that the Chairman had been extremely clever in persuading people that there was unanimity. I did not feel strongly enough for a minority report, but I felt that I should point out that we realise industry's problems. The right hon. Gentleman will recall that I was one of the 55 Committee members who voted against the Committee sitting in public. Robert Taylor and I were the only two to vote against the motion on that occasion. I voted against sitting in public because once the press and other visitors have heard part of the evidence they are apt to assume that what they have heard is right and to criticise regardless. That can do enormous damage to our industrial base.
The hon. Member for Flint, East (Mr. Jones) mentioned the Ministry of Defence. We all know that that Department overspends and that it is extremely hard to get a yardstick on it. We also know that another Committee will investigate the technicalities and efficiency of the weapons system. We pray to God that that system need not be proved in practice, although the likelihood of that is now greater than before. That is why the Committee is investigating the other aspects. Hon. Members must recall that the Public Accounts Committee was formed for a post mortem examination. We have never dealt with policy. The hon. Member for Flint, East came close to a policy statement, although that is not normally the business of the Committee. He did so in sincerity and was in order, because Mr. Deputy Speaker allowed him to comment. However, harm can be done to companies and individuals who are criticised. Members of Parliament have parliamentary privilege and can say what they like inside the Chamber without being criticised.
§ Mr. Dalyell
Does the hon. Gentleman recollect that he and I were members of the Public Accounts Committee under three different Chairmen? I refer to my right hon. Friend the Member for Huyton (Sir H. Wilson), to my former hon. Friend the Member for Sowerby, now Lord Houghton, and to the former hon. Member for Kingston-upon-Thames, Lord Boyd-Carpenter. During that time we investigated Bloodhound and Ferranti and the missile systems. Does the hon. Gentleman agree that if meetings must be in secret—in some ways, curiously enough, I agree with him—the quid pro quo is that the publication of the reports should not be tardy, but speedy? Often, a topical issue has to be cleared up one way or the other.
§ Sir Albert Costain
I well recall both the hon. Gentleman's membership of the Committee and the Ferranti incident. Something needed to be exposed. However, that sitting was held not in public but in private. I accept his criticism that the reports were published too slowly, but credit must be given to the Committee now, because the reports are being published so quickly that the printing presses cannot keep up with them. I went to the Library this week to ask for one of our reports that should have been published. I could not understand why the Dickens I had not read it. The Library personnel could not understand why they did not have a copy in stock. It was supposed to have been published on 13 April, but I was told that it was not being printed. We now have the seventeenth report of Session 1980–81.
The hon. Member for West Lothian (Mr. Dalyell) cannot complain that the reports are too long, but he can complain that we do not discuss them quickly enough in the House. Bearing in mind the attendances when they are being discussed, it might be more effective if we insisted on having a ministerial-type Cabinet to discuss them.
Hon. Members have highlighted the areas where we have unearthed the biggest problems. Another problem is regional aid, on which we have had several reports. The 56 Public Accounts Committee found that regional aid had cost from £2,000 per job to a fantastic figure, which has been reported but not yet published. It would not be in order for me to refer to that figure, but tens of thousands of pounds per job are involved. All I can say to the hon. Member for West Lothian is that it is customers who provide employment and not Cabinets. Customers buy goods when they are cheap enough and when delivery is reliable. What prevents British industry from being as competitive as industries in other parts of Europe is the very high cost to industry of certain subsidies.
It was delightful to hear the right hon. Member for Down, South (Mr. Powell) praise the Forestry Commission. I have a personal interest in that subject. I was fascinated to hear him say that we should charge his constituents more. I cannot remember any Member of Parliament rising in the Chamber and begging a Department to charge his constituents more. It is refreshing to hear that. What was interesting was the way in which he highlighted the pleasure that forestry gives to visitors. For years we have been told by the Forestry Commission that we must not allow the public into forests because they will set fire to the lot. So far as I can recall, there have been no fires of any consequence since the public were admitted.
The same applies to the reservoirs. We used to be told that the public should not be given access to the reservoirs in case they polluted the water. The public are now deriving a great deal of enjoyment from reservoirs inside forestry compounds, and with no detrimental effects.
It was a great pleasure to serve on the Public Accounts Committee with such a collection of experts. It was extraordinary that whatever subject arose there was always someone on the Committee who knew more about it than the majority. I pay tribute to the ability of the Chairman. During Easter I read his book with interest, in which he recounted how he persuaded his colleagues in the Cabinet to agree with him that they should take less money for their Departments. He has demonstrated his persuasive nature as Chaiman of the Public Accounts Committee. I am afraid that I shall not live long enough to see him write the book about how he used his great charm and personality to persuade members of the Public Accounts Committee to take certain courses.
§ Mr. William Hamilton (Fife, Central)
So far as I can recollect, no hon. Member has referred to the twelfth report of the Public Accounts Committee, which dealt with the black economy. By the black economy we mean the non-declaration of taxable incomes from heaven knows how many members of our community. The Inland Revenue estimates that it accounts for about 7½ per cent. of gross domestic product—about £16 billion a year. It amounts to tax losses of about £4 billion a year, which is equivalent to 20 per cent. of the entire yield from income tax. Those are substantial sums. In the weekend press I read an estimate that is considerably in excess of the figures I have just quoted.
My right hon. Friend the Member for Heywood and Royton (Mr. Barnett), who is an able and eloquent Chairman of the Public Accounts Committee, referred to our role as seeking cost effectiveness, the elimination of waste in public expenditure and the saving of public money. There is now a great opportunity to save the enormous amounts of public money that are being frittered 57 away. It was clear to members of the Public Accounts Committee that if the Inland Revenue could employ more staff to chase those who evade their tax responsibilities, great tax savings could result.
When we were cross-examining Inland Revenue officials, it was established that seven local offices had been established in various Inland Revenue regions to tackle the problem of tax evasion. The seventh office was established in Croydon in the summer of 1981. The additional tax which was collected as a result of the establishment of the first four offices amounted to £11.6 million.
A pamphlet which had been produced by the Civil Service unions and entitled "Whose pocket are they picking?" suggested that there should be a special office, like the seven that have already been established, in each of the 15 regions of the Inland Revenue. In the Inland Revenue's evidence to the Public Accounts Committee, it was said that there were no immediate plans for increasing the number of such offices, although it was clear that the benefits accruing from their establishment in terms of revenue collection would be enormous. In paragraph 31 of the twelfth report, we said:It is clear that, with the annual tax loss through the black economy running at some £4 billion, there must be areas where the deployment of additional resources would be likely to produce direct returns of many times the staff costs involved. Of perhaps even greater consequence is the likely effect on standards of compliance generally. With the black economy already so pervasive, it seems to us that there is a real danger of tax evasion coming to be regarded as socially and morally acceptable, with consequences spreading beyond the limits of the present black economy. We therefore consider it important that the Department should be seen to be making strenuous efforts to contain and reduce it. We trust that in doing so the Department will not overlook any desirable legislative changes which might avoid the deployment of additional investigative resources, as exemplified by the legislation proposed in the Finance Bill 1981.That has been followed up by myself and others in the House, and the Treasury has sought evasive action by referring to a committee that was set up to consider these matters. That committee may well have reported by now. When the Financial Secretary replies, I hope that he will tell us what additional steps have been taken subsequent to the production of the PAC's reports.
§ The Financial Secretary to the Treasury (Mr. Nicholas Ridley)
I shall certainly do what the hon. Gentleman wishes. However, will he clarify his reference to a committee? I am not clear to which committee he is referring.
§ Mr. Hamilton
I have forgotten the name of the chairman. However, to my knowledge a committee was set up to investigate tax evasion and related problems. I understood that the committee was to report very shortly. I guess that it will report some time this year.
§ Mr. Ridley
Is the hon. Gentleman thinking of the committee of Lord Keith of Castleacre, which is investigating the powers of the Revenue and Customs and Excise in terms of human rights, privileges and privacies rather than the black economy?
§ Mr. Hamilton
I am glad that the hon. Gentleman has refreshed my memory. I was referring to the Keith committee. When I have asked questions on this subject I have been referred to the Keith committee as a reason for not making any further advances in the direction suggested in the PAC report.
58 It is a great pity that attendances at debates on PAC reports are so poor. Almost invariably they are attended by members of the PAC. If hon. Members knew the extent of the opportunities of calling Ministers to account in these debates, they would be filling the Benches. The field is wide open. Every Government Department is exposed to a greater or lesser extent by the reports. After labouring long week after week to produce considerable and important reports on the waste or misuse of enormous sums of public money, it is rather soul-destroying to find that almost invariably the debate is attended exclusively by members of the PAC. It means that we talk to ourselves like freemasons, which is deplorable.
I am glad that one or two hon. Members who are not members of the PAC are here this evening. They have been or will be able to speak on matters that concern them, their unions or their constituencies. I note that my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) is in his place. I think that I know the subject on which he will speak and I hope that I shall be able to listen to him. I always listen to his contributions with great interest.
It may be that PAC reports are not meant for public scrutiny. They might best be described as pricey reports and not as Public Accounts Committee reports. The report on the Ministry of Defence is a fairly slim volume but it is priced at £7. It is hardly a best seller in Fife, Central at that price. However, it contains a great deal of dynamite. The report on the financial control and accountability of the National Health Service costs £7.25. It would be interesting to know how many copies of the reports have been sold. There seems to be deliberate intent not to allow the public access to them. They are being priced out of the market. We must make amends as best we can in this place.
As my right hon. Friend the Member for Heywood and Royton said, the Ministry of Defence seems to think that for special reasons it is exempt from the discipline and stringency of cash limits. It has exceeded those limits three years in succession by hundreds of millions of pounds. Ministry spokesmen say "We are quite exceptional. We cannot keep within the disciplines that the Treasury lays down." The Treasury does not exempt the Ministry of Defence from the disciplines that it imposes, and it should be brought within them. My right hon. Friend was right to say that we are now engaged on a blank-cheque exercise in the Falkland Islands.
§ Mr. Hamilton
We do not know what the eventual cost will be—whether it will be hundreds of millions of pounds or thousands of millions of pounds. However, it is clear that for the Ministry of Defence cash limits will go out of the window. Clearly some other provision will have to be made. Treasury Ministers have said that the exercise will mean public expenditure cuts elsewhere—perhaps further cuts in the Health Service or in housing—or increases in taxation. They have said that it will be necessary to take one course or the other to pay for an exercise which could cost the earth in money terms and in terms of human life. The report on the Ministry of Defence makes disturbing reading. Mind-boggling sums are involved.
My right hon. Friend the Member for Heywood and Royton has said that there are 20 projects within the Ministry of Defence each in excess of £500 million to date. 59 By the time that they have been completed each of them might have cost double that sum. In paragraph 37 of the report we recount that between 1950 and 1970 the PAC examined examples of development programmes of sophisticated military equipment. The responsibility for those programmes now falls to the procurement executive of the Ministry of Defence. I was not a member of the PAC in the early years, but I have been a member of it latterly. The Committee has found that the common features of sophisticated military projects are large increases in costs over the original estimates and expensive delays in the completion of the development programmes. Both those features and other factors contributed to the enormous disparity between the original estimate and the final cost.
Various attempts have been made to change the system of control from 1960 onwards, culminating in the recommendations of the inter-departmental steering group on development cost estimating. That was the Daniel report of 1966. The procedures recommended in the report were adopted finally in 1972. According to the Ministry of Defence they remain the basis of the Department's management of development projects. But despite that the situation is as unsatisfactory now as it was in 1950 when we started the exercises.
The example of the Sting Ray torpedo has been quoted. In 1969 the estimate for that project was £74 million. Now it is £1,211 million at September 1981 prices. That is a colossal sum for a military project that no one else wants. The Department has produced no evidence—I do not believe that there is any—that sales to our NATO allies or anyone else have been or are likely to be concluded. The Ministry of Defence will not tell us for security reasons.
That brings me to the report on the financial accountability of the National Health Service. The hon. Member for Horsham and Crawley (Mr. Hordern) has aggressively pursued the matter. I would defend to the death the existence and rapid development of the NHS. Any Government who dare to interfere with its basic principles are committing political suicide. Despite the difficulties, it is one of the most popular services in the country. The more cost-effective that we make it, the better. In that regard the hon. Gentleman has performed a valuable service in the PAC.
At paragraph 42 the report states:In 1980 a test examination by the Comptroller and Auditor General's staff of NHS reports on the commissioning of hospitals recently built or nearing completion showed that in several cases health authorities had referred to design features expected to lead to high running costs. Also, due to shortage of revenue funds, at nine hospitals in England and three in Scotland, full usage of all the facilities provided had been or was likely to be substantially delayed beyond the planned opening dates.The Prime Minister from the Dispatch Box stated that the Falkland Islands exercise would be carried through regardless of cost. Had she said that the opening and continuous running of those hospitals would be pursued regardless of cost there would have been greater public acclamation. That those hospitals should be opened and run efficiently for the benefit of our people could be considered to be as important as the expedition to the Falkland Islands.
At paragraphs 59 to 61 the report refers to the financial accountability of the Health Service to Parliament. That 60 is important. The Health Service is laudable and it is big business, but there is singularly little overall control by the House of expenditure on it. Paragraph 61 states:in our First Special Report in the present Session we recommended that responsibility for the audit of the NHS authorities accounts, which is at present undertaken by the statutory auditors appointed by the Secretaries of State, should be transferred to the Comptroller and Auditor General.That comment was also contained in our report on the Comptroller and Auditor General debated in the House last November, as my right hon. Friend the Member for Heywood and Royton reminded the House. Every hon. Member who spoke in the debate supported the PAC's recommendations, but the Government have not accepted them, although they made noises to the effect that they would, in full or in part.
We recommend that every organisation, however small, that receives public money should come under the eye of the Comptroller and Auditor General. The Prime Minister turned the recommendation down in carefully worded terms a day or so ago in reply to my hon. Friend the Member for West Lothian (Mr. Dalyell). I do not know whether the Financial Secretary will tell us what the Government's intention is, but I hope that we are told before the end of the Session. The House of Commons and not the Treasury or the Government must be sovereign. We must insist on the right to make accountable to the House every body that accepts public money. The Prime Minister says that that would destroy commercial confidence between an organisation and the Government. That is an extremely weak and invalid argument.
My hon. Friend the Member for West Lothian raised the question of the large sums paid to British Leyland. In our previous debate I thought that he made a speech of undue length, but he made the point. We have pursued the matter in the PAC. It is no secret that the Comptroller and Auditor General has not had access to papers in BL to enable him to come to a sensible and rational decision on its behaviour over Bathgate and other matters. That situation should be remedied; it is undesirable, unacceptable and indefensible.
The PAC and the Comptroller and Auditor General know how to protect commercial confidence. When matters of commercial confidence are discussed in the PAC we ask the public to leave. The evidence can be eliminated from the public record. Private firms dealing with the PAC have all the protection in the world. But they should be told that as soon as they are in receipt of public money they are accountable to Parliament, through the Comptroller and Auditor General, for how the money is spent. That point has been made repeatedly in the House.
I hope that the Financial Secretary will give us more than an offhand reply to questions about problems that we feel the Government are evading. The House asks for them to be dealt with with the seriousness that they deserve.
§ Mr. Raymond Whitney (Wycombe)
It was only in July 1981 that I had the privilege of being appointed to the Public Accounts Committee, so this is the first time that I appear in such a debate as a member of the Committee. I take the opportunity to say that the privilege of membership of that Committee has been enhanced by the fact that it gives me the opportunity to serve under the chairmanship of the right hon. Member for Heywood and Royton (Mr. Barnett), who brings to the Committee not 61 only a wide and deep understanding of the world in which the PAC tries to live, but a humorous and distinctive flavour to our proceedings which I, and I am sure every other member of the Committee, find stimulating and rewarding.
This is not the first time that I have sat on such a debate, because in another capacity I attended the previous one on 29 January 1981. My right hon. Friend the Secretary of State for Energy who was then Financial Secretary to the Treasury, referred to the Public Accounts Commitee as the House's most potent instrument for the restraint of waste and bureaucracy. As someone who yields to no one in the House in his enthusiasm to curtail waste in the public sector and unnecessary bureaucracy, I believed that membership of the Public Accounts Committee would be a challenging and rewarding experience.
Although I pay tribute to the Chairman and the tremendous experience of my right hon. and hon. Friends on the Committee, so far it has been a relatively disappointing experience. When my right hon. Friend referred to it as the most potent instrument, the accent must have been on its potency rather than on its efficacy as an instrument. The House—and therefore the country and the Government—does not receive its money's worth from the work of the PAC. The many hours put in by other members of the Committee should be tremendously valuable to the work of any Government, but the efforts are not rewarding in terms of saving waste and unnecessary bureaucracy. I do not regard the word "bureaucracy" as perjorative, but we are all interested in reducing an excess of bureaucracy.
As the new member of the Committee, I do not claim to have a deep knowledge of its effectiveness during the past 120 years. We heard only this afternoon that sometimes successes are scored. My hon. Friend the Under-Secretary of State for Northern Ireland said that it appears that the collection of arrears of water rates in Northern Ireland has been improved. I formed the impression that that was due to the efforts of the Committee, to which the right hon. Member for Down, South (Mr. Powell) paid tribute. We must all take consolation from that.
However, set against that success—I am sure that it is not the only one—we have a depressing catalogue of a lack of impact or effectiveness of the work put in by the Comptroller and Auditor General and his excellent staff, which is rounded off by the Public Accounts Committee.
Many tributes have been paid to my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) for his work on the National Health Service. I endorse those tributes, but it is sad that on each occasion that we debate the issue the tale of mistakes, waste and extravagance becomes longer. We have heard today about the Ministry of Defence and the Royal ordnance factories, but there are many other matters on which we have not touched.
The House should re-examine this, its oldest Select Committee, because we have become a little too accustomed to the fact that it exists. Everyone pays pretty tributes to it but does all too little about it. Perhaps part of the problem lies in the attitude of the media. As the Committee is rather an old gentleman, clearly it lacks the glamour of the new babies. It is entirely normal that the new Select Committees have attracted the media's attention. This is no cry for more air time for the work of our Committee, but it is a political fact that the activities of the Select Committees—whether they travel abroad, grill the Chancellor of the Exchequer or whoever may be 62 the Secretary of State in the spotlight—make the headlines and possibly have much more impact on Government decisions than do the workmanlike efforts of the Public Accounts Committee backed up by the Comptroller and Auditor General.
The reflection of that disappointing level of interest and response is also seen in the attendance at such debates. With one or two special exceptions, hon. Members who are not members of the Public Accounts Committee seldon attend. I hope that it does not seem too partisan if I say that there are few occasions when hon. Members who now represent the Liberal Party or the Social Democratic Party see fit to grace such debates with their presence. That is a sad and regrettable development.
I hope that not only my hon. Friend the Financial Secretary to the Treasury but the Government will understand that this tool is available not only to the House but to them. They are failing to use it. I join those who have referred to what is, to me, the most worrying area of Government response to the recommendations and attitudes of the Public Accounts Committee. I am referring to the role of the Comptroller and Auditor General and his right to move into a much wider area of public funds than is at present allowed to him.
The response to the recommendations of the Public Accounts Committee were contained in the White Paper, Cmnd. 8323, to which reference was made in the debate on the Comptroller and Auditor General on 30 November last year. Reference has also been made to a response by the Prime Minister recently to the hon. Member for West Lothian (Mr. Dalyell).
I should like to examine some of the defences which have been erected by the Government against the proposition that the Comptroller and Auditor General should extend his role of interest into the nationalised industries sector. I find the Government's defence not only disappointing but surprising. Whether we shall hear of a change of heart remains to be seen, but if there is no change of heart at the conclusion of the debate, I hope that at the very least we shall have a more convincing explanation of why this enormous sector of public money should be closed off, as it were, from the guardian of public money. That guardian is initially the House, which passes its responsibility to the Public Accounts Committee, which in turn passes the responsibility for executive action to the Comptroller and Auditor General.
One defence is that the Government would prefer to leave the operation of public funds in nationalised industries to the Monopolies and Mergers Commission. In the White Paper, Cmnd. 8323, published in July of last year, it is stated that only recently, by the Competition Act 1980, was the Monopolies and Mergers Commission allowed to undertake efficiency investigations into the nationalised industries and certain other public corporations.
In the White Paper the Government congratulated themselves on the good start which had been made in this process. I welcome that good start and join in the exhortations to the Government and the Monopolies and Mergers Commission to make even greater efforts. However, in paragraph 10 of the White Paper the Government go on to say that they arenot convinced that it would be fruitful to replace this framework so soon after its inception.I am sure that the Public Accounts Committee was not talking about a replacement, and I should be very surprised 63 if the Treasury or the Government as a whole were seriously under the misapprehension that there was any such proposal. We are talking about something which would be complementary to the work of the Monopolies and Mergers Commission. I should be very grateful if the Financial Secretary would confirm that there was no misapprehension on that score and explain to the House—and certainly to the PAC—what is the problem about giving more power to the elbow of the Monopolies and Mergers Commission. I simply do not see any clash or paradox, or any necessity to choose one or the other.
Another defence seems to suggest that Ministers are not responsible for the day-to-day management of the nationalised industries. That was the point made by the Financial Secretary in the debate on 30 November last, in which he also said that hewanted to ensure that the Committee's recommendations did not extend to seeking control of money for which Ministers were not responsible."—[Official Report, 30 November 1981; Vol. 14, c. 110.]Although I suppose that we can follow the logic of that statement, it would seem to be a fairly alarming proposition to make to a House which is dedicated to the control of Supply.
There has to be some limit to the extent to which we abrogate responsibility. I do not see that there is a fundamental clash here. It seems to me to be perfectly possible to ensure that the chairman and the board of a nationalised industry are told "Here is the organisation, here are the funds—the day-to-day management of the industry is your responsibility." But, having said that, it seems to me to be perfectly reasonable that the providers of the fund—the taxpayers, through the House of Commons and the Government—should also have a right to at least an outline knowledge of the use to which those funds are put. That seems to me to be a perfectly straightforward commercial proposition, just as any investor in any business would expect to have an annual account of the use to which funds are put.
The proposition implies no interference in policy, and Ministers will be aware that it is entirely within the 120-year experience of the Public Accounts Committee in those areas of public expenditure in which it is entitled to exercise a watching brief. In other words, the Public Accounts Committee never seeks to intervene in policy. It never seeks to say "We do not think you should have done that", and that something else should have been done. Our concern is with how public resources are used, and we comment on the use of public resources within the policy guidelines for the public sector, which are entirely within the prerogative of Ministers.
Why cannot a similar operation take place within the nationalised industries? We all accept that the policy concerning the use of resources is within the realm of the chairman and the board of the particular nationalised industry, but surely it is possible to have the same relationship that we have with Departments of State in trying to understand what is being done with the funds.
The next defence—which was touched on by the hon. Member for Fife, Central (Mr. Hamilton)—related to commercial responsibility and confidentiality. As the hon. Gentleman said, such things are managed perfectly well in other areas which are investigated week by week by the 64 PAC, and I do not believe that it is an adequate reason for objecting to the introduction of the PAC into the operations of the nationalised industries.
In the White Paper, the Government said that they wanted to seemore, not less, involvement of the private sector in the audit of public spending, and to avoid overloading the C & AG.Again, I question the validity of those points because no one has suggested, at least, I doubt whether my colleagues on the PAC are necessarily suggesting, that we want to crowd out the private sector of the audit profession. However, we need someone to do something because this is public money. If it means another half dozen employees as members of staff of the Comptroller and Auditor General I for one, although I am keen on reducing unnecessary bureaucracy, might be persuaded that this would be public money well spent. Time and again we come across demonstrations and evidence of public money that is not being well spent. Therefore, that too is a defence that I should question and find it difficult to accept.
Another argument that has been produced in defence of the Government's position is, I hope, a temporary one. I hope so because, as it has been pointed out by Labour Members, there is a careful wording in these matters. The Chairman of our Committee pointed out, with his nose for these things, that there is a suggestion of a last ditch defence before there is a final yielding of the position. I hope that that is the case.
We have been told, as part of the Government's case, that it would be difficult to get anyone to run nationalised industries if this condition was imposed. I find that sad and depressing, and I hope that it will be proved misguided in the event. My attitude on nationalised industries, as most hon. Members will know, is that I hope that we can reduce the number of them. There are powerful arguments for this.
Membership of the PAC—whatever members may feel about the NHS—tends to lead to the view on nationalized industries in the public sector generally, apolitical though we are on the Committee, that the public sector presents enormous difficulties. The more that we can move any operation into the private sector the better it is likely to be performed and the more conscious husbanding of resources is likely to be imposed.
I hesitate to intrude too much of an entirely political viewpoint into the debate but the move should be towards reducing the public sector as much as we can. The Government are already committed to finding fewer chairmen and board members of nationalised industries because they are committed to privatisation wherever that is possible and sensible. I should have thought that somebody really worthwhile would, for example as chairman of the Chloride group, accept as a fact of life that those who provide the money require from time to time an explanation of how the money is used. He would also then expect, and take it as a fact of life, that where it is the taxpayer who is providing the money, the taxpayer too should have, within the limits that we have just talked about, an explanation of the use of those resources.
There is a crying need for this action in respect of the nationalised industries. I doubt whether anyone in the House needs persuading about the enormous problems that there are in controlling these industries. Tremendous progress has been made in bringing private sector industry 65 back to reality—and a harsh reality it is, too. We all know that, but we also know that unless we pay our way in the world there can be no private industry.
However, that is not true in the nationalised sector, at least not in the medium or even the long term, as my right hon. Friend the Financial Secretary pointed out in the debate on 30 November. He said:we fully share the PAC's concern about the need to promote the efficiency of that sector. That is particularly true where competitive pressures are weak or absent."—[Official Report, 30 November 1981; Vol. 14, c. 48.]This is precisely the problem—competitive pressures are weak or absent and nationalised industries are also subject to another pressure. They are subject to strong trade union pressure and in many instances trade union monopoly pressure. That is pressure organised not by the ordinary workers but by a small handful of workers.
I do not wish to get into the heavy political points of this issue but it would be difficult to deny that in any of these sectors it tends to be a very small group of trade union activists who wield the levers. They can do so because of the monopoly position that the particular industry has and the few unions that there are. The whole thing is a very unhealthy and uneconomic waste of resources.
Surely, if there is one other lever that can be used by the Government and the British people in exerting common sense, the opportunity should be grasped. The PAC, with the work of the Comptroller and Auditor General, is the very epitome of common sense. I challenge anyone to suggest that any of the reports that we are discussing tonight are not based on bipartisan, across the Floor, good British common sense. If we could bring that into the nationalised industries, we should all be the gainers. The Government should understand that they have a great need for such mechanisms because there are all too few of them available.
For example, I have to declare that I am, at the very best, an agnostic about Sir Derek Rayner's exercise. I recognise his great experience and the amount of effort that he has put into the job while at the same time, remaining the joint managing director of Marks and Spencer. However, there is a great difference between running Marks and Spencer and any other business. There is also a great difference between running a particular business and putting the Civil Service machine right.
Obviously, there is a great deal that Sir Derek can contribute. Given my own background, I retain some links with the bureaucracy. The stories coming to me from many friends within the bureaucracy, who are as dedicated as any hon. Member to the sensible use of public resources, tend to suggest that sadly, Sir Derek's exercise is a great deal less effective than some of us would hope that it should be, or than some ministerial statements suggest that it is.
I hope too, if the Government examine this problem, that they will look again at what happens now with the disappearance of the Civil Service Department and its merger with the Treasury, a point touched upon by my hon. Friend the Member for Horsham and Crawley. I believe that this was right. I think, sadly, that the concept of the Civil Service Department was questionable from the beginning. In the event, it is probably not too unfair to say that it became very much a lever and spokesman for some of the Civil Service unions rather than a tool for the 66 Government of the day to achieve a modern Civil Service that would use properly the tremendous human resources available in that body.
My solution would not be to call for a stronger version of the Prime Minister's office. A strong case exists, I believe, for what I call a restructured Cabinet Office. Departments can easily lapse into paddling their own canoe and furthering their own departmental issues. This means that any Cabinet loses cohesion and coherence. Cabinet Ministers sitting around the table at their meetings are obviously not the vehicle for the sort of long-term thrust to which reference has been made. This is, therefore, not the occasion to ride with any great intensity my hobby horse of the need to restructure the Cabinet Office. I believe, however, that this is an area where government and administration could be improved.
One other item that over the recent months and weeks of our work on the Public Accounts Committee has caught my eye is the use of public funds in the creation of jobs whatever the development agency involved or whichever part of the country one cares to choose. We have been presented with depressing figures of jobs that have cost £30,000, £40,000 or £50,000 each. This might have been acceptable but for the fact that all too often we have found ourselves examining projects where the jobs have not lasted. There may have been expenditure of £40,000 or £50,000 per capita. Yet, after 18 months, or two or three years, the jobs have disappeared.
This is an alarming and depressing lesson from which we must learn. I feel often that if one took £50,000 into the street in any of these places and handed it out on a random basis, one would probably find that three out of four would drink it all away but that the fourth might set up a small business that would employ the other three. This would achieve a better result than all the complicated cost-benefit analyses, feasibility studies and all the rest involved in public funding. Once more, I find myself stepping into a partisan area. I shall step out of it again. I suggest however, to Opposition Members that if they study some of the evidence that has been presented, they will find it difficult not to come to the same conclusion.
I urge the Government to recognise the Public Accounts Committee as a remarkably useful tool. My right hon. Friend the Member for Blaby (Mr. Lawson), in a debate on 29 January 1981, described the Committee as a potent instrument. It is not an instrument in really effective day-to-day use. I hope that the Government will understand the efficacy and the sharpness of the instrument available to them. I hope that they will use it a great deal more effectively than my impression leads me to believe they have done in the past.
§ Mr. John Prescott (Kingston upon Hull, East)
I have the opportunity to break the mould as a non-member of the Committee. I have heard hon. Members complain that there has been no opportunity for non-members of the Committee to speak. If the Committee members were not so concerned to take the opportunity to speak first, other hon. Members might be encouraged to come into the Chamber to discuss the useful work of the Committee. I am sure that other hon. Members would have liked to speak but, with time pressing, they may have become discouraged.
I wish to refer to three reports, but especially the thirteenth report. I congratulate the Committee on its 67 work. Hon. Members find the reports useful and valuable. I have been helped a great deal in understanding some of the problems with which we are faced. They have assisted me in carrying out certain investigations that I have felt necessary.
I turn first to the fifth report dealing with regional industrial policy. As an hon. Member with special responsibilities for examining this policy, I was especially interested to read the criticisms of it, most of which criticisms I agree with. As the Committee points out, the £5,000 million spent during the decade has not done a great deal to reduce regional disparity. It has been geared to highly capital-intensive areas. One is therefore led to question such policy.
To consider giving Nissan £180 million for the number of jobs that would be created does not represent the best use of limited public resources. It is a matter of regional policy to which the House will have to give its attention. The widespread recession induced by the Government means that areas such as the West Midlands and the South-East will be left with high levels of umemployment that, by the standards of the 1950s and 1960s, would be considered mass unemployment. Every region will be concerned about the level of grants that it receives to combat high unemployment.
I congratulate the Committee on its realism over a possible change of direction in regional policy. I do not accept the Government's call for flexibility in their response to the report. This has led to abolition of the regional planning boards and the IDCs. Local authorities have been attacked for attempting whatever is possible with limited powers to reduce unemployment. The reduction in the number of areas that receive aid shows that the Government have drawn the wrong conclusions from the Committee's report.
The third report dealing with public purchasing has to be considered together with the Estimates for defence expenditure especially on dockyard services. These matters are causing concern in my constituency and may need to be investigated by the Committee in the future. The report on public purchasing makes it clear that the Treasury guidelines are not solely concerned with cost but have to take other matters into account. This is right. The problems are emphasised in Hull where the Argentine venture means that many trawlers and ferries are being siphoned off, with considerable economic consequences for the port development.
I do not intend to deploy that argument for long. Nevertheless, compensation policy, as a result of the Government's decision to purchase or acquire vessels, will have a major effect on the economy of the port. It will affect the fishing industry and the landing company which have faced difficulties until now. We now face the fact that less fish will pass through the port. That effect will be exacerbated in the port of Hull by the loss to its income of the trawlers and ferries that are being sent to the Argentine. I hope that Government policy will take account of those considerations rather than be restricted to the narrow compensation that is given to shipowners and trawler owners.
I shall address my more detailed arguments to the thirteenth report of the Public Accounts Committee which deals with the underwater training centre at Fort William. This is not the first time that the House has had to address 68 itself to a report dealing with that centre. There is a continuing saga of the contractual arrangements that were arrived at between the Manpower Services Commission and the Shenley Trust. I declare an interest. I am a seafarer, am sponsored by the National Union of Seamen and am a diver. My union organises divers in the North Sea. Those are my only interests. I have been anxious to establish a diving centre. I have been raising the matter in the House since the early 1970s. I have been concerned with the death rate of divers in the North Sea.
We are discussing the Public Accounts Committee's third report on this subject. The first was known as the twelfth report and was published in March 1980. The second was known as the thirty-fifth report and was published in November 1980. The third, which is now before us, is known as the thirteenth report and was published on 9 July 1981. The anxiety that has been consistently expressed in each of those reports has concerned the contract that was negotiated between Shenley Trust and the MSC.
Although the matter lies within the responsibility of the Department of Employment, there has been much agitation and discussion about who was directly responsible for drawing up the contract. The conclusions that were drawn about the financial circumstances surrounding that contract were rightly pointed out in the twelfth report of March 1980. Its conclusions are relevant to the current report. At paragraph 35 it said:We also consider that the contractual arrangements for running the Centre has unsatisfactory features. The contract with Shenley, a 'cost plus' arrangement, was not the result of formal tendering procedures, but of MSC's consideration of informal proposals from three organisations. This contract allowed Shenley a margin of 70 per cent. over their attributable costs. This appears to us to be an extremely high rate of profit.On the information that I have, I fully agree with that conclusion. The House knows that when the matter was discussed that conclusion was seriously challenged by the hon. Member for Honiton (Sir P. Emery) who was then chairman of the Shenley Trust and negotiated the contract. I gave the hon. Gentleman notice only this afternoon that I would raise the matter as I did not realise that it would arise in today's debate. During most of the debate I have been writing notes for my speech. The hon. Gentleman seriously challenged during discussion of the first report on this issue whether excessive profits had been made. I brought another matter to the attention of the House and, by letter, to the Committee. I asked for further investigations into the nature of the contracts and the degree of compensation that would have to be paid for any breach of contract. There is a five-year contract between the MSC and the Shenley Trust for the latter to provide deep sea diving training and to operate the underwater training centre. The chairman of that company was the hon. Member for Honiton who negotiated with another company, of which he was also chairman, which owned the assets of the school. Therefore, the hon. Member for Honiton negotiated with himself as chairman a five-year contract with the MSC to provide training and run the centre, and a 25-year contract to cover the assets. That matter becomes pertinent when the contract with the Government finishes in five years and someone must pay compensation under a break clause in respect of assets that were the subject of the 25-year contract. The matter is not new. The hon. Member for Honiton has expressed in the House his opinion on the circumstances of the contracts.
69 I understand, however, that the Committee has not investigated that aspect. Certainly more than £250,000 must be paid in compensation for the breaking of that contract. It could be more than £300,000. The latter figure has been mentioned in the reports. That circumstance is relevant to the fact that the school now faces closure and possible difficulties in obtaining further finance. After further investigation, having listened to various complaints about the way in which the Committee had reached its conclusion that excess profit was being made, after further evidence and after the hon. Member for Honiton had given more information, the Committee concluded in the thirty-fifth report of 13 November 1980 in paragraph 6:In these circumstances we see no reason to change the views which we expressed in our Twelfth Report.Therefore, the Committee made it clear that excessive profit had been made. The House then debated those reports on 28 January 1981. Many views were expressed by Members on both sides of the House.
§ Mr. Prescott
I am grateful to the hon. Member for Folkestone and Hythe (Sir A. Costain) for that correction. I confused that fact with the fact that on 28 January according to an appendix to the thirteenth report the hon. Member for Honiton sent a letter to the Comptroller and Auditor General giving more figures and information about the contract. That was only the day before the debate in the House. Unfortunately, the Committee was unable to take account of that extra information. The letter suggested that the figures that had previously been given were incorrect and that the Comptroller and Auditor General had misled the Committee. That is a serious matter. The Committee, therefore, was anxious to re-examine the level of profitability. I understand that the Treasury made it known to the Committee that it was not satisfied with the contracts and that they should be different in future. Clearly, therefore, there was no satisfactory outcome.
The new facts that the hon. Member for Honiton asked the Committee to bear in mind—which are in the report before the House today—included the claim that £144,000 out of a total payment of £209,000 to the company were pre-contract costs. Taking account of that information, the return can be seen to be 14 per cent., rather than 72 per cent., which was Shenley's alleged profit. That information was contained in a letter of 28 January to the Comptroller and Auditor General. That led to the third investigation and to the latest report, which is now before us. It was decided to send the letter to the Manpower Services Commission to see whether better information could be obtained for the Committee on the questions posed by the letter from the hon. Member for Honiton, so that a further assessment could be made as to whether excess profits had in fact been made.
As the thirteenth report shows, the Comptroller and Auditor General made the matter absolutely clear in the information that he gave to the Committee. He said:I also have to inform PAC, on the basis of my access to MSC's books and records, that there is no documentary evidence there to support your contention that the Commission knows that Shenley had major expenses in the preparation of the feasibility study.That appears on page 5 of the report, in a letter dated 20 February from the Comptroller and Auditor General to the hon. Member for Honiton. In other words, the Comptroller and Auditor General made it clear to the Committee that 70 the argument for pre-contract money costs certainly did not come from him and that there was no evidence for it in the books of the Manpower Services Commission which he examined before giving evidence to the Committee.
Appendix III of the report shows the questions posed to the Manpower Services Commission on the subject of pre-contract costs. Questions were put to the commission by my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) in explicit terms. Question (iii) on page 6 of the report reads:Did MSC at any stage of the negotiations, have an estimate of the order of magnitude of Shenley's expenditure on their feasibility study? In particular, did Shenley's proposal to MSC, or the nature of any feasibility work which they carried out prior to the operative date of the contract, indicate that their studies had been in such depth that they might have incurred expenditure of the order of £144,000?Question (iv) reads as follows:When you gave evidence to the Committee in November 1979, or when the Treasury Minute on the Committee's 12th Report of 1979–80 was presented to Parliament in October 1980, had you become aware of any suggestion that Shenley had incurred 'major expenses' prior to the contract"?The reply from the Manpower Services Commission was dated 2 June 1981. In view of the controversial nature of this, it is unfortunate that the commission took so long to provide this information to the Committee, which had been dealing with the matter for some time. Nevertheless, the reply should be put on record. The reply to question (iii) was:There is no evidence to suggest that Shenley Trust Limited gave or offered to give an estimate of the costs incurred in preparing their feasibility study.The answer continues, but the rest is not relevant to this point. Hon. Members may look it up if they wish. The reply to question (iv) reads:MSC were aware that Shenley Trust Limited had expended considerable time and effort in compiling their report. The report, dated 10 September 1974, states on page 51 that 'over sixty man weeks had been expended on the investigations and various presentations. Sizeable sums have been expended on research work, on travelling to collect information and on the assimilation and sifting of information to its proper phase in the assessment'.It continues:If the sixty man weeks mentioned above can be related to the figure of £57,060 for salaries and £31,441 for accommodation detailed in Annex B to Mr. Emery's letter of 28 January then the average cost per week appears to be very high and to need further explanation.On my calculations, that means accommodation costs of £524 per man week. I do not know whether the people involved stayed at the Savoy hotel to prepare their report, but anywhere in the country that kind of expenditure requires explanation, particularly when it is taxpayers' money. We spend enough time appointing social security snoopers to discover whether a fiver has been misappropriated by some unfortunate individual living on £40 or £50 per week. Then to find that sums of this magnitude apparently do not warrant proper or adequate investigation is a matter of great concern and reflects considerable prejudice in this matter. It is therefore my contention that on those questions and replies the Committee has not satisfied the House with the information presented in its final report on this. There are more questions to be answered, certainly about the use of taxpayers' money.
A number of relevant events have occurred since publication of the report. First, the hon. Member for Honiton, who has been adequately condemned by the Committee for making an excess profit, has been 71 knighted, so he has certainly received his awards. The Fort William school is about to close. The Government have just given notice that from April they will refuse to provide any further funding for it, which effectively means that the school will have to close. The industry has said that it is not prepared to finance the school unless the Treasury will allow the industry to finance its schools through tax concessions, which the Government have refused. Moreover, although the Treasury has said that future contracts should be different, it does not seem to want to do very much in that direction.
The Government's response is itemised in Cmnd. 8413. There they have a great deal to say about other aspects of the Committee's report, but in relation to the underwater training centre and the possible closure of the only major deep sea diving facility in this country, all that the Government have to say, in paragraph 84, is the following:The Treasury, the Department of Employment and the Manpower Services Commission note the comments of the Committee.Frankly, that is not good enough. It is not good enough for the Committee, and I am bound to say to some of my colleagues on the Committee that in the light of these judgments their own conclusions are not satisfactory. The Committee took the view that excessive profits were made and that the matter must be considered. Bearing in mind that the Committee has spent some time considering whether it should continue as a public watchdog committee, and whether it should be a more powerfull Committee of the House, with which I agree, I quote from the thirteenth report the Committee's conclusion on this whole sorry affair:We have decided, in fairness to all concerned, to publish all our communications in this matter. These are appended to this Report. We propose to take no further action on the subject.It is totally unsatisfactory for a Committee of the House not to follow through the full investigation of the circumstances of this case. Indeed, its credibility as a Committee to which Back Benchers can refer matters of this kind is very much on the line. If the Committee felt that somebody had made an excessive profit out of taxpayers' money, particularly if the person is a Member of Parliament, that person should be asked to pay back those excessive profits. When Ferranti made excessive profits, it was asked to pay the money back. Surely, the logical conclusion for the Committee would have been to achieve at least that.
I call upon the Committee to produce a fourth report on this due to the circumstances now surrounding the closure of the school. As I have said, in the compensation terms involving the break clause in the 25-year contract for the assets, the cost involved for whoever takes over financing the school may be some £500,000 and certainly more than £250,000. If the industry or the diving private contractors have to take over this school—they are refusing to do so—surely they will be deterred because they may have to face the compensation terms to be paid for the assets involved in the 25-year contract.
The Government statement on the future of the school and the withdrawal of funds is completely unacceptable. With trade union officials, I am seeing two Ministers in the Department of Employment tomorrow to register our great concern that the school may be closed at the end of this month.
72 The petroleum industry training board will not use its levy to finance the school, and the private diving contractors are not prepared to finance it. Therefore, this country will be denied an important training facility in an industry that is extremely wealthy by any standard. It has the resources for such finance. It trains men in the most dangerous occupation known. The industry has a far greater proportion of loss of life among its staff than has any other. It is, therefore, completely unacceptable that British divers may have to go to France, Norway or the United States for training in proper and actual deep sea diving to get a job in the North Sea.
The committee should produce a further report on the circumstances of the contract, which will contribute to the closure of the school, bearing in mind that the taxpayer has invested more than £5 million in it and stands to lose all the assets. The taxpayer, yet again, will have been raked off by a few individuals, to the detriment of the safety of the men working in the North Sea.
We call on the Government to say that they will considr this matter and that the Public Accounts Committee, which is the watchdog of this House on the use of taxpayers' money, will yet again look at the important issuee involved in the contract. It is essential that we maintain the diving school and essential for the credibility of the House that the Public Accounts Committee should spend more time investigating the circumstances of the contract.
§ Mr. Geoffrey Dickens (Huddersfield, West)
In my short speech I shall allude to the seventeenth report dealing with financial control and accountability in the National Health Service. However, before doing so I congratulate the hon. Member for Kingston upon Hull, East (Mr. Prescott) on his speech on deep sea diving. Last week I was at the Capper-Neill factory in Preston and was able to see some of the equipment that is under construction and the safety back-up equipment. The grave dangers were pointed out to me, as was the need for support lines, services and equipment in deep sea diving. The work commands a tremendous amount of my respect.
I am certain that, in common wth other Governments, the previous Conservative Government made their fair share of mistakes. Local government reorganisation was not a great success. There was some doubt about the Conservative Government's actions over devolution for Scotland. Inflation-proofed pensions have proved to be a snag. They are nice for hon. Members and others who enjoy them, but they cause great ill-feeling among others.
The restructuring of the National Health Service by a Conservative Government in 1974 was not a success, and we have recently had the pleasure of unscrambling the position ourselves. That was a useful exercise. I have carefully examined some of the questions asked in the report, and I congratulate the members of the Public Accounts Committee on their questioning and their in-depth supplementaries.
I do not serve on any of these Committees, and I wonder whether this annual ritual[...] all that it seeks to be. The people examined are permanent secretaries and the chairmen of regional health authorities. They are eminent people, but they are heading-up certain areas. They are the experts, but often the answers that they give are extremely shallow. Sometimes they defend against a difficult 73 question, as a good batsman should, but I am certain that at other times they do not have notice of some of the questions where much information is needed.
I shall quote a classic example from page 37 of the seventeenth report. The hon. Member for Folkestone and Hythe (Sir A. Costain), said:The catering industry is not noted for its honesty. How many cases of pilfering or fraud have come to light in the last 12 months to your knowledge?The permanent secretary replied:I wish I could give you an accurate answer to that question. I am afraid we do have, in the National Health Service, a relatively high level of pilfering and quite a lot of it, as I have always understood it, is in the catering departments. I could try and get you a better answer if I can.The questioner, in depth, then asked:It is not unique to the National Health Service; catering generally is rather liable to pilfering. When you compare the different costs and the different values of the various Areas, have there been any inquiries as to how much of this could be due to pilfering or fiddling with the purchase of food?The permanent secretary replied:I am sorry, I do not have information on that in any quantifiable form".That may be because such information is not carefully collated or perhaps because the permanent secretary needed more notice of the question, or even that he was badly advised. Whatever the reason, it is a classic example of the fact that in many instances answers to questions are totally unsatisfactory. I have weaved my way through the report, and that is a fairly consistent pattern.
The questions are first-class. They are the very questions that I should ask if I served on the Committee. Quite often when I read the report I felt "Well, he ought to have asked that question", and later I discovered that it had been asked. I therefore make no criticism of the Committee or the work that it does, because it spends many hours ensuring that people are accountable to Parliament for their actions and what they spend, but, without a doubt, I am suspicious of the system itself, because I am not sure whether it produces the results that Parliament wants.
The reorganisation of the NHS led to many misunderstandings. For example, the district authorities and the regional authorities were not clear about their defined responsibilities. It was a grave error on our part to have reorganised the NHS in such a way, and I hope that the responsibilities of the new organisation will be much more clearly defined.
About 930,000 people work in the NHS. That represents 4 per cent. of the national work force. A total of 73 per cent. of the money in the health budget goes on wages for that vast work force. As I read the report, I thought about the claims of the nurses, auxiliaries and domestics for more money. I thought that if one could effect sensible savings and economies one could, perhaps, find something immediately for the nurses. However, I then weighed that consideration against the fact that 73 per cent. of Health Service expenditure goes on wages alone.
That poses further questions. For instance, a great responsibility is placed in the hands of our local general practitioners. Whether they know it, or whether we understand it, they undertake a procurement role on behalf of the Health Service. Every day in their surgeries they make out vast orders for drugs to be obtained from random chemists. For example, patients who live in London can 74 take their prescriptions to any chemist, yet those prescriptions are really orders placed on behalf of the NHS.
Let me give a classic example. For many years, I have been taking tablets to control blood pressure, and have done so under three different doctors. Each has prescribed completely different tablets, which I think do the same thing. At any rate, I am still surviving. However. I do not know which of those tablets costs the most. I cannot judge the tenacity of the pharmaceutical salesman who persuades a doctor that his is a new, better, improved, slower-dissolving tablet than the one used by the GP's father when he was in practice and which may be prescribed elsewhere in the country. Doctors are daily making out hundreds of thousands of orders on the National Health Service. Many of their patients are on tablets for the rest of their lives, day in and day out.
We were talking not long ago about the optical cable coming into our homes. Loosely, this can be described as a laser beam cable through which services arrive at our homes. Heaven forbid, but it means that we may have more specialised television channels from which to select, which will require from us yet more decisions every day. There is also the possibility of our reading our gas and electricity meters from the optical cable. Furthermore, a burglar alarm can be attached to the device.
It has even been said that we could have a doctor service to the home through such a cable, by which one taps out one's symptons and receives back a prescription or some method of curing oneself at home. I think that that is already done in remote countries where doctors are scarce and distances long. The system is certainly used in teaching.
If that is possible, it leads to what I was suggesting earlier—that if one had certain symptons and needed tablets the same tablets should be prescribed nation-wide to cure that condition. We should not have tablets competing with each other. If there are very good blood tablets—the best available—they should be available nation-wide. In that way, the tablets would be much cheaper.
Surely such a controlled system would be preferable and could be devised without taking all individual responsibility from the doctor. We must have some control over the vast expenditure daily being prescribed by our GPs. That is one tiny element of health expenditure on which, surely, something can be done.
Speaking of supplies in general, one cannot walk round a hospital such as one of the many in my constituency without someone saying "If only someone could do something about these wastages". Others say "The money wasted here is nobody's business". But it is somebody's business; it is the taxpayers' and Parliament's business.
However, I do not believe that any Public Accounts Committee, interviewing the people it does, however good, can produce the right answers. In order to do that, one has to go lower down the line. I do not venture to suggest how we can do that without taking responsibility away from those we appoint.
The terms of reference of the PAC state:The Committee shall have power to send for persons, papers and records, to report from time to time, and to adjourn from place to place."."Persons" does not mean the permanent secretary all the time. Surely it does not mean only the chairmen of the regional health authorities and their expert accountants, 75 advisers and so on. Surely from time to time it can mean people from lower down the line where one can find how bits and pieces disappear or are wasted and where we can save money.
If we can save money we might be able to do more for the nurses. I am pleased that the Government have announced that they are developing a system to be implemented next year whereby the nursing profession does not fall behind everyone else, as it has done under successive Governments. Like many others, nurses need immediate help. If I were a ferret I could find that immediate help within the PAC report, but I do not know how we can do the job better.
It is easy to criticise the system, but it takes a far stronger advocate and a more knowledgeable person than myself to suggest how we might go about making improvements. I am sure that we ought to examine how we take evidence and, more important, from whom we take evidence.
I must conclude, because other hon. Members wish to speak. I congratulate the members of the PAC. I do not claim to have read all the reports, but I have scanned them. I think of the hours spent on that work and I wonder whether they have been spent wisely. I am sure that the work has been useful, but I am not certain that it has been done in the right way.
I hope that my hon. Friend the Financial Secretary to the Treasury will offer suggestions on the search for knowledge and accountability and on how we can effect savings and a war on waste.
§ 8.6 pm
§ Mr. Tam Dalyell (West Lothian)
At 4.45 pm I warned the Foreign Secretary that, as the attendance in the House was sparse, I hoped to raise a second Adjournment debate on the issue of the Falkland Islands and the views of some of us who dissent from the consensus. I also informed the Speaker's Office that, because few hon. Members were present for the debate on the PAC reports, I hoped that a second Adjournment debate would be possible.
My actions had an electric effect, thought not the effect that I might have desired. The Government Chief Whip came into the Chamber, made his dispositions and we have had speeches from the Conservative Benches that may have been longer than they would otherwise have been and some hon. Members who did not hear the opening speeches have come hastily into the Chamber, clutching their PAC reports, to make sure that the Falkland Islands debate does not take place.
We have seen another demonstration of how the House can work, but may people outside will find it extremely odd that in this hour of crisis——
§ Mr. Deputy Speaker (Mr. Ernest Armstrong)
Order. The hon. Gentleman has made his point. We ought to get back to the debate on the PAC reports.
§ Mr. Dalyell
I hope that the point is indeed made.
As the second Labour non-member of the PAC to take part in the debate, I join my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) in saying that it is right that those who are not current members of the PAC should comment on the work of our colleagues. I do so willingly, because for four years and under three Chairmen I was a member of the Committee and I know how hard 76 our colleagues work. It is a valuable part of the work of the House and deserves more scrutiny than it normally receives.
My hon. Friend the Member for Kingston upon Hull, East has given a classic example of how PAC debates can be properly used by those with expertise in certain areas, such as diving, legitimately to pursue a cause such as my hon. Friend has advocated so effectively. It would not be out of order for me, as a Scottish Member, to pay tribute to my hon. Friend for the work that he has done on the Fort William centre, which I have visited, and for the diving community, some of whom I represent.
As my hon. Friend the Member for Fife, Central (Mr. Hamilton) justifiably said, on the last occasion that we debated PAC reports—in November last year—I spoke at inordinate length. My speech concerned the specific issue of Leyland Bathgate and the cannibalisation of the Leyland tractor line—a public asset which has been sold for private profit.
Having made that speech, and with the good will of the Chairman, my right hon. Friend the Member for Heywood and Royton (Mr. Barnett), on the morning of 1 December—within 18 hours—I went to see Mr. Gordon Downey, the Comptroller and Auditor General, Philip Cousins, the secretary of the Exchequer and Audit Department, and David Myland, who is responsible in the Exchequer and Audit Department for industrial matters. I gave them the many facts that were at my disposal about the sale of the tractor line at Bathgate from Leyland to Marshalls of Gainsborough. I asked them to try to establish the truth and to clear up as soon as possible the putrid atmosphere in my constituency and the suspicions and rumours that were prevalent at that time.
I thought that that would be done, possibly before Christmas, but if not, at least just after Christmas. In fact, the matter has not yet been cleared up. Certainly, I acquit the Comptroller and Auditor General and my colleagues on the Public Accounts Committee of any sloth in this matter. On the contrary, I know for a certain fact that they have been working extremely hard on the whole Bathgate issue. I simply put down the marker, without going into more detail, that delay in such cases involves very real problems. People want matters such as this cleared up one way or the other. That is why I asked the Prime Minister the question which my right hon. Friend the Member for Heywood and Royton dealt with at considerable length in his speech.
This is an ongoing issue. I leave it with total confidence in the hands of my right hon. Friend the Member for Heywood and Royton and other right hon. and hon. Members knowing that they will pursue the matter and come to some conclusion. The issues encapsulated in the Bathgate case are of continuity importance, and are not of ephemeral significance.
In the light of this experience, I am greatly tempted to bother the Comptroller and Auditor General on another issue, the question of the expenditure of public money in relation to Motec of Livingston—the proposed closure of the road transport industry trading board unit. That establishment caters for apprentices, and a great deal of public money—£4 million and £2 million worth of equipment—has been poured into training apprentices, not just from Scotland—from which only 30 per cent. come—but from the north of England. That establishment 77 has built up simulators for faults, paint shops and all sorts of other purpose-built equipment, with accommodation for 200 apprentices on concentrated courses.
It is little short of wicked, at this stage in our industrial history, when this nation depends so greatly on skill, that we should even contemplate closing such a place. My hon. Friend the Member for Kingston upon Hull, East, who is responsible for regional development policy in the Labour Party, knows very well how important it is to have national skill centres in the regions. Motec is such a centre, and the whole question of closing Motec, and saying that it is, of course, the business of the road transport industry training board, that Governments can pass by like the Biblical Levi on the other side of the road, wash their hands of it, simply will not do in terms of the expenditure of public money.
I therefore put down the marker here and now that if, after a month, when final talks have taken place, the decision goes ahead to close Motec, I shall be running along to Audit House to ask for the kind of investigation that I believe is legitimate.
As a result of all that happened, at the request of the Secretary of State for Industry I had an hour and a quarter interview with Sir Peter Carey, accompanied by the Minister of State, the hon. Member for Kingston upon Thames (Mr. Lamont). We await the outcome of those discussions. I hope that the Public Accounts Committee will look at the basic issues. It may well be that, having taken evidence from Jimmy Swan, the convenor of shop stewards at Leyland Bathgate, and from Sir Michael Edwardes, it will come to some definite conclusion.
Another matter that I wish to raise concerns the work of the PAC in relation to the financial control of the British National Oil Corporation and the advances to the British Gas Corporation. Along with other hon. Members, I was concerned with the marathon work on BNOC and the setting up of Britoil. As a principle, should not the PAC be able to pursue public money, and the scent of public money, wherever it may lead?
In all the negotiations in the setting up of Britoil I hoped that there would be the access for the PAC that there should be. If anyone needs a reason for that, look at what happened in relation to Amersham and the underwriting of the shares. It is wrong that the PAC should be denied access, along the lines described by the Secretary of State for Energy in the Committee discussing the Oil and Gas (Enterprise) Bill.
In the light of what was said in Committee—particularly by the Secretary of State for Energy—in relation to Britoil and the British Gas Corporation, have the Government thought any more about the thorny problem of the access of the PAC? Although some hon. Members might think that in the present international situation with the Falkland Islands it was not time to dismantle the nation's oil corporation, or indeed to have an upheaval in the British Gas Corporation, there is an issue of principle here for the PAC. The Secretary of State said in Committee that it was a matter for Treasury Ministers. There was no Treasury Minister on the Committee. If it is a matter for Treasury Ministers, we have this opportunity, for at least an undertaking from the Financial Secretary—on which I shall press him either tonight or on some later occasion—that he will outline the Government's thinking on this matter.
78 I wish to raise a separate matter concerning the Science Research Council. I refer to page ix, paragraph 20 dealing with the allocation of funds by the SRC. It says that We board hoped to spendvery close to the cash limit of their total grants in aid. In the event the claims for payment have matured more quickly than they had expected, particularly in the last quarter of the financial year, and they were able to avoid excess expenditure only by postponing certain payments.I should declare an interest in my capacity as the Opposition spokesman for science. I have gone into this matter in some depth, particularly with one of the witnesses concerned, the extremely distinguished former chairman of the Science Research Council, Sir Geoffrey Allen. I refer hon. Members to the answer that he gave to my right hon. Friend the Member for Heywood and Royton which appears in paragraph 1179 of the report. He said:There is always a difficulty in forecasting on university research grants and this is because we run this unique and valuable system of the inter-connection between the money we put into the universities and money available for research. Since you cannot plan for research, you do not know what you are going to discover, and that is a very important factor in the effectiveness of research. If I can turn to the specific point in this current year, the first thing we did, as soon as we realised we had got it wrong for 1979–80, we halved the over-allocation, we took it down to £3½ million, and then, in September 1980, we took it out altogether and pulled back the whole of the over-allocation for 1980–81.I say only to my colleagues on the Public Accounts Committee that the management of research finance, particularly for the more expensive forms of physics, is very difficult. People do not know what they will discover. My right hon. Friend the Member for Heywood and Royton may say that there are no exceptions and may query where things will end if we start to plead special cases. I shall give way to him if he thinks that I am wrong, but there should be flexibility—year in and year out—for scientific research. The situation is not easy when people are dealing with the undiscovered and the unknown. As my right hon. Friend has not intervened I shall take that as an expression of sympathy—if not agreement—and pass, greatly relieved, to another subject.
I turn to the Committee's report on the cancellation and suspension of arms sales to Iran and, particularly, to paragraph 57. It states:They had therefore made no wholesale transfer of the selling function from the Ministry to IMS although they were making increased use of the company in particular countries where there was clear advantage in doing so.That raises the whole question of arms sales. I know that the Public Accounts Committee should not discuss policy, but simply whether expenditure has been properly incurred. However, the philosophy behind arms sales is important. It is fair to point out that just before the separate crises arose, arms were being sold to both Argentina and Iran and spares were certainly sold. Have the Government rethought the whole question of arms sales? It is a temptingly lucrative trade, but some of us think that the policy of many Western countries to do everything that they can by means of advertisements, credit and inducements to sell arms to regimes should be totally rethought. I hope that as a result of the Falklands Islands crisis there will be a complete overhaul of the whole Government machine of arms sales.
§ Mr. Dennis Skinner (Bolsover)
Although my hon. Friend said that the Public Accounts Committee did not discuss policy, I think that he will agree that if the selling 79 of arms to Fascist regimes—or, for that matter, to any regimes—results in the taxpayer bearing an enormous amount of expenditure as a result of such folly, or in the taxpayer bearing the cost of the task force being sent to the Falkland Islands, it becomes a matter of concern, indirectly, to the Public Accounts Committee. It will examine a tremendous amount of expenditure that would have been avoided if there had been no arms sales.
§ Mr. Dalyell
My immediate instinct is to agree with my hon. Friend the Member for Bolsover (Mr. Skinner) that it does become a matter for the Public Accounts Committee, but since the Chairman of the Public Accounts Committee is keeping a beady eye on me, it may be that his opinion on whether it is a matter for the Public Accounts Committee will be more worth having than mine. I have long since learnt not to tell my colleagues what is their business in Committee. This is a serious matter with which we should be concerned.
I turn to the cash limits in for the Ministry of Defence. The projects to which my right hon. Friend the Member for Heywood and Royton referred are mind-boggling in terms of cost-effectiveness. Difficult though it may be and misinterpreted at this moment though it may be, there is some obligation to monitor the costs of the task force. In the debate on the Falkland Islands on 7 April, I interrupted the Secretary of State for Defence and asked innocently:What is the cost of all this? Will it come from Departments or from the public sector borrowing requirement? Is there any estimate of the cost?The Secretary of State for Defence replied:We have made no estimate of costs. We are concerned with the success of the operation."—[Official Report, 7 April 1982, Vol. 21, c. 1049].I noticed in The Observer that the top saying of the week wasWe have made no estimate of costs".On the following day, 8 April, my hon. Friend the Member for Fife, Central returned to the subject in Prime Minister's Question Time. He asked:Does the Prime Minister agree with the statement made by the Secretary of State for Defence yesterday that the Falkland Islands exercise will go ahead, regardless of cost? Has she any idea of what the cost will be—£ 100 million, £500 million, £1,000 million? How will it be paid for, and how does it come within the cash limits of the Ministry of Defence?The Prime Minister replied:I wish to make it perfectly clear to the hon. Gentleman that when this information first came to me—I said when it did—I took a decision immediately and said that the future of freedom and the reputation of Britain were at stake. We cannot therefore look at it on the basis of precisely how much it will cost. That is what the Contingency Reserve is for."— [Official Report, 8 April 1982, Vol. 21, c. 1084.]If, as we all hope, no shots are fired, it may or may not be manageable within the Contingency Reserve. But, of course, that does not let us off a certain obligation to monitor costs. However, it is certain that if an attempt is not made to monitor costs at this stage, every excess of the Ministry of Defence for the next year and subsequent years will be ascribed to the Falkland Islands operation. That is a simply marvellous potential excuse for any excess spending in future.
I prophesy—I do not prophesy many things—that next year and the year after, as my right hon. Friend the Member for Heywood and Royton goes on with his work, defence officials will come before him, and whenever any excess expenditure is questioned by my right hon. Friend 80 or by hon. Members on the Public Accounts Committee the answer will be the same—"We have to attribute it to the Falkland Islands operation". That is one reason why an attempt should be made at costing.
In the third report of the Public Accounts Committee the question is raised of the air-to-air refuelling tanker fleet, a subject upon which we also took evidence, which showed the importance of interrelating decisions in different parts of operational planning. For example, a costing should be carried out of the use of Vulcans and the air-to-air fuelling that would be involved. Some of us are deeply alarmed by the talk of the use of Vulcans. They could be used for attacking the landing strip at Port Stanley or for going further and taking retaliatory action against land-based Argentine forces on the South American continent. Once any missiles or bombs fall on the South American mainland the fat will be in the fire, because that, above all else, will unite the Spanish world against us.
It would be folly of an extraordinary order to fire any rockets or missiles upon the South American mainland. All South American countries, Right, Centre and Left, including many who have suffered on the Left through Right-wing Governments, will unite behind their flags against us. That is becoming clear in Argentina. Perez Esquivel, a Nobel prizewinner, a man who has been tortured by Right-wing Governments, has come down on the side of the light blue and white flag on the issue of the Falkland Islands, the Malvinas.
I was the leader of a parliamentary delegation to Brazil and I found exactly the same thing on the Right, on the Left and in the Centre. It was generally believed that the Falkland Islands belonged to a South American State. Those who are in a minority in Britain—possibly it is not such a tiny minority as many think—are deeply disturbed by events, especially by the assumption of Sir Nicholas Henderson and others——
§ Mr. Deputy Speaker(Mr. Bernard Weatherill)
Order. The hon. Gentleman is straying somewhat from the report of the Public Accounts Committee.
§ Mr. Dalyell
I shall come back very near home, Mr. Deputy Speaker. I am concerned that the PAC should monitor the costs that will accrue to my former employees, the P. & O. following the conversion of the "Canberra" and the "Uganda". Before I came to this place I worked for two years as a director of studies on the "Uganda's" predecessor, the "Dunera". I have sailed also on the "Uganda". If anyone is thinking of the Uganda as a hospital ship, he must be expecting a great many casualties.
§ Mr. Deputy Speaker
Order. We are discussing the reports of the Public Accounts Committee, not what is not in them.
§ Mr. Dalyell
I thought that it was in order, Mr. Deputy Speaker, to suggest as tactfully as I could to the Chairman of the PAC, my right hon. Friend the Member for Heywood and Royton, what he should be considering currently. The issue of British Leyland drives a coach and horses through the understandable views of the hon. Member for Folkestone and Hythe (Sir A. Costain) on matters that are post mortem. I thought that the PAC had accepted the principle that it should consider current issues as opposed to those that are post mortem and have ceased to be topical. With all the tact that I can deploy, I suggest 81 that the PAC should examine the cost of converting the "Uganda" under pressure to ensure that the Government are not rooked. When contractors know that a job must be done they can put on it the price that they like. They know that the Government must convert the "Uganda" come what may, and so there is a danger that they will up the price. The PAC should be examining the financial undertakings that have had to be given to get the job done quickly.
The same consideration must be given to the conversion of fishing vessels into minesweepers. We should look at the value for money of converting fishing vessels with metal hulls to minesweepers. Anyone with technical knowledge knows that a minesweeper needs a plastic or wooden bottom and not a metal one.
§ Mr. Tim Sainsbury (Hove)
On a point of order, Mr. Deputy Speaker. Could you help us by pointing to the part of the reports that deal with that interesting aspect?
§ Mr. Deputy Speaker
I am grateful to the hon. Gentleman for his help. I am listening to the hon. Member for West Lothian (Mr. Dalyell) carefully. I have been in the Chair for only five minutes. I do not have the benefit of having heard what the hon. Gentleman said before, but I repeat that if the hon. Gentleman would be kind enough to look at the Order Paper he will find that we are discussing the first to seventeenth PAC reports. I understand that he is touching on what the PAC might discuss in the future, but I believe that we have heard enough of that.
§ Mr. Dalyell
It is my particularly good fortune that during my speech there should be a change of Deputy Speaker.
I do not have all that much sympathy for the hon. Member for Hove (Mr. Sainsbury). He has been wheeled in by the Government Chief Whip to stop me getting my second Adjournment debate, when all these matters would manifestly have been in order.
§ Mr. Deputy Speaker
Order. That is definitely out of order. On this Adjournment debate we cannot discuss second Adjournments.
§ Mr. Dalyell
I am always obedient to the Chair.
These are matters for Parliament. The Falklands operation is a matter for Parliament for a particular reason. It is being conducted by very few Ministers. I have been a Member of the House of Commons for nearly 20 years. I am appalled to learn how many Ministers in the Cabinet say that they have not been properly consulted. The Prime Minister is conducting the operation.
§ Mr. Deputy Speaker
Order. The hon. Gentleman knows that he is now out of order. He is an experienced parliamentarian. I ask him to come back to order and deal with the subject being debated.
§ Mr. Dalyell
As my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) reminds me, this is a debate on the Adjournment of the House.
Parliament should fight for more and more say in these matters, especially as the policy is being run by the Prime Minister, her Secretary of State for Defence, who wants to save his reputation, a Foreign Secretary new to the job and a principal private secretary, Mr. Clive Whatmore, who, from hearsay, is exercising great power. It is a power absolutely out of keeping——
§ Sir Albert Costain
On a point of order, Mr. Deputy Speaker. Are we not creating a dangerous precedent if, in an Adjournment debate, we can talk on anything that we wish?
§ Mr. Deputy Speaker
Unfortunately, the Adjournment debate is very wide. I understand the hon. Member for West Lothian is coming to a conclusion. In persisting in his line of argument he is keeping out other hon. Members, including his hon. Friends, who have been here all afternoon and wish to take part in the debate.
§ Mr. Dalyell
That consideration weighs heavily with me. If others, such as my hon. Friend the Member for Huddersfield, East (Mr. Sheerman), who has been here a long time, wish to speak, that is a good reason for me to sit down.
§ Mr. Tim Sainsbury (Hove)
It is usually a pleasure to listen to the hon. Member for West Lothian (Mr. Dalyell). He puts his points cogently and they are usually interesting. However, I hope that on this occasion the House will forgive me for not following him. He trespassed on the indulgence of the Chair and strayed a long way from the reports that we are discussing. I appreciate that he wishes other matters to be discussed, but in any debate on any subject certain right hon. and hon. Members will always regard other matters as needing the urgent consideration of the House and the pressing attention of hon. Members. The hon. Gentleman cannot complain that the Committee's reports, which most hon. Members regard as of exceptional importance, are not deserving of debate even when other matters press upon us.
The reports cover a wide area and I wish to say something about four of them. I apologise for not being present at the beginning of the debate. The Public Accounts Committee in its reports must steer between two dangers. The first is that of paying too much attention to the detail. The old story that the time spent on discussion varies inversely with the sum of money involved can on occasions become only too true. The other danger is that the Committee will consider the broad issues and the way in which the money is spent rather than the value for money that is achieved, which I am sure is its main objective. No one would disagree that manpower is the critical element in any area of cost. If one can control manpower, or achieve the correct balance between the number employed and output, one can be reasonably sure of getting value for money.
The sixth report is of great importance, because it is addressed to th control of Civil Service manpower.. It emphasises the link between the costs of running the Civil Service and the number of people that it employs. However, I stress to my hon. Friend that it is more than that—it is the relationship between the total costs and total output of the Civil Service.
Paragraphs 6 and 7 of the sixth report are especially revealing, because they highlight the inadequacies of our previous methods of controlling the efficiency of the Civil Service. Paragraph 6, at page vi, emphasises that the Civil Service Department accepted that its view did not always prevail, but that its business was not to "second guess" but to help Departments to establish satisfactory control systems. If it is the Department's business not to second 83 guess but to help people to establish an appropriate control system, it is not doing that job adequately. Surely the essence of the whole thing is to ensure that there are adequate control systems. I hope that now that my hon. Friend and the Treasury have control of such matters they will ensure that every Department has adequate control systems to ensure managerial efficiency within the Civil Service.
In paragraph 7 the Civil Service Department correctly emphasises the shift of its manpower control system increasingly towards the assessment and monitoring of departmental control systems. However, it is clear from reading the report that that was not carried out adequately. The recently published, well-received and widely commented upon report of the Select Committee on the Treasury and Civil Service again highlighted the need for more attention to be given to the vital problems of the efficiency with which we use manpower and to ensuring that in every area where Civil Service manpower is deployed there are proper control systems, that managerial efficiency is high and that those who have a responsibility for exercising that managerial efficiency are appropriately trained and rewarded.
The same theme of manpower control and efficiency also comes out in the seventeenth report on financial control and accountability in the National Health Service. By coincidence, again we find that it is paragraph 6 on page vi which highlights the problem, and it is rather horrifying reading, because one finds thatthe number of NHS employees has more than doubled to over 930,000 whole time equivalentssince 1948. That is a considerably greater number of employees than in the whole of the Civil Service, and it highlights the need in the National Health Service for the sort of managerial control over use of manpower for which I have been emphasising the need in the Home Civil Service.
Reading the report gave one little confidence that there was any great regard for efficiency throughout the NHS. It seemed to me that the report highlighted one matter that is perhaps the key to achieving the sort of performance that one ought to get in the use of manpower in the NHS—the use of comparative statistics.
Not only are there different regions in the health service, but there is a system of districts, as well as individual hospitals and individual units, many of which are extremely comparable. It seems to me appalling that more use is not being made of comparing the number of people employed to achieve a given function in comparable areas and in comparable hospitals and other NHS establishments.
Paragraph 11 of the report says:We recognise the difficulty of attempting overall staff planning in the NHS, but taking account of the points we make below, we doubt whether the present largely devolved system of control in England has ensured that the numbers of staff employed have been limited to those strictly necessary to meet the objectives of the NHS.One could say that in some ways that is the understatement of the year.
I think that everyone in the House would agree that there is profound reason to doubt whether we are getting efficiency, not so much in the use of nurses and the trained staff in the National Health Service, as among the large numbers of ancillary staff—the cleaners, caterers and the 84 laundry side. Anyone going into hospital is likely to get the impression that there is a lack of efficiency in those areas and of real managerial control in large areas of cost. I suggest that it is in those areas that we should not only look at the comparative statistics, but should take the very considerable opportunity that exists to improve efficiency by introducing the element of competition.
I see no reason why the catering, the cleaning or the laundry in many of the units could not be put out to private sector contractors and let on competitive tender. If that were done, very likely a lot of the work would be performed better and more cheaply, and there would be more money left to spend on the vital health aspects of the NHS.
The tenth report, dealing in part with museums and the arts, refers to the problem of obtaining inventories of what is contained in some of our great museums. Paragraph 27 states that the Science museum and the Victoria and Albert museum each have about 1 million objects in their collections. One can understand the difficulties, but I am rather appalled to read that it might take up to 20 years to get an inventory. The need for an inventory is to find out what is there, what is not there, and what should be there.
Paragraph 28 mentions one of the reasons why the inventory will take so long. It is due tothe problems of identification and description of many of the objects.If the objects cannot be identified and described, one wonders what they are doing in the museum.
This is an area in which there is considerable scope for the use of modern technology. If, perhaps with Government help, we could introduce all the systems of information technology which the Minister for Industry and Information Technology is so keen to promote, it would not only greatly improve the recording of the inventories of our great museums; it might provide an opportunity to export British skills in this area to other countries and thereby provide more employment.
I could not support more strongly than I do what is said in the fourteenth report about the need to look for some system of achieving carry over. Surely in this day and age we should be looking at the cash control and the cost of a project rather than at the amount of cash that is spent in a year. I congratulate the members of the Committee on the work that they have done. I only wish that there were more time for the House to discuss their valuable reports and perhaps find more effective ways of ensuring that their recommendations are acted upon.
§ Mr. Barry Sheerman (Huddersfield, East)
It was with a sense of supreme irony or déjà vu that on the second occasion I have been waiting to speak on this important subject of the Public Accounts Committee and its reports, I was worried that my hon. Friend the Member for West Lothian (Mr. Dalyell) would pip me at the post as he did on 30 November. On this occasion I have triumphed. I shall be brief and not deal with the detailed aspects of the reports, although I wish to go through a catalogue of them. I shall deal partly with those matters that I wished to discuss on 30 November. I have every right to do that because those matters are involved in the first special report.
I have been a member of the Public Accounts Committee for exactly one year. Membership of that Committee has been one of the most educative experiences 85 of my three years in the House. Members of the public sometimes under-rate the political skills that are necessary to be a fully effective Member of the House. It is a pity that very often they do not understand the work of the Select Committees, and the central task that the Public Accounts Committee is given.
These political skills are important, and they are not magically endowed. I believe in the process of apprenticeship, and I hope that in the coming years, if I am fortunate enough to remain a member of the PAC, I shall develop the skills to the extent shown by hon. Members of the Committee from both sides of the House. To extract the right kind of information, or even a small percentage of it, from the witnesses whom we call needs a great deal of political skill.
It has been a good and historic year to be a member of the Public Accounts Committee. From 1945 there has never been such a period of intense scrutiny of the work of the Public Accounts Committee or so many debates devoted to its role and effectiveness as in the 1980s. The first special report on the role of the Comptroller and Auditor General was a very important watershed. There was a debate on how a parliamentary system modernises and changes itself in line with the social, political and economic changes proceeding in the world at a very fast pace.
My right hon. Friend the Member for Heywood and Royton (Mr. Barnett) and my hon. Friend the Member for Norwich, South (Mr. Garrett) made this point succinctly in the debate on 30 November. They said clearly that it has been a long time since the PAC has been modernised and up-dated to meet the difficult task of financial audit and accountability imposed on it over the past 100 years.
An examination of the rate of change and the flow diagram of public expenditure, reveals that Government expenditure has flowed from areas where it has been directly and obviously Government expenditure into public corporations, nationalised industries and a range of bodies that one would not normally, certainly not in the nineteenth century, have associated with Government expenditure.
Government expenditure is diverse and sophisticated. A powerful body is needed to pursue that finance and expenditure to the point where it is spent. This process would be greatly helped if the recommendations of the special first report were incorporated in their entirety. This is a critical report. Historians looking back on this debate will see it as an important watershed. If the Public Accounts Committee does not develop in line with Government, social and economic changes, it will be increasingly unable to carry out its central and important task. It will become discredited.
I do not wish to make any comment about the number of hon. Members present in the Chamber or how many people are occupying the Press Gallery. However, there must be some changes that could be made to bring greater attention in the House to the important reports before us. The absence of heads in the Press Gallery indicates that although we are discussing what happens to taxpayers' money, the great press of this country is lacking in its presence and ability to follow anything above mundane and simple issues. As soon as we discuss sophisticated business that is central to the work of the House, there is a distinct lack of interest in Fleet Street.
If there is to be a proper audit of Government expenditure, the Public Accounts Committee must have 86 access to all bodies in receipt of money voted by Parliament. That was the central recommendation of the special report. Flowing from that, the report suggests that if expenditure cannot be examined in high spending areas such as local government, the Health Service and nationalised industries, then the Public Accounts Committee and the accounting process of Parliament will fall into disrepute. I feel most strongly that that is the case.
Some hon. Members have mentioned the difficulty of following and auditing expenditure that has flowed to private industry. As a new member of the PAC, that surprises me. I have spent many hours listening, to evidence given by perhaps the most sensitive of Ministries—the Ministry of Defence, on subjects such as the Chevaline delivery system. If hon. Members are able to cope with interrogating Ministers and civil servants over defence expenditure of the most sensitive kind, how can the Public Accounts Committee not have access to matters concerned with commercial confidentiality? It seem.; to me that we must have either both powers or neither. As hon. Members have remarked, the Public Accounts Committee has shown in the past that it is able to deal with problems of commercial confidentiality and sensitivity. It seems not to be a problem.
There are suggestions that the Public Accounts Committee is not as efficient as it could be and that it should be scrapped and replaced with something new. There are two arguments of concern for serious students of parliamentary procedure. If the financial checking mechanism is essential to this place, if at the end of the day that is one of our central concerns, it can be argued that we should do it properly and be seen to do it properly. I do not wish to pursue this too far, but the special report of the Comptroller and Auditor General made it clear that the powers of the PAC must be extended to flow where the money flows. That is important.
There are other matters in the report which were perhaps not appropriate to it but which should be considered with it. If the 15 members of the Public Accounts Committee are to scrutinise the range of expenditure that is involved, surely there should be some mechanism by which they have help in carrying out that very important task. I have spoken to members of legislatures in Europe, the United States and elsewhere. They find it laughable that on a Monday afternoon we may be interrogating Ministry of Defence witnesses about sophisticated missile systems, on the Wednesday interrogating people from the Department of Industry about moneys flowing to ICL and then on the following Monday talking about higher education and so on. The list that emerges from the proceedings of the Public Accounts Committee is enough to make the mind boggle. Even the superhuman individuals—myself excepted—who make up the Public Accounts Committee cannot cope with that job and do justice to it without some research back-up and some help to enable us at least to ask the right questions. My year on the Public Accounts Committee has taught me that asking the right questions is central to the task. If the Committee does not have help in that complex task, it cannot do it properly.
The second way of considering reform of the PAC is to say that as it has not kept pace with modern changes in Government expenditure it should be abolished. I believe that my hon. Friend the Member for Lewisham, West (Mr. Price) takes this view. It is argued that the new Select Committee structure which parallels Government 87 Departments and which seems to be working well should take over the role of the Public Accounts Committee. Each Select Committee would thus have a financial watchdog role and would check expenditure in that way. That is an intelligent response to the problem, but I believe that it is wrong-headed. I believe that the special report brought forward by the PAC is the right answer and will take us many years forward in the intelligent assessment, scrutiny and audit of Government expenditure.
I return to the debate of 30 November to which I referred earlier. My hon. Friend the Member for Norwich, South made a highly appropriate comment which is central to this issue when he said that Treasury civil servants opposed these reforms. They always have. Therefore, the Treasury Bench opposes the reforms. It says much for the power of our Parliament that we cannot overthrow the Treasury's will on a matter which concerns the machinery and procedure of Parliament. We must seem to outsiders to be members of a supine and spineless Parliament, unable to retrieve its historic rights over Government expenditure. I believe that that is central to the problem and that all historians will tesitfy that the past 100 years have shown that our State audit system has been steadily weakened by the encroachment of the Treasury.
We have allowed the rights and duties of the House to exercise scrutiny over the Executive to wither, and our system of State audit has become enfeebled. The time is now overdue for the House to take control of our audit system and to develop it to the point where its scrutiny reaches every corner of public expenditure.
§ 9.5 pm
§ Mr. Robert Sheldon (Ashton-under-Lyne)
My first duty, as it has been for a number of hon. Members, is to congratulate the Public Accounts Committee on the work that it has done throughout the year. I particularly congratulate my right hon. Friend the Member for Heywood and Royton (Mr. Barnett), a distinguished Chairman, and distinguished members of the Committee. The increasing amount of work that they bring to us shows their dedication to the task and provides the meat which this debate sets out to consume.
The essential role of the Public Accounts Committee and its work is to bring these important matters to the House. However, we must remember that in attempting to criticise and be censorious—as we must be—we have the enormous advantage of hindsight. It is a great help to see the two years that followed a decision as well as the two years that led up to it. We do not abuse that advantage, but it is right to remember it.
I disagree a little with my hon. Friends the Members for Huddersfield, East (Mr. Sheerman) and for Fife, Central (Mr. Hamilton) about the attendance at these debates. It would be nice to have large numbers present, but it is not essential to the work of the Public Accounts Committee. In one sense it is even a mark of confidence in the work of the Committee. We are all aware of the importance of its work. If there was any doubt whatever on the way in which the work was being done, this place would be packed with hon. Members wanting to know how the Committee had let down the House, their colleagues and the British taxpayer. It is because we read these reports, consider the various points and judge that the Committee has been doing its job that we leave these 88 debates to those who have a continuing and special interest. There is no lack of interest. It is a sign of confidence, and my right hon. Friend the Member for Heywood and Royton would be right to bask in the confidence that he enjoys.
Tribute has been paid to Gordon Downey and Sir Douglas Henley. I echo that tribute. We are right to take note of the great public servants whose skill we can bring to bear on these matters, and the advantage that we have in such civil servants. The present attitude to civil servants does not make it certain that this will continue. We owe a great deal to the senior civil servants and to the NCOs—although I should prefer not to use that phrase. The ordinary British administrators, or senior executive officers, have a reputation for being incorruptible which is higher than in most other countries. They have a reputation for competence that is still strong despite some of the attacks that are made at all too frequent intervals.
I note the recent statement by the Council of Civil Service Unions that young graduates have been put off the Civil Service by the Government's continual denigration of public service. The recruitment of good staff into the executive officer grade is becoming harder. To my knowledge that is largely true. It has not yet gone very far, but there is a danger that in the denigration of these duties and tasks we are doing ourselves no good. It is up to us to make sure that the standards we call for are met with loyalty and that a proper back-up is provided for those who enter public service.
The hon. Member for Wycombe (Mr. Whitney) said that the success of the Public Accounts Committee was largely measured by the genuine and quick reaction of Government. We see that quite frequently. The Treasury minute needs a lot of deciphering, both because of the way it expresses itself and because of what it leaves out. However, there is no question but that having come before the PAC those civil servants who have appeared have no wish to reappear. If there is some point that they can meet in respect of the criticism that has been placed upon them by the PAC, they will certainly do so. Appearing in that horseshoe for a second time on a charge identical to the first one is something that no civil servant wishes to do. Therefore, in the vast majority of cases there is a genuine and quick reaction where it can be arranged and achieved.
Let me first deal with the first special report. Here I fully agree with my hon. Friend the Member for Huddersfield, East. It was the clear view of the House of Commons that there should be access to records. My hon. Friend the Member for West Lothian (Mr. Dalyell) was right to ask for clarification of the Prime Minister's reply to the question that he put to her. It is necessary to know what the Government have in mind to be able to improve this access to records.
If we look at Cmnd. 8323, we see in paragraph 10—which, incidentally, was quoted by the hon. Member for Wycombe—thatThe Government are not convinced that it would be fruitful to replacethe investigation by the Monopolies and Mergers Commission with the ability of the Comptroller and Auditor General to have access to these records. But no one is asking for a replacement. All we are saying is that in certain cases there should be access to these records. The Government seem to be saying that there shall not be access to these records, whatever circumstances might suggest. The House of Commons must show itself to be 89 master of the control of detailed expenditure in a way that reveals that money has been used for the purposes for which it was intended.
I fully agree with the hon. Member for Wycombe. How can one think of replacing this kind of scrutiny by the PAC with the activities of Sir Derek Rayner with his few civil servants who go around making suggestions, most of which are largely political, while those that are administrative are of fiddling consequence? I should be delighted to have a debate at any time with the Financial Secretary on some of these matters. That is useful but small, but the work of the PAC is major and important. We cannot compare these two types of activity. We need only think of the way in which we are looking at these reports, and we need only compare their strength and importance with the absence of any report on the work of Sir Derek Rayner to understand the true comparison between the magnitudes that we are discussing.
My hon. Friend the Member for Flint, East (Mr. Jones) spoke about regional industrial assistance. He talked about the problems we have experienced in trying to define what we get for our money. The PAC was wholly right to try to find some way of assessing the more advantageous ways of obtaining results arising from the expenditure of money so that it could decide its usefulness, in what circumstances it would be more useful, and whether it was the best way to proceed. I agree that it is a difficult task. The Treasury Minute says that regional aid is useful. That is generally accepted, but even if it were less than that it would still be essential, if only to show that we are still one nation and that efforts were being made to diminish the differences that are so apparent as soon as one moves north or west from London.
Of course, the ideal would be to diminish those differences considerably, but even if the diminution were small or, to take an extreme example, there were no diminution, regional aids would at least demonstrate that the Government accepted that we were one nation. That would be important. However, that is putting the issue far too low. Regional assistance achieves much more than that.
One has only to look at the infrastructure, where the advantages of regional assistance are clear and apparent, to know that it is worth while. I go further and claim that regional aid has been very important, as we can see from the protests made at the dropping of assisted area status, even in my area of Tameside, where I have talked with manufacturers who have demonstrated the disadvantages that they suffer as a result of being denied useful, if limited, regional incentives.
The PAC's fifth report makes the important point that regional incentives seem to have been more effective before 1971. That is correct. For regional incentives to have their greatest effect they depend on Government's pursuing expansionary policies. It is difficult to ask some areas to expand when the rest are constricting output. It is difficult to set up such counter-flows and it is easier to improve expansion in one part of the country when others are also expanding.
The hon. Member for Horsham and Crawley (Mr. Hordern) spoke about other methods. He favours spending money on regional incentives. He understands the sort of political and social problems that I have described, but he thinks that there are other methods to deal with them, 90 including corporation tax reductions and foreign trade zones. His suggestions bristle with difficulties, but perhaps such aspects could be considered in future.
Paragraph 11 of the fifth report states that the incentives to firms to expand and invest are more important than constrictions on firms wishing to expand in the south-east or, as they did until recently, in the Midlands. We have moved from a carrot and stick policy to a carrot only policy.
I was always a little uneasy about industrial development certificates, which prevented a firm from moving, because I believed that in some cases they may have prevented a firm from expanding at all. Paragraph 13 of the report suggests that IDCs play only a small part today. We have incentives without many disincentives, and that is right in the present circumstances.
The twelfth report, dealing with the Inland Revenue, has been mentioned by a number of hon. Members, particularly my hon. Friend the Member for Fife, Central, who referred to the black economy, which, according to one estimate, totals about £16 billion, with a tax loss of about £4 billion.
Much of that money will inevitably be difficult to recover and would involve only small sums, but we must all be concerned about the standards of compliance and none of us can be happy about how the black economy has developed. The general talk that one hears in pubs, clubs and golf clubs shows that compliance is not treated in the same way as it was treated, say, 10, 20 or 30 years ago. There is no doubt that our standards are slipping, and, once they have slipped, the distance lost is difficult to recover. Much more attention should be given to an improvement in compliance, even if one cannot wholly justify the extra sums spent on it. I notice that the Treasury Minute accepts that, too, and that the Treasury has been spending rather more money on training people for that work. I note, too, that there was to be some taxation of casual and agency workers. Perhaps the Financial Secretary will tell us the Government's intentions in this connection when he winds up.
The fifteenth report looks at private finance in the nationalised industries. It has always been the view of the Treasury that, to obtain private finance, there must be acceptance of genuine risk. Otherwise, one simply creates a new kind of semi-gilts. If the Government give an assurance that they will bail out that private finance, one has gilts with the same sort of backing as there is for stock that the Government broker sells. The difficulty is to obtain the difference, the risk element, for the private sector to bear. In my view, we shall never resolve this difficulty. I am happy to consider any new suggestions but we have been round this course a few times, and nothing new has been suggested, other than privatisation, with which, for political and other reasons, I disagree.
My own view is much simpler: the purpose of trying to get private funding is to reduce the PSBR. That is what it is all about. Should we not be a little more relaxed about the PSBR? Is a PSBR that has a large element of genuine investment precisely the same as a PSBR that has a limited amount of genuine investment? Are the people who provide the funds for the purchase of that Government stock so naive as not to draw the distinction between a Government who are genuinely investing—providing they give the information and prove that that is what they are doing—and a Government who are not providing a genuine investment? As a result of the concentration on 91 the PSBR, there has been a decline, year after year, of investment in nationalised industries and in capital investment.
The easiest solution is to adopt a more relaxed attitude to the PSBR, to explain the kind of investment that is being made, and accept that it is still investment, whether it is private or public. It is the investment that matters, not the manner of its investment.
I turn now to the National Health Service. The PAC report on the NHS was an important one, and one which dismayed many of us when we learnt what was being done in the financial organisation of the NHS. There was an absence of statistics. Of course, one could always improve statistics, but they are necessary if one is to make comparisons. The whole basis of management expertise rests on being able to compare one fact with another, and one use of resources with another. That is what management is about. It is a matter of saying "Here we have a good operation; there we have a bad operation. How can we improve the one that is not so good and bring it up to the standard of the one that is so much better?" There are various ratios of one kind or another. It is not for me to go into the kind of ratios that the National Health Service requires, but anybody with any knowledge of what happens in management accountancy will know that that is how it operates. That is the way to secure improvements in efficiency and effectiveness.
The levels of food waste, for example, that are mentioned in paragraph 38 are appalling. We all know that when people go into hospital they may be put off their food a little or may want special kinds of food, but that is not something new. That is something that has to be lived with for 30-odd years, ever since the National Health Service started. Why was no central lead given? I am not asking the National Health Service to dictate what goes on in every hospital, but surely some essential central appraisal needs to be given?
That brings me to the question of investment appraisal, which is the very tool of management efficiency. The Public Accounts Committee expressed its surprise at the failure to make such investment appraisal. We know that the language used by the Public Accounts Committee is restrained. I was astonished that such investment appraisal was not carried out by the National Health Service. Of course, we know that the medical profession can spread medical knowledge throughout the hospitals and areas in which it operates. However, whose responsibility is it to compare the efficiency of an area with another? Whose responsibility is it, not necessarily to direct, but to inform and to request statements as to what might be done? If it is not the work of the DHSS, it is nobody's. We are not talking about some small fund. We are talking about a major expenditure on which the lives and happiness of so many people in Britain depend. If the DHSS does not know, one has to ask "What does it think it is doing? What does it think it exists for?" It is absurd that we have to ask such questions.
In paragraph 26 of the report the DHSS admitted that it had no staff figures, other than for doctors and dentists, later than 1979. That is wholly inadequate. I hope that those responsible will not need to come before the eagle eye of my right hon. Friend the Member for Heywood and Royton and his Committee again. I hope that before the Committee comes to look at these matters they will have 92 changed and changed quickly in the way that the hon. Member for Wycombe said. We want a genuine and quick reaction from the Department.
The Court of Auditors formed part of a debate in which I spoke on European matters about a month ago. Following that debate, I had the advantage of receiving a letter from one of the auditors, our good friend Sir Norman Price, who was in charge on the Inland Revenue for many years who appeared before the Conservative Members, my right hon. Friend the Member for Heywood and Royton and my hon. Friend the Member for Fife, Central in the Public Accounts Committee on a number of occasions. He feels that the Court of Auditors is working along the lines of the Public Accounts Committee and the Exchequer and Audit Department. That is the impression that I received. That is wholly valuable, and it shows the influence that we and our work have brought to bear on a different scene.
I turn to the Ministry of Defence and its third report. My right hon. Friend the Member for Heywood and Royton pointed out that year after year the cash limits are exceeded. In 1979 to 1980 the cash limit was put at £8,005 million and the out-turn was £8,554 million. That was at a time when there was supposed to be a great control, when cash limits were reaching the peak of their efficiency. I listened with great care and interest to what my hon. Friend the Member for West Lothian said about those matters.
There will be no constraint in cash limits for the task force. No one could argue with that, because in an emergency such matters are considered much less important that the task ahead. However, we must consider how the overspend will be financed. We do not know how much it will be or where the money will come from. The contingency reserve will cover so many things and there will be so many calls on it by the end of the financial year that the Financial Secretary, Chief Secretary and the Chancellor of the Exchequer will find themselves hard pressed to meet all the demands that will be made.
We must ask how the Government will deal with the evident overspend. The Chief Secretary has said that the Government's strategy is well on course and that everything is fine. He has said that there will be no problem, because revenue will be buoyant. However, I do not know how he can say that it will be buoyant when we have only just had a Budget. If he got things wrong only a month ago, I do not know what new information he can have to improve the situation. However, we must ask how the Government will finance the extra, considerable expenditure in a way that will at least be no worse than the Ministry of Defence's unhappy record on control of expenditure.
The debate has been something of a bran tub. Each speaker has put in his hand and come out with something different. That is the nature of Public Accounts Committee debates. As long as there are hon. Members who keep in touch with some of the work, hon. Members will retain their confidence in the PAC, its officers and distinguished Chairman.
§ The Financial Secretary to the Treasury (Mr. Nicholas Ridley)
I, too, congratulate the right hon. Member for Heywood and Royton (Mr. Barnett) and the Committee on the excellent and valuable work that they do. I shall deal first with the "bran tub" and answer as 93 many points as possible. I shall then turn to more general matters and to the role of the Comptroller and Auditor General.
It was a pleasure to listen to a debate opened by the right hon. Member for Heywood and Royton and closed by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). It was just like old times. It reminded me that they must have grappled with the problem of overspending by the Ministry of Defence. As they rightly said, the House and the Public Accounts Committee have been grappling with that problem for some time. There has been a further attempt to implement procedures of financial control in the Ministry of Defence. Changes have been made, and will continue to be made, in that direction. Wherever there is scope for varying the rate of spend during the financial year, it will be actively examined. However, it needs to be recognised that the scope is limited by the long lead times for purchases of major equipment.
I was asked about Sting Ray. This is an old subject both for the House and for the Public Accounts Committee. On many occasions criticisms have been answered by officials from the Ministry of Defence, although it is for those who have complained to say whether the answers were satisfactory. Since 1978–79 the cost of the project has not increased in real terms. Sting Ray continues to make satisfactory progress and is expected to enter service shortly.
I was asked about the joint funding of Ministry of Defence projects. The Ministry of Defence attaches great importance to the possibilities for the joint funding of defence equipment. Joint funding has been discussed with industry in the forum of the National Defence Industrial Council. The Ministry of Defence is now actively seeking a number of projects which offer the possibility of putting joint funding into practice.
The right hon. Gentleman asked also about efficiency incentives in MOD contracts. If possible, MOD contracts are let on a competitive basis with a fixed price. The price of large contracts is subject to an inflation adjustment. But when contracts have to be let on a non-competitive basis, a fixed price, a target price or some other arrangement is used, which leaves some risk and incentive for the contractor. If the term "easy on development" cannot be defined in detail, it is not possible to negotiate a fixed price, at least in the initial stages. The contract is then let on a cost-plus basis. That is avoided wherever possible.
The Chief Secretary announced recently that the review board for Government contracts had agreed, at the request of the Government and the CBI, to carry out a major review of contract arrangements for non-competitive contracts. An important aspect of this will be the extent to which contract arrangements can lead to improvements in the efficiency of contractors.
The right hon. Member for Heywood and Royton's next question—one that was taken up by the hon. Member for West Lothian (Mr. Dalyell)—was about the cost of the present operation in the South Atlantic. Incidentally, I must congratulate the hon. Member for West Lothian on having an Adjournment debate within an Adjournment debate. He will not expect me to answer an Adjournment debate other than the one concerning the Public Accounts Committee's affairs.
Obviously I cannot assess the cost of the operation. No one can, and it would be absurd to set out to put any cost on it. My right hon. Friends have said that the needs of the 94 task force must and will come first, but that its cost can and must be met in ways consistent with the Government's economic strategy.
§ Mr. Ridley
No. I wish to finish my sentence. Not all of the cost will be additional. Additional expenditure arises only where the cost of the operation proves to be greater than that of the tasks to which the forces concerned would otherwise be consigned. At this stage the extra cost represents a very small proportion of the defence budget of more than £14 billion. There is therefore no cash or budgetry problem immediately in prospect.
§ Mr. Dalyell
I asked the Secretary of State for Defence what would be the cost to public funds of requisitioning the liner "Canberra" for naval purposes. The answer came back that it was too early to say. Has not the Ministry of Defence even an estimate of the cost of requisitioning "Canberra"?
§ Mr. Ridley
I seek your protection, Mr. Deputy Speaker. I do not know whether the cost of "Canberra" appears in any of the Public Accounts Committee's reports.
§ Mr. Joel Barnett
I understand that the Financial Secretary does not know what the total cost of requisitioning the "Canberra" will be. However. there is an important question which I asked him and which is important to public control of expenditure in the Ministry of Defence. I am not in any way seeking to limit whatever the cost needs to be to deal with the crisis, but is the cash limit of the Ministry of Defence still in place?
§ Mr. Ridley
Yes. The cash limit of each Department remains in existence. Any cash limit can be agreed, in which case, as the right hon. Gentleman knows, a Supplementary Estimate is presented to the House. That applies to any Department in any circumstances.
Many right hon. and hon. Members, including my hon. Friends the Members for Horsham and Crawley (Mr. Hordern) and for Hove (Mr. Sainsbury), consider internal audit to be of the greatest importance. The present programme of work, which was started by the letter of 20 March 1981, which was sent to the permanent secretaries of the 18 major departments, has sparked off a great deal of activity. The programme was extended subsequently to smaller departments and those sponsoring non-departmental bodies with a target date and response commencing 30 April 1982.
Seven departments have conducted major reviews of their internal audit units to provide a firm foundation for future advance. These departments are the Public Services Agency, the Land Registry, the Inland Revenue, the Departments of Employment and Industry, the Ministry of Agriculture, Fisheries and Food and the Department of Education and Science. Most of the major Departments have now agreed with the Treasury terms of reference and objectives for the internal audit unit, job descriptions for heads of internal audits and firm plans for improving computer audit. The Departments that have not done so are expected to finalise by the end of the month the points of detail that are still being discussed.
The House may know that 21 changes of head of internal audit have taken place. In 11 instances the post leas been upgraded. In March 1981 the number of heads professionally qualified was five, but they now number 95 15, nine of them being in the major Departments. All Departments have now accepted the systems-based audit approach. Several have changed the scope of their audit so that the systems dealing with non-financial transactions are also to be audited. The need to strengthen and upgrade the internal audit function has been generally recognised and is beginning to be implemented. Comprehensive training needs are being centrally identified with the help of the financial management co-ordination group. A basic training profile will aim to train internal auditors to a fully acceptable standard of performance and will soon be available. I am able to tell my hon. Friend the Member for Northampton, South (Mr. Morris) that we train to the standard that he suggested we should and seek to recruit as he suggested.
The right hon. Member for Heywood and Royton referred to the carry-over of cash limits at the end of the financial year. The right hon. Gentleman will know that since the PAC's report the Prime Minister announced during questions on 9 February that my right hon. and learned Friend the Chief Secretary would reconsider the matter. There is nothing more to report. There will be a complete review. The object is to find a way round the problem if that is possible. The objection to the scheme is its cost, which is estimated at about £300 million at today's prices.
Many right hon. and hon. Members have talked about the National Health Service. There has been mounting concern and criticism, which, of course, the Government take seriously. There has been a saving of about £30 million in management costs, which the PAC has welcomed, but there is still a remorseless growth in staff numbers and in costs, which in part represents Government policy. However, it is equally right that the House and the PAC should seek continually to improve value for money in the Health Service.
The work of my hon. Friend the Member for Horsham and Crawley in this area is much admired and respected by the House. I must tell him that 67,000 extra staff have not come into the Health Service. That is the number in terms of full-time equivalents. I believe that the increase is 47,000 in England, of which 82 per cent. are front-line staff.
The DHSS is keeping a close watch on the growth of administrative and clerical staff. Selected regions have been asked to take a detailed look at their staffing to see where and why the growth has occurred. Reports received so far from Trent, Mersey and East Anglia suggest that most of the increases have been in secretarial and clerical staff supporting doctors, nurses and other professionals, freeing them to spend more time on patient care.
§ Mr. Hordern
If the DHSS has a firm grip on recruitment why does it know only the numbers that have been recruited as at September? Why does it have no further knowledge? Secondly, if it is talking about full-time equivalents, why does it not appreciate that every decision to recruit an extra member of staff should be noted? It does not matter if they are part or whole time. What matters is each conscious decision to recruit an extra member. What matters to the House is the number of those decisions and the cost of the number of staff employed.
§ Mr. Ridley
I entirely agree. My hon. Friend will know that my right hon. Friend the Secretary of State for Social Services is making plans to improve the control of staff numbers in the NHS.
The use of manpower is inevitably a major topic at the annual review meetings with the Secretary of State. Regional manpower comparisons will form part of the comprehensive data base for use at the meetings. I would have more to say, but I do not wish to miss other points that were raised.
My hon. Friend the Member for Northampton, South asked about direct labour contracts for the Health Service. There is competitive tendering for all capital works and also, with limited exceptions, for maintenance and small repairs. The Secretary of State is satisfied that the requirements are as effective as those now applying to local authorities.
§ Mr. Michael Morris
There have been changes in the Department of Environment's requirements in the past six weeks. I asked whether there had been consequential changes in the NHS.
§ Mr. Ridley
I shall ask my right hon. Friend the Secretary of State for Social Services to answer the specific and detailed point.
Many hon. Members mentioned regional policy, including the hon. Members for Flint, East (Mr. Jones) and for Kingston upon Hull, East (Mr. Prescott), as well as my hon. Friend the Member for Horsham and Crawley, although from a slightly different perspective. All Departments have noted the Committee's concern about .the operation of regional policy and have been asked to consider the need to look at the effectiveness of regional policy and to find ways to measure it.
My hon. Friend suggested that we should consider tax relief as well. We have little, if any, firm evidence on the effectiveness of tax reliefs as instruments of regional policy as compared with the capital grants that we now have. The Government keep the operation of regional policy under review. The choice of tax or expenditure instruments is a relevant consideration, but we must beware of trying to find too many incentives, chopping and changing between different instruments as fashions change. There is a need for stability in regional policy so that firms can plan ahead and so that the instruments in use can play their full part in influencing plans. The Government have noted the report and are continuing carefully to examine whether they could go further to meet the Committee's obvious wishes.
The hon. Member for Fife, Central (Mr. Hamilton) mentioned the black economy. A great deal of thought and study is going on into how to do more to collect revenue that at present escapes us. The hon. Gentleman may know that in response to the Committee's work on the subject the Inland Revenue has redeployed 400 employees into the different regions expressly to consider some forms of tax evasion. About three-quarters of those will be concerned with checking PAYE performance and trying to pick up any abuse of that system. That is a form of the black economy which represents a large chunk of the revenue lost. Seventy-five of them will be investigating moonlighting.
We hope that we shall obtain two things from the exercise. The first is how it will be possible to restrict the operation of the black economy, and the second is what 97 is believed to be tolerable by the innocent observer, who clearly must accept that some measures to increase tax compliance are correct and others are not. Alongside the Keith committee, which is studying the latter point, we hope to obtain much more information on the subject.
Infomation plays a large part in dealing with tax evasion, which brings me to the question of agency workers, about which my hon. Friend the Member for Northampton, South asked me. I said on Second Reading of the Finance Bill that we had decided not to legislate for agency worker companies but that we intended to use section 16 of the Taxes Management Act 1970 to obtain information from the agencies on a regular basis about payments made to agency workers. The returns will now be monitored systematically and we hope to improve tax compliance by those means. The matter must be kept under review. If that is not sufficient, we shall return to the House. However, in order to improve compliance we must have much more information.
As to the future of the Comptroller and Auditor General and the Public Accounts Committee, the Government have considered carefully the strong arguments put in the debate on 30 November 1981. We have decided that it would be right to have informal discussions with some senior right hon. and hon. Members on both sides of the House to try to find a common position and an agreed solution to the problem. The problem should not exist, because the Government and Parliament have the same objectives. We both wish to improve value for money and to cut waste. We both wish to see more efficiency in the public sector, and now that public spending is reaching £115 billion a year we should agree on how best to achieve that instead of having debates that are not entirely harmonious and issuing White Papers that are not acceptable to the House as a whole.
The dispute is about means and not ends. We have some difficulties and perhaps hon. Members have fallen into the trap of putting forward too simplistic a solution. I do not wish to pre-empt those talks, but it might help if I mention one or two of the difficulties. The first which concerns the House, is which Select Committees should do what. A small problem is that the PAC has suggested that the Comptroller and Auditor General should have access to the books of all bodies in receipt of money voted by Parliament. The TCSC, in its recent report, changed that toin receipt of public funds".The two are very different, so that there is a different interpretation here which the House must reconsider.
There is, however, a more important point, because the TCSC has now said that it wants other Select Committees to have the use of the resources of the Exchequer and Audit Department. Apart from the greatly increased staff that that would require, the real point is that if the PAC is to investigate a problem and another Select Committee is to investigate that same problem, there will be confusion, and we must make sure that we avoid such confusion.
§ Mr. Joel Barnett
I have been listening very carefully to the Minister and I am happy to hear that he wants harmonious debates. It is not the fault of members of the PAC that we have not had them. The Minister seems to be concerned about which Select Committee will deal with these matters. Is he saying that in his concern that the talks between us should be open, he has now accepted the basic point that, one way or the other, there should be proper accountability, and that we are talking only about which Select Committee should handle it?
§ Mr. Ridley
I think that we must leave these matters to the talks. I was merely saying that the House must be aware that the bodies about which we are talking cannot be investigated first by the Monopolies and Mergers Commission, then by the Public Accounts Committee, and then by another Committee of the House. We have to take into account, first, the vital importance of protecting public industries from excessive inquiries. That is not just a commercial problem. It is a problem of excessive interference with the time of management. Secondly, the House has to work out the system under which it believes these things should be done.
I come now to the question of BL and Bathgate. Publicly owned industries and nationalised industries are open to special investigation by the PAC, which has the power to call for persons and papers and records in relation to the accounts laid before Parliament. Those are very formidable powers. Indeed, the Committee has done it in the case of Bathgate. It used its powers in that instance. I do not know whether the powers were adequate to obtain what the Committee wished to obtain. I imagine that they were, because the Committee could have taken the matter further if it had wished to do so.
The hon. Member for West Lothian mentioned the question that he put to the Prime Minister. The whole House will know that the terms of reference of the PAC, which give the Committee the formal power to send for papers, are no more than the powers to which she was referring. In practice, the PAC usually relies on the access to departmental papers afforded to the Comptroller and Auditor General by virtue of the Act. The Prime Minister was describing that situation in general and shorthand terms and was not suggesting any change in the traditional procedures. My right hon. Friend said that that was the Government's present view, and that in order not to preempt the discussions she was doing no more than stating the existing position and making it clear that all of this could be subject to the discussions that we proposed.
I reject the suggestion that the Treasury and Civil Service Committee report shows that the Comptroller and Auditor General has been controlled or influenced by the Treasury since at least 1921. The right hon. Member for Heywood and Royton denied this. We offer not to use section 3(1) of the Comptroller and Auditor General Act without the agreement of the PAC, and we offer to find some satisfactory way of dealing with the problem——
§ It being Ten o'clock, the motion for Adjournment of the House lapsed, without Question put.