Motion made, and Question proposed,
That a further sum not exceeding £496,708,000 be granted to Her Majesty out of the Consolidated Fund to defray the charge which will come in course of payment during the year ending on 31st March 1985 for expenditure by the Department of the Environment (Property Services Agency) on maintenance and running costs (Subhead A3 of Vote 1), acquisitions and new works costing over £100,000 (Subhead C1 of Vote 1), and general administrative expenses (Subhead A2 of Vote 2).—[Sir George Young.]
§ Sir Hugh Rossi (Hornsey and Wood Green)
I beg to move,That Class XIV, Vote 1 be reduced by £20 million in respect of Subhead C1 (Acquisitions and new works costing over £100,000).Estimates and accounts are not the most riveting of subjects for debate. At first sight they present little to excite and stir the imagination. However, the Environment Select Committee was appointed by the House to examine the expenditure of the Department of the Environment. That obliges us to examine pages of detailed accounts and to report on our findings.
The Votes on the Order Paper are the subject matter of the third report of the Environment Committee. We asked for the debate because during our examination of Class XIV, Votes 1 and 2, which contain the Property Services Agency estimates, we came across matters hidden away amongst the mass of figures, which worry us. We sought to highlight the seriousness of our anxiety by placing on the Order Paper a motion to reduce by £20 million the provision for acquisition and new works which cost more than £100,000. Whether this motion is pressed to a 231 Division at 10 o'clock will depend upon the way in which the Minister replies to our criticisms and on the assurances he can give to the House.
The Committee has serious reservations as to whether the proper value will be obtained for the financial provision being sought by the PSA under three Sub-heads within the Votes. That is quite apart from the even more serious matters, which are the subject of the Wardale report, recently considered by the Public Accounts Committee. I have no doubt that this will be raised by the Chairman of that Committee, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), if he catches your eye, Mr. Deputy Speaker.
In considering the three Sub-heads the Environment Committee had the advantage of reading the Comptroller and Auditor General's report on "The PSA: Building Maintenance Expenditure in the United Kingdom." Although that report is for the PAC's consideration, we could not overlook its findings and recommendations when considering the PSA's Vote provision for maintenance and running costs. This is a further example of co-operation between our two Committees, to which my hon. Friend the Member for Scarborough (Sir M. Shaw) drew attention on 4 July during the debate on the Department of the Environment's Estimates for 1984–85. We await with interest the report from the PAC on building maintenance by the PSA.
Regarding the three Sub-heads, I ask the House to consider Class XIV, Vote 1 on civil accommodation services. Our examination of Sub-head A3 on maintenance and running costs shows that an extra £11.6 million was being provided for maintenance works—an increase of 18 per cent. over the previous year. However, we also discovered that the maintenance of the civil estate had fallen below its proper level. A shortage of funds was said to be the reason for a backlog of maintenance from past years, provisionally estimated at £90 million.
This year's provision will not enable that backlog to be overtaken. It will merely restore expenditure part way towards the level needed to maintain the estate in good condition. Obviously, another year's delay in dealing with the backlog will lead to a much heavier maintenance bill next year.
It is difficult to reconcile the PSA's two explanations for the backlog of maintenace of £90 million, which it gave the Committee in evidence. On the one hand, it gave the reason as being a shortage of funds—that is found in its answer to question 2 of our report—and on the other, it said that the backlog was of recent origin,over the last few months"—that is found in its reply to question 7.
When the Minister replies will he tell the House what volume of backlog was planned for when the 1983–84 Estimates were presented? The House also needs to be told whether the backlog results from under-estimating. In that case, who is to blame? Is it the Treasury or the PSA? Alternatively, does the fault lie in inadequate agency methods of gathering information? If it is the fault of the information gathering methods, there remains a real risk that additional financial provision may not be allocated where the need is greatest. It is clear that the PSA needs to lay down central guidance on maintenance priorities and 232 to ensure that regional directors are using common standards in making their assessments for maintenance programmes. We await its response.
The Committee also awaits the outcome of the PAC's inquiry into the Comptroller and Auditor General's report on "The PSA: Building Maintenance Expenditure in the United Kingdom". That inquiry may offer greater scope for the issues I have raised to be fully examined.
It should be good news that the discretionary limit of expenditure which client departments may incur on local offices is being doubled this year. But the new limit is only £1,000. That is insufficient. It will simply redecorate a fair-sized room. According to the report, a more realistic level would be helpful,both in averting new arrears of maintenance of the kind that have arisen and in putting into decent condition some of the local public offices, in particular DHSS offices, whose appearance and atmosphere are at present deplorable".My hon. Friend the Minister will remember that when we both served in the Department of Health and Social Security, and I had personal responsibility for social security matters, the conditions of the social security offices in which the staff of the Department had to work and in which their clients had to wait, sometimes for many hours, were a matter of deep anxiety for me. When one tried to discover why the conditions could not be brought up to an acceptable level one found that it was not within the right level of priorities for the PSA. On inquiry, one found that if the local managers of those offices were given a discretion to approach local builders, the work could be done rapidly and at far less than apparently it cost the PSA to carry out required work from time to time in those offices. That is a matter upon which I would press the Minister strongly — the level of expenditure at local discretion should be considered and reviewed substantially.
In the same class, Vote 1, I should like to draw the attention of the House to Subhead C1 "Acquisitions and new work costing over £100,000." That is the subject of the motion on the Order Paper that I have just moved. The provision sought is £172.5 million compared with a provision of £131.1 million in 1983–84 of which, in practice, only £114.8 million was spent. The increase in the Estimate provision is thus £57.7 million, or about 50 per cent., above the previous year's expenditure. Although the PSA expects a large number of projects to reach peak spending in 1984–85, the planned expenditure is extremely ambitious when viewed against past performance.
Our assessment of the probabilities was made much more difficult when we learned that important errors had been made in supporting tables 1 and 2 of pages 67–76 of the Estimate. The technical explanation for the errors will be found in paragraph 11 on pages vi and vii of our report.
At the same time, we wanted to question the PSA about four projects where the estimated cost was being exceeded so substantially as to suggest that they were running out of control and a glance at tables 1 and 2 to which I have referred will show how we came to that assumption. Liverpool Crown court, on page 72, appears to be 40 per cent. in excess of estimated cost; the Houses of Parliament heating modernisation, on page 74, 30 per cent. in excess; Park Lane fourth special hospital, on page 74, 65 per cent. in excess; and Wymott prison, on page 72, 45 per cent. in excess.
The figures presented to Parliament were wrong anyway—for example, in the case of Liverpool Crown 233 court, the original estimate of costs at current prices was not £37.3 million as printed but £50.338 million. Probable expenditure to March 1984, also at current prices, was not £50.242 million as printed but £55.301 million. That is a cumulative figure and not last year's expenditure.
We were also puzzled as to why further financial provision was needed in 1984–85, and after 31 March 1985 when the building had been completed and had been opened by Her Majesty. No explanation was given during the oral examination of PSA witnesses, but the position has been clarified in additional written evidence as will be seen from the footnote to question 49 of our report.
The published Estimates are important public documents provided for the information of Parliament and other interested parties. We considered it wholly unsatisfactory that they should have been permitted to be issued with significant errors throughout ten pages of the Estimates. It is surely even more unsatisfactory that neither the Department of the Environment nor the Treasury discovered those mistakes in their examinations of the Estimates, which must have been perfunctory to a degree.
We insisted that corrected tables should be provided, and that has been done in the revised Estimates. When I tell the House that, in cash, the Liverpool Crown court cost £43 million and that the figure does not merit a mention in the Estimates or the revised Estimates, right hon. and hon. Members will understand why we so readily accepted the PSA offer to discuss a better format or an explanatory note for the tables in next year's Estimate.
I have explained our difficulties as a Committee in assessing the financial provision under this subhead, and, given the inaccurate statistics throughout the ten pages of the Estimates, we had no confidence in a bid for funds which represented a 50 per cent. increase over the previous year's expenditure. We therefore recommended a reduction in the Vote provision of £20 million. Even so, the reduced provision will allow for a 33 per cent. increase over last year's expenditure. That £20 million is the subject of the motion.
I come now to Class XIV, Vote 2 "Administration and Miscellaneous Services". We were interested in the provision under Subhead A2 "General administrative expenses". Even after allowing for a supplementary provision last year, the provision this year has increased by almost £39 million, nearly two thirds of which is attributed to the increase in consultants' fees.
We were told that the increase was needed to meet an expanded programme of work, coupled with a policy of switching from in-house resources to the use of professional design consultants. On the first point, we were assured by the PSA that the projects in the expanded programme of work could be expected to mature in two or three years' time. We were pleased to hear that, because it means that the expansion of the employment of out-house consultants does not seem to be running unduly ahead of the planned programme of work.
We noted the steady reduction in staff for in-house major design work in recent years as well as the increase in the proportion of design work, in value terms, put out to private contractors over the past seven years with even larger increase forecast. We were less certain about the somewhat imprecise nature of the approach to allocating schemes between in-house and out-house. Normally the PSA is interested in obtaining the best financial deal, and in arriving at that assessment we have been told that it had 234 to be assumed that it would be financially disadvantageous to have in-house staff sitting around doing nothing, simply to pursue an out-house consultant's policy. Given that the professionals available in-house, both type and number, can hardly be expected to match the project requirements, it would seem that in many cases schemes are allocated not on the basis of an assessment of the relative costs of the two methods, but rather on the basis of what professional expertise is for the time being available in the PSA's territorial organisation or in headquarters. Perhaps the Minister can say whether suitable staff can be moved temporarily between headquarters and the territorial organisation to ensure the full use of in-house staff. We thought that it might be preferable to maintain a staffing level sufficient only to meet the lowest troughs in demand and, therefore, not have excess staff against a possibility of there being peaks. The out-house people can deal with that situation.
Our main recommendation is that a proper assessment be made of the relative costs of designing different types of scheme by different methods, and that the agency staffing and design practices be actively managed to minimise costs.
The Committee welcomed the opportunity to examine the agency's estimates. Despite the illustrious parentage of the format of the tables on the cost of projects, we have found them wanting, as I have demonstrated, and we look forward to seeing them improved after further consultation. We look forward also to continuing the estimates dialogue next year with the added advantage of the forthcoming report of the Committee of Public Accounts on building maintenance expenditure.
Finally, I express the fervent hope of the Committee that the Department of the Environment and Treasury officials will not again allow so many errors in the Estimates to slip through unnoticed during their examination so that the Committee had to pick them up.
§ Mr. Robert Sheldon (Ashton-under-Lyne)
The House will be grateful to the hon. Member for Hornsey and Wood Green (Sir H. Rossi) for his examination of the Property Services Agency, and the third report upon it. I congratulate the hon. Gentleman not only on his speech but on the report and on the way in which the investigation was conducted, the estimates were made and the errors were discovered.
The hon. Gentleman mentioned the way in which the presentation of financial documents was made, and he made one or two criticisms. He may be aware that it was only at the end of last week that Mr. Likierman presented a report on the presentation of Government financial documents and how they might be improved, so this matter is very much in the centre of thinking at present. I am sure that the wise comments he made will be part of the argument that is just beginning upon the publication of that report.
As the hon. Gentleman foresaw, I wish to deal with the Wardale report, and in particular the twenty-sixth report from the Committee of Public Accounts on systems controls and fraud in the Property Services Agency. The Committee report dealt with an examination of the Wardale report which had been produced by Sir Geoffrey Wardale, assisted by Mr. Herron. The report examined a number of cases of corruption in the PSA. I believe that this question of corruption and dishonesty in the public 235 service is the most important matter to come before the Committee of Public Accounts. We have had matters involving substantial sums of money, matters where a number of errors were made, such as the De Lorean affair, and matters concerning the size of defence contracts.
The integrity of the Civil Service, its reputation for incorruptibility and its dedication is one of the great treasures of our constitution. If we observe any decline in those standards, we need to act urgently, immediately and thoroughly. Isolated examples of corruption when they occur must be dealt with immediately and thoroughly. Dishonesty has a number of the characteristics of a malignancy. It can spread, if unchecked, and it can take over the organism in which it intrudes. At the early stages of such corruption, fellow workers will disdain involvement in fraud, and the threat of disclosure will effectively deter many from taking part in such practices. But there can come a time when bribery is so widespread in a department or part of a department that it becomes part of the system, and when that happens eradication becomes very hard. We know many countries where this has happened. The examples are, sadly, all too numerous.
The threat of increased fraud and corruption in the public service is a very real one. We are presently faced with a situation in which Civil Service morale is unhappily rather low, there are questions of pay, and there is a feeling among many civil servants that they are seen as failures who were unable to get a job in the real world of competitive finance and industry. The idealism which prompted so many of our leading civil servants to engage in the public service for the good of the people of this country is declining as a result of attitudes being taken towards civil servants.
The very ethos of the Civil Service is under threat. We know that some of our leading young figures — for example, a number of principals—some of the brightest people in the Civil Service, are leaving the Treasury for other areas of activity, and we have to be careful about the decline in the standards and abilities of the people employed in the Civil Service and in the public service generally. I happen to believe that there has been a general decline in standards in the country as a whole. The patterns of honesty are changing, unfortunately frequently for the worse, as we become a more competitive economy, which is after all the aim of the Government. However, a more competitive climate, as an unfortunate by-product, leads to a number of corners being cut, and these are matters that we also have to consider. At the same time as this is happening, opportunities for corruption are greater in the public service as hard-pressed industries struggle for contracts by Government Departments. Thus there is a need for continual surveillance, and that need will remain with us for some time.
The Wardale report examined 61 cases of corruption. That Committee and the Committee of Public Accounts accepted that those 61 cases were the tip of an iceberg. How big the iceberg is we are obviously unable to say. What the Comptroller and Auditor-General found particularly disturbing—he repeated it in his memorandum—is the extent of collusion, collusion within the Department and collusion with contractors. Particularly disturbing was the deliberate swindling of the PSA by 236 contractors. The attitude to this, about which we heard, is best expressed by a reply of Sir Geoffrey Wardale to a question that I put to him. I said:you make some strong comments about the complacency and failures of management in the PSA. In your view, how deep-rooted are these weaknesses of attitude—are they widespread across the country, and do they exist at all levels of management"?Sir Geoffrey replied:The simple answer to that is yes, to all the questions. We found that this attitude which we have described as complacent—and we have tried to define in the course of the report what exactly we mean by complacent, because it is rather a loaded word used on its own—was a deep-seated attitude. It showed itself in people's attitudes almost without them knowing it. Although I would not like to give you the impression that everyone was tarred with the same brush, because of course there were people in the organisation we saw who were doing a good and efficient management job, nevertheless I think I have to say that I regard these attitudes almost as the attitudes of the organisation; they are the ethos of the organisation.Later, it was put to him:You say in your report that there is a degree of complacency on the part of management which is reflected in its attitude towards dishonesty and fraud.Sir Geoffrey replied, "Yes."
There is only one interpretation of those replies: there was a certain amount of corruption and those in many parts of the areas concerned felt that it was a problem which they had to live with. When that happens, certain serious consequences follow for us, because we have to ensure that that state of affairs is brought to an end. If it remained unchecked, it would spread, bit by bit. The eradication of corruption is one of the most difficult tasks that many countries have tried, often unsuccessfully, to achieve.
Sir Geoffrey pointed out that when contracts went out to an individual jobbing contractor, there was a "field for bribery". He added:this field in our view was made worse in the PSA because often only one officer dealt with all the stages of letting the contract, saying the work had been completed and authorising the payment. We did not regard that as a very satisfactory arrangement. Finally of course there is the direct works with which you would not want to be concerned. As to how it compares with the outside world, perhaps before I turn to Mr. Herron on this I should say that when we started on this enquiry I took it on under the impression that I would find the systems and controls in the PSA would be, like they are in most Government organisations I have had any acquaintance with, somewhat elaborate, rather more elaborate than perhaps you would get in the private sector as a rule, and that the kind of cases we would have to deal with would be those that would escape through any system of control, however elaborate. I am bound to say that I was rather taken aback to find that the controls were nothing like as elaborate as I would have expected in any organisation. In fact the conclusion we came to was that both on the preventive controls, the controls where work is authorised and at the other stages while work is being carried out and authorised they were weak and the detective controls that find out irregularities later in the day after the work had been completed, by spot checks and so on, were weak also. I am bound to say that I found myself surprised at this.Inspection teams were set up to discover errors and frauds. Sir Geoffrey was asked:You perhaps in your mind drew an analogy, or I did in mine, with banks where fraud is always a risk and where they have outside inspection teams who drop in on a bank unannounced and within ten minutes are going through the books. You made a recommendation that there should be what you called regional management inspection. Had you something similar in mind?Sir Geoffrey replied:It was of the same nature.The next question was:Were you surprised when the PSA did not accept that recommendation?237 Sir Geoffrey replied:Yes is the short answer to that.There were not even the inspection teams that one would regard as a minimum requirement, knowing that there had been fraud.
We understood initially that the 5 per cent. sample that was subject to check was a means of checking on fraud within the PSA. Mr. Herron, who advised Sir Geoffrey, said:This 5 per cent. check as it is, is the management's day-to-day control of the business; it is nothing more than that. It is not an independent check as such. That is our view and therefore if you wish to set up an independent check you cannot use the 5 per cent. checks as being that, it must be something superimposed over and above; hence our recommendations on an inspection team.Against that argument, Mr. Montague Alfred said that the aims of the PSA were, first, to satisfy clients, secondly, to spend the voted funds and thirdly, to obtain value for money. The Committee's objectives were different. They were that if there is corruption, public money must be safeguarded. Even if that leads to unpleasant consequences, it must be our first priority, given the pressures to which, as I said earlier, the Civil Service is subject.
We made a number of recommendations. We were pleased to receive the Secretary of State's assurances of determination to root out corruption in the PSA. That was unqualified and we welcomed it. The right hon. Gentleman also said that he intended to press forward the Wardale recommendations. We shared the Comptroller and Auditor-General's concern about examples of deliberate swindling by contractors and we asked PSA to sharpen its staff's alertness to the risks, whether or not there was collusion.
We recommended that, quite apart from the ordinary judicial penalties, which would be incurred anyway, dishonesty should normally entail dismissal for staff and loss of orders for contractors, and that sharp practice falling short of dishonesty should also be penalised. We recommended that the PSA should re-examine with the Director of Public Prosecutions how disciplinary action against staff might be speeded up.
We recommended that the PSA should take prompt action against unsatisfactory contractors and publicise it among its regular contractors, so that they knew the risks that they were taking if they indulged in the practices to which I have referred.
We said:We shall expect next year to see evidence of significant improvements in attitudes and performance.When we examined the new chief executive of the PSA, we were given assurances on those matters.
The most important aspects are the attitudes and the seriousness with which Government Departments deal with and anticipate dishonesty among employees. It must be at the pinnacle of our priorities for the public service that its reputation is protected. The Government hold the Civil Service in trust, not just for themselves, but for all Administrations to come. It is that trust which we must fulfil.
§ Mr. Sydney Chapman (Chipping Barnet)
It is a great pleasure to follow the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who speaks with immense 238 authority on public finance. I hope that he will excuse me if, on this occasion, I do not follow him in his remarks about the Wardale report.
I want to take this opportunity to support the motion tabled by my hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi), following the third report of the Environment Committee on the Property Services Agency's main Estimates for the current financial year. I reiterate what my hon. Friend said on Class XIV, Vote 1 about civil accommodation services.
As I understand it, the maintenance of civil estates has fallen below an adequate level. My hon. Friend said that there was a backlog of £90 million maintenance work which will not be tackled in the current financial year. I believe that, all things being equal, the present time is ideal to step up maintenance and repair work.
I shall give the House one construction statistic, which is revealing. It was given to me some time ago by the director-general of what was then the National Federation of Building Trades Employers, now known as the Building Employers Confederation. He said that, although between 1979 and 1982 building costs had increased by 40 per cent., tender prices had increased by only 11 per cent.
The director-general's point was that that gave some indication of the construction industry's contribution to the battle against inflation. I do not believe that the position has materially changed since then. Now is the best time to obtain value for money and to get work done at less than the estimated cost of a project at the time of its conception. It is absolutely essential that the estates under the responsibility of the PSA should be kept in good repair. I join my hon. Friend in asking for an assurance that the House will be told about the Government's plans to dispose of the backlog of work. Does the deficiency result from under-estimating at a time when, if anything, the tendency would be to over-estimate contract prices, or was it a result of the inadequate PSA methods of what I call property intelligence?
I wish to give an example that is rather close to home. Across the road, in St. Stephen's house, room 404 is used by an assistant clerk to the Select Committee on Social Services. Not long ago the ceiling fell into a state of damage and disrepair, as did the walls, because of a leak from above—whether it was from defective plumbing or because of a leak in the roof, I do not know. Several hundreds of pounds were spent on repairs lasting a full week, including replastering and repainting the ceiling and repapering the walls. However, after last week's rainfall, the ceiling is again bulging, the carpet must be dried out and the occupant has again been moved. Surely this is a classic case of its being absolutely essential to have a tight grip on management control of those properties. We should not try to save a penny now when it will cost an additional pound next week.
I am not suggesting that that is endemic and widespread throughout the service—I hope that it is an exception. But that sort of instance cannot be tolerated with the large and important estate of the PSA, for the cost could be hundreds of thousands, even millions, in wasted pounds.
I want to underline another point made by my hon. Friend about the provision for acquisition and new works of more than £100,000. He said that, in reality, the provision was 50 per cent. more than the amount spent in 1983–84. One reason for that may be the uneven flow of 239 projects and contracts at different stages. Even so, there is a need for better management control to ensure a smoother and steadier flow of work.
I wish to refer to the errors in tables 1 and 2 on pages 67 to 76 of the Estimates. My hon. Friend mentioned the Liverpool Crown court. Other instances were given which, frankly, show that the figures were badly wrong. I described them as gobbledegook in the Committee proceedings and that is no exaggeration. More importantly, they emphasise that if the figures are not correct, and if the information given to us was inaccurate, it makes a mockery of the purpose of Select Committees watching the work of Departments.
A wider issue is involved, in addition to over-estimating or under-estimating on projects, be they a Crown court, a hospital, a prison or any other building. Evidence presented to me shows that far too regularly the costs of contracts rise significantly, not primarily because of inflation but because the plans of the buildings and schemes are changed.
It may be prudent for me to declare a possible interest as a non-practising architect and a non-executive director of a construction company. To my knowledge, there are NHS hospital buildings where the costs are much higher than the estimates simply because design and construction works have been changed—not only after the contract has begun, but even after it has been completed.
§ Mr. Chris Smith (Islington, South and Finsbury)
Will the hon. Gentleman include in his analysis a comparison with the very stringent rules that the Department of the Environment places upon housing associations that are constructing housing projects with funding from the housing association grant system? Any additional costs, additions to the contract and changes in the plans once the contract has begun are pored over by the Department in excruciating detail. The housing association is forced to justify every item. Will the hon. Gentleman contrast that exercise with what appears to be happening to the PSA?
§ Mr. Chapman
The hon. Member for Islington, South and Finsbury (Mr. Smith) does not need me to make that comparison. He made it eloquently himself. I am not arguing whether the regime of the Department of the Environment vis-a-vis housing associations is too rigid or harsh, but certainly a better element of discipline in hospital and prison building programmes should be a first priority.
After all the plans have been designed, the working details drawn up and the contracts let — remembering that committee-itis runs rampant in the NHS — DHSS officials, consultants, nurses' representatives or somebody else may have a change of mind. If that happens when the construction is proceeding, the added expense is unwarranted and significant.
I know of a case in the building of a prison where the warders demanded changes after a prison extension had been completed. I am not against warders being consulted, any more than I am against nurses or consultants being consulted in matters of hospital building. I am simply saying that the consultation period should occur before the design details are drawn up and not after the work has started, which is apparently the norm, or even, as happens in exceptional cases, when the project has been completed.
§ Mr. John Mark Taylor (Solihull)
Is not the conclusion which the hon. Member for Islington, South and Finsbury (Mr. Smith) was seeking that the further one gets from direct public ownership the more scrupulous would appear to be the regime? He compared the PSA with housing associations, which have private input, and said that the latter was the better-run regime. Are we not forced to the conclusion that we should move these activities away from public ownership?
§ Mr. Chapman
My hon. Friend makes an important point, but I do not want to get involved in an ideological battle. On balance, I agree with my hon. Friend. Public authorities must take extra care to ensure cost-effectiveness and efficient management systems because they are spending taxpayers' money. When private money is being spent, there is a natural mechanism of efficiency because the company would go out of business if it did not order its business in an efficient way.
§ Mr. David Alton (Liverpool, Mossley Hill)
Would the hon. Gentleman extend the analogy in the public sector to a comparison between the PSA and local government? Does he agree that if local government overspent by 30 to 40 per cent., as have some of the contracts and companies listed in the PSA accounts, it would be subjected to massive financial penalties, including rate capping, yet the PSA has been able to get away with it scot-free?
§ Mr. Chapman
The hon. Gentleman is correct. Indeed, all of those who have intervened in my remarks have underlined the importance of the PSA management getting a grip on the efficient execution of the building work entrusted to it.
My hon. Friend the Member for Hornsey and Wood Green referred to Class XIV, Vote 2, and the whole question of in-house services and the use of outside consultants. The provision on this aspect has been vastly increased, by at least £39 million over last year, and probably two thirds of that is due to the increase in consultants' fees. I understand that that has occurred because, in giving outside consultants responsibility for certain jobs the fees in the early stage, before construction and completion, are relatively high.
I am satisfied that that increase is due to the expanded programme of work, though it must include an increase in the proportion of design work — and, as I say, consultants' fees—partially offset by a steady reduction in the work of in-house staff. We should not be dogmatic about this, but I believe that there is a case for more work going to consultants outside rather than to in-house staff. I say that because, particularly with large contracts, there is greater opportunity, for example, to get the best architect for the type of building, and the fee can be negotiated or be at a standard rate.
I hope, therefore, that more serious consideration will be given to comparing the cost of each contract so that we adopt the most effective way of using the resources, in-house or outside, that are available. Clearly on some work it is better to have the in-house specialists deal with the contract, whereas on others it is best to go out of house. I am told that at present the proportion is about 50:50. I would welcome a commitment on the part of the Government to go to a 60:40 split for design work, using 60 per cent. outside consultants. The key should be excellence of design, cost-effectiveness and value for money of design work.
241 The PSA is a large and important enterprise of Government. Much needs to be done, as our inquiries have underlined only too well. I hope that its leading personnnel and the new chief executive will take to heart the perhaps overdue but constructive criticisms of the Select Committee. I am happy to be associated with the motion of my hon. Friend the Member for Hornsey and Wood Green.
§ Mr. David Alton (Liverpool, Mossley Hill)
When the hon. Member for Chipping Barnet (Mr. Chapman), in his opening remarks, said that he intended to tell us something about leaks, I thought at first that he proposed to reveal inside information about some forthcoming story in The Guardian, or that he would provide some inside information about some of his hon. Friends on the wetter fringe of the Conservative party.
Instead, the hon. Gentleman gave the House an accurate account of the inadequacies of the PSA accounts and mentioned some remedies, with which I wish to be associated. Those remedies would prevent the sort of problems that the Select Committee has highlighted.
The hon. Member for Hornsey and Wood Green (Sir H. Rossi), the Chairman of the Select Committee, in a characteristic speech, gave an authoritative, competent and eloquent account of many of the problems that the PSA has been facing. He spoke of the concern, which will be shared by hon. Members on both sides of the House, about the need to get value for public money. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon), when referring to the Wardale report, spoke about some of the problems that have bedevilled the PSA, and he suggested some remedies that might be applied.
The hon. Member for Hornsey and Wood Green, who put his remarks under three headings, referred to civil accommodation services, acquisitions and new works. I shall deal with new works later, but I should underline at the outset that the Select Committees, acting as watchdogs have been most valuable in putting forward suggestions and remedies.
They have demonstrated that the Estimates which were submitted to the Environment Committee were a farrago of errors and deceit and that, without the Committee's careful scrutiny, the figures would have slipped through unchallenged. I am glad, therefore, that a proper assessment of the schemes was made, and I hope that, as a result of this debate and a possible reduction of £20 million in the funds made available to the PSA, change will be stimulated in the way in which that body is organised.
I shall mention now the two reports that are before the House, beginning with the report of the Committee of Public Accounts, which looked at the Wardale report and at fraud in the PSA. There are many theories in politics about the motives. There are some who talk about the cock-up theory and others who talk about the conspiracy theory. It is clear that the corruption theory also has a part to play when one considers the way in which the PSA has been operating. Sir Geoffrey Wardale's report is a formidable indictment of the PSA, and I shall refer briefly to some of the comments that appear in it. Those who read the report of this debate should be aware of the gravity of the situation.
Paragraph 5 deals with the extent of fraud in the PSA. Sir Geoffrey 242emphasised his view that known cases represented only the tip of the iceberg; and PSA accepted that the full extent of fraud could never be known and that they could not be confident that no major frauds were still going on.That is a matter of major public concern. It seems that what has been discovered so far is only a small fraction of the corruption that Sir Geoffrey Wardale believes is taking place in the PSA; that it extends a great deal further, and that much of it has yet to be uncovered.
In paragraph 7, Sir Geoffrey talks about the remedies that are open to the PSA arid to the House. He says:dishonesty should normally entail dismissal for staff and loss of orders for contractors".In paragraph 8 he reports that nearly 200 staff have been disciplined for irregularities. It appears that 66 members of staff have been dismissed — 21 in 1983. I ask the Minister to tell us rather more about those cases. Can he say in which schemes those staff were involved, what action was taken against those who were not dismissed, and whether he will consider further the way in which we deal with those who have their fingers in the till? The action that has been taken so far has not been effective enough to ensure that the problem is tackled adequately.
Paragraph 11, which deals with delays, states:We were also concerned about delays in taking action against dishonest contractors, and about the adequacy of the action itself.This is also a matter of great concern. If this really is only the tip of the iceberg and if there is much greater corruption in the PSA, why have there been delays? What are the Minister and the Government doing to ensure that there are no delays in future?
Paragraph 12 of this excellent report, which directs itself to the uncommercial attitudes of the PSA, reads:The Wardale team thought that PSA's attitude to contractors was uncommercial, and that firms should not be employed if they could not be relied upon to perform services in accordance with prescribed contractual terms.It is clear that some of those who have been running the PSA should not have been put in charge of running a whelk stall. I am worried that people of such low calibre should have been in charge of such vast sums of public money.
Paragraph 13 deals with the lack of vigour that has been shown in trying to root out the corruption, which the right hon. Member for Ashton-under-Lyne described as an insidious process that undermines the respect and integrity with which public servants are normally regarded. Paragraph 13 states.its lack of vigour in handling them when identified, indicated a degree of complacency which was reflected in its attitude towards dishonesty and fraud.That is unacceptable, as is the complacency that is mentioned in paragraph 14, where it is reported thatcomplacent attitudes were deep-rooted, widespread and existed at all levels of PSA management.It is clear that complacency and corruption are not confined to the man who simply pushes a wheelbarrow on a building site somewhere in the north of England. It exists at all levels of the PSA. It is an organisation that appears to be riddled with corruption.
In paragraph 15 the report refers to arrogance and incompetence within the PS A. Sir Geoffrey commented:First, he was concerned and surprised that PSA had rejected his proposal for a form of regional management inspection.If it rejected that recommendation, what is the Minister doing to ensure that the PSA is made to accept it? The paragraph goes on:The second point concerned the DWOs'"—the direct works organisations— 243spot checks of transactions … which Sir Geoffrey considered were unsatisfactory in both conception and execution.What is being done to change that system?
I refer the House to paragraph 19, which states:It is plainly useless for PSA to set great store by checks which do not meet the proper objectives or are not carried out consistently well.In other words, the PSA has indulged in self-delusion about the solutions which it has introduced to try to tackle the problems. The solutions have clearly been inadequate. I should like to know what action the Minister is taking.
In paragraph 21 the strongest possible indictment is levelled at the PSA. The report states:Our enquiries have confirmed that an unsatisfactory state of affairs still exists in PSA. The very serious frauds which have come to light in recent years would be cause for concern in any organisation, but they are intolerable in a government department.Paragraph 23 adds:we are not convinced that PSA's detailed proposals for action are sufficient.In other words, nothing has changed. It seems that everyone is at it. What someone cannot carry away, he drags behind him. It is clear that some members of the PSA would sell their own grandmothers. The place is riddled with incompetence, corruption, lethargy and laziness, and it is apparent that there is total disregard for the protection of public funds. The remedies that the PSA is considering introducing are entirely inadequate.
I shall address the second part of my remarks to the evidence of the Select Committee on the Environment. I refer the House to page 11 of the evidence. Hon. Members will observe that when the witnesses from the PSA appeared before the Select Committee, I, along with other Members, questioned them about a number of schemes, but two especially—the Liverpool Crown court and the House of Commons heating scheme. Both projects provided examples of the problems to which I have been alluding. If local government operated in the same way as the PSA, councillors would be called up before the district auditor and surcharged. If local councils behaved in the same way as the PSA, they could expect to have the most punitive measures taken against them, including a considerable measure of rate capping.
I put it to PSA witnesses that the Liverpool Crown court scheme had increased in cost by about 40 per cent. during the course of its construction and that the costs of the House of Commons heating scheme had increased by about 30 per cent. At page 12 of the evidence one witness from the PSA, Mr. Johnston, said:The Liverpool courts are shown on page 72 at an original estimate of £37 million but a probable expenditure of £52 million.That is an extraordinary way to go about accounting. First, it is said that it will cost about £37 million to build the Crown court complex, and then a probable estimate of £52 million is submitted. If the target is not met, it can be covered up by a much greater figure. When it is said later in the evidence that it has cost only £43 million, that is regarded as some sort of triumph, despite the fact that originally the scheme was supposed to cost only £37 million. It is revealed that supply services — for example, furnishing and the like—were not included in the original estimates, but were included in the final figure, and that an adjustment to the contract had to be 244 made. Why are furnishings not included in the cost of a building? The idea of building a shell without including furnishings strikes me as crazy.
I put it to Mr. Johnston, in question 48, that the cost of the Crown court started at £37 million and that the figure is now £43 million. I asked him whether that looked like being the final figure, and he replied:The final figure is a firm one because we have agreed the final bill with the contractor.I was unhappy about the evidence that was given on the Liverpool Crown court and later on the Palace of Westminster heating modernisation scheme. I pressed for further information. The information appears on pages 40 and 41 in annexes B and C. Some new figures emerge in the cost of the Liverpool Crown court. The original estimate of the project in 1976 now appears as £21.5 million, not £37 million. Annex B lists how the increase occurred. There was a variation of price payments of £14.8 million—that sounds like confetti money. Next, the cost of fitted furniture had to be added to the bill, at a cost of more than £900,000.
Justice is no better dispensed because of palatial surroundings. A figure of £900,000 to provide something along the lines of the Savoy lounge is totally unnecessary. The Crown court complex, which I visited, is a fine building, but it should not have cost as much as it has. If the original estimate was £21 million, why did it increase to £37 million, then to £43 million and eventually to £52 million?
The story does not end even there, because paragraph 5 of annex B, giving the Supply Estimates figures, shows that the original estimate of £37 million and the current estimate of £52 million were both to increase further. Paragraph 6 states that there was a revised version because of the pressures placed on the PSA to do its sums again. I suspect that someone in the PSA should learn how to add up, or perhaps a calculator should be bought. The new final revised version of the original estimate was £50.3 million, and the revised version of the current estimate was £57.5 million. Having begun at £21.5 million in 1976, the final jackpot figure was £57.5 million—an increase of £36 million, or nearly three times as much as the original estimate.
We can compare that with what would happen in local government. As most people know, during the past few weeks the Liverpool city council has been in conflict with the Government about the £30 million additional rate support grant for which it asked. Contrast that £30 million with the £36 million required to make up the difference between the original estimate for the Crown court project and the final estimate. The cavalier approach adopted by the PSA, whereby it treats money as though it were confetti, and zip go the millions, smacks more of squandermania than of any logical system of accounting. We began with a steamer and ended up with a Queen Mary.
The same is true when we note the information in annex C about the Palace of Westminster heating system. Some might say that there is sufficient hot air in the building without improving the heating system. In 1978, the original cost of the modernisation project was put at £2.5 million. Paragraph 2 includes a figure for inflation—that is reasonable—and a figure of £850,000 for under-estimation and other causes. No one has given any indication of what those other causes and under-estimation are. Yet they involve a considerable sum. The final figures 245 are cited in paragraph 4. The first version of the original estimate is shown as £4.5 million and the current estimate is £5.8 million. The final revised version gives figures of £5.03 million for the original estimate and £6.7 million for the current estimate—an increase of 33 per cent. That is outrageous. We are throwing money around like a man with three arms. The PSA seems to have no idea how these figures have been arrived at. The evidence of witnesses was hopelessly inadequate. The Committee Chairman, the hon. Member for Hornsey and Wood Green, put it like this:If you wanted to set out to confuse everybody as to what you were up to, you could not have gone about it in a better way.So say all of us. The hon. Member for Chipping Barnet was right when he described those figures as sheer "gobbledegook".
That is not an adequate way to run our affairs or a proper way to deal with large sums of public money. The people who have been running the PSA should be dismissed. The Government should do that immediately. It is clear from the two reports we are considering that all is not right in the PSA. First, we have heard charge after charge of corruption. Secondly, we have heard charge after charge of sheer incompetence. That is why my name is added to this motion and why my right hon. and hon. Friends will support the motion to deduct £20 million from the Vote. I hope that the Government will act to ensure that a proper performance review and financial control mechanism are developed to ensure that money is not frittered away or wasted and I hope that they will implement the excellent recommendations of the Wardale report.
§ Mr. Richard Alexander (Newark)
I add my support to the remarks of my hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi). I am a signatory to the motion that stands in his name. The discretionary limit of expenditure on what we call client departments of the PSA can now be doubled. I agree with my hon. Friend that that is a small figure of only £1,000. I should like to underline what my hon. Friend said about the conditions under which many of our DHSS officers have to live and operate.
A few months ago, I visited the DHSS office in my constituency. The hard part of winter was just over, and I was appalled at the grim, tight, cramped, dingy conditions in which our civil servants must work. Sometimes I think that we under-estimate what we ask of our civil servants. I was especially appalled that during working hours male and female officers had to use an outside loo. I do not believe anyone in private business would be allowed to oblige their female and male staff to trudge through the snow to a brick loo. Admittedly, that loo is attached to the building, but it is outside the main building. Frankly, that is disgraceful. I support my hon. Friend the Member for Hornsey and Wood Green when he said that the appearance and atmosphere of some of our DHSS offices are deplorable.
§ Mr. Chapman
Does my hon. Friend recognise the fact that, if a private employer offered those inadequate facilities to his employees, he would be in contravention of the Offices, Shops and Railways Premises Act 1963?
§ Mr. Alexander
I am obliged to my hon. Friend. Had he allowed me to pursue my speech, I would have made that point. He has properly underlined that aspect.
246 The Select Committee was unhappy with the PSA's evidence and these Estimates. We had an unhappy afternoon, as I believe all hon. Members who served on the Committee would agree. Despite all the expertise at its command, the PSA had failed to notice certain enormous discrepancies. I shall repeat the figures, although I know that my hon. Friend the Member for Hornsey and Wood Green cited them. The figures are startling.
Liverpool Crown court will cost 40 per cent. above estimate, the Palace of Westminster heating modernisation 30 per cent. above estimate, the Park Lane fourth special hospital 65 per cent. above estimate and Wymott prison 45 per cent. above estimate.
If the Select Committee had not raised the matter no one at PSA would have bothered to check whether the figures being put out were correct. Indeed, when the Select Committee checked, the figures turned out to be wrong. In other words, the arithmetic was apparently not checked by the PSA and when it was checked by someone else it turned out to be wrong. One is bound to ask whether PSA figures are checked before they come out. If they were properly checked, the major discrepancies identified by the Committee could not have occurred. If it turns out that the figures are indeed checked within the PSA, I strongly recommend that the gentleman or lady concerned be transferred to a less expensive occupation.
Equally, one is bound to ask whether anyone at the Treasury checked the figures that the Select Committee discussed that day. The House is entitled to know whether anyone checked those figures. If someone at the Treasury is supposed to have checked those figures, I suggest that that person, too, would be less expensively employed making tea for the rest of his or her professional life. Ten pages of the estimates presented to us contained significant howlers and had to be revised after we had gone through them.
It was left to a Committee of politicians, assisted by their advisers, to spot instances where professional statisticians and accountants had boobed. That is highly unsatisfactory and gives us little confidence in the accuracy of the remaining estimates. I am in no position to make such allegations stick, but I must say that I regard the remaining figures with little confidence and I concur with all that my hon. Friend the Chairman of the Select Committee has said about the unhappy experience that we had in going through these highly unsatisfactory figures.
§ Mr. Tam Dalyell (Linlithgow)
Those of us who are not on Select Committees owe a debt of gratitude to colleagues on both sides who carry out that work. Having served for five years under three Chairmen of the Public Accounts Committee — Lord Wilson, Lord Houghton and Lord Boyd-Carpenter — I know how much work, often unsung, is carried out by such Members.
As my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) used to say, "Chacun à son goŭt," but my experience of the PSA in Scotland has been of very efficient people apparently doing a good management job. In the light of what has been said by some colleagues, I wish to make it clear that my experience as a constituency Member in Scotland has been very favourable to the PSA. In this context, I draw attention to question 2179, in which Sir Geoffrey Wardale said: 247It showed itself in people's attitudes almost without them knowing it. Although I would not like to give you the impression that everyone was tarred with the same brush, because of course there were people in the organisation we saw who were doing a good and efficient management job".I seem to have come across just such people and I should not like the message to go out from the House that everyone in PSA is tarred with the brush of inefficiency, let alone corruption. Some of us have very good experiences of the PSA and have found the people working there helpful and efficient.
That being so, if I ask the Minister about certain aspects of the PSA's work I am not suggesting that there has been inefficiency, corruption or slapdash attitudes of any kind. Nevertheless, I am concerned about the estimates for certain projects.
The first is a matter on which I have approached the Minister before in written questions. To what extent is the PSA and British money involved in the construction of a £26 million hospital at Lakenheath in Suffolk? I attended a political meeting at Bury St. Edmunds last week and was taken to Lakenheath. The Bury St. Edmunds Labour party was convinced that the hospital, which will be mostly underground, would cost £26 million and was to be constructed by the PSA. Perhaps the Minister can tell us more about this. Exactly what are the terms of the contract under which, rightly or wrongly, justifiably or not, this work is carried out for the Americans? Does the PSA take a percentage profit? How much of the cost of that hospital is borne by the British taxpayer and how much by the American Government? I do not think that the Minister is being deliberately evasive. Reticence about projects for the Americans seems to be standard practice and the Labour Government, too, were unwilling to reveal figures. Nevertheless, we are entitled to know how much the British taxpayer is paying for the hospital at Lakenheath. Will the Minister give us that figure?
Secondly — again I do not allege incompetence — I should like to know more about the PSA's role in the building of the airport in the Falkland Islands known in common parlance as the Margaret Thatcher international airport. Is the £215 million estimate to be adhered to? What is the truth about the 6,600 tonnes of aggregate and rock mined near Bristol and Oxford which have had to be taken from the northern hemisphere to the southern hemisphere because the tillite and quartzite mined in the Falklands was too full of impurities, clay and sand having integrated themselves to such an extent that the apron would not be smooth and Tristars would not be able to land? Was the PSA in any way responsible for the original information given to the Laing Amey Mowlem consortium that the rock and aggregate to be found in the Falklands would not be suitable? What tests were done? What extra costs—
§ Mr. Deputy Speaker (Mr. Harold Walker)
Order. I am sorry to interrupt the hon. Gentleman, but it is difficult to see anything in the motion which would cover the matter that he now raises. If he can tell us under which subhead it arises, that would be most helpful.
§ Mr. Dalyell
I thought that we were talking about the PAC's systems of financial control. That is also highly relevant to the next topic on which I wish to ask the Minister questions.
§ Mr. Deputy Speaker
Order. The motion before the House relates to Class XIV, Votes 1 and 2 of the Estimates.
§ Mr. Dalyell
Are we not discussing the general issue of the financial control of PSA projects, because in that case it is highly relevant to ask how——
§ Mr. Deputy Speaker
Order. We are not discussing a general question but the motion on the Order Paper and I am finding it extremely difficult to relate the point that the hon. Gentleman is making to the motion.
§ Mr. Jack Straw (Blackburn)
On a point of order, Mr. Deputy Speaker. Perhaps I might offer some advice. Page 5400 of the Order Paper makes it clear that we are also discussing the reports of the Environment Select Committeee and of the Committe of Public Accounts. Therefore, the discussion necessarily goes wider than the relevant Votes. My hon. Friend seemed to me to be discussing financial control in the context of those reports.
§ Mr. Deputy Speaker
If the hon. Gentleman draws to my attention the parts of those reports which refer to the matters that he is discussing, I shall accept that he is in order, but I find it difficult to find such references.
§ Mr. Dalyell
I thought that we were discussing the general issue of financial control. However, I promised the right hon. Member for Worthing (Mr. Higgins) that I should sit down at 9 pm. I think that it is in order for me to ask the Minister how the £133,000 Brewster houses have got to such an expense and how it is that 26 of them are still unoccupied. Surely that is a matter of financial control. What is the PSA's reaction to the situation imposed by the dock strike and the fact that supplies in the form of the Orepesa, which is shortly to leave Avonmouth, are not likely to get through? Will that create problems for the PSA? I could go into the issue of the squalid conditions but I shall merely ask, is the PSA in any way involved in the allegations of the squalid conditions in the building of that airport and in the condition of Ascension Island? I gave my word to the right hon. Member for Worthing that I should not go over time, so I shall leave it at that.
§ 9.1 pm
§ Mr. Terence Higgins (Worthing)
The hon. Member for Linlithgow (Mr. Dalyell) has done even better than he said and I do not wish to detain the House too long.
It is worth observing that, at the conclusion of this debate, we shall have completed the first round of Estimates days under the new procedures. In the previous Parliament, we had just one Estimates day when we debated the Stationery Office and investment in the Turks and Caicos Islands. Since the general election, we have had all three debates that were promised to the House by the Government. We had some satisfactory debates on Department of Health and Social Security redundancy arrangements and National Coal Board allowances for subsidence. Only a few days ago we had a further set of debates on prison education and the vexed issue of dog licences, on which at long last we got some action. Whether hon. Members agree that the action was the right one is perhaps a matter for consideration.
After today's debates on Grenada and the Property Services Agency, it seems that the new system is beginning to run satisfactorily. It reflects what people at school have always been told—that Parliament controls the Executive by controlling the purse strings. Only in the 249 past couple of years have we finally begun to re-exert that historic role. That is important and it is possible only if we have the type of hard work that has been put in by the Select Committees, the reports on which we are debating. My hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi) and his Committee should be congratulated on their work as the report reveals some important points.
It should be stressed that it is much easier for Select Committees to pick up what has gone wrong when they scrutinise a Supplementary Estimate as by definition, in those circumstances, something unusual has happened. That is much easier than scrutinising the main Estimates. The items that were brought to the attention of the Liaison Committee show a wide range of interests in the scrutiny of public expenditure arrangements. One of the weaknesses that have emerged following the establishment of the departmentally related Select Committees is the short time that is given to debate reports on the Floor of the House. On financial arrangements, we have a specific allocation of time, albeit only three days. I am glad that Committees such as that chaired by my hon. Friend the Member for Hornsey and Wood Green have taken the opportunity to raise broader issues in the context of financial arrangements. That gives us considerable scope as many of the issues with which Select Committees are concerned involve money.
I wish to refer briefly and specifically to some of the other points that have been made, because I know that the hon. Member for Blackburn (Mr. Straw) wants to intervene. The reports that we are now considering give considerable cause for concern. As the hon. Member for Linlithgow said, we must not exaggerate the extent to which they give cause for concern, but at least three aspects ought to be considered carefully.
The report clearly shows that in the presentation of the Estimates there were some simple, straightforward arithmetical errors. That is not satisfactory. Even if the Department could not get its arithmetic right, the Treasury most certainly should have picked up such a mistake. While we are fulfilling our watchdog function as the guardian of the public purse and can point out when such errors need to be corrected, it is not good enough that such errors should occur.
Until the new procedure was introduced, this kind of thing was not picked up, except in particular cases by the Public Accounts Committee. In that context, it is pleasing that the work of the Departmentally-related Select Committees is becoming satisfactorily integrated with the work of the PAC under the expert and excellent chairmanship of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). That far from ineffective combination gives us more scope.
The disadvantage of the usual annual debate on the PAC was always that it was related to a huge range of subjects on which the Committee had done an immense amount of work. However, it was not always possible to pin down and, if necessary, vote on a particular issue.
The report that we are now discussing contains some interesting statistics. On page V of the third report from the Environment Committee, we are told that maintenance and running costs have increased by 18 per cent. over 1983–84. That is a substantial increase which raises the question of priorities. At present I do not think that we have got right the allocation of priorities between different items of public expenditure.
250 I accept that broad issues are involved, where huge sums of money are allocated to defence, housing and so on. However, on more specific issues we must question why maintenance and running costs have increased 18 per cent. We must look at some of the items of expenditure, where quite substantial sums have been expended by the PSA. Attention has been drawn to a number of those individual items.
Page VIII of the third report, states:The most noticeable feature is a £41 million increase in general administration expenses. This stems mainly from a … (30 per cent.)increasein consultants' fees and a £4.5 million (31 per cent.) increase in travel and subsistence.These are substantial figures against a background in which the House has voted on difficult policy decisions to curtail the provision of NHS spectacles to pensioners at a saving of £14 million. We must therefore consider whether our mechanism for assessing priorities — say, between £41 million for an increase in general administration expenses in the PSA as against a £14 million cut for pensioners' spectacles—is right.
These broad issues are brought out by the report. However, I wish to comment on a couple of more detailed issues. I refer in particular to the revisions in tables 1 and 2, which were eventually provided by the PSA in the light of the inquiry to which the Select Committee referred. It says:When PSA was scrutinising the initial draft of the 1984–85 Estimates it concluded that some of the proposed provisions in that financial year were too large because the work was not likely to proceed as fast as had previously been forecast. A number of the provisions for 1984–85 were therefore reduced. There should have been a corresponding increase in the amount shown as needing to be spent in later years to finish the work but due to an oversight this adjustment was not made.I could read on, but hon. Members have the report in front of them. It is not good enough that the PSA is apparently incapable of getting the figures right and not only comes to the Select Committee in the first instance and gives inadequate evidence, but has to provide a revised Estimate and an explanation of things that should have been put right in the first place. Again, the House is fulfilling an important operation through it watchdog function.
Finally, I come to the point made by the right hon. Member for Ashton-under-Lyne about the conclusions of the Wardale report, which are important. Paragraph 21 of the report says:Our enquiries have confirmed an unsatisfactory state of affairs still exists in the PSA.It goes on to refer to the various frauds. This country has a deserved reputation for having a system of financial accountability unmatched anywhere in the world. I agree with the hon. Member for Liverpool, Mossley Hill (Mr. Alton) that it would be wrong sensationally to exaggerate the points that have rightly been brought to the attention of the House. Unless the House fulfils its proper function, we shall not maintain our standards, and we should do everything possible to ensure that they continue in the future. Therefore, it has been a worthwhile exercise to debate this matter, through the motion tabled by my right hon. Friend the Member for Hornsey and Wood Green. I hope that it will become a permanent and useful feature of our procedures.
§ Mr. Jack Straw (Blackburn)
I commend the speech of the right hon. Member for Worthing (Mr. Higgins). I 251 pay tribute to the hon. Member for Hornsey and Wood Green (Sir H. Rossi) and to my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), the Chairman of the Public Accounts Committee, and its members. As the right hon. Member for Worthing said, the approval and granting of Supply is central to the proper role of the House. If Parliament is to re-exert its proper authority over the Executive, the machinery for scrutinising and granting Supply has to be improved and made more effective. The attendance and interest shown in these debates by hon. Members on both sides of the House must increase. We are slowly moving towards a re-assertion of Parliament's historic role, and I hope that I am as enthusiastic in support of that move if and when I ever sit on the Treasury Bench as I am now. I hope that if I am not, my words will be held against me.
Some changes are still needed. In particular, it is high time that the accounting conventions of the Supply Estimates were brought into line with those of the public expenditure survey committee and the national accounts. We have three sets of conventions and therefore three sets of numbers, which makes comparison difficult. I hope that there will come a time when in these debates dealing with specific aspects of Supply, we are able to discuss not only accounting questions but the economic impact of the Supply with which we are concerned.
For example, through its orders, the PSA has an important impact on the building industry, and through that on the economy as a whole. When its orders are cut, the building industry suffers, as we shall discover tomorrow when the Government announce cuts in capital expenditure on local authorities through the moratorium that they are planning. That will have a serious effect not only on local authorities but on the building industry as a whole.
Before coming to the main part of my remarks, I shall bring into the debate the question raised by my hon. Friend the Member for Linlithgow (Mr. Dalyell). With respect, we are discussing financial controls on the PSA, which seem to be germane to both of the reports, in relation to the hospital at Lakenheath and to the airport on the Falklands and the amount of aggregates that had to be imported to the Falklands from this country. He wanted to know whether the additional costs had been incurred as a result of the failure of the financial controls that we are discussing here, or as a result of political decisions.
The PSA is a large organisation by any standards. Any of us who has ever had any dealings with maintenance organisations — I know that the hon. Member for Huntingdon (Mr. Major) and the Under-Secretary, who are adorning the Front Bench, had such dealings when they were councillors in Lambeth, as I did when I was a councillor in Islington—knows that there are problems of management and control inherent in the nature of the work. We need think only of the problems that all of us have when dealing with small builders who provide maintenance in our homes. Some of us have experienced those problems and we can imagine their magnification and the difficulties that are caused. These problems are not confined to the public sector. Every large firm finds that its maintenance operation is difficult to control. It is not a neat and tidy area of paper administration.
The difficulties inherent in the nature of the work are made more difficult because large sums of money are 252 involved. Transfers take place between the public sector and individuals in the private sector. Some individuals make large sums of money for themselves as a result of these transfers. The opportunities and incentives for corruption are greater than in almost any other area of public service.
We must also recognise the reality that the culture of the private building industry is one in which a blind eye is turned to financial practices that would be wholly unacceptable in other industries, involving back-handers or "drinks", as I believe they are called in the trade. That leads to tax evasion and petty corruption and, in some cases, corruption on a grand scale is endemic. The PSA has to work against that background. I echo the remarks of many hon. Members this evening, from my not inconsiderable experience, that the majority of staff in the PSA have always acted in the highest traditions of public service and have been efficient and wholly incorruptible. If we are to ensure that the House roots out corruption efficiently we should do so in a way that does not wreck the service and morale of the PSA, that has served the public well for many years.
There are obvious and serious shortcomings in the administration of the PSA, which are well documented in the reports. That is so particularly at the crucial level of the delivery of the service, at middle management level — the regional and district offices from which the services are delivered. That level forms the interface, as it were, between the public service and private contractors. The opportunity and temptation for petty corruption and inefficiency is at its greatest there.
I was in a position to observe at least one aspect of the management of the PSA when I acted as adviser to my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) when he was Secretary of State for the Environment in 1976–77. I also worked on the staff of "World in Action" when we made a film of the book by Leslie Chapman, "Your Disobedient Servant". That disaffected former civil servant made serious allegations of inefficiency, rather than corruption, against the PSA, his former employer. From both those standpoints, I believe that the complacency in senior and middle management that was identified by Wardale and the Public Accounts Committee was reflected in the organisation. It is a matter of great regret that, despite the clear allegations and warnings then, the organisation's response was continually defensive, and it has taken the enormous force of these two highly critical reports to enable serious change.
In the brief time available to me I shall direct a few remarks at this Government, as they specifically bear some responsibility for the PSA's present difficulties. There are criticisms that I could make of the previous Labour Administration, and of the Conservative Administration of which the right hon. Member for Worthing was a member, and of their respective activities between 1970 and 1979. Neither Administration got things exactly right in deciding to hive off the PSA as a separate agency or in the way that they administered it. But both of those Administrations were at least fired by one concern alone—to ensure the most efficient use of resources by an organisation that, by definition, must be in the public sector, as long as there is such a sector.
However, I am afraid that the same cannot be said about this Government. Their concern for efficiency in the public sector has become mixed up with an ideological 253 vendetta against that sector. Thus their judgment as to what management decisions to take in relation to the PSA has been tainted by their instinctive response to any problem in the public sector, which is to privatise. The result, as I shall explain, has been demoralisation of the service, a reduction in efficiency and, consequently, a climate in which corruption and collusion of the type mentioned could increase.
There is no better illustration of that than the sorry saga of the appointment and subsequent service and dismissal of Mr. Montague Alfred as chief executive of the PSA. That matter is referred to in some detail in the PAC's report.
§ Mr. John Mark Taylor
The hon. Gentleman spoke about the possibility of transferring resources, property and activities from the public to the private sector. He purported to give us a universal rule that in such circumstances staff became demoralised and so began to under-perform. But will he not accept that in the important cases of British Airways and British Telecom the threat of privatisation has worked wonders in making those organisations begin to work extremely efficiently and well?
§ Mr. Straw
With your ever-watchful eye on order, Mr. Deputy Speaker, I am sure you would not wish me to extend my remarks to a debate about privatisation. Time will tell whether British Airways will benefit from privatisation and telecommunications will be debated later tonight.
I am making a specific point about the management decisions made by this Government about the PSA. My criticism of the Government is not that they have judged that it would be sensible to bring in someone from outside but that their Pavlovian reaction is to believe that only people from the private sector have the management skills necessary to run such a large organisation. They thus denigrate the skills of those in that sector with rather disastrous and, indeed, palpable results.
Mr. Alfred was appointed on 1 January 1982 by the then Secretary of State for the Environment, the present Secretary of State for Defence. A great song and dance was made about it, and it was said that his appointment and salary level, and the arrangements made in relation to that, although exceptional, were — to quote from the deposited paper—considered necessary to attract the right man from the private sector with skills and experience not available within the Civil Service.It was an insult to people of Sir Geoffrey Wardale's capability and to his former colleagues to say that they did not have the experience and skill necessary to run the PSA. Although that appointment was made by the former Secretary of State, it was confirmed by the present Secretary of State on 5 October 1983. In a press notice he said:We have appointed a Chief Executive from the private sector who is bringing a new perspective to the Agency's work.He can say that again. The new Chief Executive indeed brought a new perspective.
The Times of 14 March 1984 states:His departure came as no surprise. If you alienate each and every audience you are playing to, your immediate colleagues, the other permanent secretaries, the Cabinet Office, and then the Prime Minister, it is bound to happen".Within 15 months Mr. Alfred was summarily sacked by the Secretary of State, who explained his reasons on 13 254 March. Mr. Alfred's departure was directly connected with the questioning of my right hon. Friend the Member for Ashton-under-Lyne and other members of the PAC. It is of importance to the House that it is now possible through the PAC to hold a temporary public servant to account and, in some circumstances, to have his employment terminated.
He was fired not because he introduced new ideas and reorganised the operation to make it more efficient, but because he seemed to be infected with the complacency of the private sector and his answers conflicted with those given by officials from the Department of the Environment. I hope that his experience and service at the DOE is a lesson to the Prime Minister and the Secretary of State for the Environment that bringing people in from outside—Mr. Alfred had worked for the British Printing Corporation, and, given its record, that should have been warning enough—is not necessarily the best way to get efficiency from the service.
My right hon. Friend the Member for Ashton-under-Lyne referred to a climate of collusion and an acceptance of corruption. The Government should recognise that they bear responsibility for lowering standards. Mr. Alfred was paid £50,000 a year—£20,000 a year more than if he had been appointed from the Civil Service. Secondly, the payment for Mr. Alfred's services, £50,000 per annum, was not made to him as an individual. The deposited paper states:It is made to a private company, Masa Management Services Limited, who provide Mr. Alfred's services, and are responsible for his superannuation and national insurance provision.Value added tax was paid on top of that £50,000.
The Government were colluding with Mr. Alfred in a mucky, greedy scheme of tax avoidance. A man who was already being paid £50,000 thought to save a few more pounds by setting up a management services company. The Government are supposed to be the keepers of high standards of public service, yet they felt it appropriate to pay him £20,000 more than a civil servant would have been paid and to collude with a scheme which was at best tax avoidance and whose probity could have been questioned by the Inland Revenue. The Government must recognise that, by lowering standards, they have contributed to that climate.
The hon. Member for Liverpool, Mossley Hill (Mr. Alton) referred to the Government's double standards. I made a similar point in the House last week. There is case after case of ineffeciency for which Ministers are responsible. Had that taken place in local government, and had those Ministers been councillors, they would have been surcharged, disqualified and, in all probability, bankrupted. That would have happened in respect of some of the instances documented in the PAC report and the report of the Select Committee. It would also have been the case in respect of another matter which was the subject of inquiry by the PAC relating to the Hamilton college of education, where it turned out that the Under-Secretary of State for Trade and Industry, who was then a junior Minister in the Scottish Office, wasted about £4 million by his decision to sell that college of education to the private sector at an inopportune moment. If he had been a councillor, he would have been hounded by Ministers, surcharged and disqualified. ft is time that the Government adopted a single standard for financial probity.
My last point picks up the general issue of ministerial accountability and whether, after 12 years, the experiment 255 of hiving off the PSA into the demi-monde of not being a separate corporation with relatively clear lines of communication but not the responsibility of one Ministry, has been a success. I doubt it. I believe that it was sensible to establish the PSA as a separate trading fund and that because of the nature of the PSA's work it should continue. I make no criticism of the Under-Secretary. By having the PSA as a separate agency, but not a separate national corporation—it could not be that—we have the worst of all possible worlds. The Secretary of State is responsible for it, but he is also responsible for a vast Department.
If the experience of the past five years is anything like the five years of the previous Labour Government that I watched, the truth is that no Secretary of State, however hard-working, will be able to devote his full energies and attention to the PSA. He will be happiest when it is causing no ripples. Whoever he is, his political career will be dependent upon much bigger political issues — what happens in local government, housing and planning — than what happens in the PSA. As a result, day-to-day responsibility for the PSA is delegated to an Under-Secretary who, however good, has other responsibilities and is not identified as the Minister whose reputation stands or falls with the reputation of that agency.
I believe that we should reconsider appointing a Minister responsible for the PSA, with the PSA as a separate Department. It would entail no internal reorganisation of the PSA. If it is said that would make the Department too small, I remind the Secretary of State that there are other examples — the Office of Arts and Libraries — where small Departments have separate Ministers, and that greatly enhances accountability to the House. The debate is devoted to improving the accountability of the agency to the House and, through it, to the country.
§ The Parliamentary Under-Secretary of State for the Environment (Sir George Young)
This debate has arisen from the Environment Committee report on the PSA's 1984–85 Estimates. I intend, therefore, to deal first with the comments and recommendations in the report, concentrating upon the points that I know caused anxiety to members of the Committee and those hon. Members who have spoken this evening. In particular, I should like to mention the presentation of the new works programme and how we shall do that more comprehensibly. I hope to reassure the House of the PSA's ability to spend this year's provision. If I can do that, I hope to be able to persuade the House that we can spend the £20 million in question.
I will also, of course, deal as best I can with the PAC report on fraud in the PSA and the Wardale report, and outline the action Ministers and senior staff are taking to bring about the change of attitude and the tighter management control of the PSA which is needed. As the PAC report was published only last Thursday, this will be an initial response. I hope to deal in writing with some of the questions that were raised during the debate if I do not have time to deal with them in my remarks.
The Environment Committee took evidence on a number of aspects of the PSA's expenditure, and I very much welcome the interest that it has shown under the chairmanship of my hon. Friend the Member for Hornsey 256 and Wood Green (Sir H. Rossi), and its willingness to look into the details of the PSA's work and the effort that it has put into the examination of witnesses, its report, and its helpful recommendations.
I deal first with the level of expenditure on maintenance. As PSA witnesses told the Committee, the Government are concerned about the low level of maintenance spending on the civil estate. This is the familiar problem of constraints on public expenditure which has been with us for many years, starting in December 1976, when I believe the hon. Member for Blackburn (Mr. Straw) was helping the Department, and, indeed, mentioned in two White Papers published by the last Labour Government.
Fortunately, when the Government reviewed their public expenditure plans last year, they were able to allocate extra money for maintenance amounting to about £18 million in 1984–85, with slightly higher amounts in subsequent years.
However, we have not been able to get back to the level of spending that we would like to see, and I acknowledge that there is a big problem still to be tackled of the backlog of work which has been building up over the years. But at least a start has now been made. In the expectation that we can continue to make progress on this front, the PSA is developing a three-year forward look at maintenance requirements, the first version of which was produced early this year and quoted to the Committee. This will be further refined to incorporate the work that the PSA is doing to set priorities, which my hon. Friend the Member for Hornsey and Wood Green rightly mentioned, and to measure standards.
Dealing next with the client departments role, which several hon. Members mentioned, we made a significant change in financial responsibilities in 1983–84, by asking the PSA to charge other Departments for their occupation of the civil estate. As part of this, they were given complete responsibility for small routine works which they now order themselves on local contractors instead of going through the PSA. This arrangement covers works costing less than £1,000—about a quarter of all the spending on maintenance work on the PSA's civil estate. The reason why we have stopped at this level for the moment is that, whilst it is relatively easy to get a simple quotation from a builder and place an order for a small job without bureaucracy and documentation, this ceases to be the case as the jobs get bigger and more time and effort and technical expertise is required to handle them. However, I note that the Committee has proposed that client departments should have more power to decide what work should be done in local offices. We have already doubled the powers of Departments since 1983–84; this was increased to £1,000 in April this year.
We are also studying other ways in which the system might be developed in the light of experience. I can tell the House that we will certainly be looking at the idea of increasing the role of client Departments in a way which would allow them to decide how much of their own money should be spent on improving conditions in local offices. As a former DHSS Minister, I end on what my hon. Friend the Member for Hornsey and Wood Green said about the conditions of some local offices. We will look at this when we assess our priorities for next year.
I would like, before considering the actual expenditure provisions in the Estimates, to deal with the details of individual projects shown in the tables attached to the 257 Estimates. Until 1983–84, these tables merely showed how the total provision was broken down between the major new construction projects and other works concerned, together with figures for past and future expenditure at difference prices.
Obviously there is a need to monitor the handling of these projects, and in particular to direct scrutiny to any increases in their cost which occur during their life. In 1983–84, following investigations by the Procedure (Finance) Committee, the Estimates tables were altered so that the Select Committees dealing with particular Departments, in our case the Environment Committee, could scrutinise the projects. The tables now show both the original estimated cost of projects and past, current and future expenditure, all at current Estimate prices, the objective being to show the real changes in cost of projects by putting out the figures on a common price basis.
As has been said in the debate, I am afraid that the PSA did not manage to get the new procedure off the ground satisfactorily, and I deeply regret the fact that, as a result, the figures printed were confusing and severely handicapped and retarded the work of the Committee in examining the Estimates. The basic problem lay in the treatment of inflation.
The PSA's method of correcting for price changes since the original estimate of cost was prepared — based on changes in tender prices—gave a substantially different answer in practice from the method used to bring past expenditure on projects up to Estimates prices, which was an essential part of establishing the current estimate of cost at this price basis. The comparisons in the original Estimates tables were, therefore, defective.
I do not want to take the House through the technical details of the revaluation, particularly as the figures were also affected by some other distortions that crept into the process. They have been set out by the agency in a note which is reproduced as an appendix to the Environment Committee's report supplementing the oral evidence given to the Committee on 14 May.
The officials concerned have already offered their apologies, to which I add my own, for the fact that the figures originally put before Parliament were unsatisfactory. I hope that we have now put it right and will not have that difficulty again.
I should, however, stress, since this is important for what is said about the Vote as a whole, that these problems related to the comparison between original and current estimates of total cost and not to the forecasts of what will be spent in 1984–85. Indeed, as was explained to the Committee, one of the sources of the misleading totals was action taken by PSA to reduce the 1984–85 figures to fully realistic levels before the Estimates were presented to Parliament.
We are considering with the Treasury the scope for improving the information shown in the tables. However, since it follows a standard format for such tables across all Departments' Estimates, and it would in any case be difficult to give in these tables enough information to provide a complete analysis of changes in cost, it may be more satisfactory to supply the Committee instead with a supplementary note. We are anxious to be as helpful as possible on this score and to make the Committee's task of looking at the Estimates as easy as we can and, with that in mind, we suggested to the Committee that PSA officials should explore this suggestion with their advisers.
258 I understand that those discussions will start this Thursday, and I assure the House that I shall take a close personal interest in them.
The Committee recommended that the 1984–85 provision should be reduced by £20 million in respect of major new works, because it did not believe that expenditure on them could rise to £172 million in that year, in large part because this would represent a 50 per cent. increase on the outturn in 1983–84. Of course, a Government committed to reducing public expenditure have to take extremely seriously the suggestion by Environment Committee that £20 million might be deducted from estimates.
Let me explain what the £172 million is spent on. Broadly speaking, £62 million is for offices and general accommodation suitable for a miscellany of Government Departments; the balance of £110 million is to meet the specialised requirements of a variety of civil departments, listed in the Estimates.
The first claim on the funds is to allow completion or continuation of work already started. Of the £172 million, £152 million is for projects that are in progress. Hon. Members will have seen for themselves the work that is going on at Richmond terrace and in Broad Sanctuary for the international conference centre. The balance of £20 million is for projects that are due to start in the rest of the year. The implications of a £20 million cut are therefore clear; no new starts could be accepted for the remainder of this financial year.
§ Mr. Chapman
Is not my hon. Friend forgetting that the outturn expenditure last year was almost £20 million less than the forecast? Surely the Committee was making the point that this year's forecast might be an overestimate?
§ Sir George Young
I hope to come to that valid point. I have asked my officials for the latest information on spending in the current year to satisfy myself on the point made by my hon. Friend, which is whether the £152 million is still a fully realistic assessment. They have confirmed that it is, and expenditure in the first three months of this year is well over 50 per cent. higher than in the first three months of 1983–84.
Faced with the reduction that is suggested, I should have no option but to place no more new contracts. The consequences of such a decision would be grave. For example, the programme to computerise PAYE, which the Government expect will bring major savings in the administration of taxation, would have to be deferred. Two computer centres and one training centre, which are due to start later this year, would have to be put off.
The court building programme for the Lord Chancellor's department would be delayed. Twelve new projects to provide 53 courtrooms are due to start in the remainder of the current year, but they would be postponed and the backlog of outstanding cases for trial, and difficult working conditions for all involved, would continue to arise.
The prison building programme would be affected. My right hon. and learned Friend the Home Secretary has declared the Government's intention of starting two new prisons a year. A cut of £20 million on the major works subhead would mean that Garth and Swaleside prison—due to start this year—would have to be deferred. 259 Overcrowding in existing prisons, from which prison officers suffer as much as prisoners, would thus be perpetuated.
That illustrates the effects on the main programmes, but there are many individual schemes of importance to the efficient operation of government that would also be affected. Many rationalisation measures included in the new starts would bring savings in the operation of the civil estate as a whole. All that would, of course, have a damaging effect on the construction industry.
In practice, it is doubtful if it would be safe to rely entirely on abandoning all the new starts as a small increase in spending on works in progress due, for example, to contractors making faster progress than expected, would then jeopardise the cash limit. For prudence, it would be desirable in addition to provide some safety margin by slowing down some work in progress. Hon. Members who are familiar with the construction process will know that any attempt to slow down the rate of progress on work where there are existing commitments would lead to claims from contractors that might well outweigh any saving in the present year. I have already mentioned two examples of continuing work, the international conference centre and the Richmond yard project in Whitehall.
Those, with the major office building in Glasgow to take the Ministry of Defence, require in total £27 million in the current year. Slowing down or stopping any of those would have a very major impact on the Government's programmes. I could not commend any such action to the House.
In response to what my hon. Friend for Chipping Barnet (Mr. Chapman) said, there are good reasons for believing that the planned spend this year of £172 million is both realistic and attainable. As I have already explained, there is a very high proportion of expenditure on work in progress where the risk of failing to spend is considerably reduced compared with new starts. Secondly, allowance has already been made for some slippage in drawing up the details of the programme. In other words, if every project spent according to the expectations of the project manager, there would be an overspend. Nor should there be any argument about inherent limitations of the PSA capacity. All the works in question are being carried out by private contractors, and many of them are designed by private consultants.
I direct the attention of the House to the possible wider implications of a cut in this subhead for other elements of the Vote—which include maintenance, rents and other services that go towards the provision of accommodation.
The Committee has rightly recognised the need for more expenditure on maintenance, but a cut in major new works, which could not be fully met from that source, would inevitably mean a cut in maintenance. If, contrary to present expectations, some leeway were to emerge on new works for reasons outside the PSA's control, there would be every reason to direct the balance towards maintenance.
I hope that my hon. Friend and other hon. Members, having weighed the serious implications that a £20 million cut in provision would have for urgent and important programmes of work, will accept that the PSA should be allowed the money it needs to fulfil its services to 260 Government as a whole. I will be keeping the position under personal review during the remainder of the year in the light of monthly reports on the progress of expenditure.
Finally, on the report of the Environment Committee, I come to the PSA's administration costs, mentioned by my right hon. Friend the Member for Worthing (Mr. Higgins). The Committee's report draws attention to the design staff savings of 39 per cent. made since 1979, and to the fact that we are moving from a position where only one third of the major new works designs was done by consultants to one where the proportion has increased to about 50 per cent. already and will approach two thirds. The report very properly asks that an assessment be made of the relative costs of design methods, and I can say that the need to monitor these costs on a continuing basis is accepted, as is the need to ensure that the agency's practice is managed in the most economic way.
Studies have been made of relative costs in past years, and the report of a working party on design costs was placed in the Library in July 1983. Naturally, we now have to assess what they will be in future at a time when there are considerable changes in circumstances in prospect, including the abandonment by the consultants of mandatory fee scales. It is also essential to ensure that the quality of work done is reflected in the assessment and not just its price, and the PSA practice in choosing between consultants will be based on getting the best overall results.
The Environment Committee's examination was the first it has made of the PSA's Estimates, and I am afraid that the difficulty over the tables, for which I have accepted entire responsibility, has meant that it was rather heavy going. I hope, however, that this will be the beginning of a more fruitful relationship in the future, and I assure the House that the PSA, for its part, will work towards that end.
In coming to the PAC report on fraud, I endorse what the hon. Member for Blackburn said in commending the work of his right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) and his Committee on the report that is before us. We shall be studying carefully all 12 recommendations and will be putting in a full reply in a Treasury minute this autumn. Ministers are determined to see that the highest possible standards of conduct of our staff, and fair dealings by our suppliers, are enforced.
Indeed, the PAC report welcomes the assurances which we have given that we need to root out corruption and that pressing forward action on the Wardale recommendations is a top priority task. I reaffirm that that remains the policy and intention of all three DOE Ministers who look after the PSA, and of the top PSA management.
As part of our actions on fraud, not only is every case notified immediately to Ministers, but we have established new procedures for reporting cases of theft, fraud and irregularity, and a central record of all cases involving staff or contractors, or both, has been set up. There is now a single focal point covering industrial and non-industrial staff and contractors.
The pooling of information will assist higher management to ensure that any developing patterns of irregularity are recognised from the outset, that vigorous and even-handed justice is meted out to offenders — whether staff or contractors, or both — and that the lessons learned from one case are applied throughout the system.
261 In an organisation as large as the PSA — spending over £0.5 billion a year on maintenance — with a widespread and complex net of relations with the construction industry, irregularity can take many forms. The cases which we put to Sir Geoffrey Wardale—the PSA commissioned the Wardale report, and then published it; there are few organisations which would do that—and on which the PAC has reported, pinpointed certain danger areas, for example, awarding jobbing contracts with personal interests in mind, the authorisation of the payment of bills to jobbers by the person who ordered the work in the first place without any check by a second person, and the payment of bills on measured term contracts without proper measurement of the work.
We have taken specific action in these and similar cases — for example, making it clear that patronage of any sort will not be tolerated, requiring second signatures for the authorisation of payment in jobbing cases and instituting better arrangements for checking measurement on measured term contracts. But the most effective way in which we can ensure that we stop irregularities from taking place, or catch them when they do, is, first, by having keen and effective managers operating sensible and tight procedures; secondly, by being tough with any contracor or consultant who tries to defraud us in any way; and thirdly, by disciplining severely any of our staff who are implicated in them.
§ Mr. Eddie Loyden (Liverpool, Garston)
If there is to be a reduction in so-called bureaucracy, how will the degree of control necessary to eliminate the practices which the Minister has outlined take place if there is not control of a bureaucratic nature?
§ Sir George Young
The hon. Gentleman makes a valid point. When it comes to the integrity of the public service, we cannot afford the sort of economies that might be accepted in the private sector. My right hon. Friend has made it clear that we are prepared to pay costs which would not be accepted in the private sector so as to set higher standards in the public sector.
Not only will the actions I have outlined help us control irregularities, but they tie in with the wider sphere of the Wardale recommendations which cover financial controls and value for money recommendations generally. From this point of view, they link in closely with the National Audit Office report on building maintenance, which was considered by the PAC on 21 May and on which it will, no doubt, soon be reporting, as it will on other work, particularly the 1982 Rayner study on resource control in district works offices.
These two reports were concerned basically not with fraud but with getting value for money, and they show, as does Wardale-Touche Ross, that we need to work very hard to get it. The reports show that PSA needs some review of its policies, procedures and management practices affecting the work of the United Kingdom territorial organisation. In some instances changes are needed to make it more difficult for the kind of irregularities that led to the WTR investigation to take place. In other cases they are needed to improve performance generally and to give a better assurance that value for money is being achieved.
§ Sir George Young
I have no responsibility for the Crown Agents, and I hesitate to intervene in that relationship. To my knowledge the responsibility does not come within the Department of the Environment. The hon. Gentleman must direct his question to the appropriate Minister. I hope to deal with some of the matters that have been raised in the debate and not only those raised by the hon. Gentleman. If I fail to deal with the matters that he raised, I shall write to him. His questions were rather technical ones about two specific contracts.
We have already done a great deal of work on the reports. For example, 42 of the 62 accepted recommendations of the Rayner report have been implemented. Many of the recommendations that run through all reports—for example, better management information systems, better training and use of staff and better budgeting systems—are taking time to implement and must be co-ordinated so that we can implement them with the resources that we have available.
The heart of the matter, as many hon. Members have recognised, is to change attitudes and to make it quite clear that certain conduct will not be tolerated. We must restore a pride in the public service, which sets itself the highest standards. We must not confine ourselves to individual changes of systems and procedures. Attitudes can be changed only by personal conviction. It is necessary to convince managers at all levels in the relevant area of work throughout the PSA that the criticism might, and to some degree probably did, apply to them. We are trying to do this by ministerial statements and by personal visits by all the senior staff of the PSA to regional, area and district offices throughout the United Kingdom. It is too early to assess their success but I believe that at least one fundamental criticism of WTR—that management is out of touch with what happens on the ground — is now being answered.
§ Sir George Young
With respect, I must try to deal with some of the questions posed by the hon. Gentleman's hon. Friends. I was asked about RAF Lakenheath. I can only confirm that no detailed instructions have been received by the PSA for the design and construction of a new hospital at that station. As for the effect of the dock strike, the closure of Avonmouth could well affect an important and difficult project. The contractor and the PSA are reviewing the procedure.
The hon. Member for Liverpool, Mossley Hill (Mr. Alton) talked about penalties. I agree that dishonesty should normally entail dismissal as well as any judicial penalties. That is the agency's stated policy and it is being made known to all the staff through a variety of notices dealing with general policy and precepts. It is publicising the disciplinary action that is taken. Regional directors are now required in all cases to report before taking disciplinary action even when the action contemplated falls within their delegated powers.
I shall conclude by taking up a matter that was raised by the hon. Member for Linlithgow (Mr. Dalyell). In doing so I hope that I shall not be accused of complacency. There are 27,000 staff who work for the PSA and who know that the agency has some fine achievements to its 263 credit. Hon. Members will have seen the stone restoration programme at the Palace of Westminster and I hope will shortly see the ceiling of the House of Lords. I hope that many hon. Members will find time to visit the Cabinet war rooms. In putting right the problems which my right hon. Friend and I acknowledge, I hope that the solid achievements of the PSA, of which it can rightly be proud, will not be forgotten.
§ Sir Hugh Rossi
I am grateful to my hon. Friend the Under-Secretary of State for the way in which he ahs responded to the debate, the regrets that he has expressed and the assurances that he has given. Bearing in mind what he has said about the effect that the £20 million will have on new contracts in the construction industry, I beg to ask leave to withdraw the motion.
§ Motion by leave, withdrawn.
§ It being Ten o'clock, the original Question was deferred, pursuant to paragraph (2)(c) of Standing Order No. 19 (Consideration of Estimates).
§ MR. SPEAKER then proceeded to put forthwith the deferred Questions necessary to dispose of the proceedings on Estimates, 1984–85, Class II, Votes 1 and 8 and Class XIV, Votes 1 and 2.