§ Mr. Robert Sheldon (Ashton-under-Lyne)
I beg to move,That this House takes note of the Sixth to Thirtieth Reports from the Committee of Public Accounts of Session 1981–82, of the First Special Report and First to Eleventh Reports of Session 1982–83, of the First to Ninth Reports of Session 1983–84 and of the Treasury Minutes and Northern Ireland Department of Finance Memoranda on those Reports (Cmnd. 8620, 8757, 8759, 8828, 8995, 9071, 9178 and 9191).My first duty in presenting the Public Accounts Committee reports to the House is a particularly happy one. It is to pay my personal tribute, and offer the thanks of the House, to my predecessor, Joel Barnett, now Lord Barnett. He is of course much missed by the Committee, and by the House, and his work set standards of good sense and kind good humour which are difficult to emulate. My thanks must go also to Sir Albert Costain, who played a notable part in the previous Committee.
Of my colleagues, I can say only that their dedication astonishes me. When I was first a member of the Public Accounts Committee in 1965, it was difficult to obtain a quorum for even important matters. Today, we have almost a full complement of members at each meeting and, when one allows for the mass of paper which our lucid and eloquent Civil Service presents to us, that dedication is clear and gratifying, and is of benefit to the House.
The gratitude of the Committee must also be extended to our Comptroller and Auditor General, Sir Gordon Downey, who, to general satisfaction, was knighted earlier this year. The relationship between him and the Committee is indeed a crucial one. Complete confidence is required between the two for the work to be carried out efficiently, and both he and the Committee understand this. Sir Gordon and his National Audit Office have the essential confidence of us all.
Of the other officers who serve us, I should mention the Comptroller and Auditor General for Northern Ireland, Mr. Dennis Calvert, and his Exchequer and Audit Department. We have been calling upon his advice more frequently than usual, because of our investigation into the De Lorean motor company. We value his help and his expertise.
The Treasury Officer of Accounts, Mr. Clifford Judd, the accounting officers who come before us, and the witnesses who present these matters to us, have a general agreement with the Comptroller and Auditor General over matters of fact. It is essential that these be cleared before they come before the Committee. The crucial work of the Committee could not be carried out unless there were this general clearing of facts and acceptance of a large amount of the material before it reaches our deliberations. So it is that we have to thank those people who present the reports to us and come before us for that essential work.
This debate is the first that the House has had since the enactment of the National Audit Act. That was the measure introduced by the right hon. Member for Chelmsford (Mr. St. John-Stevas), and, as a result of that Act, which was squeezed in on the very last day before the Dissolution of the House for the general election last summer, the Comptroller and Auditor General is now clearly established as an Officer of the House. As a result of that Act, there will now be a wider range of reports, and we are also enabled to undertake value-for-money audits.
917 We were disappointed that the Act did not extend to the nationalised industries. It was a pity that the chairmen and others concerned with the nationalised industries did not realise how the House and the Public Accounts Committee operate. They frequently base their views on the actions of Ministers, and sometimes they form an incorrect view and do not realise that the work of the Public Accounts Committee would have been directed only to securing value for money and efficiency in the organisations. That is the way in which we carry out all our investigations.
It is a great shame that it was not considered that the Public Accounts Committee, far from being an interfering busybody, could have been a valuable ally in making sure that the nationalised industries had clear guidelines set for their operations and were enabled to get on with their task without excessive interference from Government Departments. I am sure that we shall return to that point in due course. After all, the Public Accounts Committee has been on record for a long time as being in favour of pursuing public money wherever it may go. In the United States and in other countries, public money is followed to ensure that it is used purposefully, that it is used for the purposes that Parliament intended, and that the way in which it is spent ensures the best value for money. That is something to which we must unquestionably return.
There are 46 reports before us. The number is so high largely because the general election took place last year and, therefore, there was no debate then. As a result, very few hon. Members will be able to do more today than skate over a few of the reports.
In the Public Accounts Committee, even more than in most Select Committees, there is an all-party consensus. That is essential for the working of the Committee. That consensus is easier to achieve in the PAC than in most other Committees. The members of the Committee all have a respect for each other because we have an important duty which is clear, accepted and understood. That duty is to ensure that money is spent as Parliament has authorised and—within the objectives that have to be set out by any Government—in the way that produces the best value for money.
That is the work of the Committee, and we approach it in three ways. First, we ask that any initiative on the spending of public money should have clearly stated and measurable objectives. Secondly, we ask that the monitoring of progress towards those objectives be undertaken so that any failures or inadequacies can be noted and corrected in sufficient time to maintain the original schedule. Thirdly, we ask that the final outcome should be capable of being measured against those objectives. There is the setting of the objective, the monitoring of progress towards that objective and, finally, the need to be able to compare the result achieved with the original objective.
§ Mr. Michael Latham (Rutland and Melton)
Would the right hon. Gentleman not mention one other matter that is important in the Committee's work? It is that in our questioning and our subsequent discussions we deliberately moderate our language.
§ Mr. Sheldon
The hon. Gentleman is absolutely right. The understatement of the PAC's reports is a noted feature of the House, and the Committee does not lose from that. Indeed, it gains because when a normally quiet person 918 raises his voice it is an indication that something is amiss. When someone constantly shouts, no modulation is possible and it is not possible to judge the extent of the indignation. That is right and it is a tradition that we would do well to follow. I imagine that it has lasted for a century or more. I am grateful to the hon. Gentleman, who plays such a notable part in our deliberations.
The setting of objectives, the monitoring of progress towards them and the ability to compare the outcome are crucial. We had a good example of all three factors being missing in our debate on the new Estimates. Two weeks ago the House debated one of our reports on premature retirement. The idea behind premature retirement was that the number of administrators in the NHS would be reduced. There was an absence of objective in that no one knew how many were to be dismissed, there was no monitoring of how many would accept voluntary redundancy, and even at the end it was not possible to compare the number who had left voluntarily with the original estimate because it was not known how many had gone or how many were expected to go. That defied the basic criteria that we must set ourselves and others in the public service whose accounts we monitor.
Each of the 46 reports could form the basis of an interesting debate, as did the report on early retirement that I have just mentioned. It might be useful for me to pick out a few themes to give the flavour of the Committee's work and to deal with some serious issues. We are not here just to apportion blame. Our major task is to improve the effectiveness of the expenditure of public money and ensure that we get value for the money that the Government raise from the taxpayer. That must be and remains our task.
I shall give a range of the questions that we ask ourselves and those who come before us. One of the most important considerations must be cost effectiveness and efficiency. We regularly see big spending Departments such as the Ministry of Defence and the Department of Health and Social Security and, within it, the National Health Service. Reports 16 and 17 from the 1981–82 session deal with them. Another consideration is financial control and accountability. In that regard we have the Chevaline report to which I shall refer later. We also consider matters such as taxation, tax avoidance, Customs and Excise and Inland Revenue. We also cover wider subjects such as Civil Service manpower and investment appraisal. We make recommendations as to how these matters might best be tackled and handled.
I shall consider the black economy first. In our twenty-second report of 1981–82 we considered Customs and Excise and the Board of Inland Revenue as well as some other Departments. They pointed out the difficulty in recruiting staff and retaining trained inspectors. The evidence showed that that was a serious problem for the Inland Revenue. It was asked what were its criteria for the extra staff who were expected to produce savings well in excess of their cost. We were conscious that if we raised extra taxation to employ more people to carry out investigations, we must consider the revenue that they would be able to raise and the cost of raising it. The Committee concluded that the employment of investigative staff gave excellent value for money. The Committee was pleased that the revenue departments were trying to improve their information on costs and output as a better basis for decision-making.
919 We pointed out in the sixth report of the 1981–82 Session on the control of Civil Service manpower that the critical question is not how many civil servants are employed, but what work is obtained from those who are engaged. We repeated in the twenty-second report on the Inland Revenue that the reduction in Civil Service numbers must be balanced by the value to the taxpayer of investigative work. It is the size of the bill to the taxpayer rather than the number of civil servants employed that counts.
In our second report of 1983–84 we considered fraud in the DHSS and in the Inland Revenue. It is valuable to compare the investigative work that we thought desirable in the Inland Revenue with that done in the DHSS. We discovered that in the Inland Revenue, £92,000 was obtained from each official whereas £38,000 was obtained in the DHSS. We also noted that the Inland Revenue estimated the total of the black economy at £4 billion and that the DHSS was unable to give a figure. It strikes me, as I would imagine it does most people, that it should be easier to assess the amount of fraud in DHSS payments than to assess the size of the black economy. Whereas the Inland Revenue was able to do one the DHSS was unable to do the other. At paragraphs 25 and 26 of the second report for 1983–84 we said:25. We note that most of the detected fraud is perpetrated by individuals for small sums and that DHSS have been giving increasing emphasis to stopping unjustified benefit payments rather than to prosecutions, although the latter are generally successful. We accept that it is more important to maximise savings than to prosecute in every possible case, though we consider it important for DHSS to maintain prosecution at all levels of deliberate fraud, as a deterrent. We understand this to be the Department's attitude.26. We are surprised at DHSS's attitude to the paucity of information on the extent of undetected fraud. The large gaps which they admitted in their knowledge of this area mean that their existing management information, even after reassessment, will remain an unsatisfactory basis for determining the most cost effective deployment of staff on anti-fraud activities. We are also disappointed that DHSS could offer no informed guess as to the possible cost to the Exchequer of undetected fraud, whether as a result of their benefit studies, their economic advisers' work or the Rayner scrutiny.It was the lack of information that we thought wrong. Whereas the Inland Revenue was able to make out a strong case for increasing its investigative staff on the basis of its assessment, however vague it might have been, and assess the value of increasing investigative work, the DHSS was unable to make that type of comparison and therefore was unable to say how far investigative work is being best applied. We said that the DHSS should undertake to present some estimate to us in due course as we believed that its task was easier than that of the Inland Revenue.
The Committee's ninth report for the Session 1981–82 dealt with the Chevaline improvements to the Polaris missile system. The Chevaline project commenced in 1972 at an expected cost of £175 million. The latest estimate is £1,000 million or, in 1972 prices, £530 million. The programme is several times its original cost in real terms. The project was expected to be fully operational last year—five years late. The Government intend that Chevaline will be replaced in the early 1990s by the United States Trident 2 missile system.
The Committee is concerned not with defence policy but with financial management and control. The fundamental principle is and must be full accountability to Parliament. It is unsatisfactory and unacceptable that vast 920 sums should be spent on these matters without accountability. It is imperative that there is full accountability to Parliament.
We produced a critical report, and are now receiving information on defence projects costing more than £100 million during their lifespan. It is essential that the House knows about large expenditures on defence projects. Many people were offended by the fact that there was a massive defence project about which members of the Cabinet, let alone hon. Members generally, were completely unaware. By a special minute, the Committee of Public Accounts obtains information about those expensive projects, monitors them and asks for further investigation by the Comptroller and Auditor General.
I turn to the Committee's twenty-fifth report for the 1981–82 session on the Property Services Agency In the period 1979–80, 35 frauds were notified by the Property Services Agency. The Committee believed that the Property Services Agency played down the significance of the detected cases in its regional organisations, and the Committee said so. The Committee stated:We do not consider that comparison of these cases with the broad statistics for convictions in the country as a whole can be meaningful; nor did we think it realistic to compare frauds involving long term collusion or conspiracy among civil servants, where the losses are uncertain, with measurable `shrinkage' in department stores. We therefore trust that PSA will not minimise the possible implications of detected serious frauds, nor act on the assumption that the degree of irregularity which has been detected is acceptable.That is a serious matter. We have long been proud of our high standard of public life. We must be aware of the uncertain foundations on which that rests—the incorruptability of civil servants. A standard or ethos among civil servants means that, if any one were discovered in breach of what was held to be the morality by which the Civil Service lives, some people would be outraged. Not only would that outrage be known, but the offences would rapidly become known as well. That is largely the position at present. The task of the PSA and the House of Commons as a whole is to ensure that we retain that attitude through difficult and trying days.
Obviously, the decline in the number of civil servants and the possible diminution of morale because of that and other matters are among the factors that make it even more necessary to ensure that the PSA's efforts to improve the effectiveness of the measures to prevent fraud and irregularities are continued. The Committee has expressed that belief repeatedly.
The Committee had before it an examination of the Wardale report. Only a week or two ago, the Committee took evidence on that report. We shall, therefore, be issuing a further report on the subject. This must be a matter of continuing concern. It is clear that standards of public life must always be higher than standards in certain private organisations, even if it means that we must pay more to achieve that. The standards that come when public money is spent are different from other standards and must be retained.
The Hamilton college of education was discussed in the debate on the Consolidated Fund Bill, but that should not preclude hon. Members from examining the matter. We are interested in improving the standards of public accountability rather than in making any political points. I wish to ensure that when public property is sold the best value is obtained for it. The Committee's ninth report for 1983–84 dealt with the Hamilton college of education. 921 That college was built in the mid-1960s for £2 million. It provided residences for 600 students on 51 acres. A decision was made to close the college. Some hon. Members opposed that decision, but that matter does not worry us at present. Our interest is simple and clear, and the Committee can be wholly united on this point. Our task is to ensure that we get value for money on all occasions. The Halliday committee established the ground rules for the sale of property. Those rules followed the sale of Robroyston hospital in 1977. The PAC report states:Departments are stongly recommended to take professional advice from the Chief Valuer (Scotland) and the Solicitor's Office".The Chief Valuer said that in favourable circumstances—I stress that point—the property might realise £6 million. Paragraphs 6 to 8 of the Committee's report state that the Chief Valuer recommended,appointing a commercial selling agent with whom the District Valuer would co-operate; the District Valuer would be able to advise on the choice of agent and make the first attempt to obtain reliable planning guidance. The Solicitor's Office also advised that a commercial estate agent might know of some specialised pockets of potential purchasers in the commercial sector who would be interested in out of the ordinary property.SED and the Jordanhill Board of Governors agreed that the sale should be handled by the College's own solicitors, who it was felt had as much experience in selling properties as estate agents. The appointment of these solicitors was approved before SED received the Chief Valuer's letter of 9 December. They did not contact the Chief Valuer again until offers for the property had been received.The College was advertised in each of four papers (The Times, The Scotsman, The Glasgow Herald and The Times Educational Supplement) for one issue in the period 14–18 December 1981I draw the attention of the House to the fact that that was just before Christmas,and one issue in the period 11–15 January 1982in the new year,About 40 brochures … were issued as a result of the adverisements, but only four offers were received.The placing of the advertisements and the failure to take the Chief Valuer's advice made the Committee feel sure that that was no way to market a property as valuable as Hamilton college. The governors recommended acceptance of two offers amounting to £680,000, although by then security costs had amounted to £106,000. An amount of £574,000 was obtained for properties which, admittedly, under favourable circumstances, was estimated to realise £6 million. The failure to advertise in such obvious journals as the Estates Gazette surprised the Committee. When the governors intimated that that was the best price they had received, they consulted the Chief Valuer for Scotland and the Solicitor's Office. The advice received was,that experienced estate agents should be appointed to market the property and that the District Valuer should be involved in exploring planning possibilities with the local authority.We say in paragraph 16 of our report:We were astonished to learn that SED had approved the appointment of the Jordanhill College's own solicitor as selling agents without waiting for the advice for which they had asked; and had then made no attempt either to change their decision or to discuss with the Chief Valuer their rejection of his advice.That, we thought, was language which was strong and apposite to the circumstances of the situation. We made it clear that on any future sales of this kind proper attempts should be made to market property adequately.
§ Mr. John Maxton (Glasgow, Cathcart)
Does my right hon. Friend agree that it is not the practice of the PAC to place responsibility for actions on Ministers rather than on 922 civil servants? In other words, responsibility is normally put on the Department generally and not on a particular Minister?
§ Mr. Sheldon
That is right. Ours is one of the few Select Committees which does not take evidence, in the normal manner of speaking, from a Minister. Indeed, we have a Minister on the Committee, and we are always pleased to see the Financial Secretary. It is traditonal for the Financial Secretary to attend only once, but I have made it clear to him a number of times that we should be happy, and benefit from his advice, to see him more often, though we know the pressure of duties on him. Our task is to make sure that the procedures which we consider to be sensible are followed, that the Department tries to ensure that it obtains the value for money that is its task and that lessons are learnt for the future.
As a result of the National Audit Act 1983, we are undertaking value-for-money audits. Such audits always have been undertaken, but invariably they have followed the certification procedures. Those procedures are designed to make sure that the money has gone to the purposes for which Parliament voted it and has not disappeared into somebody's pocket. As a result, the Comptroller and Auditor General and the National Audit Office—the Exchequer and Audit Department, as it was—have in the past found some instances where better value for money could have been obtained, and investigations have been carried out.
As a result of the new National Audit Act, that cumbersome procedure is no longer necessary. When dealing with a substantial volume of expenditure or some new procedure, they can initiate straight off a value-for-money audit, and some of the first of those will be coming forward in the next few weeks; and eventually we shall come before the House and explain the way in which they have worked and how valuable have been their contribution to improving the standard of expenditure of public money.
The seventh report on the nationalised industries concerned us in respect of the way in which corporate plans are prepared. We recommend that sponsor Departments should seek to ensure that all nationalised industries prepare corporate plans annually and provide in them certain essential information, as specified in the 1978 White Paper.
That is important because only when one has corporate plans can one compare one industry with another. Only then can the Government say where public investment can best go. Only when comparing one nationalised industry, in which money can usefully be spent, with another nationalised industry or public body, perhaps where money can less usefully be spent, can the allocation of expenditure be prepared in a sensible way. We hope that that will be done and we look forward to the implementation of that recommendation in due course.
I have spoken of the matters that have been concerning us. We shall be taking evidence on value for money on such matters as the Trident programme; we are at present looking into the De Lorean case—the amount of money that was spent in establishing the motor company in Northern Ireland—and inevitably that will take up more of our time than is usual in an inquiry, but we feel that that is essential in the interests of learning a number of newer 923 lessons; and we are continuing our examination following the Wardale report into frauds at the PSA. We have an extensive programme.
The Committee has much work ahead of it and the House should be gratified that so many people have dedicated themselves to providing the means by which this House is able to control the expenditure of money and to make sure that, whatever else happens, the taxpayer has confidence that some people care about these matters and are determined to ensure that standards in public life continue to be improved to the best of our ability.
§ Sir Michael Shaw (Scarborough)
I am glad of this opportunity to speak following the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). We understand that through no fault of his, he was unable to be present at our deliberations the other day. We missed him and we are glad to have him leading us today. It is right for me to say from these Benches how much we support his warm words of thanks to the man who formerly represented Heywood and Middleton, Lord Barnett, who was Chairman of the Committee during most of the deliberations on the reports that are now before the House. We remember him not only with affection but with admiration for the skilful way in which he led us through our discussions and inquiries.
We also echo the right hon. Gentleman's comments about the former hon. Member for Folkestone and Hythe, Sir Albert Costain, who probably set a record for service to the PAC. No debate of this sort would have been complete without him. He always seemed to achieve his objective by appearing quite late in the debate, whereupon he would sum up in his own inimitable way the conclusions that had been reached by the Committee, always finding a few points of his own that were completely individual but relevant to the discussion. We miss him.
As the right hon. Member for Ashton-under-Lyne said, we are today discussing 46 reports, together with Government reports. The mind boggled at being told late in the weekend that one would have to address the House on those reports, particularly when one had a complete constituency programme built through the weekend. Nevertheless, hon. Members taking part today will have done a great deal of homework on the relevant documents.
As I read the reports, I felt that the work of the PAC was developing all the time. As the right hon. Member for Ashton-under-Lyne pointed out, there have been some significant changes during the period about which he spoke, as a result of which we shall find that our responsibilities have increased. We are lucky in having Sir Gordon Downey as our Comptroller and Auditor General. He is fashioning his new department well and is of invaluable support to us in the help that he gives.
A. number of inquiries that are on the stocks will make us think carefully about the Committee's future role and how best to discharge it. Some of the matters that we are looking into are bigger than those we have considered before. It would be wrong for me to say more at this juncture because we shall finalise them in future reports.
I emphasise, as I did last week when I spoke about the National Health Service, and as did the right hon. Member for Ashton-under-Lyne this afternoon, that the PAC takes an all-party approach. Speaking quietly is part of it. If we got excited and used extravagant words, that all-party approach would quickly break down. As it is, tempers are 924 kept cool, the facts are considered as they are and conclusions are drawn that may be unpleasant to one side or the other. We have a duty to the House to play it that way. The House would be the loser if the party element were carried to all its activities.
There are 46 debates—reports, I should say.
§ Sir Michael Shaw
Yes, one debate. The more significant fact is that most of the reports were drawn up by a different Committee. Many of those who were deeply involved, including some hon. Members present today, are no longer on our Committee, being engaged now on other duties. Much of the value of those reports lies in their being implemented quickly, and discussed as quickly as possible. The value of debates such as ours this afternoon is lost when so many reports are involved. Some of them have taken a long time to produce, and discusssions on some of the earlier reports began in 1981. That is a long time ago. Many different people were involved at that date.
Having said that, I am bound to question whether we need more frequent debates. I believe that we do, but our next query is, "Do all the reports need debating?" That is much more questionable. Knowing the habits of Leaders of the House, as I do, I believe that more debates are unlikely. If it were possible to limit the number of debates, some reports could be taken on the nod, leaving room for those that are more controversial or that are worthy of discussion, which is perhaps a better way to put it.
I have heard one or two hon. Members, who should perhaps know better, ask whether the PAC is really effective. No doubt other hon. Members have heard that question asked, too. They believe that our tone is not strong enough, yet recent events have shown that even the mildest review—I shall go no further than that—seems to have the most alarming effects. The Committee is effective. The only way forward, if earlier reports are wanted, is to insist on that and to accept at the same time that it might be possible to draw lines around what is necessary for discussion and what we can get through on the nod.
Many of the reports have been largely overtaken by events, although those events have been partly influenced by the reports. Although there have been no debates on certain reports, they have had an effect and helped events. The right hon. Member for Ashton-under-Lyne mentioned the Property Services Agency in relation to frauds and irregularities. We are still working on that a second time around, as it were.
The financial arrangements for the Exchequer and Audit Department are water under the bridge, but the report was effective and valuable. The PAC is inquiring into drugs, sales of Government shares and costs paid to opticians. The reports on drugs and opticians must have had an effect on later Government action. In spite of a lack of debate—we would have welcomed an earlier debate—the Committee has not been without effect on those matters.
This afternoon, I shall raise two matters from the many issues that could be raised from all these bundles of paper. The Chevaline improvement was also raised by the right hon. Member for Ashton-under-Lyne. We were all rather shocked at the escalation in project costs from £175 million to £1,000 million within about 10 years. Our 925 criticism, as we said in the report, is that the costs were not disclosed and that there was no requirement that they should be. That will not do, and must stop. It cannot provide for proper supervision of expenditure by Parliament. The fact that the escalation was largely unknown is a very serious criticism.
The ninth report of 1981–82 concluded:There is no doubt … that the history of the Chevaline up to 1976 was an unhappy one and is open to serious criticism on grounds of failure to recognise and provide contingencies against the major problems involved in a complex and novel field.This is the point that I want to emphasise. We go on to say:It is not the task of this Committee to deal with policy objectives in defence matters.We had that matter out when discussing one of the torpedo developments. We criticised the financial arrangements, and the laxity in expenditure on development. We came in for a good deal of criticism because of our strictures on the development costs. Ministers and others thought that we were trying to criticise the weapon itself, whereas we were criticising the control over expenditure. I emphasise, as the report says, that it is not our job to establish the quality of defence expenditure. That is for the Select Committee on Defence. Our job is to see that cost is kept under control, and we must always keep that problem well in mind. There is a clear difference between our duty and that of other Select Committees. The PAC deals entirely with costs and the control of costs, on behalf of Parliament.
We end the report by saying:Full accountability to parliament in future is imperative.We can maintain that only be getting the information and, where necessary, by criticising it. The quality of the weapons concerned is not a matter for us to discuss.
My other point is about the second report of the Public Accounts Committee, 1982–83, entitled:Development of Internal Audit in Central Government".The PAC was greatly concerned at the lack of an adequate system of internal audit and of adequate staff to carry out the work. In 1981 we were concerned at what we called the standard of internal audit in central Government. In the second report, we welcomed the introduction of a basic training package for new entrants. During discussions on the first report, evidence was taken as a result of my questioning, which is referred to in the second report, on page 19. I asked Sir Anthony Rawlinson:Reverting to the last report, one reread the evidence of Sir James Hamilton and Sir Brian Hayes and I got the strong impression at that time that they were very much in favour of having most, if not all, of the internal audit staff, doing a tour of duty from the main body of their staff and they felt that this was a good thing: I frankly doubted it in many cases but that was their view. Has there been a basic change of view in the departments on this?Sir Anthony replied:There has not been a change of view.If the internal audit department is regarded solely as a stepping stone in the career of a civil servant, who is moving just for a tour of duty into the internal audit side and then back to his normal duties, I doubt very much whether the job of the internal audit department is done well. I was told that that gives the staff added interest, but I do not believe that anybody in the internal audit department who expects to go to another branch of the same department in two years' time will be unduly critical of what is going on in that department. Perhaps it is a good thing to spend some time in the other department, but the 926 main control and thrust in it must come from somewhere else. There must be much more training of specialised staff, such as accountants, within the Departments and the Civil Service in general. I am glad to note that in our report we received an assurance that that was beginning to happen and that there were special training courses and so on.
I raised this matter the other day, and still have not received an answer. There is in the Civil Service, proud though we should be of the quality of our civil servants, an outdated notion that, if one is to advance in the Civil Service, one must aim at being a policy adviser. So much work in the Civil Service revolves around management, not policy. In the past not enough emphasis has been laid on the need for management skills.
Therefore, I should like to ask when we shall get a replacement for Sir Kenneth Sharp. His work brought the importance of that aspect of work in the Civil Service to the fore and much more to its rightful place. Time and again, as we saw in the report on early retirement that we discussed last year, matters have not been managed correctly or objectives set out clearly. The follow-through has not been watched carefully, so the results were not compared properly. That work must be done on a much wider scale in future. Every time a new project comes forward, let us have proper planning. We should not just establish the policy and go ahead with it. That is not the way to do it. One may think of a good policy, but let us work out the management consequences before we get cracking. Therefore, I ask again: when shall we get a first-class successor to Sir Kenneth Sharp?
§ Mr. William O'Brien (Normanton)
I should like to express my appreciation to the present Chairman of the Public Accounts Committee, my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), for his guidance as Chairman. In the Committee, the Chairman gives a lead with searching questions and in-depth consideration of the subjects, which is most inspiring. As a new member of the Committee, I find the help and guidance given by the Chairman most encouraging.
There are 46 reports before us. As was said by my right hon. Friend and by the hon. Member for Scarborough (Sir M. Shaw), many subjects are covered by them. I shall refer to the eighth report of 1982–83, which is entitled:The Joint Financing of Care by the National Health Service and Local Government.It has been said that many of the reports have been overtaken by events. The last time that the House considered a report by the PAC was in March 1982. It is obvious, therefore, that some reports have been overtaken by events. The eighth report fits that description in some respects. It states in paragraph 1:The aim is, so far as possible, to provide complementary services through the NHS, which provides hospital, primary and community health care, and local authorities, which provide social services including residential and day care, home helps and meals on wheels.One can see that events in local government and the Health Service have developed to such an extent because of economic controls that the recommendations in the eighth report are now outdated. In this report, as in others, and in the meetings of the PAC, the theme is value for money and accountability, as was said by the Chairman. We must accept that there must be some demonstration of accountability. In many instances the Committee extracts 927 information about who is accountable for what responsibilities and duties. In the recent past, such matters have been highlighted in more than one instance.
The work of the Committee of Public Accounts and the way its reports have been presented, ensure that people who are accountable carry out their duties responsibly. The eighth report relates to the work of the Department of Health and Social Security and joint financing by that Department and by local government.
The Committee has spent, and will spend, many hours considering the work of the DHSS, the services it provides and their value to the people in need of and receiving them. The cost of services must be considered in terms of their value to the Department and to the people receiving them.
The principle behind joint financing is that the long-term services normally provided by the DHSS may be better provided by local government health and social services. In under two years the report affected Government policies, and Government policies also affected the principles behind and the work outlined in the report. The points made in the report can be influenced by various Secretaries of State. That is illustrated by the Department of the Environment.
The Department of the Environment is responsible in the main for monitoring local government expenditure. A change in the level of government expenditure can influence joint financing by the area health authority and the social services department in local government. It is clear, therefore, that the reduction in rate support grant and the effect of proposed legislation could influence the level of services provided by joint financing.
Paragraph 2 of the eighth report states:Jointly planned social services projects will normally be financed by the local authorities primarily responsible for them from their ordinary budgets. In order to help finance such projects in the short term health authorities in England have since 1976–77 contributed towards the costs of specific capital schemes, such as the provision of day centres, and to revenue expenditure on, for example, additional social workers".Against that background I support the view that much of the information contained in the report can be overtaken by events brought about by Government policies and the decisions taken in the Chamber.
The report continues:As the NHS funds are being used, health authorities need to be satisfied that such jointly financed schemes are in the interests of the NHS as well as the local authority and could be expected to make a better contribution to total care than if the funds were directly applied to health services".Even that recommendation is out of date because of developments in the Health Service over the past 12 months. Value for money and accountability are matters for which—I agree with other hon. Members—some Departments must have a rolling programme. The Committee should take particular interest in the DHSS to ensure that it is up to date with the report's comments.
Paragraph 11 states:We note that health and local authorities will jointly specify the detailed purposes for which the grant is to be expended, the services to be provided and their cost".We live in a changing world and therefore we should request opportunities to consider particular health services, in conjunction with social services, to ensure that we get value for money and the services necessary to maintain the increasing numbers of the elderly, and those long-term mental patients whom the local authorities' social services departments are being requested to take over.
928 It is suggested that Health Service resources should not be tied down to long-term patient services, which can be maintained in the local government sector. There is nothing wrong with that approach, providing we ensure that resources are available to care for those people and to maintain the service.
Paragraph 12 states:As to the effectiveness of joint finance and the associated new scheme"—at that time, people were referring to new schemes—we accept that since the policy of successive Govemrnents in providing alternative care outside hospital is to improve the quality of life, community services could be cost effective and good value for money even if they cost no less and possibly cost more".That view was expressed in the report then, but it is not being considered by various Departments. I refer to the Department of Health and Social Security and the Department of the Environment that caters for local government social services.
Paragraph 12 of the eighth report states:care outside hospital is to improve the quality of life, community services could be cost-effective and good value for money even if they cost no less and possibly cost more.That view should underly our examination of the matter.
The same paragraph continues:However, we consider that there are a number of reasons why the cost-effectiveness of the schemes in meeting this policy objective will need to be kept under review by the health departments.The Committee should keep that point in mind because it has an effect on the way of life of many people. We have a responsibility to consider the services provided to the people who need them at the same time as we discuss value for money and accountability.
Paragraph 13 states:First, since district health authorities will be able to guarantee continuing annual payments to local authorities and voluntary organisations for people transferred to community care, they will be entering into virtually open-ended commitments involving a permanent transfer of NHS funds.Although that paragraph states that there will be continuing annual payments for services we know that the Government are trying to maintain public expenditure levels and that some of the joint financing of annual payments being made in the late 1970s and early 1980s has been cut. Paragraph 13 continues:Second, the sums involved could be substantial, especially in view of the expected rise in the numbers of very elderly, who will undoubtedly place a high demand on community care.We have had reports from various Departments which show that the number of elderly people in communities is increasing and that the responsibilities placed on local authority social services departments are also ever-increasing. That matter should be kept under review and there should be reports from the PAC to ensure that we are receiving value for money at all times.
Paragraph 13 further states:Third, DHSS expect it to take years to transfer into the community the 20,000 mentally affected in-patients presently in hospital, since health authorities will be obliged to make the transfers at no extra cost and could therefore find it difficult to finance community care facitilites in advance of realising NHS savings.That is correct. There is a policy of transferring the responsibility for National Health Service patients to the local authorities. We should accept the report's recommendation to keep that matter under review.
The recommendations of the Royal Commission on the National Health Service run side by side with the points I have been making. The commission published a 929 consultative paper called "Patients First". We should study that closely, because if we are to pursue the principles and policies I have mentioned we should keep those matters in mind.
The Chairman of the Committee and the hon. Member for Scarborough expressed appreciation for the work of the Comptroller and Auditor General. I believe that the Committee is well served by Sir Gordon and his staff. The Committee receives regular constructive reports from them and, in the long term, that also serves the House. I wish to be associated with the appreciation already expressed for the work done by that Department.
One of the first questions that I asked Sir Gordon was about audit control. The new arrangements for audit have been referred to, but computer auditing is one of the matters that worried me. There is greater reliance on, and increased services provided by, computers in all Government Departments. If the Committee is to do its job effectively and maintain the spirit and principle of ensuring value for money and accountability, that must apply right across the board. It is against that background that I questioned the value of computer auditing. The Committee was advised that there are sufficient trained accountants and other people in the Auditor General's Department to ensure that there is a proper audit of the computers.
Various frauds have been referred to. Without a doubt, computers will provide the greatest opportunities for fraud if we do not keep them under control. I was satisfied by the report that that matter is well in hand.
Nationalised industries have been mentioned. As a new member of the Committee, I was to some degree disappointed and surprised to find that the PAC is not involved with expenditure by nationalised industries. I was concerned with nationalised industries before I entered the House and I thought, therefore, that we should be studying the operations of nationalised industries and their expenditure of public money. I hope that some time there will be an item on the agenda of the PAC that will allow us to examine the matter and to make out a case for studying the expenditure of nationalised industries. I hope that we shall consider that in the near future.
The point has been made that the Committee must ensure that the money allocated by Parliament to the various Departments is spent for the purposes for which it has been approved. The Committee can monitor that aspect of expenditure. The Committee spends time questioning civil servants and pressing for details on expenditure. It specialises in asking questions and in trying to bring forward reasons as to why money has been spent on certain things. When there has been a request for additional money the Committee makes extensive inquiries about it. Because of the experience of the officers and members of the Committee, it would be helpful to the nationalised industries and to the House if we were given the opportunity to ask questions and to comment, as has happened on defence and the National Health Service.
The reports that are before us are voluminous in number and in content and should be given all the consideration they merit by the House. I hope that there will not be a two-year time lag before future reports are debated.
§ Mr. Michael Morris (Northampton, South)
I should like to be associated with the remarks of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) and of my hon. Friend the Member for Scarborough (Sir M. Shaw) about our former chairman and colleagues who were previously on the Committee, particularly Sir Albert Costain. In addition, I should like to pay tribute to the right hon. Member for Ashton-under-Lyne. It is a pleasure to serve under his stewardship, not least because I am now getting coloured pieces of paper to differentiate one subject from another.
Before I go into the substance of some of the reports, I point out to my hon. Friend the Member for Bosworth (Mr. Butler) that although I shall not be commenting on Northern Ireland matters today, the De Lorean inquiry has opened a Pandora's box which leads me to believe that the Committee has been perhaps a little too sympathetic to Northern Ireland's financial problems. I suspect that when we next discuss public accounts, my hon. Friend, if he is still in his present position, will be fairly busy.
I contrast this debate, covering as it does 46 reports dealing with over 60 subjects, with what happened recently when we had one day's debate on Estimates covering just two subjects. I think that you will confirm, Mr. Deputy Speaker, since you were in the Chair, that each of those debates was substantially over-subscribed. Allied with the plethora of Fridays when we discuss private Members' motions, that suggests that something is wrong with the organisation of the parliamentary timetable. Although it is not the responsibility of my hon. Friend the Financial Secretary to the Treasury, I hope he will draw the attention of the Leader of the House to the fact that we cannot go on in this manner. We lose immediacy, as has already been said, but also—this is important—the opportunity for hon. Members who are not on the Public Accounts Committee to add to our deliberations by debating these matters so long after the event.
When I saw the large number of reports, I was tempted to comment upon many aspects, including the National Health Service, one of my first loves but one on which we had a good debate recently. I suspect that my hon. Friend the Member for Crawley (Mr. Soames), who may seek to catch your eye, Mr. Deputy Speaker, may have one or two additional points to make on that.
I was very tempted to go into the Ministry of Defence in some depth because it is a little time since we have considered the financial dimensions of that Ministry on the Floor of the House. In our Committee we used to be traditionally served up by the Ministry of Defence with the fact that it had overspent by between £250 million and £500 million. It became a regular tour de force with the then permanent secretary, now retired, as to what his latest assessment of overspending would be. Indeed, we have great problems. My hon. Friend the Member for Scarborough has referred to the Chevaline report, the ninth report of 1981–82, and the fact that Parliament did not know what was going on, despite it being a £1,000 million programme. My hon. Friend quoted paragraph 19. The concluding paragraph, paragraph 20, sums it up in the last sentence when it says:Full accountability to Parliament in future is imperative.If I put "Trident" in brackets after that, I hope the Ministry of Defence will recognise that the Public Accounts 931 Committee will expect and, if it does not get it, will seek full information on the financial implications of that programme.
If the rumours of an underspend this year of about £280 million on top of the £240 million cut that the Ministry of Defence took earlier in this financial year are correct, we have come from an overspending of £500 million to an underspending of £500 million. While I am sure that my hon. Friend the Financial Secretary and the Treasury will be delighted if they have that sort of money in hand, it is just as bad in financial planning to underspend as it is to overspend.
I want to deal in depth with just two issues, although they are covered in several reports; the first concerns staff and the second the nationalised industries. Starting with staff, the twenty-second report of 1981–82 was concerned with the Board of Inland Revenue, Customs and Excise and the Department of Health and Social Security. As my hon. Friend the Member for Scarborough has mentioned, the black economy was estimated by the Inland Revenue at about £4 billion. The Inland Revenue said in its evidence to us that it believed it could make some inroads into the problem by the recruitment of 400 extra staff, of whom 70 would be exploring experimental areas. The results that department has achieved are interesting. It gave us evidence that with 1,870 investigators it had raised £173 million, or £92,000 per member of staff. Customs and Excise give us evidence that with 4,000 extra investigators it had raised £150 million, or £37,500 per person. The Department of Health and Social Security, dealing with fraud, with 2,500 staff had raised £40 million, or £38,000 per person. In addition, through the fourth category of employers' contributions, where new selective techniques have been used in my constituency amongst others, it was reported that £25 million had been raised in 40 weeks—or £170,000 per person.
I support wholeheartedly the efforts of my right hon. Friend the Prime Minister to reduce the global number of civil servants. That overhead factor is far too high in relation to our GNP. I go all the way with the Prime Minister in her attempts to reach a target of 630,000. She has got very close to that in two Parliaments, with a reduction of 100,000 in overall numbers. My hon. Friend the Financial Secretary should note that there are Departments of State where people of calibre—I emphasise "calibre"—could usefully be redeployed.
I had a petition from my Inland Revenue staff in Northampton 1 and 2 districts, complaining about the closing of PAYE files. I had to tell them that I had little sympathy with their petition because most of the files were inactive or had tiny amounts. However, I was sympathetic to stiffening up the investigating element of senior tax officers and senior tax inspectors. In paragraph 11, the report refers to the need for special measures to secure and retain the required specialist staff. I hope very much that the Government will take on board that paragraph, because those senior officers are extremely valuable members of the public service, and we should support the work that they do.
That, in a sense, was the secondary issue that I wanted to raise. The primary issue that I want to raise this evening concerns the broad public sector and, in particular, I want to refer to the sale of public assets. The issue covers a great number of reports. When we look back on the period in office of my right hon. Friend the Prime Minister, I believe that one policy aspect of her Government and of my right 932 hon. Friend the Chancellor that will be remembered is the successful return to the private sector of the monoliths of many of our nationalised industries. I pay tribute to my hon. Friend the Member for Eastbourne (Mr. Gow), who was here a few moments ago, because between 1974 and 1979 he pricked the House with a continuous flow of ten-minute Bills to denationalise one public sector area after another. He provided the necessary stimulus to many of us to look at the area in great detail.
I want to consider three aspects of policy connected with the disposal of assets—the disposal of assets of a non-trading nature, the disposal of assets of a trading nature, and the flotation or privatisation of those assets. I shall take each separately, because there are different implications in each of them. I am sure that the hon. Member for Glasgow, Cathcart (Mr. Maxton) will enjoy the first one, which is the 1983–84 ninth report on Hamilton college.
§ Mr. Morris
The Chairman of the PAC has already referred to the details of that disposal, but I think that it is worth setting the scene. It was closed in 1980, sale agreed at £680,000, replacement value of £20 million, cost of £2 million, no public sector bodies interested in it, guidelines firmly laid down by the Halliday committee in 1980. The chief valuer was absolutely right when he made a clear recommendation and said that the value might be £6 million. The Scottish Education Department chose to ignore that, and went along with the board of governors' recommendations, and used a local solicitor. The key lesson for any Government, of whichever political party, is that where agreed procedures are laid down they must never be flouted unless a conscious decision is taken to do so. That is the implication of that exercise.
For another disposal of assets of a non-trading nature, I go back to the eighth report of 1982–83 on surplus NHS lands and buildings. I knew that I would not be able to resist the temptation to go hack to the Health Service. The procedure here is that health authorities seek the professional advice of the Inland Revenue 'valuation office. In that report we were told that, in 1981–82, 1,424 acres of surplus NHS land had been sold for £20 million. That was a valuable contribution to the Exchequer. However, it was interesting that, at 31 March 1982, a further 6,445 acres were awaiting disposal—nearly 10 per cent. of the whole NHS estate. I do not know what the figure is today, but I am willing to bet that it is still substantial. May I add, for the record, that for 10 years I have been trying to persuade the health authority to sell about 15 acres at Mansfield hospital, right in the middle of Northampton. The report gives examples of land that has been held for over 12 years, in the hope that the health authority would get a better price some time in the future.
That was the story in England. In Scotland, the situation is almost as dismal. In 1978–79 and since, according to the evidence there, there has been little effort at disposal, and the reason given for most of that is the fiasco of the Robroyston hospital.
Then we go to Wales. It is amazing how, whenever we go to Wales, we find something even more interesting. We were told in the inquiry that there was little information about how much land was surplus in Wales, apart from the fact that it was estimated, at March 1982, that 1,080 acres were surplus to requirements. That was 26 per cent. of the 933 land stock of the Health Service in Wales, yet no one had done a proper analysis of whether that was the absolute amount.
There are incentives to sell, but I suggest that they have not worked to date. Paragraph 30 of that report suggests that there should be a notional rent charge for under-used assets. However, the Treasury did not favour such an approach. I hope that my hon. Friend, when he winds up, will tell us that the Treasury has changed its mind or found an alternative stimulant to health authorities to sell. Indeed, the Treasury minute went on to say in paragraph 53 thatthe introduction of legislation to provide departments with the power to seek planning permissionwas being considered. That was to obtain any gain, rather than to sit on it for 12 years. Again, I am not aware of any progress on that front.
So much for the disposal of assets of a non-trading nature. I come to the disposal of assets of a trading nature. Here I refer to the twentieth report of 1980–81, which was picked up again in the third report of 1983–84, relating to the Department of Industry and British Leyland at Bathgate. That report suggested that performance indicators were needed in the accounts of a national industry such as British Leyland, and that it was necessary for all nationalised industries to consider having them. May I point out to my hon. Friend the Minister that it is not necessary—it should be mandatory for the annual accounts of any company operating under public ownership to contain performance indicators. Indeed, I go further. There should be a common accounting basis. It makes a mockery of a situation in which the underperforming nationalised industries always give their figures on a historic basis, and those that are doing well always do it on a current costing basis. Clearly, both hide the truth. I hope that before long the Treasury will say, "Enough is enough," and that we shall have a common basis.
That report went on to say, reassuring the Committee to a degree, that 75 per cent. of the asset sales that we considered then had been covered by the memorandum of agreement but—inevitably, there is the "but"—the evidence was that British Leyland had failed to consult the Department on a major and substantial transaction which had an element of tax avoidance. I say again to my hon. Friend the Minister that it ill becomes the public sector to be in the vanguard of tax avoidance schemes, because inevitably there are major dangers of charges of tax connivance. That is something that we as parliamentarians cannot accept.
Finally, the report has the salutary paragraph that refers to the definition of the value of disposals. We talked about a "probable cash value" realisation whichwas substantially less than the book value of the assetswhich was substantially less than the actual cash value that we got. These were semantic discussions, but they serve to show that, when we are dealing with the valuation of assets in the public sector, the one thing we want is a realistic valuation and not one that looks good on paper but bears no relation to real life.
On the third aspect, which has come to be known as privatisation, I refer to the tenth report, dealing with the Department of Industry and the sale of assets. In paragraph 24 the report quite rightly says that the maximum return 934 to the Exchequer is not the only criterion to be used when it comes to floating off a public sector company, but that there are other policies which it may well be necessary to take on board. We say in the report that Parliament has the right to expect the maximum return "consistent with the policies" of the Government of the day. In that report we looked at British Aerospace, Cable and Wireless and Amersham International, and the sale of British Petroleum shares on two different occasions.
The report took the view that it was fair to suggest that in the British Aerospace sale the Department of Industry had followed a learning curve: errors were made but, in a sense, they were understandable errors. Then we had the launch of Britoil, when a substantial amount of the stock was left with the underwriters. As we say in our report, it is easy to look back with hindsight. Nevertheless we drew certain conclusions, one of which is that we have an obligation as a Parliament and as a Committee of Public Accounts, no matter how enthusiastic we may be as individual Members to liquidate the vast majority of the public sector—I will nail my colours to the mast because I believe that that is the right policy—to tackle this vexed question of the value of assets prior to sale. A recent, very interesting report analysed oil companies and showed that Britoil was the only one whose share price reflected only 50 per cent. of the asset valuation, when all the others were very much in line.
I point out to my hon. Friend the Financial Secretary that this question will not go away. As we go into the very large-scale privatisation of British Telecom and British Airways, to name just two—and we have a programme in the public expenditure White Paper of at least £2 billion a year for the foreseeable future; I hope, for all our sakes, that that is an underestimate and I shall encourage my hon. Friend to take it further—there must be as professional a valuation of the assets as we can obtain before the launch. In that way, we will, consistent with whatever the policy of the Government may be, contrive a fair deal for the taxpayer.
Across these three categories of disposal of public sector assets—trading, non-trading and ownership—the Treasury must urgently review the guidelines on the sale of land and building assets by all Departments of State. We need to ensure once and for all that in England, Wales, Scotland and Northern Ireland each Department of State is fully aware of the guidelines, so that in 12 months' time we do not find thrown up in the PAC some other Department of State that has forgotten to use them.
Secondly, I re-emphasise my earlier point about ensuring that all public sector accounting is done on a common basis. Whilst it cannot be done overnight, we should have a target date for a clear-cut analysis of historic cost accounting or current cost accounting. Thirdly, we need consensus on the valuation of assets prior to sale.
Turning to the seventh report of 1983–84 on the nationalised industries, the House will recall that the Government in their wisdom rejected the Bill presented last summer by my right hon. Friend the Member for Chelmsford (Mr. St. John-Stevas), for which I was the unofficial whip, and thereby the opportunity for Parliament and the PAC to monitor the performance of nationalised industries. It was claimed at the time that the combination of financial targets and the reports of the Monopolies and Merger Commission would be more than adequate to keep a steady hand on the tiller of the nationalised industries.
935 Without wishing to be harsh, I submit to my hon. Friend that the submission now looks pretty weak. It has not worked for the National Coal Board, as we found in the recent debate on a Supplementary Estimate of £290 million, when we were also told that there would be another £200 million in the wings and, in addition to that—sotto voce—would be whatever was decided as a wage settlement. It has not worked for the Electricity Council, which suddenly discovered that it needed an extra £300 million out of the back pocket.
I will not detail the conclusions of the seventh report—they are there to be read—but they clearly show that in the case of British Telecom, the British Railways Board and the National Coal Board the Departments' controls were not working, that the financial planning did not exist and that there was no reporting. In almost every aspect that we examined, the Departments of State were failing systematically to monitor those nationalised industries. We looked at only three. I assume, being slightly mischievous, that they were probably the best three. We were not allowed to look at the others. They were probably a great deal worse—but I may be unfair to my hon. Friend.
We have to find a way—I hope that it will be whilst I am in the House, and I have every intention of remaining here for a good many years—for Government and Parliament to monitor what happens to public sector money, particularly in the nationalised industries.
§ Mr. John Maxton (Glasgow, Cathcart)
I agree with the hon. Member for Northampton, South, (Mr. Morris) that we must always keep very careful control of the spending of public money. We have to make sure that the money is spent on providing the services that it is supposed to be spent on. It is not the job of the Committee of Public Accounts to try to save money at the expense of the services that are being provided by the Department that it is considering. There is sometimes a danger of hon. Members on the Government Benches falling into that trap—not those who are members of the Committee but some of their hon. Friends.
I should like to echo what has been said by those hon. Members who have referred to our Chairman and past Chairman and the way in which they have guided the Committee. Both have done a tremendous job. My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), the present Chairman, has undertaken a difficult task in following Lord Barnett. Nevertheless, he is fulfilling it with a quiet confidence and skill which most of us on the Committee much appreciate.
I pay tribute to a member of the Committee who served on it for a long time but who has now left, although he is still an hon Member. I refer to my hon. Friend the Member for Fife, Central (Mr. Hamilton). When I first went on the Committee, I remember the advice he gave me and the honourable and worthwhile part he played in our discussions.
The PAC is a unique Committee in many ways, and I consider it a privilege to be on it. It is unique in terms of its age, because it is the oldest. It is unique because it does not consider things in the same political way as the other Committees. It looks at spending and does not question Ministers. It is unique in one other way, in that it is the one Select Committee with a member of the SDP on it, although when the alliance parties were fighting over the 936 places on the Select Committees recently they conveniently forgot that fact. The Committee has that privilege, and I am glad to see that the hon. Member for Caithness and Sutherland (Mr. Maclennan) has now joined us. I hope that he will speak later.
The PAC has its failing. We have a separate accounts department supporting the Northern Ireland Office and giving us evidence purely on Northern Ireland. There is a separate Scottish Office, which has as much power in Scotland as the Northern Ireland Office has in Northern Ireland, and, as a Scottish Member, I find it strange that we do not have a separate Scottish accounting office. After all, we have separate Scottish law, and that law is sometimes different in terms of accountancy. We have specially trained accountants. Someone who wants to be an accountant in Scotland will find it difficult to get a job elsewhere, just as someone who has trained in accountancy elsewhere will find it difficult to get a job in Scotland. In view of the uniqueness of the Scottish Office, there may well be reason for having a separate Scottish accounting office.
I do not see the two Ministers from the Scottish Office who are present nodding in agreement with me. They may feel that their affairs and how they spend money would be more carefully looked at if there were such an office considering purely Scottish matters. Some hon. Members may suggest that I am perhaps getting rather political in what I am saying. However, the PAC, in carrying out its job, tries to act in a non-political way. It is right that when the members of the Committee are working together in the Committee, questioning and drawing up and finalising reports, they must try to get a consensus and to cross political barriers.
Once those reports are produced and we have debates such as this, that political consensus should not continue. I am sure that Conservative Members do not expect me to be non-political—and the Committee and the 46 reports provide an enormous amount of political ammunition for both sides of the House, although that may be less true of the minority parties. There are many things in the reports that attack the philosophy that I stand for, and there are many things that give me ammunition for my political philosophy.
We should not follow the line that these debates are academic. I find it disappointing that almost the only hon. Members wishing to contribute to the debate are members of the PAC. That is wrong. These reports are full of political ammunition for other hon. Members to use. I have spent some time this afternoon trying to persuade some of my hon. Friends who have special interests in, for example, the Health Service, the Scottish Development Agency, hospitals, drugs, and so on, to make a speech in this debate. Now is the time for them to do so.
§ Mr. Robert Maclennan (Caithness and Sutherland)
I follow and agree with the hon. Gentleman's argument about the non-partisan nature of the Committee and feel that it supports the position of the alliance parties. Nonpartisan probing of the Government can be as effective as the brickbats that the hon. Gentleman is more accustomed to throwing across the Chamber. He should not judge the effectiveness of the PAC by the attendance in the Chamber. Its effectiveness is almost the reason why the Chamber is empty. We have done our work well.
§ Mr. Maxton
I shall return to the hon. Member's point about effectiveness. As a member of the SDP, he should 937 know that it claims that it is not involved in the dirty party politics in which the rest of us get involved. The personal sniping in which his party indulges at elections and in the House makes nonsense of that claim. The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) is looking at me aghast, and I agree that the Liberal party indulges in it slightly less than the SDP in Scotland. I cannot be too rude to the hon. Member for Caithness and Sutherland, who was best man for a friend of mine, and I have to be careful what I say about him. However, the SDP indulges just as much in party politics as the other political parties, and its only problem is that it is a minority party and therefore cannot take part in the discussions between the two major parties about political philosophy.
Let me deal briefly with the effectiveness of the Committee. It is worrying that some of the recommendations, even relatively minor ones, of the Public Accounts Committee are not taken up by the Treasury. For example, we produced a report on dog licences in the 1982–83 Session. It was a minor report and not of any great importance, but it makes it clear that we are spending considerable sums of money to collect small sums of money from 50 per cent. of dog owners. We are spending roughly £4 million to collect less than £1 million. That is not an effective use of money and it is not an effective way to control the nuisance of dogs—and I have to say that for my wife's benefit because she does not like dogs. Here, surely, is a small matter that could have been dealt with in either of the last two Budgets, but it has not been. The licence could either have been abolished, or its cost could have been increased, and local authorities could have been given the revenue from the new, increased expenditure. I should like to see introduced a one-off dog licence of £ 100, which would make sense. The money would be paid to the local authority to ensure that there were proper dog control powers and organisations to make owners look after their dogs. Why has the Chancellor not taken up this matter and dealt with it?
We shall be reporting later on vehicle excise duty, which again the Chancellor has increased. The Public Accounts Committee has taken evidence showing that large numbers of people evade the duty. So we must find other ways of dealing with it.
Those are examples of the ways in which, I believe, the Public Accounts Committee is sometimes not effective in getting across the message that it ought to get across to the House and to Ministers. I do not think that Ministers pay sufficient attention to the Committee.
I come to the report which most Members are probably expecting me to deal with. I am grateful to my right hon. Friend the Member for Ashton-under-Lyne for concentrating his speech on what, in terms of the money which we on the Public Accounts Committee deal with, is a relatively unimportant matter. Quite rightly, because of the seriousness of what the report says and of the underlying principles involved, he made considerable play with it. I refer to the ninth report, the one on the sale of Hamilton college of education.
It is a damaging report. It is, as my right hon. Friend said, worded in the understated way in which the Public Accounts Committee usually drafts its reports. Unfortunately, the Government and, in particular, the Under-Secretary of State for Trade and Industry, the hon. Member for Edinburgh, Central (Mr. Fletcher), who was 938 the responsible Minister at the Scottish Office at that time, have used and, I think, deliberately misunderstood the way in which the Public Accounts Committee operates in order to evade their responsibility.
As I have done before on this matter, I declare something of an interest. Prior to coming to the House, I was employed in the college when it was a college of education. The hon. Member for Eastwood (Mr. Stewart) was on my side in the campaign which we fought for some time to keep the college open when the hon. Member for Edinburgh, Central was attempting to close it. I therefore admit that when looking at the report I had a certain bias, because I was concerned, not just about the cost and the cash lost but because I had a personal involvement in it. That personal involvement also meant that I knew what was involved in the assets of the college, which no other Member of the House knew. I include even my hon. Friend the Member for Hamilton (Mr. Robertson), whose campaign against the sale was totally justified by the Public Accounts Committee's report.
It was a disgrace to sell those assets. The main building contained more than 30 teaching rooms, a major hall with almost full theatre capacity, a 25m indoor heated swimming pool—which, by the way, had been completely renovated in the two years prior to my leaving the college—a games barn, two gymnasiums, art rooms and television studio facilities, as well as halls of residence for 650 students.
To sell those assets for £680,000 was a disgrace. In Northern Ireland—and I am glad to see that one Northern Ireland Member, the hon. Member for East Antrim (Mr. Beggs) is present—the estimate for building a nine-classroom primary school was £450,000. Yet a man is able to buy that building in Hamilton as a private school, with all the facilities that I have described, including playing fields, for £680,000.
It is quite clear from the report that this sale was bungled. Nobody has claimed, despite what hon. Members on the Government Benches said during a recent debate in the House, that we could have got £6 million for it. It must be pointed out, however, that the chief valuer said not that that was an ideal price or that it was the price that could be obtained in the most favourable circumstances but that that was the price that it ought to be possible to get in favourable circumstances. I admit that at present, under the economic regime of this Government, circumstances are not favourable for those who are attempting to buy that sort of property. Even so, if we look at the chapter of accidents—to which I will return later—that led to the sale, we see that the sale price ought to have been much better.
There was a failure to advertise properly. The report deals with that quite clearly. There was a failure to advertise in the proper papers. There was no attempt, as my right hon. Friend the Member for Ashton-under-Lyne said, to advertise in commercial estates papers, the Estates Times in particular. The property was advertised at the wrong time of the year—just before Christmas and just after the new year—and, as far as The Times is concerned, it was not even advertised on the day on which commercial property is usually advertised. It was tucked away among other advertisements, and anybody who wanted to buy commercial property would certainly not be looking for such advertisements on that day.
The Government failed to take the advice of the chief valuer. They failed to employ an estate agent. Also, they 939 employed the college solicitors, one of whose partners was a member of the board of governors. It should have been seen that there was a danger of a conflict of interest and those responsible should have steered well clear of employing that firm. There is no imputation that anything wrong took place, but it should not have been done like that. Public bodies have to make quite sure that there is no chance of that sort of thing hanging over them. The right people to sell the property were not employed.
Having got offers, having taken advice again from the chief valuer, after having ignored his advice in the first place, the Government again ignored it on the basis that it would cost money to readvertise the property. I cannot imagine any Member of the House who owns his own house and has to move out of it because he is changing his job who would advertise it for, say, £40,000 on this side and £150,000 or £200,000 on that side, not expecting to get that price.
In Scotland, of course, we often do not put in the advertisement what the price will be, as was done with the Hamilton college case. But if a property is advertised at £40,000 and somebody offers £4,000 for it, I cannot seriously believe that any hon. Member would accept that offer and not bother to put more advertisements in the papers, even though it was costing him money to maintain the property. Of course he would readvertise the property and, if necessary, go on readvertising it until he got an offer near to his price, even though it would mean losing money on maintenance of the property.
Knowing the Scottish college of education system very well, I do not put any of the blame for this sale on the Jordanhill board of governors. The blame rests entirely on the Scottish Education Department, because it controls the purse strings of the colleges of education in Scotland. Having seen them operating, I know that boards of governors in Scotland do very little without the agreement of the Scottish Education Department. They certainly did not sell the Hamilton college at that price, or even give advice to sell the college at that price, without the fullest consultation with the Scottish Education Department and without its consent.
One of the problems is that the PAC does not call Ministers before it. My right hon. Friend the Member for Ashton-under-Lyne stated that it is not the responsibility of the Committee to call Ministers before it. Therefore, it makes no attempt within its report to blame Ministers for any shortcomings. However, Hamilton college was not a small piece of property on the fringes of the Scottish Education Department's concern. It was not something about which there had been no debate. It was not a school which had been standing empty for two or three years and in which no one was very interested. It was not as though there had been no fight over its closure.
There had been a massive public campaign over two years to keep the college open. Very few Scottish Labour Members had not taken some part in the campaign and some of us had taken an extremely active part. The college fought against closure and so did the Church of Scotland and the Roman Catholic hierarchy in Scotland. It is almost impossible to find an organisation in Scotland that did not try to keep it open. Even some Conservative Members were not prepared to back the Minister during the campaign to keep the college open. The Minister who is now responsible for education in Scotland, the hon. Member for Eastwood, who replaced the then Minister with responsibility for education, the hon. Member for 940 Edinburgh, Central, campaigned to keep the college open because many of his constituents attended it and trained as teachers within it. I pay tribute to him for the part which he played in the campaign. It was a high-profile campaign and a great deal of publicity attached to it. I refuse to believe that in those circumstances the then Minister played no part when the college was closed and transferred to Jordanhill.
§ Mr. Maclennan
The hon. Gentleman is making a powerful argument in support of the thesis that ministerial involvement contributed to the appalling mess surrounding Hamilton college. The officials who sought to defend what had been done before the Committee indulged in arguments that were pure casuistry in seeking to distinguish between Hamilton college and the case already covered by the rules set out in the Halliday report. They argued that the Hamilton college case was not covered because the college was, for certain reasons, a peculiar property and, although publicly owned, was administered by the college. Is that weakness of argument by the officials not indicative that there was something more to the Hamilton college issue than that which met the eye?
§ Mr. Maxton
I entirely agree with the hon. Gentleman. I think that there was an attempt to advance that argument, which was entirely unreal. The Treasury response to the PAC's report, which is the response of the Scottish Office, has destroyed that argument. That response is to accept the Halliday report on the sale of all public property and not only that which is deemed to be Crown property. Although I was one of those who questioned the officials as hard as I could—the civil servants who appeared before us and represented the Scottish Education Department—I felt rather sorry for them. They were trying to defend the indefensible. They were having to try to defend decisions which I do not think were theirs. I do not think that they would have recommended them to the Minister in the first place. They were having to defend the Minister without naming him and without his being made accountable.
The Minister was responsible for reasons beyond the strict legal approach, although even that responsibility appears to be denied by the Government. I am certain that it was the Minister who said, "Sell. Get rid of the college as quickly as possible as it is nothing more than an embarrassment to me. For as long as the building stands empty in the middle of Hamilton, the people of Lanarkshire will be aware that their college of education has been destroyed. For as long as it remains, it will be a monument to the campaign that they fought. Get rid of it as quickly as possible."
When the offer came from Christian schools, a private school, I believe that the Minister said, "That is marvellous. That is agreed. We can keep the college in the hands of the education sector. How embarrassing it will be for Labour Members who are fighting the closure to find that the college will be turned into a private school." I think that the Minister said, "Get rid of it. We can and out what we can get for the residencies in addition to the college itself."
Miller Homes Northern Limited put in an offer for the residencies, which it is to convert into flats. I am no builder, but the hon. Member for Banff and Buchan (Mr. McQuarrie) suggested that kitchens and bathroom suites worth about £15,000 and £ 10,000 respectively would be 941 put into the luxury flat conversions. I do not believe that. Each unit will cost Miller Homes about £4,000. That will be the cost of purchasing the original building. The renovation may cost £4,000, £5,000 or even £10,000, but the profit that Miller Homes will make as a return on its capital will be outrageous. It is disgraceful that the taxpayers' money should be used to allow a private company such as Miller Homes to make that sort of profit.
I am not opposed to private companies building houses and I am not opposed to them making a profit on those houses. However, when that profit is made at the taxpayers' expense, I do not think that it should be tolerated.
It is my view that the Minister, the hon. Member for Edinburgh, Central, was closely involved, and that involvement raises a major constitutional issue. A week ago today I asked the Prime Minister how it was that the then Minister, the Minister in charge of the sale and who carried out the sale for a price that was 10 per cent. of the valuation, could remain a member of the Government. The Prime Minister replied to the effect that she had read the PAC report and could find no personal condemnation of the Under-Secretary of State. She added that she deeply resented what I had said and that she saw no reason to condemn the hon. Gentleman.
My right hon. Friend the Member for Ashton-under-Lyne has made it clear that in PAC reports we do not condemn Ministers. He will appreciate that I asked him to clarify that issue. In trying to evade her responsibilities on behalf of the Minister by saying that no personal condemnation appeared in the report, the Prime Minister was either deliberately evading the issue or trying deliberately to cover up for a Minister who, at best, has been incompetent and, at worst, was deliberately acting against the public interest. Alternatively, the Prime Minister is so ignorant of the way in which the PAC and the House operate that she is not worthy to be a Member of this place or to lead the Government.
The then Under-Secretary of State for Scotland, the hon. Member for Edinburgh, Central, presided over the sale. Even if I were prepared to say that he had no personal involvement, that it was a Civil Service decision and that civil servants made the mistake, have we now reached the stage when there is no ministerial reponsibility for the actions of the Civil Service? Can there be such blunderings and mistakes without their leading to the resignation of a Minister? It is incredible that we have reached that point. Even now, it is not too late for the Prime Minister to take the opportunity to get rid of the Minister who bungled the matter and who, in my view, has been deliberately involved in the whole episode.
This is not the first time that the Minister has been involved in the closure and sale of public assets. My hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes), in a recent Adjournment debate, pointed out the Minister's involvement in Stonefield Trucks, which is mentioned in one of the PAC reports. The report makes it clear that Stonefield Trucks was sold at an under-valuation to Gomba Trucks, as it became known. The hon. Member for Eastwood is puckering his eyebrows, but he replied to the debate in which he was asked a number of questions which he has not yet answered. I hope that he will be able to give the Minister something with which to reply later.
942 I raise the issue of Stonefield Trucks briefly to make a comparison in two ways. First, the same Minister is involved in a bungling mistake. Secondly, there is a comparison to be made, such as the Scots make, concerning the sums of money involved in keeping employment in Ayrshire and keeping what was an interesting vehicle development alive and thriving, which could have resulted in orders, because orders were in the pipeline when the company was eventually closed. The comparison is between those sums of money and the sums of money that were poured into De Lorean Cars which the PAC has recently examined.
One has to ask why Northern Ireland seemed able to get money to keep De Lorean alive when, in Scotland, Stonefield Trucks was not able to get a similar sum of money. The answer to the question is very worrying, because it appears to be that violence succeeds and that, if there were no violence in Northern Ireland, the country would not receive the sums of money that it does in the way that it does. I hope that that is not the answer we will be given by the Government, on the principle that, if one makes enough noise and creates violence, one is offered more money than one would otherwise get.
There are many other points in the reports on which I should like to comment. There is a report on the cost of prescribing drugs in the National Health Service. When I compare the profitability of the drug companies, as set out in the report, with the sums of money poured into other parts of the National Health Service, it makes me sad that the pockets of the drug companies should be so lined by the exploitation of people's illnesses. The profit margin is 25 per cent.——
§ Mr. Maxton
My hon. Friend says that it is much more than that. In the Health Service, 25 per cent. profit is allowed, but, as he knows, because he was a member of the Committee at the time of this inquiry, when the accounting officer at the DHSS was asked what happened if the companies went over the 25 per cent. allowable margin for profitability, he replied that there was a grey area. When asked what grey area was allowed before clawback was considered, he replied that it was 10 per cent. Ten per cent., therefore, is the grey area. In other words, one is really talking about profit margins of 35 per cent. I then asked about advertising and backing—because we all know that drug companies do a great deal of that—and the reply was, "In the cost of production, we allow for 10 per cent. to cover packaging and advertising." In other words, in the production of drugs that are prescribed to people, one is talking about costs of approximately 55 per cent. It is astonishing that such money is being spent on the production of drugs when the Government are trying to cut down on every other area of National Health Service expenditure and are refusing to consider the generic prescribing of drugs which could save so much money.
Many other reports could be mentioned, but the report on drugs companies illustrates the role of the Public Accounts Committee. It illustrates that this Committee, comprised of members of the whole House, is not afraid to make reports that criticise Governments, of whichever party they may be formed, and is prepared to say things which would not necessarily reflect the political philosophy of individual members of the Committee.
943 I wish that more hon. Members who are not members of the Committee would contribute to the debate. The number of hon. Members present in the Chamber has slowly increased since I began to speak, which I am sure has nothing to do with the fact that I am speaking but is due to the interest of hon. Members who are ready to address the House.
§ Mr. Peter Hordern (Horsham)
I agree with the hon. Member for Glasgow, Cathcart (Mr. Maxton) that it is a great pity that more hon. Members are not taking part in the debate. As the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) said correctly when opening the debate, the House is discussing 46 reports of the Public Accounts Committee, and there is ample scope for any hon. Member to find a rich field in which to concentrate his remarks.
I join other hon. Members in congratulating the right hon. Member for Ashton-under-Lyne on the way in which he chairs the Committee. I have been fortunate to serve under a number of Chairmen over the years, and he is one of the better Chairmen, as was his predecessor Lord Barnett, of whom he spoke so warmly. I regret that Lord Barnett is no longer in the House, although not because I think he was a better Chairman than the right hon. Member for Ashton-under-Lyne. I regret that it was not my right hon. and hon. Friends who defeated Lord Barnett in the last election. His defeat arose because he was so candid in his opinions about his own Government that his own party would not reselect him in his constituency.
§ Mr. Sheldon
Lord Barnett is a dear friend of both of us, I know. His constituency was fragmented into dozens of small pieces and formed no basis for a new constituency.
§ Mr. Hordern
It might be said in that case that there were three or four constituencies which took the opportunity not to re-select Lord Barnett—but of course I accept the right hon. Gentleman's explanation.
This debate concerns a new organisation, the National Audit Office, which takes the place of the old Exchequer and Audit Department. The nature of the work of that Department has changed over the years. The Comptroller and Auditor General, when he gave evidence to the Committee about the work of his Department, reminded us that there was a time when two thirds of the work was concentrated on value-for-money exercises. Now, he said, he spends three quarters of his time on certification—certifying that money has been properly spent. That is a great pity. The proportions should be reversed, and more time and attention should be paid by the Comptroller and Auditor General and his Department to value-for-money exercises. There is certainly scope for them.
When he gave evidence, the Comptroller and Auditor General said that he hoped to be able to spend half his time on value-for-money and half on certification by 1987. I consider that that rate of progress is a little slow. I hope that he will think again, and that the House will think it proper to allow him to take on extra support if he needs it to carry out the value-for-money exercises that members of the Committee have found useful and will find increasingly useful in the future.
944 Some hon. Members will recall that members of the Committee were fortunate enough to visit the United States. So far as I can recall, that was the only expedition abroad that the Public Accounts Committee has ever made. It is not, alas, like some Select Committees, which seem to go abroad at the drop of a hat. In the United States, we investigated the work of the General Accounting office. We found that it had some 6,000 members of staff, of whom half were accountants, and that it concerned itself with value for money in all the departments of the federal Government and, indeed, wherever public money went. I am sure that that was the origin of the Bill brought in by my right hon. Friend the Member for Chelmsford (M r. St. John-Stevas) which brought the National Audit Office into the world. It is important that the National Audit Office should be more concerned with value-for-money exercises, if only because of the scope and the growth of public expenditure. When the right hon. Member for Ashton-under-Lyne and I came to the House in 1964, public expenditure was some 36 per cent. of gross domestic product. It is now 46 per cent., having reached 48 per cent. in 1976. We should not be satisfied that public expenditure should rise in that way unless we are sure not just that that money is being properly spent but that we are getting value for money. We have to judge the adequacy of existing mechanisms for ascertaining whether there is value for money.
When my right hon. Friend introduced his original Bills it was intended that the National Audit Office should be able to investigate the nationalised industries. There was a great deal of opposition to that from those industries. They felt that they already had the Departments crawling all over them, and, from time to time, the Monopolies and Mergers Commission. Now there was to be the National Audit Office as well. They refused, and because of shortage of time the House did not insist. Had we insisted, we might have lost the Bill.
We have to accept the consequences of that decision. The truth of the matter is that the nationalised industries have not been under proper surveillance 5y the Departments, and the Monopolies and Mergers Commission does not adequately fulfil the task that the Government have set for it. From time to time it presents admirable reports, but it is only at the invitation of the Government that it can examine a Department or a nationalised industry and issue a report. It cannot go in at any time and investigate what is going on, as the National Audit Office can.
Six or seven years ago, the Monopolies and Mergers Commission reported on the activities of the southern region of British Rail. It found that there was no point in having guards travelling on goods trains. There was nothing for them to do. I checked up recently and found that guards are still travelling on those goods trains. The commission also reported that only half of the working time of drivers was actually spent driving trains. Nothing has been done to put that right, either. If the National Audit Office was concerned with looking into the nationalised industries, as it should be, the Committee would receive regular reports about such matters and would be able to ask the Departments why they were not putting into effect the recommendations that had been made. At present, we cannot do so.
I take an example from the seventh report of 1983–84. When the Comptroller and Auditor General reported on the monitoring by the Departments sponsoring the British 945 Railways Board and the National Coal Board, he reported that all the Departments agreed that there should be corporate plans but that neither the British Rail Board nor the NCB had been ableto submit formal and fully worked up plans after November 1980 and January 1981 respectively.They simply had not bothered to introduce corporate plans. I quote from paragraph 12 of our report:The Department of Industry stated that they accepted that there had been deficiencies in the corporate plans produced by British Telecommunications (BT), and in its whole system of financial control … Notwithstanding the deficiencies, the Department confirmed that they regarded corporate planning as the central feature of their monitoring process.It appears that although the Department said that BT had produced no corporate plan, it felt that it was important that a corporate plan should be produced. Paragraph 14 states:In one specific instance the Department of Industry's monitoring arrangements had been unable to detect during 1981–82 that BT had failed to keep within conditions attaching to an increase in its EFL for that year. The Department explained that £33 million had been used by BT other than on capital expenditure for which an increase of £200 million in the EFL had been intended: they had taken this matter up with BT.There was a lack of the tight control that we should be able to expect. Consequently, paragraph 19 states thatthe Department of Industry did not consider it appropriate to seek information on individual projects in BT's planned capital expenditure of over £10 billion.Ten billion pounds is an awful lot of money.
Finally, in paragraph 25, the Committee stated:We observe that in 1981–82 there appears to have been considerable flexibility in the way the EFL system operated over all the nationalised industries. For that year the EFLs originally set totalled £2,390 million. Subsequently the limits for six of the industries (NCB, BNOC, British Gas, BT, Post Office and BRB) were increased by almost £1,000 million and the final external finance requirement totalled £3,254 million, an increase of 36 per cent.That report was rather damning, and I awaited with some interest the Treasury's reply. In course of time, just this month, it appeared. I quote from paragraph 82:The Treasury and departments do not agree with the Committee's conclusion that sponsor departments may have been unable to ensure that EFLs operate effectively to provide a firm discipline on management of the industries on an annual basis … EFLs have been and continue to be a salutory financial discipline, and an effective short term control".Therefore, the Treasury did not think that there was anything wrong in not meeting EFLs, but £1 billion is not an inconsequential amount and to go so far wrong in a total of about £3 billion is quite a large mistake. If the Treasury—and, thereby, the Government—says in its reply that it does not think it worthwhile doing anything about it, who will? That draws me to the belief that a great deal more importance and responsibility now attaches to the National Audit Office.
Our fourth report of 1982–83 concerned special employment measures. Apparently they are to cost £2 billion in 1984–85. We reported that no proper comparisons were being made on alternative methods of providing employment. For example, nothing was being done to compare whether a reduction in the burden of taxation might have achieved better results. It has all been done by extremely subjective judgments. The net cost of the young workers scheme was £5,355 per person. By any standards, that is a great deal of money. It is certainly a 946 great deal of money when one considers that no proper assessment was made before the money was spent. The Treasury report refers to that as well. It says:The Treasury and the Department of Employment accept the need to compare the cost effectiveness of SEMs with one another … However, as the report has noted, valid comparisons are difficult where specific objectives differ".I believe that the truth is that the scheme was the brainchild of my right hon. Friend the Prime Minister's personal economic adviser, Mr. Alan Walters, who felt that it was a good plan to get young people back into employment. That was a worthy enough objective. However, I do not believe that it matters how dignified such a source might be; it is still important that such methods be tried and tested before being put into practice at such enormous expense. We should remember that £2 billion is spent on such special schemes each year. I accept the youth training scheme, which costs £1 billion a year and serves a different purpose and, if I may say so, a very good one. However, this is another example of the lack of professionalism to be found throughout the Departments in these important matters. They just adopt a scheme and carry on with it, no matter what the criticism, and when they are criticised they try to find some half-baked reason to justify their action.
In our ninth report of 1981–82 we discovered the Chevaline project. Although the project had been going for many years it was first reported to the House in January 1980, when we were told that it had already cost £1 billion. In July 1981, Sir John Non, as he now is, said that the cost of Chevaline had gone bananas. In retrospect that was a happier expression to use in those days than it is today. Even so, how can we be confident that others of these great defence expenditures are not going exactly the same way? There are now 20 projects that cost more than £500 million and another 20 are costing more than £200 million. When they come before us they are not exactly flush with detail. We get merely a two-word description of the object—it might be radios—and some millions of pounds are attached to the figure. There is no way in which to decide on the practical effects of the weapons. I hope that they frighten the Russians as much as they frighten me. We remain to be satisfied that these great weapons of destruction have been properly evaluated with each other and with our NATO allies to ensure that our defence expenditure is as good and effective as it can be. I am not criticising the amount of money that we spend on defence. Like all of my right hon. and hon. Friends I favour it, but I question whether the money is being spent to the best purpose in conjunction with our allies. We should examine that matter further.
In our sixth report of 1981–82 we have a review by the Civil Service Department. It was a further analysis of the 1977 and 1978 staff returns. There used then to be a three-year inspection cycle of all of the departments in the Civil Service to see what they were doing. It was discovered that when the Civil Service's inspectors had taken part in the departmental inspections they found that they were able to recommend savings more than double those recommended by the inspectors in the department. I recollect a little gem in our original report, to the effect that, at the current rate of progress with staff inspection in the DHSS, it would take between seven and 28 years to get round once. That statistic stuck in my mind. I was therefore interested to see what had happened since. There are now many fewer staff inspectors. The technique has changed, as it is no longer thought necessary to look at all of the departments' 947 operations. I entirely understand that it will do to take samples but it is interesting that, when there is criticism that it is hard for departments to meet, they merely change their method of operation to avoid the criticism being made in the future. I regard that as a rather peculiar form of progress.
I should like to deal briefly with the sale of assets, which is touched on in one of our reports. I know that my hon. Friend the Financial Secretary is interested in this matter. The price obtained does not concern me and I think that the House well understands that these matters are by no means easy to judge. My point is that when the assets of nationalised industries are sold, a pension fund is always attached to that nationalised industry and the pension fund is always index-linked and funded. When the National Freight Corporation was denationalised recently, we were told that the receipts from the sale amounted to some £50 million. I understand that the net receipts were not £50 million but £4 million because £46 million had been taken up in paying off the deficit of the pension fund. That is only the beginning of the problem. I have often said that the commitment to a funded index-linked scheme will cost an unconscionable amount of money. I envisage the problem cropping up again with British Airways and any other nationalised industry that is sold. My solution is that the people who are in receipt of an index-linked pension that is guaranteed should be paid, as is the case in the Civil Service, on a pay-as-you-go basis. That would be much cheaper for the Government and it would save a great deal of money. I see the hon. Member for Stoke-on-Trent, Central (Mr. Fisher) shaking his head and I should like to know why.
§ Mr. Mark Fisher (Stoke-on-Trent, Central)
If I catch your eye, Mr. Deputy Speaker, I should like to elaborate at some length on some of what the hon. Gentleman has said.
§ Mr. Hordern
I may not be in the Chamber when the hon. Gentleman makes his speech. That is why I wanted him to reply now. I have made my point and I hope that my hon. Friend will mark it.
In defence, industry or employment, the evidence is that existing methods of control are, alas, insufficient. If cuts are demanded, they are found first, all too often, in research and capital investment. There is little appraisal of existing expenditure within individual Departments and still less between one Department and another. No weight is attached to one form of expenditure compared with another within a Department or between Departments. When it comes to the crunch of the public expenditure round, which happens every year, all those forms of expenditure are doggedly defended by their Ministers as though each one were sacrosanct, although some were dreamt up many years ago and have long since ceased to fulfil the purposes for which they were founded.
My hon. Friend and his colleagues at the Treasury do not have the resources to deal with the matter. It needs a much longer-term survey than they can apply, because they are so overworked in dealing with the whole of public expenditure. I wish that I could see the solution. I do not like to think of recommending that the Treasury should expand, but, failing that, a heavy responsibility falls upon the National Audit Office to carry out those types of surveys and value-for-money exercises. Ultimately those reports will be made available to the House. Although we 948 may apply pressure and ask questions of the Executive about how it is proceeding with value-for-money exercises, ultimately it must be the Executive's role to ensure that the country and the House receive value for money.
§ Mr. George Park (Coventry, North-East)
I have had the privilege of serving under both Lord Barnett and the present Chairman of the Committee, my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), who have different styles. They are both effective in asking the searching questions that are essential at hearings of the Public Accounts Committee. Under both Chairmen, as has been said, the Committee has had the benefit of the excellent reports from the Comptroller and Auditor General and his staff. The thread running through those reports is that we still have a long way to go before we can be satisfied that taxpayers' money is used to the best effect.
Hon. Members stressed the politeness of the Committee. Sometimes, when I hear long and opaque replies to questions put by the Committee, I get a Little impatient. I do not suggest that witnesses are trying to evade the questions, but sometimes I feel that in those instances it is possible that a more abrasive approach might achieve more positive responses.
The reports, which hon. Members have highlighted, show that the Committee must repeatedly return to major areas, such as size and the money involved in projects. In his excellent speech, my right hon. Friend the Member for Ashton-under-Lyne instanced from the Committee's twenty-second report the fact that the best course in dealing with tax evasion could be to engage more civil servants to ensure that more people meet their tax responsibilities and bring more revenue into the Treasury. My right hon. Friend did not continue, as is his habit, to draw the obvious inference that greater efficiency is not always achieved by reducing the Civil Service.
In examining aspects of, for example, the Ministry of Defence—the hon. Member for Horsham (Mr. Hordern) referred to this point—the Committee often runs up against the needs of national security. Those needs preclude me from going too far in giving instances even in this debate. Although I accept that weapons development frequently takes us to the frontiers of knowledge, we must still devise a more effective method of preventing and controlling massive overshooting of original estimates.
On several occasions in the debate the DHSS has been instanced, and I believe that will be repeated. In its seventeenth report, the Committee dealt with the costs of remedying defects in hospitals. It was evident that the lessons of initial errors have not been learnt and applied more recently. The irony was that, in the fourteenth report, attention was drawn to the fact that the consultants who had made the original errors were being paid an extra set of fees to correct their errors. In another report, the Committee dealt with the DHSS devolving responsibility to the regional health authorities. The guidelines were not sufficiently clearly laid down. There was the spectacle of officers being made redundant, given compensatory payments in one week, re-engaged the' week after and retaining those compensatory payments. That is not good enough.
949 The Committee's eleventh report dealt with the Department of Education and Science and the University Grants Committee. My impression was that the UGC was not sufficiently accountable for the very large sums of money handed over to it. I concede that, as a non-university type, I am probably biased. Since the majority of hon. Members have gone through the university mill, they sympathise with and understand one another and are prepared to make concessions they would not make to me. In considering the use of money, especially other people's money, I do not differentiate between academics and the lumpen proletariat. They are all liable to get their fingers caught in the till.
It is clear that the Committee's work will not diminish, although the stamina of hon. Members on the Committee might, because we face fearsome paperwork in some of our studies. Sometimes I wonder how we get through all the paper to ask coherent and relevant questions of the witnesses we invite. Somehow we manage it. It is essential that, when taxpayers' money is being spent, the PAC should be allowed to ascertain whether it is being used to the best effect. No obstacle should be placed in the Committee's way in achieving that aim.
§ Mr. Michael Latham (Rutland and Melton)
It is a pleasure to follow the hon. Member for Coventry, North-East (Mr. Park). I was especially glad that he began by saying that Committee members need to be abrasive in these matters. I remember, as I as sure does the hon. Gentleman, that during recent questioning the hon. Gentleman lost patience with an especially turgid witness and turned on him with considerable effect. That is an example of where the hon. Gentleman's approach effectively came into play.
Each hon. Member who has spoken in the debate, especially the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), the Committee's excellent Chairman, talked about the Committee's dual role. That must remain the focus of hon. Members' attention. Above all, there is need to get value for money in public spending. I agree with the hon. Member for Normanton (Mr. O'Brien) that, when considering the activities of the DHSS—they have been regularly considered by the Committee—we must remember that the object of the exercise is not to administer for the sake of administering, but to ensure that money goes to patient care. It should not be wasted on poor procedures, overspending or, as the hon. Member for Glasgow, Cathcart (Mr. Maxton) said, on excessive payments to pharmaceutical companies. The basis of it all, therefore, is ensuring value for money, which means seeing that money is spent properly on patient care, which is what the taxpayers demand.
But there is a second role of the Committee, of which we have heard less today, although it was stressed by the right hon. Member for Ashton-under-Lyne. That is the need—a need which goes back to Gladstone—to scrutinise payments to ensure that they are proper and made without irregularity. Unfortunately, it is still necessary for the Committee to continue that role. It is no secret to anybody sitting in the public proceedings of the Committee or reading the newspapers that, on De Lorean and Wardale, the Committee has had to return to the more historic role of looking at irregularities.
950 My hon. Friend the Member for Scarborough (Sir M. Shaw) spoke of what happened when reports were brought before the House. I have no idea what the Committee will say about De Lorean or Wardale, but when those reports are made, they must not be allowed to sit on the table for two years in the way that some of the reports that we are discussing today have. We shall expect them to be discussed by the House, without delay, at length and with full explanations of why things went wrong. I hope that the Minister will bear that in mind when the Committee has reported and the Treasury has produced its minute in reply.
There are three matters to which I particularly wish to draw the attention of the House, the first being the question of the Comptroller and Auditor General's department, the National Audit Office. It must be clear to anybody listening to the debate that the C and AG has an absolutely vital role to play in our proceedings.
Having come to this Committee new in this Parliament, after nine years on other Select Committees, to me the difference between the PAC and other Select Committees is obvious. We in the PAC are lucky in that, while other Select Committees have excellent specialist advisers, the PAC, in effect, has a whole department behind it which can do the in-depth research and investigation that is not available to other Select Committees. Thus, it must be properly staffed.
I appreciate that this issue has gone before the new House of Commons Commission, but certain matters should be before the House. First, the C and AG is proposing an increase in staff. When he gave evidence on 7 November 1983, I asked him:You must be the only department of Government which is expecting a 5 per cent. addition in staff numbers this year and more the year after and more the year after that, except possibly the Ministry of Defence.It does not come easily to me to advocate increasing staff, but for the C and AG's Department there is an overwhelming case for it, and I am glad that apparently that has been accepted.
However, a less satisfactory side of the matter is that of salary scales—not I hasten to say, of the C and AG's Department but of some of the competing organisations. The Committee was not entirely happy with what it heard about some matters relating to the new Audit Commission; this is gone into at length in the eighth report. I hope that there will be no question of a merry-go-round of competition. While we want public officials to be properly paid, we do not want the Audit Commission and the C and AG's department competing against each other for the same scarce resources, with salaries being forced up as a result. That would be detrimental not only to staff morale but to the effective job of the PAC. I hope that the Ministers and others with responsibility for wider staffing considerations will keep a careful watch on that.
The right hon. Member for Ashton-under-Lyne stressed the need for a bipartisan approach in the Committee to the question of Hamilton, and the hon. Member for Glasgow, Cathcart (Mr. Maxton) pointed out in his lengthy speech that that was all very well in Committee but that, once the issues were being debated on the Floor of the House, he would feel entitled to make any points he wished, and I am sure that we all accept that. We are well aware that Hamilton is a highly political issue in Scotland and that there has already been a debate in the House on the matter.
951 While the whole affair was, in my view, poorly handled by the Government at the time, the Committee's views, and some of the questions and answers, should not necessarily have led to some of the statements that have been made or to some of the tone that has been adopted. In question 468 I asked Mr. Gilchrist, the valuation officer for the Inland Revenue:Do you think that the property was sold on 1 and 8 November at a fair market price?He replied:We would have preferred the market to have been more tested.I then said:I am not sure that I know what that answer means: does it mean yes, or does it mean no?He replied:I can neither answer yes or no to it. The fact is that specialised buildings are notoriously difficult to sell. The market for them is unpredictable and erratic. The best that one can do is to advertise as widely as possible and make sure that every single avenue has been explored.I must say, in fairness to Scottish Ministers, that the point was taken in the Treasury minute, which said:The department accepts that there are lessons to be learned from the sale of Hamilton College. Scottish Office departments have already been reminded of the existing guidance and in accordance with the Committee's recommendation full revised guidance will shortly be issued throughout the Scottish Office on the procedure to be followed".The Treasury minute said:the department accepts that it should have attempted to reconcile the views of the Governing Body and the advice of the Chief Valuer that estate agents should be appointed before finally approving the appointment of the selling agents.It should be stressed, therefore, that the PAC did not say in terms that the building had been undersold—there was no evidence to that effect—and in paragraph 25 we said:There can, of course, be no certainty what price would have been obtained for Hamilton College if SED had sought to have its sale handled in accordance with the Chief Valuer's and Solicitor's Office advice.We criticised the procedures—rightly, in my view, because they were poorly handled—and those points have been met in the Treasury minute. My personal view as a member of the Committee is that that has been satisfactorily resolved as a result of the Committee's investigations.
A report which has not been referred to today—I was not involved in the questioning, although, as it has been approved in this Parliament, I was involved, as were all hon. Members, with it—is the fifth report of this Session on economy measures in the civil, defence and overseas estates. The report makes good reading, and I see the right hon. Member for Ashton-under-Lyne smiling at that remark.
I shall refresh the memory of the House on two delightful exchanges about embassies. An excellent exchange involved the hon. Member for Cathcart when he asked Sir Antony Acland, the top mandarin responsible for those matters at the Foreign Office:Would you not agree that the Austro-Hungarian Empire disappeared in 1918?Sir Antony replied:Yes.The second delightful exchange occurred when the hon.
Member for Coventry, North-East said:Let me be quite honest; you could number the embassies that I have seen on less than the fingers of one hand.The Chairman, Lord Barnett, commented:You are likely to see even fewer now.952 This report must be handled with some care because the impression which tends to be given is that envious hon. Members are sitting around complaining about the way in which mandarins live in luxury in large houses, in a style long since passed, in a lavish style of personal accommodation which appears to have outlived its time. We refer to that in paragraph 31. There is considerable force in those criticisms.
Equally, one may fairly ask whether there is some difference of opinion between the Treasury and the FCO on the matter. Paragraph 54 of the Treasury minute said:It is the view of FCO Ministers that there should be more flexibility in the guidelines and their application, and this subject will be discussed with the Treasury. The FCO accepts that space standards for residential accommodation are an essential tool of estate management.We know what the Foreign Office thinks, but not what the Treasury thinks, still less whether they agree. The PAC will probably be looking for clear indications—to be fair, there are some in the Treasury minute—that the Foreign Office realises that properties must have some relation to the modern style of diplomacy and to public expenditure problems in this country.
§ Mr. Eric Cockeram (Ludlow)
I am grateful to my hon. Friend for giving way. Does he accept that the Government's reply to the comments on accommodation overseas for FCO staff was probably a less ready acceptance of the PAC's recommendations than any report that we have submitted?
§ Mr. Latham
That is a fair comment. I stress that the report from the Treasury minute appeared to emphasise the view of the Foreign Office, suggesting that Ministers are not a seamless robe on this matter. The Treasury's view is usually given to the PAC on behalf of the Government as a whole.
I hope that it will be clearly understood that the Committee understands that diplomats overseas have a very difficult job, sometimes in unsatisfactory physical conditions and unpleasant climates. They may be in physical danger, and some of them have been kidnapped. Alas, some have even been murdered. No one in the House is under an illusion about the difficulties and importance of the job of a diplomat. Equally, we realise that questions of national prestige may be involved at a particular embassy site. I hope that we shall ensure, if we return to this matter and if there is continual monitoring by the Comptroller and Auditor General, a clear balance in Government thinking between a reasonable position for Britain and her embassies, and maintaining economy in public accommodation, which is a fair balance to obtain.
I aimed to be the briefest speaker in the debate and I expect that I shall succeed in that. What has become clear to me, in the nine months that I have served on the PAC, apart from the great amount of work done by the right hon. Member for Ashton-under-Lyne, is that the Committee is a very real weapon in this House. It is not true that it is all "Yes, Minister" and that anybody can get away with whatever he wants. I should not have liked to be some of the public officials being grilled by the PAC at a public hearing, as they must have had an unpleasant time. If the Committee continues to do its job in that way and report to the House as a whole, it will be doing good for the taxpayers.
§ 7.2 pm
§ Mr. Willie W. Hamilton (Fife, Central)
I am the only non-member of the Public Accounts Committee who has taken part in the debate so far, perhaps because hon. Members are fairly thin on the ground.
I served on the PAC for a few years, until the 1983 general election. The debate gives me an opportunity to pay tribute to the hon. Member for Horsham (Mr. Hordern), who I found during my short experience of the PAC to be very assiduous and perceptive. He was not averse to putting his party political points in the nicest possible way. He was a man after my own heart in that respect, except that I do not always make such points in the nicest possible way.
The hon. Gentleman said that it is important to ensure value for money rather than carry out the certification procedure, although that is important. The money involved in whatever area we engage ourselves in is so great and the opportunity for waste so frightening that we cannot but admire machinery invented by the House or the Government to ensure that such waste is reduced to a minimum. I hope to return to that matter later.
I recall, as the hon. Member for Horsham may recall, that he referred to a defence contract involving thousands of millions of pounds of taxpayers' money. The Committee dealt at one stage with the profits of contractors. The Chairman, Mr. Joel Barnett, as he then was, asked Sir Frank Cooper, who was then the permanent secretary at the Ministry of Defence, whether any of those defence contractors had gone into liquidation in the current Session. Sir Frank smiled his quizzical smile and replied, "Not to my knowledge."
It is clear that there are enormous rip-offs of the Ministry of Defence, no less than of the Department of Health and Social Security in relation to pharmaceutical firms. We have had ample evidence in front of us about the pharmaceutical firms, although some of it was erased from the report for good, sound commercial reasons—or so the DHSS and the pharmaceutical firms considered. The profits were enormous. The defence contractors are doing it, too, because of our desperate need to protect ourselves from the Russians. I hope that the Russians are as frightened of that defence expenditure as we are. The Public Accounts Committee cannot find such evidence. Indeed, it gets a minimum of information about how decisions are reached in favour of one weapon rather than another.
The Committee took evidence on the Sting Ray torpedo. We discovered that the Americans were producing a weapon that we thought seemed to do the job equally well but at half the cost. We decided, for good, jingoistic and nationalistic reasons, to take the British weapon. When I started to criticise Sting Ray, I was subjected to fairly gentle abuse by Marconi, at Hillend in Fife, reminding me that my constituents, who elected me, had votes. If I did anything to destroy Marconi's work on Sting Ray, so be it, but I had better watch out. Such pressure can be brought to bear on hon. Members when they criticise, quite properly, the wisdom or lack of wisdom of public expenditure.
I regret that the debate is so poorly attended. It makes absurd our claim to be guardians of the public purse when almost all aspects of government are scrutinised by 20 hon. Members out of more than 600. The advertisement for these debates might be improved if we were to put on the 954 Whip that we would talk about nuclear weapons, drug companies' profits or defence contract profits. If that were done, we would sell these debates to the public and to the House. When an hon. Member who is not on the PAC discovers that there is to be a short debate on 46 reports from that Committee, what conceivable interest could there be for him?
The debate is bound to be disjointed because each hon. Member has his own hobby horse or horses. Inevitably that calls into question the way in which we organise our parliamentary year. There should be a Select Committee to consider the way in which we organise our procedure. If more reports from Select Committees, not just the PAC, were published and debated on the Floor of the House as a result of the House sitting for, say, four more weeks each Session, there is bound to be public interest in the work of the Committees and how the Government work and how public money is spent. I hope that that point will be taken on board by the Minister.
I should like to say on a personal note that I served on the Public Accounts Committee for a short time, but I came off it on the ground that I found the work too heavy. We sat for two afternoons a week for two or three hours. The reading involved was demanding, so I gave it up. However, I am now sorely tempted to try to get back on the Committee, as there is a lot of muck to be raked, and I want to rake it. I hope that the Minister is taking what I am saying in good part. I think that he understands the message that I am trying to convey.
I shall devote my remarks to two or three reports. The first is the twenty-second report on the black economy, from the Session 1981–82. I served on the Committee that produced that report. The next report to which I shall refer is the second report for the Session 1983–84 entitled "Prevention and detection of evasion of National Insurance contributions and of fraud and abuse relating to Social Security benefits".
The 1983–84 report describes how in 1980 the Department of Health and Social Security was to allocate an extra 1,050 specialist staff to control and reduce, if they could, social security fraud and abuse. That additional 1,050 staff brought the total number of staff to 5,600, of whom 2,370 were directly involved in anti-fraud activities in local offices and in regional special investigation teams.
We said in the report that the Department of Employment employed at that time the equivalent of 653 full-time officers to detect possible fraudulent claims for unemployment benefit. Therefore, within those two Government Departments, about 6,000 people were engaged on checking fraud and abuse. No one objects to the detection of fraud and abuse wherever they occur in the expenditure of public money.
Paragraph 20 of the report deals with the cost-effectiveness of the employment of such staff. The Department of Health and Social Security estimated that in two years the 2,300 anti-fraud staff had saved about £164 million through terminating suspected fraudulent claims, and that £388 million altogether had been saved. The estimated savings per man employed ranged from £26,000 for local office staff to £90,000 for staff controlling special cases. Those are significant savings which cannot be ignored.
However, I shall compare those figures with the figures given in the twenty-second report of 1981–82 on the black economy. There is a great discrepancy between the cost benefit analysis within the Department of Health and 955 Social Security and that of the Inland Revenue. The tax loss in the black economy was estimated at £4 billion a year. That figure was given a year or two ago. As far as I know, no information is available for the present figure, but I guess that it is probably considerably more. What is being done about that? Paragraph 14 states:the Treasury said in evidence that they might refuse to allow extra staff for an area of high yield if this conflicted with constraints on the size of the Civil Service".In other words, the Treasury was saying, "No matter how beneficial it might be to the Revenue to employ extra staff, it is important for us politically to be seen to be reducing the number of civil servants." There is evidence that there is a substantial gain to be had from employing investigatory staff within the Inland Revenue, but the Treasury believes that it is more important to be seen to be reducing the number of staff than increasing its cost-effectiveness. Figures are given by the Treasury in paragraph 15:Yields in the Inland Revenue in 1981 were: £100 million extra revenue from 1,300 staff engaged on selective examination of taxpayers' accounts".If one reduces that to unitary figures, it means that for every extra 13 staff employed an extra £1 million was gained in revenue. The Treasury states further that the yields were£29 million from special investigations by less than 80 staff at Special Offices".For every two or three extra staff employed, an extra £1 million was gained in revenue. The Treasury states that there was a yield of£23 million from 100 staff in Enquiry Branch".That works out at about £1 million of extra revenue for every four extra staff employed. There is a yield of£20 million from 390 PAYE audit staff.In other words, £1 million of extra revenue is gained from the employment of an extra 19 staff. The report states in paragraph 18:The expectation that additional staff would save more revenue than their own cost was not of itself a sufficient criterion for this.In effect, the Treasury is saying that it is interested not in the cost-effectiveness of employing extra staff, but in reducing the overall number of staff. However, if one looks at appendix I of the report, one sees that the return is considerable. When I was refreshing my memory on these matters, I discovered that Sir Lawrence Airey, the chairman of the Board of Inland Revenue, said in answer to question 2370 that the savings ratiois at the top end of the range. It is now up to 19 to 1.In other words, for every £1,000 in salary to a member of the investigatory staff, one gets £19,000 back. It is much more cost-effective to employ staff in that area than to employ them in investigations for the Department of Health and Social Security, although both are important.
The Government can be criticised for being more energetic and enthusiastic about chasing DHSS fraud and other abuses, which primarily involve relatively poor people, than about employing extra staff to chase the people taking part in the black economy who generally—it is not always true—are better heeled and more prosperous. If the Chancellor of the Exchequer wants to reduce taxation during his term of office, as he says he does, and to get the best value for money, he should study carefully the desirability of switching investigatory staff from the DHSs to the much more fertile black economy.
Similar considerations apply to the supply of drugs to the National Health Service. My hon. Friend the Member 956 for Glasgow, Cathcart (Mr. Maxton) and other hon. Members referred to that matter, and it was referred to in the tenth report during the 1982–83 Session. Evidence was given, which was deleted from the report, of the enormous and unjustified profits made by the pharmaceutical companies. Far greater savings can be found there than by messing about yet again with administrative structures within the Health Service or by increasing charges to patients.
There is enormous potential for public expenditure savings in defence, the Health Service and the black economy and I hope that the Government will address themselves to that with great enthusiasm. If they do, they will receive almost unanimous support from the Opposition.
§ Mr. Eric Cockeram (Ludlow)
I commence my brief contribution by paying tribute to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who chairs our Committee with great courtesy and attention to detail. I do not know how he handles all the necessary reading and paperwork. He is an effective and popular Chairman, and has had an opportunity to make a significant contribution to Parliament.
Two matters are now taking place of which the House is aware. First, on 1 January 1984 the National Audit Office was set up and, secondly, greater attention is given to value-for-money audits. The shift of emphasis in the Committee will ensure that Parliament gets even better value from the Public Accounts Committee than has been the case previously.
There are 47 reports, but I shall speak about the sixth report from the current Session, 1983–84. The Committee examined the construction and management of factories by the English Industrial Estates Corporation, the Scottish Development Agency and the Highlands and Islands Development Board, and placed particular emphasis on the English Industrial Estates Corporation.
The report reveals that the factories already constructed by that body have a historic cost less depreciation of about £700 million. However, as the historic cost factor must take into account that these factories have been built over a number of decades and that depreciation has been provided for, the true cost is between £1 billion and £2 billion. That is an under-estimate, because the accounts of the English Industrial Estates Corporation do not take into consideration any interest on capital, which they would do if the factories were developed privately. The true cost is still greater.
Last year when the report was published the Committee was told that a further £474 million was to be spent—that was at 1983 prices and, therefore, it is clearly more than £500 million at today's prices. That exercise continues unabated. What is the return on that? The report records concisely that the return is £25.5 million, which is a small return, of about 2 per cent.
If one looks further, one finds that the £25 million worth of rental income is absorbed, as in all good bureaucracies, by considerable administrative expense, which is neatly pitched at £24 million, thereby leaving a profit of El million. That is a fine exercise in accountancy. In true television terms a mandarin can go to the Minister and say "Yes, Minister, but we are making a profit," and so they are, but the profit is £1 million from an estate valued at many billions. The figures are distorted because they do 957 not take account of the interest on capital costs. Instead of a £1 million surplus, as shown in the accounts, there is a substantial loss.
The report states that the English Industrial Estates Corporation builds factories only where the private sector is not building them. It is not surprising when losses on such a scale are financed by taxpayers that the private sector does not step in to build factories.
What steps does the English Industrial Estates Corporation take? It records that 23 per cent. of its factories are vacant, so it steps up its publicity campaign. Again the report shows that the cost of publicity for the English Industrial Estates Corporation has multiplied by 50 during the four years covered in the report. Although there has been inflation—happily, it is now only 5 per cent.—a factor of 50 is an extraordinary increase. The corporation is working jolly hard to cover up the fact that 23 per cent. of its factories are vacant, yet it continues to build to the tune of £500 million a year.
The House will recall that one of the Government's policies is to get rid of state landlordism. We have fought two general elections in the past five years. One feature of our manifestos has been the sale of council houses because the Government believe that the state should not be a landlord. Yet in this case the Department of Trade and Industry works hard to get into state landlordism as fast as it can, regardless of the costs of, and the loss incurred by, building the factories, and of the fact that the private sector cannot compete against a state corporation which makes a loss on such a scale. If that is so, somebody somewhere should step back and query the logic of it. I hope that the Minister will attempt to do so tonight.
§ Mr. Mark Fisher (Stoke-on-Trent, Central)
I am the first hon. Member to speak in the debate who is neither a current nor a past member of the Public Accounts Committee, and I rise in some trepidation. As my hon. Friend the Member for Fife, Central (Mr. Hamilton) said, the size and display of the Committee's reports was daunting for someone who was not a member of the Committee and even, possibly, for the Financial Secretary.
Having studied some of the reports and noted the degree of scrutiny and interest that they show, I found the prospect of speaking in the debate even more off-putting. I came to the debate to listen and learn. I was rapt by the speech of my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) and, having been held by him, I was drawn further into the debate by the excellent and pugnacious contribution of my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton), and then by the extremely interesting and wide-ranging speech by the hon. Member for Horsham (Mr. Hordern). I am sad to see that he is not in his place although he has been here almost throughout the entire debate. The quality of those speeches drew me into the issue.
I should like to comment on the tenth report of the PAC on the Department of Industry—"Sale of shares in British Aerospace; Sales of Government Shareholdings in other publicly owned Companies and in British Petroleum Ltd." I was a member of the Telecommunications Bill Committee during the earlier part of the Session, and I am now serving on the Ordnance Factories and Military 958 Services Bill Committee—those two Bills are concerned with privatisation—and I have served as a member of the Select Committee on the Treasury and Civil Service, which was interested in asset sales.
I was intrigued by the report of the PAC. It is of extreme public importance because it goes to the heart of one of the main strategies of the Government's economic policies—the shedding of the public sector and the privatisation of public assets. That raises so many issues, not just for the future of our industry, the Government's stance and political considerations, but for the economy.
The Chancellor's Budget last week showed how proposed asset sales—£2.6 billion this year—have had a considerable effect upon the apparent nature of the public sector borrowing requirement. That, with the comments by the Treasury and Civil Service Select Committee on how asset sales should be accounted and whether they are being correctly and helpfully accounted by the present procedures, and the real technical difficulties that the hon. Member for Horsham described, make this a difficult matter even if it is thought that the policy is correct. All those matters make the tenth report interesting now. Although it appeared in the 1981–82 Session, it could not be more topical.
The report deals with the sale of the shares in British Aerospace, Cable and Wireless, Amersham International and British Petroleum. It is a short report. The evidence took only one day and three witnesses only were called. However, some striking aspects immediately come off the page when one starts to read. The four share sales were offered at a fixed price. They were all underwritten—we learn from the report that a tender system was considered for Amersham International—and oversubscribed to a greater or lesser extent. The Commission payable on the four share sales came to an amazing £21.3 million. They have a great deal in common. There are matters that the Government should be considering and learning from them.
The other striking comparison—I am sure that even the Financial Secretary will agree with this—is that a poor price was obtained for the shares. There are mixed reasons for that, and the PAC has fairly considered them. The Financial Secretary shakes his head, but he cannot be happy with the price obtained for the shares. As the PAC said, it was perhaps understandable as they were the Government's first attempts at privatisation. They undoubtedly had a mixed, but none the less political, motive for ensuring that the first privatisation moves were successful in so far as the assets were disposed of.
Leaving that and the expense of the underwriting aside, there is the wide public ownership that the Government sought through the sale of these shares. It is clear from the PAC report that that wide ownership was not achieved. It specifies British Aerospace where 158,000 individual shareholdings were taken out on the day of offer, but within 10 months that figure was down to 27,000. That is a reduction of 83 per cent.
The Government, I believe sincerely, make the case for the wider shareholding of the privatised public assets, but they should study the experience of the market and the desire of small individual shareholders to take their profit, particularly when shares are sold at a considerable discount as, in effect, these all were. The temptation for individual shareholders to take their profits in the first year is considerable. One cannot blame them for that, but it makes nonsense of the Government's case. I believe that 959 when the Financial Secretary answers the debate he should address himself to that problem. There are lessons to be learnt, and the Government would be exceedingly foolish if they did not read the tenth report of the PAC to see what can be learnt. It is important that the Government should do so, because the four shareholdings considered in the report are minnows compared to what the Government are now proposing.
The Government are to sell a 51 per cent. shareholding in British Telecom—that will be worth approximately £4 billion of taxpayers' money and public assets—and the royal ordnance factories where the fixed and current assets as shown in the 1982–83 accounts stand at £450 million. That scale of privatisation dwarfs the matters dealt with in the report. It is therefore doubly important that we and the Government learn the correct lessons from the report.
The Government will face other problems—foreign shareholdings and alternative means of sale. It is apparent that the idea of a fixed-price issue for an organisation such as British Telecom will not be acceptable or operable. The ideas that the Government are floating around for part-payment of the shares over two or three years is one of a number of possible schemes.
It would he interesting if the Financial Secretary, when addressing himself to the debate and the report, would give some sign that the Government have thought about that problem, are learning and will come out with some more practical and more responsible methods of selling public assets, if that is what they are intent on doing. It is important that the Government proceed responsibly as guardians of the public purse.
There are wider issues that I wish the PAC had had the opportunity, with more evidence and time, to consider. In this report the Committee was interested only in the sale of shares, but there is the vital issue of how the assets are valued. The capital reconstruction, and what is effectively the massaging of accounts, and the handling of depreciation in the company accounts, assume considerable proportions when one considers the size of British Telecom's assets.
In the penultimate year's accounts of British Telecom, depreciation increased suddenly, out of the blue and, for no reason referred to in the accounts, by 24 per cent. in one year. That presents the following year's profit and loss account in a completely different light and makes the business a different and much more attractive proposition for sale.
I believe that when studying the report the Financial Secretary should address himself to that point and say what the Government's policy is on depreciation with regard to the sale of assets, and how far, in all probity, they are prepared to go in reconstructing capital.
I am sad that the hon. Member for Horsham is not in his place because I should have liked the opportunity to have an exchange with him about the role of Civil Service pension funds in all this. He gave the example of the National Freight Corporation. Being on the Committee dealing with the Ordnance Factories and Military Services Bill I have the royal ordnance factories most in mind. In that case the Government have recognised that it will cost them £250 million effectively to buy out the principal Civil Service pension fund for the employees of the royal ordnance factories.
Even if they sell all the shareholding in the holding company—and the Government have not yet disclosed 960 what they will do—they are unlikely to raise more than £300 million. That is the sum that the chairman of the royal ordnance factories, Mr. Clarke, has suggested might be the proceeds, although the fixed and current assets are in the book at £450 million, so there could be £150 million sudden discount. Even if the Government got £350 million for all the shares, there would be only a £50 million profit. The pension fund will have to be reconstructed whether or not all the shares are sold, and it is unlikely that they all will be.
Therefore, on selling off the royal ordnance factories the Government will be making a considerable loss—perhaps £50 million, possibly £100 million or even £150 million, plus the discounted loss on fixed and current assets. When the Financial Secretary faces up to those figures and when he considers the points that are validly, sanely and calmly made by the hon. Member for Horsham, surely the financial case for the sales of public assets will disappear over the horizon. The Financial Secretary should address himself to that.
The report shows clearly that there is a vital role for the Public Accounts Committee in future in scrutinising not only the sale of these far bigger assets but the valuation and the preparation for sale. I am not sure whether that is something for the PAC or whether it would be more properly divided between that Committee and the Select Committee on the Treasury and Civil Service. It may be that there is a role for both Select Committees. Between them they owe it to the public and to the House to scrutinise these privatisation plans. They should do it to save both the financial and the political face of the Government. To go ahead without a great deal more serious thought and scrutiny would be thoroughly irresponsible and would not be a sane, sensible and coherent use of public assets.
This is brought home further by the fact that in the Ordnance Factories and Military Services Bill Committee we have been talking about valuation. The Minister of State and the Under-Secretary have rejected the idea of basing it on historic on current cost or on price-earnings ratio. On three occasions, including this morning, they have come up with a brand new theory for the valuation of public assets; it is called by them the theory of usefulness. It has nothing to do with historic or current cost or price-earnings ratio or with any other accepted method of valuation. It is their theory of usefulness.
The Treasury, Treasury officials and the Financial Secretary should have a word with the Ministry of Defence and the Secretary of State, because what is proposed is not satisfactory. It would make a laughing stock of the Government if they valued £450 million of public assets on a wholly specious and meaningless theory of usefulness. If they go ahead on that basis the Public Accounts Committee will have to carry out a serious and substantial investigation.
The tenth report for 1981–82 is extremely important and pertinent. I wish it had been longer. We shall need more reports like it from the Public Accounts Committee and possibly from the Treasury Select Committee. Because of this report the House and the public are greatly in the debt of the Public Accounts Committee.
§ Mr. Tony Favell (Stockport)
Like the hon. Member for Stoke-on-Trent, Central (Mr. Fisher), who has spoken so eloquently, I am not a member of the Public Accounts 961 Committee and I, too, came here to listen to proceedings rather than to speak. Obviously I cannot speak with the expertise or knowledge that members of the Committee have shown. One thing I have learned is that the work that the Committee does is immensely valuable and is undervalued by the House. This debate should have been held long ago. Debates on reports by the Select Committee should be held regularly.
My attention has been directed to the seventeenth report for 1981–82 which deals with the Department of Health and Social Security; that report was printed on 21 May 1982 yet here we are in March 1984 debating it. There has been a general election in between, but that was on 9 June 1983. We spend a great deal of time in the House discussing how we will raise money and far too little time on how it is spent, which is just as much in the interests of the taxpayer.
If this were a report on the activities of an industrial concern, some of the matters to which the Committee has drawn attention would be hair-raising, to say the least. Paragraph 4 says:As regards DHSS's own lack of up-to-date information on manpower in the NHS, the Department told us that their operational need was only for an annual view of the total structure of the NHS payroll, which was obtained by an annual census each September. They now had the provisional figures for September 1981"—this was in May 1982—which was a significant improvement on earlier years.We are not dealing with a tinpot, tuppenny-ha'penny business but with the largest employer in Europe, a concern that employs 1.25 million people. Here we have the Department that controls this enormous, high-spending Department saying that it is enough to have a census once a year, nine months late, of how many employees the Department has. This is the most extraordinary way to run any concern. I venture to suggest that we would not run even a sports club in this way.
Paragraph 7 reports an improvement on what had gone before:On 22 January 1982 the Secretary of State announced in the House of Commons new arrangements to ensure better accountability to Ministers and within the NHS. These would focus on the progress made in each region towards implementing agreed national strategies and determining the action to be taken in the following year.It was reported that that system would start in 1982–83. In fact, we heard in the debate on the Supplementary Estimates on 8 March that those reviews have been implemented, but this is two years after the event. During that time approximately £32 billion has been spent. If any company were run in this way it would be out of business within weeks. The lack of control is extraordinary.
It was disclosed during the debate on the Supplementary Estimates that the voluntary redundancy programme had been hopelessly underestimated. It was reported that that programme, which took place on reorganisation, had been originally estimated at £8.6 million, but that eventually it cost about £50 million. Again, we are not talking about peanuts. We are talking about approximately £40 million. The explanation given by the Department was that the original estimate was more of a guesstimate. It is simply not good enough to have guesstimates about this amount of public expenditure.
The work of the PAC is vital, and I venture to suggest that without its reports, the improvements that were 962 announced during the debate on 8 March for the control of manpower and accountability of the regions within the DHSS would either never have been implemented, or would have been implemented much later. How much better it would be if the Committee's report had been debated on the Floor of the House within a matter of months, instead of two years later. I suggest that a great deal of public money would have been saved, and perhaps the rise in prescription charges announced two weeks ago might not have occurred.
§ Mr. Michael Shersby (Uxbridge)
I am pleased to have the opportunity to participate briefly in this debate. I want first to pay tribute to the Chairman of the Public Accounts Committee, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). I have the privilege of serving on the Committee of Public Accounts, having been a member only since last July. During the 11 years or so that I have been in the House, I have found the Committee's work very worth-while. I have the feeling now that I am at last getting to grips with some of the problems that hon. Members have to consider. Also, I am beginning to find out why taxation has been so high, and why the taxpayer has got poor value for money on so many occasions.
One of the great advantages of the Committee of Public Accounts is that it operates in a non-political way. We operate very much as a team. We have to spend a great deal of time studying the papers that are made available to us for the two meetings that take place each week. that is necessary if the questions that we direct at witnesses are to be of value. So I believe that this Committee and its reports represent one of our most valuable parliamentary activities.
I agree with the hon. Member for Fife, Central (Mr. Hamilton) that it is a great pity that so few hon. Members are present today. Not long ago, this came to the attention of one of my constituents, who wrote me a sharp letter asking why it was that so few of the 650 Members attended debates on the PAC reports, saying that I should do better myself. I was able to write back and point out that not only did I attend the debates, but that I was a member of the Committee. I said that I hoped that he and other members of the public would take more interest in what we did. I am sympathetic to the notion that parliamentary time should be found for more frequent debates, so that we are not faced with a plethora of reports that have to be disposed of in one day. It is a most unsatisfactory procedure.
As I listened to the debate I could not help thinking that one way to deal with the problem would be to have some debates on the Floor of the House and other debates in a Committee upstairs which, of course, would be open to members of the public, so that more scope could be given to the discussion of our reports.
I apologise, Mr. Deputy Speaker, that I have not been present throughout the debates, but I have been in Standing Committee G, which has just completed its thirtieth and—I am relieved to say—its final sitting on the Rates Bill.
I want to comment on one of the reports, which illustrates how the PAC works and how it examines the reasons why the taxpayer has not got good value for money. I refer to the ninth report of Session 1983–84 about Hamilton college of education and the disposal of the land and buildings. There, the Committee was dealing with the 963 sale of a college that was built in the mid-1960s, at a cost to public funds of about £2 million. In 1982, agreement was reached for the sale of the main college building, with playing fields and halls of residence, for £680,000—about one third of the original construction costs, and a very small fraction of the current replacement cost of £20 million. How could that happen? How could a Department of State—in this case, the Scottish Education Department—and a small sub-committee of the college, get themselves into a situation where they disposed of a public asset, which today would cost £20 million to provide, for the piffling sum of £680,000? How could the taxpayer expect to receive a satisfactory explanation from those who were responsible? The PAC's job was to find the answers to those questions.
The board of governors of Jordanhill college of education and the joint Jordanhill-Scottish Education Department sub-committee dealt with the disposal of the property. They were responsible for ensuring that the Scottish Education Department was a party to all the discussion. There was no question of the board of governors of the school being solely responsible. It was a joint operation with the Scottish Education Department. As one would expect, the Scottish Education Department took the advice of the chief valuer for Scotland about how to conduct the sale, and it specifically sought advice about whether estate agents should be employed, as well as about the possible selling price. It was eventually agreed that the sale should be handled by the college's own solicitors.
The PAC spent a considerable time on this issue because, certainly to English Members, it seemed unusual that it was handled by the solicitors, instead of by a large and perhaps a well-known estate agent operating in Scotland, with all the benefit of its experience of the property market. In fact, it is not unusual for solicitors to act in that way in Scotland. So perhaps one should not criticise that.
The college was advertised in four papers—The Times, The Scotsman, the Glasgow Herald and The Times Educational Supplement. It appeared in one issue in the period between 14 and 18 December 1981, and in one issue in the period between 11 and 15 January 1982, and 40 brochures were sent to people whom it was thought might be interested in the property, its playing fields, halls of residence and all the other facilities that were available.
My understanding is that the run-up to Christmas and the early part of January is a time when most good Scottish citizens are engaged in activities other than studying the property market and spending sums of about £20 million on property. They may well spend it on other things that they consider are desirable at Christmas time or in early January. Certainly their minds were on other things. One would expect, therefore, after the advertisements had been unsuccessful, that the sellers of the property would have advertised the property far more extensively in the national daily newspapers in Scotland and England during February and March of 1982, and that they would have sought the advice of expert estate agents to make sure of getting a good price for the property. But they did not.
Only four offers were received by the closing date of 23 July 1982. The highest of these was for £1,550,000, but this did not commit the tenderer to complete until he had obtained all planning permissions and development grants and a firm guarantee to buy the developed property. So that particular bidder wanted absolutely everything in return for the price that he was prepared to offer. The only 964 other bid for the whole site was dependent on detailed planning permission for change of use of the property. The sum of £650,000 offered was exactly the same as the sum of the two remaining offers.
Before seeking offers, the joint committee had discussed with the local district council the likelihood of obtaining planning permission. In the report it is made clear that the council had concludedthat permission was unlikely for any use of the main college block for other than educational purposes, although the Council had indicated that they would consider a proposal for conversion of the halls of residence to housing. They were not prepared to allow any development of the playing fields. The Council confirmed this general attitude after the offers had been received, although they indicated that conversion to a hotel and conference centre might be acceptable and other proposals would he considered on their merits.The local district council was not, therefore, being unreasonable. It considered very carefully the various options open to it and made it clear that conversion to a hotel and conference centre might be acceptable and that other proposals would be considered on their merits. Although I have not had the pleasure of visiting this particular college, it seems to me that, situated as it is, quite near a racecourse, it would not be unreasonable to assume that it would be quite an attractive conference centre or even——
§ Mr. Maxton
Perhaps I can add a little to this. Not only is it near a racecourse, it is near a big country park and also less than three quarters of a mile from the main motorway between Glasgow and the south.
§ Mr. Shersby
I am very grateful to the hon. Gentleman. He is very familiar with the area. I remember that during the proceedings of the Committee he drew attention to some of these matters. I am glad that he has refreshed my memory on them today. As he rightly points out, it was not only near a racecourse, it was near a very fine park and had excellent access by motorway. So here we have premises which comprise excellent accommodation, playing fields and all the rest, valued at £20 million in terms of replacement cost, being sold for this comparatively small sum of £680,000.
It was only at this stage, so the Committee of Public Accounts was told, that the Scottish Education Department again sought the advice of the chief valuer. He wrote to the Scottish Education Department in August 1982, giving his views on the way in which the sale had been handled. Although he said that his estimate of £6 million as a possible price represented a sale in the most favourable conditions,he was not satisfied that the market had been adequately tested".Neither was the Committee of Public Accounts.
The chief valuer went on to suggest:that public bodies might be interested if they knew how low a price was expected; that the current cost of providing the building would be about £20 million; and that the 34 acres of the site outside the loop of the racecourse could be worth about £25,000 an acre.Thirty-four acres at £25,000 an acre is a lot of money.
The Scottish Development Department estates office, which was also asked for advice, thought that the offer for the halls of residence was reasonable but that the rest of the college was worth more than £270,000. It even went so far as to recommend that a major firm of estate agents be employed to market this part of the property comprehensively. That did not happen. The Scottish Education Department thought that all the offers were very 965 low and considered whether to seek better ones, but decided that the market had been adequately tested and that re-advertising or engaging estate agentswould be unlikely to produce a different result and would prolong the need to maintain an empty property at substantial cost to public funds.Obviously it costs a lot to keep a building of this size heated, secure and so on. Nevertheless, the sum mentioned to us for doing that, which I think was in the region of £300,000, is a comparitively small one set against the total cost of this particular college and the price that should have been obtained for it. This is the situation that we were considering. In paragraph 21 of our report, we say:In these circumstances we find it most surprising that, limited advertising having produced only four unattractive offers, SED once again rejected the Chief Valuer's advice to use estate agents in conjunction with the District Valuer to apply a much greater marketing effort; and decided to sell at a bottom of the market price.That sums up the situation very well. In paragraph 24 of the report, we say:The Treasury told us that although it was SED's responsibility to sell the property for the best price they could get, they were surprised that SED did not tell them that they had rejected the Chief Valuer's advice on the handling of the sale.Of course, the PAC shared the Treasury's surprise at the way in which the whole business had been handled.
This case illustrates the way public money is spent and how the taxpayer fails to get value for it. It is also a strong condemnation of the way in which this whole matter was handled by those responsible. It should not happen today. There surely cannot be a Member of the House of Commons selling his house who, if the first estate agent or solicitor did not succeed, would not try another. There cannot be a single Member who would advertise his house in the period immediately before or immediately after Christmas and expect that the maximum number of offers for the house would be forthcoming. Surely he would put his property on the market at about this time of the year. Next week is, I think, the optimum time, when the daffodils are out. It may be a little later in Scotland. Surely these are elementary considerations that would be borne in mind by anyone seeking to sell any property anywhere.
The case also illustrates the valuable work done by the PAC. I hope that the officials and Ministers concerned take note of what has happened and make quite sure that they put in place new procedures that will ensure that it cannot happen again. I hope very much that the House will be told what steps have been taken by the Scottish Education Department to ensure that when in future it disposes of property it will be obliged to do so in such a way that the maximum number of people know about it and that it stands a really good chance of getting a fair price for the public asset that it is responsible for handling.
§ 8.9 pm
§ Mr. Lewis Stevens (Nuneaton)
I add my tribute to the work of the Public Accounts Committee in looking at the expenditure of the various Departments. I am not a member of the Committee and I have found it intriguing to read some of the reports—not all of them by any means—that it has presented. The one that caught my attention is the twenty-second report, which concerns itself with "taxpayer compliance and the black economy". Few hon. Members on either side of the House would 966 disagree that the black economy needs sorting out so that we can get the maximum amount into the Government purse.
We also recognise the dangers of the black economy. It makes some businesses unfairly competitive. In effect, they have an unofficial Government subsidy helping their prices. The smaller business can undercut many of the more reputable firms. On more individual matters, the casual worker can nip in and do unfairly priced jobs. We hear much about the so-called cowboys who thrive on the black economy. We need to put this right.
There are some things in the report that caused me concern. When I read it from the back, as I normally read a newspaper, I noticed from the table on criminal proceedings, given on page 55, that there were only 174 prosecutions and only 157 convictions. We have a good idea that there are many people involved in the black economy, so that is a comparatively small number. That information is brought out well by the report.
I am surprised to find that I greatly agree with some of the comments by the hon. Member for Fife, Central (Mr. Hamilton). That may not do my political career too much good, but I sympathise greatly with his points about the black economy.
It seems to me that the report, although accepting that the black economy is costing about £4 billion, hesitated to say that something has to be done urgently because of the large sums of money involved and the unfairness of the system. There are one or two points in particular. It did not go into any depth about how the Inland Revenue operates. The report looks at the American ability to take samples of taxpayers, to examine in depth what their accounts are about and to use random samples to improve the position. It says:We have not considered the full implications of removing the limitation from the Inland Revenue. But, considered solely in terms of efficiency in combating tax evasion, the limitation seems regrettable because the use of modern statistical methods might well assist the Department".Knowing at first hand the ability of many civil servants, and that the techniques within the Civil Service are usually modern, I am aware that we already use some of the modern statistical techniques available to pinpoint the more likely cases that could be looked at. I should like to hear that the Treasury has added into the Inland Revenue better statistical methods, particularly the use of computers, to try to identify more clearly the cases that we should be looking at. That may need an alteration in the law, but I am sure that, from the records of the Inland Revenue, that analysis could be made to identify problems.
The report goes on to say that one of the problems of the Inland Revenue today isdifficulty in recruiting suitable staff and retaining trained inspectors.That would suggest that, perhaps, there is a need for the Inland Revenue and the Government to consider the competition with the accountancy professions and to ask what training the Inland Revenue should be doing to get the type of people that it wants, in particular to investigate company taxes and the evasion of such taxes. Much of that training could be done internally. The Inland Revenue has already transferred staff from one area to another.
The hon. Member for Fife, Central made it clear that he saw the need to put people into the Inland Revenue as a priority, although our overall approach has been to reduce the Civil Service. However, it is important that 967 people go into the Inland Revenue. Such a move would be widely cost-beneficial. With £4 billion missing, there is plenty to come in. There is a case for increasing the investigatory staff of the Inland Revenue in that area, and I hope that the Treasury will look at the amount of effort going into investigation in the Inland Revenue.
The DHSS has put a lot of successful effort in the investigation of fraud. It has been criticised for this, but if there is fraud, it does not matter whether it is within the ambit of the Inland Revenue, the DHSS, or Customs and Excise. It is all anti-social and against the public interest in total and that investigatory power should be there. None of us would wish to support the idea that people can get away with the sort of tax evasion that we have known in the past.
Later, the report says:The size of the black economy is clearly much influenced by the effectiveness of the means the Government employ to deter fraud and abuse.That is fairly obvious, and by the sound of it the Inland Revenue has not been particularly successful. On the first page the report says:87 per cent. of cases examined … disclosed understatements of profits".If such a large percentage reveal that, something is wrong, and we should be investigating even more cases.
On page 37, there seems to me to be an element almost of naivety. Sir Lawrence Airey was being examined, and he said:There are other areas. There were simplifications suggested in one of the Rayner exercises in relation to Schedule D … we will no longer go hunting for small sums of money like £10 or £15".It concerns me that in 1981–82 such a basic statistical approach was relatively new and we were not looking for the best return. That is a rather simplistic approach. There are many sophisticated techniques in the Inland Revenue and Civil Service, but it appears that we are not using them to the best advantage, if that is the correct interpretation.
These reports are important. Many of them are two years old, which is something of a disadvantage, but they serve a great purpose. If they draw our attention to subjects such as the black economy and reinforce our determination to get something positive done and give the Inland Revenue the support and facilities that it needs, they will have been well worth while.
§ Mr. Terry Davis (Birmingham, Hodge Hill)
Apart from the special debate about premature retirement in the National Health Service two weeks ago, it is two years since we had a debate on the reports of the Public Accounts Committee—a point that has been mentioned by several hon. Members. In the meantime, we have seen a change in the chairmanship of the Public Accounts Committee. Many right hon. and hon. Members on both sides of the House have paid a justified tribute to the work done as Chairman by my former right hon. Friend the Member for Heywood and Royton, Joel Barnett, now Lord Barnett. We have a very worthy successor in my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), who brings some distinction to the chair of the Public Accounts Committee because he was previously for six years a member of the Committee, then became Financial Secretary to the Treasury, then Opposition spokesman—indeed, he spoke from this Dispatch Box during the debate a couple of years ago—and has now become the Chairman of the Committee.
968 I served for only a few months on the Public Accounts Committee before I was called to other things, and I found it a most enjoyable part of my time in the House of Commons. Nevertheless, I can assure my right hon. Friend that I have no intention of following him from the Dispatch Box to the chairmanship of the Committee—certainly not within the next two years.
With his typical modesty, my right hon. Friend paid tribute to his predecessor and to the work of the other members of the Committee as well as to the Comptroller and Auditor General and his staff, but many hon. Members in the debate have praised his contribution. It is true that the atmosphere of and the work done by the Committee owe a great deal to the person who is Chairman.
Many members of the Committee, and many other hon. Members, have referred to the length of time that we have waited for this debate. It has been too long, and we are today dealing with too many reports. To try to debate 46 separate reports, some of them dealing with several subjects, is an impossible task for the House. As my right hon. Friend the Member for Ashton-under-Lyne said, each report could be the subject of a debate, and the position is very unsatisfactory. I thought that he was a little kind when he attributed the delay to the general election. It was 14 months between the last debate and the general election, and we have had another nine months since then. It seems to me that the delay has been due to the tradition or convention that the reports of the Public Accounts Committee should be debated once a year. I agree with several hon. Members who have said that we should debate the reports of the Public Accounts Committee more often. The hon. Member for Stockport (Mr. Favell) argued the point most forcefully, and I agree with him. I also agree with the hon. Member for Scarborough (Sir M. Shaw), who said that the value of the debate is lessened by the number of reports and the time that has passed since their publication. I believe that it also affects participation in debates.
Several hon. Members—in particular my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) and the hon. Members for Horsham (Mr. Hordern) and for Uxbridge (Mr. Shersby)—pointed out that very few Members take part in these debates unless they are themselves members of the Public Accounts Committee. My hon. Friend the Member for Fife, Central (Mr. Hamilton) put his finger on the reason for this when he said that the debate is billed as a debate on the reports from the Public Accounts Committee, and therefore other hon. Members tend to leave it to the members of the Public Accounts Committee. I believe that we should have much greater interest and participation in the debates if they concerned subjects rather then reports, and I suggest that the House consider that point. Certainly we are all agreed that we need more debates.
As the hon. Member for Scarborough pointed out, we do not need to debate all the reports of the Public Accounts Committee, but we should at least devote enough time to debating the more important reports to do justice to the work of the Committee. I emphasise that I am not suggesting that a debate in the House of Commons is the only purpose of a report from the Public Accounts Committee, or that we can consider a report as having been finished, or disposed of, as the hon. Member for Uxbridge put it, as soon as it has been debated. On the contrary, we can often learn lessons for the future from the failures of 969 the past, as my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher) reminded us in his comments on the tenth report from the 1981–82 session.
My hon. Friend the Member for Normanton (Mr. O'Brien) drew attention to the report on joint financing by the National Health Service and the social services authorities, and pointed out that we could obtain better value for money and that that did not necessarily mean that we spent less money. We may spend the same amount and obtain better value by getting more for our money. That is certainly the philosophy of my right hon. and hon. Friends and myself.
My hon. Friend the Member for Normanton was not a member of the Committee when it considered that particular subject but, as he said, the whole matter should be kept under review. That is a very important part of the role of the Public Accounts Committee. It is important for it to return to some subjects again as it decides from time to time to check on the progress that has been made by Government Departments in the implementation of the Committee's recommendations. It must be emphasised to Government Departments that the House does not regard a report as having been finished with as soon as it has been debated.
My hon. Friend the Member for Coventry, North-East (Mr. Park) and the hon. Member for Scarborough drew attention to the shocking escalation in the cost of the Chevaline project from £175 million to £1,000 million. They referred to the lack of any requirement to disclose costs and increases in costs. As one of them said, that will not do. My right hon. Friend the Member for Ashton-under-Lyne informed the House that in future the Public Accounts Committee will monitor all defence projects that are expected to cost more than £100 million. All hon. Members should welcome that improvement and extension of the Public Accounts Committee's role.
There were some comments about nationalised industries and my right hon. Friend pointed out that the Public Accounts Committee recommended that all nationalised industries should prepare corporate plans, and said that these corporate plans would assist the Government in the allocation of funds. The hon. Member for Northampton, South (Mr. Morris) emphasised that the lack of corporate plans was a serious defect in the way in which nationalised industries are run. I feel, however, that the real failure shown by the report of the Committee is the failure not of the nationalised industries but of their sponsoring Departments.
I would repeat that comment in reply to what was said by the hon. Member for Ludlow (Mr. Cockeram) about the factory building programme undertaken by the English Industrial Estates Corporation. Reading the Committee report, it seemed to me that the strongest criticism concerned the failures of the Department of Industry.
The clearest failure of all identified in these reports is, of course, that in the ninth report of the 1983–84 session on the sale of Hamilton College. Many hon. Members commented on that report. My right hon. Friend the Member for Ashton-under-Lyne and my hon. Friend the Member for Cathcart would be expected to comment on what one of them described, I think, as a rip-off. But some Conservative Members also drew attention to the implications of that report and expressed their concern about what had happened. The hon. Member for 970 Northampton, South referred to it in strong terms. The hon. Member for Uxbridge took us through the history of what happened. I shall not repeat his description of that saga. I thought that his summary of events was very fair. I must say that I agreed with another Government Member—the hon. Member for Rutland and Melton (Mr. Latham)—when he said that his conclusion, having listened to all the evidence, was that the matter had been "very poorly handled".
Most of the discussion about Hamilton college of education has centred on the price. That is understandable. People are shocked to learn that this college has been sold for £600,000, when it had been valued at £6 million in favourable conditions, and that therefore a public asset has been sold for, apparently, one tenth of what it might be worth. I believe, however, that the real point is not the price but the way the sale was handled. Having listened very carefully to the hon. Member for Uxbridge, it is clear to me that the Scottish Education Department ignored existing guidelines. It ignored the procedure recommended by the Halliday committee. It ignored the advice of the chief valuer, not once, but twice. It was the hon. Member for Uxbridge who said that the Scottish Education Department had overlooked "elementary considerations". It was he who used the expression "strong condemnation".
I have read with interest the Treasury minute which has been put before the House. It accepts that there were three separate failures by the Scottish Education Department. I shall be grateful if the Financial Secretary will tell us what action has been taken as a result. I accept that steps are now being taken to ensure that nothing of the sort shall ever happen again. So much for the future, but what about the past? If Ministers were not personally responsible for these failures, if follows that civil servants were to blame. I hope that the Financial Secretary will tell the House what disciplinary action has been taken within the Civil Service. I do not ask him to identify the civil servants. I ask him to tell us clearly and without equivocation whether any civil servants have been reprimanded or disciplined in any way for the failures of the Scottish Education Department.
The hon. Member for Rutland and Melton told us that the matter has been "very poorly handled" in his opinion. Poor handling should not be good enough for the Government. What has been done or said to those responsible for the poor handling?
§ Mr. Willie W. Hamilton
Does my hon. Friend recall the decision of Sir Thomas Dugdale in the Crichel Down affair,? I was a member of this place when Sir Thomas, although not responsible himself for the Crichel Down incident, offered his resignation in the last sentence of his speech from the Government Dispatch box. He felt that the political master responsible for the case must accept responsibility. He took the honourable course and resigned, in striking contrast to the events that have followed the closure and sale of Hamilton college.
§ Mr. Davis
I remember the Crichel Down affair although I was not a member of this place at the time. I remember discussing it at school in what was then called current affairs. I remind my hon. Friend that there has been another incident in more recent times. It arose in 1979 when the PAC was considering a matter that it thought had been badly handled. The PAC asked the permanent secretary at the Department of Energy what had been done as a result of the failures in his Department. It wanted to 971 know what had been done in reprimanding the civil servants who were responsible. On that occasion it was felt that certain civil servants were responsible. It is a matter either of ministerial responsibility or of civil servants falling down on the job. It is clear that the Hamilton college sale was badly handled and, therefore, the Minister concerned must accept responsibility, or we are entitled to be told by the Financial Secretary, who is responsible for the Civil Service, that, through his Department, disciplinary action of an appropriate sort has been taken in respect of those who overlooked elementary considerations. The House is entitled to be told one way or the other.
Several of the reports published by the PAC show that the Committee is anxious to encourage better performance by Government Departments. The hon. Member for Scarborough made a plea for greater attention to be paid to internal audit departments within Government Departments. He drew attention to the need for permanent staff instead of temporary postings. He argued that there should be more trained accountants within internal audit departments. I have a great deal of sympathy with both of the hon. Gentleman's arguments, but I believe that an internal audit department needs both permanent staff and those who are passing through, for the latter group will learn skills and attitudes that they will take elsewhere. There is a danger of putting too much emphasis on permanent staff.
Similarly, there is a danger in putting too much emphasis on trained accountants because others can sometimes contribute to the work of an internal audit department if they have skills other than those that stem from training in accountancy. That is especially so if the aim of the department is to obtain better value for money. I should belatedly declare my interest, because I used to be an internal auditor.
The hon. Member for Scarborough and I are both arguing for a more professional approach by internal departments. In talking about value for money, it is important for departments to be conscious of the need to give value for money in a way that is slightly different from the concept that is often adopted. It is important to emphasise that the assessment of value for money should not be made in isolation, for it will involve the comparison of different programmes, as described by the hon. Member for Horsham.
The hon. Member for Northampton, South, who has been a member of the PAC for many years, argued that there should be a common accounting basis for nationalised industries to assist the PAC and the House generally in their work. In principle, I am inclined to agree with him, but in practice I suspect that there might be some difficulties. Nationalised industries are all engaged in different businesses, and what is appropriate accounting in one type of business or industry may not be appropriate in another. I throw the argument back to the hon. Member for Northampton, South by saying that his suggestion seems to be an excellent one for the PAC to consider.
The hon. Member for Northampton, South said also that he went all the way with the Prime Minister on the question of reducing the number of civil servants, but argued that in some Departments there was a need for redeployment. He referred especially to the need to investigate fraud in respect of benefits, national insurance contributions and tax. According to the hon. Gentleman's 972 figures, tax fraud is the most important of the three categories. This brings me to the twenty-second report in the Session 1981–82 on cost-effectiveness of investigation staff and the second report of the Session of 1983–84 dealing with the prevention and detection of evasion of national insurance contributions as well as social security benefit fraud and abuse.
Several hon. Members have referred to the reports, but I am surprised that nearly all of them were Labour Members. They included my hon. Friends the Members for Coventry North-East, and for Fife, Central and my right hon. Friend the Member for Ashton-under-Lyne. Apart from the hon. Member for Northampton, South, I think that the hon. Member for Nuneaton (Mr. Stevens) was the only Conservative Member to refer to the reports. I read them with great interest and I was struck especially by the figures contained in the twenty-second report in the Session 1981–82, which show that, for every official employed in detecting fraud in the Inland Revenue, there was a gain to the Treasury of £92,000 in extra tax, penalties and interest. That amount was contrasted with the average figure achieved by officials employed in the Department of Health and Social Security, which is £38,000. I should add that the figure was £170,000 if the official was checking unpaid contributions instead of checking those claiming benefit. The DHSS does not estimate the total amount of fraud under either heading.
Slightly different figures appeared in the second report Session 1983–84, which showed that the amount achieved by an official in the DHSS was £42,000. The report included a table which showed a spread from £26,000 for local office staff up to £90,000 for staff in specialist claims control. An important phrase appears in the memorandum of the Comptroller and Auditor General. It tells us that these figures for so-called benefit frauds are based onestimated savings from the termination of suspected fraudulent claims.There is a great difference between this work within the DHSS and that undertaken by the Inland Revenue. The money that is recovered by the Revenue is not based on an estimate of suspected fraudulent claims. I draw that fact to the attention of the hon. Member for Nuneaton because he talked about the DHSS as if the figures represented actual fraud. The emphasis should be put on "suspected".
The attitude of many of the staff in the specialist claims control is to stop first and discuss afterwards. Its members of staff come and go. They are specialists in hit and run. The first thing that a member of the specialist claims control will do is to stop the payment of benefits. Later he will talk about whether the benefit was justified. Benefit is often reinstated when the plaintiff appeals, and I am suspicious that the figures in the report do not allow for the fact that benefits have been rightly resumed after a member of the staff of the specialist claims control unit has left the local office. I have some personal experience from constituents' cases to that effect.
The figures show in any case that we get better value for money—and that, after all, is our aim—by employing more people to detect Inland Revenue fraud rather than employing people to stop fraudulent benefit claims.
My right hon. Friend said that the Inland Revenue has estimated that the black economy costs the Treasury a total of £4 billion a year. The Department of Health and Social 973 Security says that it cannot estimate the amount of fraud. I have my own suspicions about why the DHSS prefers to avoid any estimates. I suspect that it may be because the lack of any estimate by the Department enables some extreme Conservatives to indulge in the propagation of myths about scroungers.
The true scroungers in our society are shown by other reports published by the Public Accounts Committee. I refer specifically to the fifth report Session 1982–83, which showed that the defence industry is ripping off the Ministry of Defence. That is the report on pricing and post-costing of non-competitive contracts. The report shows that the target profit rate agreed with the Ministry of Defence remained at 20 per cent. return on capital at a time when it should have been reduced. That cost the Treasury £75 million a year. When the Financial Secretary comes to reply to the debate, I hope that he will tell us whether the review board report, mentioned in that Public Accounts Committee report, has now been received, what has happened to it and whether it has been implemented.
The suppliers to the Minister of Defence were not alone. The other scroungers in our society are the pharmaceutical industry which is also operating on noncompetitive contracts. From the tenth report Session 1982–83, one notes that the Public Accounts Committee found that the return on capital in that industry had risen under this Government from 21 per cent., to 23 per cent. at a time when it should have been reduced.
The PAC has done its job, and done it well. Now we want to know what the Government have done. After all, the Government were elected on a promise to obtain better value for money. What have the Government done to obtain better value for money as a result of these reports?
§ The Financial Secretary to the Treasury (Mr. John Moore)
This has been a long but enjoyable and illuminating debate, I think, for most hon. Members. It is one from which hon. Members, whether or not they are members of the Public Accounts Committee, will have benefited. I say that as someone who, like the hon. Member for Birmingham, Hodge Hill (Mr. Davis), was, unhappily, able to spend only a few months of my first year in the House on the Public Accounts Committee. Unlike the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), I did not have the privilege of spending six years on it. I was asked to do other things in the spring of 1975. I found that it was the most exciting and interesting Committee on which I served. I enjoyed the five or six months that I spent on the Committee. Throughout the 10 years in which I have been in the House, I have recognised the enormous value of work that it does.
I sympathise very much with the right hon. Member for Ashton-under-Lyne, the hon. Member for Hodge Hill, my hon. Friend the Member for Scarborough (Sir M. Shaw) and many other hon. Members who have commented on the difficulties of having to debate as many as 46 reports. I will make sure that their remarks and the remarks of my hon. Friends the Members for Northampton, South (Mr. Morris), and for Stockport (Mr. Flavell), the hon. Member for Fife, Central (Mr. Hamilton) and my hon. Friend the Member for Uxbridge (Mr. Shersby) about the character and the way in which we debate what I regard as important matters are brought to the attention of the Leader of the 974 House. These remarks concern the way in which we debate the reports of the PAC and face difficulties in the work that we all did on the 46 reports.
Despite the work, I join unreservedly those hon. Members who have paid tribute to the Public Accounts Committee, not only for the quality but for the quantity of work that it does. The large number of reports is a testimony to a great deal of hard work put in by the present Committee and by its predecessor chaired by Lord Barnett. Again, I unreservedly echo the tributes that have been paid from both sides of the House to the outstanding work that Lord Barnett did as Chairman of the Committee for so many years.
It was nice to hear the remarks that were made about our colleague, Sir Albert Costain, whom one could not imagine to be absent from the Chamber during debates on reports of the Public Accounts Committee.
All but two of the 46 reports are based on evidence taken by the Committee chaired by Lord Barnett. No doubt the reports of the present Committee, which has already made such a noticeable mark, are the forerunners of many more. On this occasion, I am sure that we would all wish to acknowledge the considerable contribution of their predecessors to the agenda for this debate. They contributed not only to most of the reports that we are considering today, but to the passage of the National Audit Act. I join my hon. Friend the Member for Horsham (Mr. Hordern), the right hon. Member for Ashton-under-Lyne and other hon. Members who said how indebted the House was to my right hon. Friend the Member for Chelmsford (Mr. St. John-Stevas) for introducing that measure. I am sure that he and other hon. Members will readily acknowledge the valuable support of other hon. Members—for example, my right hon. Friend the Member for Taunton (Mr. du Cann), who has long been concerned with parliamentary scrutiny of public expenditure.
The Act is the first substantial piece of legislation on national audit for 60 years. It builds on the massive foundation laid by Gladstone in 1866, and it is a worthy addition. The National Audit Act tackles some difficult issues—for example, the status of the Comptroller and Auditor General. All are agreed that he should be completely independent, yet he works closely with the Public Accounts Committee on behalf of the House. He must also enjoy the confidence of the Government, not only because the Comptroller and Auditor General uniquely enjoys access to the files of Government Departments, but because he is a valuable source of constructive criticism leading to greater efficiency, a high priority for all Governments.
In defining the relationships of the Comptroller and Auditor General to Parliament and to the Executive, the Act sought to some extent to embody existing practices, and that is not easy when practices shaped by a delicate balance of interests have not previously been codified. In other respects, too, the Act is innovatory. It gives the House of Commons an important role in the process of appointing the Comptroller and Auditor General, and firmly establishes that he is an Officer of the House, and the staff of the National Audit Office are not civil servants. A new Public Accounts Commission examines the estimates of the National Audit Office and presents them to the House.
The Act serves another major purpose. It provides a statutory basis for the value-for-money studies which I think have been greeted by both sides of the House as one 975 of the key and crucial features of our current debates. They have developed over the years on a non-statutory basis. The studies are important, and the most publicised part of the activities of the Comptroller and Auditor General. It is right that they should be supported by legislation.
The National Audit Office is now in being. I am sure that it will continue to develop and improve its techniques, increase its own efficiency and effectiveness, and provide vital support for the Public Accounts Committee. The Government wish it well.
Many other hon. Members, including my hon. Friend the Member for Horsham, the hon. Member for Normanton (Mr. O'Brien) and my hon. Friend the Member for Northampton, South, who apologised for the fact that he would be absent at the end of the debate, raised legitimately—I think it is an issue that will not go away—the question of the lack of coverage of the nationalised industries by the Public Accounts Committee.
Subsequent to the passage of the National Audit Act, the Government have encouraged the industries to look at possible means of strengthening their arrangements for internal efficiency and for reporting to Parliament. The work of the PAC is particularly important to the Treasury. Indeed, it is a vital part of the process of accounting for the Government's expenditure. In a sense, it substitutes for the shareholders' interest in that most vital line in any company's account, the bottom one. It helps Parliament and the Government to make use of the public accounts.
Our common interest in economy, efficiency and effectiveness is clearly evident from the fact that the Committee's reports more and more emphasise the messages contained in the Government's financial management initiative. We are trying to do things better, the Public Accounts Committee is rightfully exhorting, encouraging and helping us to do so, and we welcome the help.
I shall try to answer as many of the detailed points as I can. I hope that the House will bear with me if I do not have at my fingertips the details of all 46 reports. My hon. Friend the Member for Uxbridge, the hon. Member for Hodge Hill, the right hon. Member for Ashton-under-Lyne, my hon. Friend the Member for Northampton, South, the hon. Member for Glasgow, Cathcart (Mr Maxton) and my hon. Friend the Member for Rutland and Melton (Mr. Latham) all paid attention to the most recent item on the agenda—the sale of Hamilton college. The House has already spent three hours debating this issue, and the mistakes made have been fully acknowledged. Steps have also been taken to ensure that such mistakes are not repeated. The hon. Member for Hodge Hill asked me for that confirmation.
The Treasury minute said that we were, as the Committee suggested, considering whether the guidance to Departments in England and Wales needs any revision. I can now say that it does not, but all Departments have been reminded of that guidance. I cannot comment on all the specific points raised by the hon. Member for Hodge Hill now, but I will endeavour to ensure that they are answered.
There is more than enough meat in the other reports. The Ministry of Defence, the DHSS and the Revenue Departments figure prominently. That is not surprising, considering the size of their operations. Nor is it surprising that the Committee's reports are usually critical. Generally speaking, the Committee's function has been to bring to light what is not satisfactory, with a view to getting it put 976 right. Constructive and objective criticism of departmental performance is, as it should be, the Committee's main stock-in-trade.
The Treasury and, I believe, Departments generally welcome examination of the way in which Departments have carried out the policies laid down by the House and by their Ministers. That is not to say that the accounting officers positively enjoy the vast amount of detailed work that they have to put in to be able to answer the Committee's questions. However, I am sure that they accept that it is absolutely right that the PAC, representing the interests of the taxpayer, should be able to call them personally to account, as they do. Of course there must in practice be a great deal of delegation of authority within Departments. However, there can be no delegation of responsibiity or accountability to this House. Ultimately, that accountability is the accountability of Ministers but, for all practical purposes, it is with the accounting officer appointed by the Treasury that the buck stops in departmental administration. I hope very much that as the financial management initiative takes its effect and the Committee moves into the area of the more rounded studies that we have heard about, we shall come to see more reports, such as the third report of the present Session, in which a Department is commended.
I will now dip into what, on the last of these occasions, was aptly called the bran tub. The hon. Members for Hodge Hill and for Fife, Central and my hon. Friend the Member for Nuneaton (Mr. Stevens)—who has no need to apologise for participating in a debate in which most of those present are or have been members of the Committee—the right hon. Member for Ashton-under-Lyne, the hon. Member for Coventry', North-East (Mr. Park) and my hon. Friend the Member for Northampton, South all discussed the detailed reports about the black economy.
Mention was made of the cost-effectiveness of investigation staff. I take the simple point that in purely financial terms it can be profitable to employ more investigative staff wherever their efforts can lead to recoveries of tax or prevention of social security abuse which are greater than the cost of employing them. Cost-effectiveness is not the only factor. Another, which has been central to the Government's policies, is the need to reduce the size of the Civil Service, and yet another is the public acceptability of increased investigation. That has been mentioned in speeches from both sides of the House. A balance has to be struck, and the Government have approached the problem by determining the overall departmental staff allocations consistent with manpower policy, and within them to allocate as many staff as are compatible with the other objectives to the most profitable investigative work. The Departments themselves have been responsible for this as part of their overall responsibility for deploying the resources available to them.
All three Departments involved have greatly improved the cost-effectiveness of their staff allocations to this important work, and we are getting the optimum result in terms of trying to pursue all those objectives at once. The right hon. Member for Ashton-under-Lyne referred—the comparison was made implicitly by other hon. Members—to the way in which the DHSS was relatively unable to be specific about the quantification of the total amount of money lost through fraud, whereas the Revenue Departments had, in evidence, appeared to be more specific. However, the estimates of the Revenue 977 Departments are no more than figures of a global order of magnitude—figures for something which is by definition not capable of calculation.
The Treasury minute in reply to the second report of 1983–84 explains why successive Governments have not attempted the measurement of benefit fraud. It would mean the taking of random samples which would for the most part concern innocent people. However, the minute promises a reconsideration in the light of the Committee's report.
It is hard to quantify in this area, but I draw the attention of the House to the letter written on 17 Febmaiy by Mr. Judd of the Treasury to the clerk of the Committee about aspects of quantification by the Revenue. I am sure that the right hon. Member for Ashton-under-Lyne will not mind if I refer to the letter. Mr. Judd reminded the Committee thatreliable measurement, or even such measurement as has been done in the case of vehicle excise duty, is not possible.He then discusses specific direct taxes:So far as direct taxes are concerned, Sir Lawrence Airey told the Committee on 28 April 1982 that such evidence as there was would point to the size of the black economy"—these are the figures on which we have all been working—being towards the lower end of the range of 6 to 8 per cent. of GDP; this would represent about £15 billion on which the tax loss could range around £4 billion … The Revenue have always emphasised that these figures are not firmly based on concrete evidence.We all accept that, but it is important to put the figures in context.
My hon. Friend the Member for Nuneaton asked about efforts to identify and combat tax evasion where the Revenue was unable to examine taxpayers' records on a random sampling basis. Legislation involving the Revenue's powers would be required to enable the Revenue to carry out random sampling. The Revenue's powers were the subject of Lord Keith's committee on enforcement powers of Revenue Departments. The Government will need time to consider the committee's findings; it is still receiving outside advice.
On the question of the Revenue's effort on the black economy, my hon. Friend the Member for Nuneaton will be pleased to know that, although the Revenue, like other Departments, has taken its share of the reduction in the size of the Civil Service, it has been possible to increase the priority given to investigation work and to improve efficiency. There are now 10 special officers compared with four in 1979, and 300 more members of staff engaged on audit work for the next two years. Moreover, an additional 850 staff will be deployed on other investigative work in the next four years.
The hon. Member for Hodge Hill, who has constituency experience, talked of the difficulty of detecting fraud. He was right to remind us that it is a different consideration from that of the Inland Revenue. I am advised that in its second report in the 1983–84 Session the Committee expressed anxiety to the effect that the DHSS was unable to provide a reasonably sound estimate of the extent of benefit fraud. Research into the prevalence of undiscovered benefit fraud has been the subject of much debate recently. There is no easy answer without involving varying degrees of intrusion into the lives of many innocent people, as any statistically reliable 978 study would entail thorough investigation of a random sample of claimants, most of whom would be under no suspicion. It is mainly for that reason that successive Governments have not authorised such a project. We are taking the PAC's recommendations seriously and are reconsidering that point.
§ Mr. Terry Davis
Perhaps I might put two points to the Minister. First, how is it that the DHSS can estimate the amount that is under-claimed but cannot estimate the amount that is overclaimed? Secondly, is it necessary to have a random sample? Every claimant is supposed to be visited within one year of making a claim and then to be visited again on a three-year cycle. The officers who visit the claimants are supposed to check that they are receiving the right amount of money and sometimes find that they are not receiving as much as they should. I should have thought that, if enough staff were employed to do the job properly, it would be possible not so much to give an estimate as to tell us on a three-year basis how much has been found to be overpaid and how much has been found to be underpaid.
§ Mr. Moore
The Treasury shares the PAC's interest in this matter, so it is obvious that I shall pursue it further. To the extent that my right hon. and hon. Friends in the DHSS are concerned, I shall ensure that their attention is drawn to what the hon. Gentleman has said. I shall be interested to hear their responses.
§ Mr. Robert Sheldon
The Financial Secretary to the Treasury is of course aware of the Fisher committee which reported in 1973 on how the samples could be undertaken. Will he now consider that? The report is now 11 years old and most of the arguments that it advanced still apply.
§ Mr. Moore
I am aware of it, but thought that I was covering some of the basic objections that were regarded as substantive. This is one of those happy debates in which the Treasury, as always, shares the views and interests of the PAC.
The right hon. Member for Ashton-under-Lyne, the hon. Member for Hodge Hill and my hon. Friends the Members for Scarborough, for Northampton, South and for Horsham were rightly anxious about the problems surrounding the initiation of the Chevaline project and whether lessons had been learnt from it. The House will be interested to know that the project costs of Chevaline have not increased in real terms on the revised cost estimate of 1977. The system is now in service and the project is virtually complete, but the key issue is whether lessons from the early project stages have been learnt. The Comptroller and Auditor General's recent report on the Trident project does not dispute that. The Comptroller and Auditor General has examined the financial arrangements for Trident and, I believe, found them satisfactory.
The principal lessons that have been learnt are the need for strong central project management, fully integrated programmes and co-ordinated financial management arrangements from the outset of any major project. An important fact is that the Government accept that Parliament should be better informed about major projects and have taken steps to provide such information regularly to the PAC. That is an important illustration of the way in which the Committee is crucial to how the Government react and act so that we can scrutinise such projects better.
The right hon. Member for Ashton-under-Lyne and my hon. Friend the Member for Scarborough raised the 979 problems of fraud and irregularities in the Property Services Agency. I share and appreciate anxiety about cases of fraud or corruption in the Civil Service. We expect the highest standards of conduct and vigilance from civil servants and Government Departments. That is fully accepted in regard to the recent cases in the PSA. Following the discovery of the cases referred to in the Committee's twenty-fifth report for the 1981–82 Session, the PSA's procedures have been subjected to detailed scrutiny which has most recently resulted in the Wardale Touche Ross report which was published in October 1983.
The Secretary of State for the Environment made it clear that he took the report extremely seriously and that he was determined to do everything necessary to bring about the changes in the management system and management attitude that were called for. The agency began to implement improvements immediately following receipt of an interim report in February 1983. It has now completed work on several of the recommendations and action is in hand to implement the majority of the remaining ones. The PAC has recently examined witnesses from the agency on its response to the Wardale Touche Ross report. When the PAC report is available, the agency will take full account of its conclusions and recommendations in pursuing a programme of improvement initiated by the Wardale Touche Ross report.
My hon. Friend the Member for Rutland and Melton rightly stressed the critical importance of the work being done in that regard. I recognise its importance and the urgency with which it can be pursued. I can do no more than draw the attention of the House to my right hon. Friend the Prime Minister's reply to my hon. Friend the Member for Beaconsfield (Mr. Smith) on 13 March 1984 when she referred to the anxiety of the Secretary of State that the task of following up the report be pursued vigorously, and to the Secretary of State's statement on the same day.
The right hon. Member for Ashton-under-Lyne, the hon. Member for Hodge Hill and my hon. Friends the Members for Northampton, South and for Horsham drew attention to the position of nationalised industries in the production of corporate plans and the need for proper information. Obviously matters have changed considerably. I acknowledge the problem of the dating of reports. We are examining reports which, in many cases, are effectively almost three years old. This year we expect all nationalised industries to produce corporate plans. Since the PAC reported on this subject in 1982, we have made further improvements to the quality and usefulness of the plans. They are more uniform, although, as one who has been Under-Secretary for Energy, I fully accept the point raised by the hon. Member for Hodge Hill about the disparate nature of many of the businesses. All the plans now include better information about matters mentioned in the 1978 White Paper. The corporate plans are more fully integrated within the monitoring framework, and that is a significant development, following the key recommendations of the Public Accounts Committee.
My hon. Friend the Member for Northampton, South raised a considerable number of questions in an outstanding speech. He asked about guidelines on the sale of land. Such guidelines have been re-examined following the Hamilton college affair and will be examined again when the Crown obtains the right to apply for planning permission.
980 My hon. Friend the Member for Northampton, South asked about the accounting of nationalised industries. I have covered that point. I agree that there is a need for consistency, but we must understand the disparate nature of the different organisations. My hon. Friend asked also about up-to-date valuations, which may be needed when preparing for sales. We expect our professional advisers to help on that subject.
My hon. Friend the Member for Scarborough looked for an updating of the key area of internal audit, which was raised in the second report. I learned tonight for the first time that I share a past with the hon. Member for Hodge Hill. I, too, was an internal auditor, but I was given the job to learn to move through and into other areas. Like the hon. Gentleman, I recognise the kernel role of an auditing department and the transience of an audit. There is need for a happy blend of the two elements. My hon. Friend the Member for Scarborough will be pleased to know about the upgrading of internal auditors which has continued since the Treasury minute of July 1983.
Ten training establishments now offer relevant courses, and 370 staff began the first courses last autumn. More than 400 staff will start courses in 1984–85. The senior staff review has shown that there are sufficient accountants in internal audit to fill the posts that require professional qualifications. Although, like the hon. Member for Hodge Hill, I am not an accountant, I am aware that disciplines other than accountancy are important in profess ionalising those areas. Again, the hon. Gentleman and I share a similar view.
The hon. Member for Normanton referred to computers. Outside assistance is still required for computer audit, but we are beginning to train more specialists of our own.
My hon. Friend the Member for Scarborough asked about the successor to Sir Kenneth Sharp. His successor will be an accountancy adviser to the Treasury and will have charge of the Treasury's work on developing internal audits in all Departments. I cannot say exactly when he will be appointed. We would have him now had we found him. It is important to get the right man for this key appointment, and strong efforts are being made to find him.
The hon. Member for Normanton was joined by my hon. Friend the Member for Northampton, South in asking questions about the eighth report on the Health Service. I can bring him up-to-date about the Treasury minute of July 1983. As of March 1984, a joint working group of DHSS officials and local authority associations has been set up to review the working of the joint planning and financing arrangements. The DHSS inquiry into the identification and disposal of surplus property led to specific encouragement to help authorities in November 1983 to pursue an active estate management role with resources released by disposals being recycled for new NHS uses.
My hon. Friend the Member for Northampton, South will be pleased to know that the legislation required to allow Crown departments to obtain planning permission is before Parliament. My hon. Friend the Minister of State, Northern Ireland Office is in the Chamber. I will draw his attention to the fact that my hon. Friend the Member for Northampton, South, in expressing a personal view—I am sure that the right hon. Member for Ashton-under-Lyne will confirm it on another occasion—gave fair warning that the Committee would be concerning itself 981 with De Lorean and other aspects of Northern Ireland affairs and could well be spending more time on such matters.
My hon. Friend the Member for Northampton, South spoke of tax avoidance, at which the Committee had looked in the past, in relation to BL. Paragraph 21 of the Treasury minute says:BL has now provided assurances which should prevent any recurrence of the tax avoidance problem.My hon. Friend the Member for Horsham—in a speech in which he illustrated the qualities that he has displayed throughout the affairs of the PAC—asked two questions, one about EFL overshoot and the other about the special employment measures. I appreciate that he has a strong interest in this area of the nationalised industries, but I must stress that the criticism was about what was happening, and I accept the problem of concerning ourselves with reports that are quite old.
We believe that we are now doing much better, partly because of the Government's success in reducing inflation. It is no longer the case that EFLs are overshot by the sort of figures that my hon. Friend quoted. The special employment measures which have been criticised were instituted in a difficult employment situation. Unhappily, the situation is still not good. The Treasury minute accepts that a better comparative valuation of such measures is desirable.
My hon. Friend the Member for Rutland and Melton asked about the Treasury and the Foreign Office. I should have thought that it was hardly surprising if the Treasury and the Foreign Office—let alone the Treasury and any other Department—started with different views. Indeed, I thought that it was common ground in debates about Whitehall that the views of the Treasury were different from everybody else's. We hope—I say this as a Treasury Minister—to finish in agreement. It is highly undesirable for the Audit Commission to drive up National Audit Office salaries or vice versa. I take the point that my hon. Friend made and we shall take a close interest in the matter.
My hon. Friend the Member for Ludlow (Mr. Cockeram) criticised some aspects of the sixth report concerning factory estates. I remind him that an interdepartmental review has, since June 1983, been considering much the same questions as the Committee recorded. There are no simple answers or measures of efficiency and effectiveness, and the achievement of regional policy objectives is of paramount importance. The agencies, after all, are in business only because the private sector is not interested, and premises are required to attract occupiers. Some intermediate output measures are being explored.
New building is related to demand and vacancy rates and it is hoped in due course to be able to relate costs to common criteria, allowing direct comparisons between agencies. Private sector participation is desirable but it is inherently unlikely in this area on any extensive scale. Sales to occupants are, however, encouraged and help can be given in the form of mortgage guarantees.
§ Mr. Latham
My hon. Friend has given a rather laconic reply to my questions about the difference between the Foreign Office and the Treasury regarding the overseas 982 estate. Is it of any help to him in his negotiations in trying to get a common line in this matter to be assured that it is an issue on which the PAC will be keeping a close eye?
§ Mr. Moore
As I said earlier, the Treasury and the PAC seem to speak frequently with one mind and with one voice, and obviously we appreciate help and assistance in this area.
The hon. Member for Hodge Hill asked about the defence position and the review. The current review has been completed. Talks with the contractors' representatives have taken place and new arrangements will come into effect on 1 April 1984. The review board's report will be published soon. It recommended—and the parties have accepted—continued acceptance of the principle of comparability in consequence of which the profit rate is being reduced substantially. I will give the hon. Gentleman any information I can post this debate.
The hon. Member for Fife, Central and for Hodge Hill asked questions about pharmacists, as raised in the 1982 and 1983 reports. The re-examination promised in the Treasury minute was carried out. It showed that the assumption on which pharmacists were reimbursed had been over-generous to them.
§ Mr. Terry Davis
The Minister is mistaken. I referred to the pharmaceutical industry, not to pharmacists. There is a big difference.
§ Mr. Moore
Agreement was reached with the pharmaceutical services negotiating committee on a revised scale allowing for past over-reimbursements to take effect from August 1983. Subsequently, legal proceedings challenged the Department's right to recover over-payments in that way, and certain concessions had to be made. I shall deal with the matter later in correspondence with the hon. Gentleman.
I have endeavoured to cover most of the points made in a relatively lengthy debate. I must say to the hon. Member for Fife, Central that if I have missed anything in my remarks I shall give additional details in letters to hon. Members.
My hon. Friend the Member for Uxbridge and the hon. Member for Fife, Central regretted what they described as the relatively poor attendance for the debate. I can do no better than quote from Hansard in 1976:The success of the Committee's work cannot and should not be measured by the attendance of hon. Members in this House when the reports are debated, but by the way in which it changes the future of those who appear before it, and changes the way Government operations are conducted."—[Official Report, 22 January 1976; Vol. 903, c. 1623.]Those were the words of the then Financial Secretary to the Treasury, now Chairman of the Public Accounts Committee, the right hon. Member for Ashton-under-Lyne. I can think of no better way of reaffirming the Government's view of the importance of the PAC and the way in which we seek to act upon its recommendations than by drawing the House's attention at the conclusion of our debate to the right hon. Gentleman's words in 1976.
§ Question put and agreed to.
That this House takes note of the Sixth to Thirtieth Reports from the Committee of Public Accounts of Session 1981–82, of the First Special Report and First to Eleventh Reports of Session 1982–83, of the First to Ninth Reports of Session 1983–84 and of the Treasury Minutes and Northern Ireland Department of Finance Memoranda on those Reports (Cmnd. 8620, 8757, 8759, 8828, 8995, 9071, 9178 and 9191).