Property Services Agency

HC Deb 26 February 1988 vol 128 cc584-622 11.25 am

Mr. James Couchman (Gillingham)

I beg to move, That this House urges the Government to convert the Property Services Agency as rapidly as possible into a fully commercial organisation whose future would depend upon successful performance at the market place. I have noted that the second report from the Environment Select Committee on the Property Services Agency, Session 1986–87, and the Government's observation thereon, are relevant.

I am delighted to have the opportunity to move the motion. I do not win many raffles — unlike my wife, who is forever drawing her own tickets out of the tombola drum — and I still await any significant win on the football pools, but this is the second time since I was elected in 1983 that I have had the second motion on the Order Paper.

The first occasion was on 22 March 1985, but the preceeding debate finished at 2.20 pm, leaving me just 10 minutes in which to give my reasons for choosing the subject of my debate. As the Chancellor had that very week yielded to most of my demands in his Budget—my motion appeared on the Order Paper just six hours before the Budget was delivered—I did not need to labour my point. Today I am more fortunate, thanks to the comparative brevity of my hon. Friend the Member for Cardiff, North (Mr. Jones), who has presented a worthy motion to the House.

I have plenty of time—about three hours—in which to explain why I have chosen the future of the PSA as the subject of my motion and to try to develop the argument why I think that it should be converted as soon as possible into a fully commercial organisation.

When my name came up in the ballot for today's debate, I thought, "Good. It will give me another opportunity to expose the iniquity of the PSA in relation to the sale of land declared redundant to the Ministry of Defence's needs in my consituency". Upon considered reflection, it seemed that a narrow and parochial subject would be more appropriate to an Adjournment debate, and that it would be unlikely to attract much vocal support from my hon. Friends.

Thus I decided to chose the somewhat broader subject of the PSA's future. The announcement on 3 February by my hon. Friend the Under-Secretary of State that the Crown Suppliers is to be privatised — with my unequivocal support—encouraged me to think that the time is ripe for the PSA to take the first steps towards whole or partial privatisation by being set up as a Government trading fund.

Mr. Ian Gow (Eastbourne)

My hon. Friend whetted my appetite. He mentioned the sale of land in his constituency by the Ministry of Defence, that sale being the responsibility of the PSA. Perhaps my hon. Friend could satisfy my keen interest and that of my hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi) the chairman of the Select Committee on the Environment with just a few sentences on this topic.

Mr. Couchman

I can hardly wait to satisfy my hon. Friend's desire for knowledge on this subject. He need have no fear—I shall tell him and the House about it.

During Question Time on 3 February, my hon. Friend the Under-Secretary was careful not to underrate the difficulties of privatising the PSA. He did not encourage me or my hon. Friend the Member for Eastbourne (Mr. Gow), who I am delighted to see present, or my hon. Friend the Member for Wells (Mr. Heathcoat-Amory), who cannot be with us today, to believe that such privatisation was just around the corner. Indeed, he stressed that the PSA does not yet have proper commercial accounts.

At Question Time on 17 February, my hon. Friend the Minister encouraged my hon. Friend the Member for Wells to believe that he is willing to cosider seriously the recommendation in the report by Deloitte Haskins and Sells that the PSA should be set up as a trading fund, but discouraged notions of early privatisation.

On Thursday 18 February, my right hon. Friend the Prime Minister made a most important statement about the future management of certain Civil Service functions, and announced that the Government have accepted major recommendations in the efficency unit's report "Improving Management in Government: The Next Steps". In particular, my right hon. Friend paved the way for certain important executive functions to be established as agencies — some to be retained within the Civil Service but some to be placed outside it.

The PSA is already an agency headed by a chief executive, whom I am delighted to see in the Chamber. It seemed to me that this should not preclude the placing of the PSA outside the Civil Service. I suggested to my right hon. Friend the Prime Minister that, presumably, those Government activities that were wholly or mainly commercial would lend themselves to being set up as agencies.

Furthermore, I suggested that my right hon. Friend might consider existing agencies such as the PSA as suitable candidates to be placed outside the Civil Service. My right hon. Friend agreed that functions of Government that are essentially commercial services would lend themselves to being set up as agencies outside the Civil Service. She also reminded me that the Government are considering and reviewing the PSA and how best to reform its activities. I hope that today's debate will prove to be one more modest step towards that reform.

To initiate on blind prejudice a debate on a subject as important as the future of a £3 billion turnover Government agency employing more than 22,000 people would be foolhardy indeed, not to say monumentally impudent. Therefore, I have spent a good deal of time reading about the PSA to augment the limited but not encouraging knowledge gleaned through dealings with the PSA in my constituency. I have been much helped in my research by the second report of the Select Committee on the Environment for 1986–87, which deals with the PSA. I have read volume I most carefully and I congratulate my hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi)—who I am delighted to see in his place—on the concise distillation of so much evidence into just 28 pages. I must confess that my reading of the evidence in volume II was more selective. My research has also been helped by the Library and its splendid staff.

I do not want to repeat in detail what I said during Adjournment debates about the PSA's estate agency activities in the Medway towns. However, my hon. Friend the Member for Eastbourne has requested information and it was my constituency experience that led me to my unease about the present operations of the PSA. Therefore, it is as well to offer a brief resume to illustrate my case. On talking to other hon. Members who represent garrison towns and constituencies, I find that my experience is reflected in theirs. Perhaps my prejudice is not so blind after all.

The 1981 Defence review recommended the closure of the Royal Navy base and dockyard at Chatham, which was mostly in my constituency and about which I have spoken on many occasions. Aside from the cataclysmic loss of employment in the area, that closure, which was confirmed and ultimately carried out in March 1984—the Falklands campaign notwithstanding — posed the problem of what to do with 500 acres of land and several hundred old and outdated naval dockyard buildings that have not been available for upwards of 400 years.

The PSA's response to the challenge that such a disposal potential offered was twofold. The largest, and arguably the finest, collection of scheduled monuments in the country, would be mothballed — closed up, made wind and weather proof and left. The historic Georgian dockyard would simply be abandoned to the ravages of time and weather. The PSA's solution for the so-called modern — that is Victorian—or commercial dockyard was to dispose of each of many dozens of buildings and areas of land piecemeal to the highest bidder—indeed, to any bidder, as most of the buildings had long outlived their useful lives and were in poor condition.

It was only as a result of local indignation and shock at the proposal of such a shoddy solution to what the PSA saw as an inconvenient problem that Gillingham council and Kent county council prevailed upon the then Secretary of State for the Environment, Patrick Jenkin, who is now Lord Jenkin of Roding, and a more far-sighted and productive solution emerged.

A commercial dock operation was set up by the Medway ports authority in one of the basins to augment that body's operations at Sheerness. A trust was set up under the chairmanship of Lieutenant-General Sir Steuart Pringle to manage and develop the historic dockyard as a living museum. It must be said that much of the trust's funding was already committed by the PSA to substantial and long overdue maintenance work on the fine Georgian buildings.

The central and largest part of the yard, including the huge naval barracks known as HMS Pembroke was handed to English Industrial Estates Corporation, now English Estates, to undertake an integrated development. That redevelopment is now going ahead under a most imaginative scheme, but I stress that it was local pressure that brought about a worthy solution to this difficult problem.

The PSA's answer would have led to fragmented and partial occupation of the best of the outdated buildings. The rest would have fallen into dereliction, so replicating all the problems of London's docklands from the 1960s to the 1980s. It was simply too big a challenge for the PSA to comprehend and, in any case, as the land was to cease to be occupied by the Crown, the PSA was not really interested. As it was, we were left with some difficult problems in the form of unwanted tenants let into the dockyard on short leases or licences by the PSA in the twilight months of the base.

That insensitivity to the legitimate aspirations of the local community has been repeated by the PSA in its handling of the disposal of Ministry of Defence land declared redundant to the Army's needs in 1985. My hon. Friend the Minister will know that I refer to the land known as the Great Lines, Lower Lines and East Camp and Garrison No. 2 sports ground in my constituency.

Inevitably, in a garrison and Navy-based town, much land finds its way into the Crown's hands over the centuries—I stress "over the centuries". Some of it, such as the dockyard, is intensively used, and when such a facility is closed the land cries out for imaginative redevelopment. Other parts, acquired perhaps as fortification land or as a safety cordon around a great establishment, remain undeveloped open land. In time, such open space is used, courtesy of the services, as open recreation land to be enjoyed by the local people as a green lung in what is usually a tightly developed and urban area around the military establishment. That was the case in my constituency. It comes as a shock to local people suddenly to have their open space threatened by the Ministry of Defence declaring the land redundant and the PSA being commissioned to dispose of it.

When that happens, would it not be sensible for the PSA to sit down with leaders of the local community to discuss sensible development where that is appropriate and the conservation of open land where that is the responsible disposal? Such a sensible and sensitive course of action has not commended itself to the PSA. Its response to the task has been to file a series of predatory and highly-provocative planning applications.

When thwarted by local council refusal the PSA has appealed under planning law—as it is entitled to do—to the Secretary of State for the Environment. As such appeals are sent to the PSA's Secretary of State, I believe that people have a right to feel a certain amount of cynicism about natural justice. There is public disquiet about what is considered to be an incestuous relationship. The PSA has conducted its affairs in this regard in a most obtuse and awkward way. It has refused even to prove title to the land to the local council.

I do not wish to labour the particular when my motion is about the general.

Mr. Gow

Before my hon. Friend leaves this part of his fascinating speech, will he explain to my hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi) and myself what has happened so far with the land? Has the Secretary of State appointed an inspector to determine the appeal, and is it to be determined by written representation or by public inquiry?

Mr. Couchman

There have been three applications, two of them for highly contentious land. I understand that the first application is under appeal to the Secretary of State. I am not yet aware whether an inspector has been appointed or whether that inquiry will be determined by written representation or public inquiry. I suspect that, because of the vast interest and disquiet in my constituency, it will need to be determined by a public inquiry. One of the other applications has also been rejected, but I am not aware, that an appeal has been lodged.

The third application concerns less controversial land. Indeed, development on that land would be welcome to the local council and it has prepared a planning brief. I suspect that, in due course, planning permission for development of that land will be given. There are, of course, the usual matters to be ironed out between the applicant and the local council.

I have tried to illustrate a certain ineptitude in the PSA's role as the Government's estate agent. In the case of the dockyard disposal, its approach was flabby, lazy, unimaginative and uninterested. In the case of open space land, the PSA has proved unwilling to consult and insensitive to local aspirations. Another unsatisfactory feature of its role as the Government's estate agent is what I consider to be the dichotomy of responsibility. If one challenges the PSA about its disposal of land it states that it is just acting as the estate agent. If one challenges the holding Department—the MOD in this case—one is referred back to the PSA because it is claimed that the PSA is responsible for the disposal of the land. It is a sophisticated version of pass the parcel, and it is extremely frustrating.

I understand that there is a growing feeling wihin the MOD that it would like to regain control of its land management affairs from the PSA. That would certainly eradicate the problem of split responsibility. Indeed, when the MOD is rearranging its land holdings, but staying in a given area — the great military establishment, the Royal College of Military Engineering has remained in my constituency at Brompton barracks — it will wish to maintain its good relationship with the local community.

I understand from paragraphs 65–71 and 83 of the Select Committee's report—as well as comments in the more general paragraphs—that there is good reason for concern about the PSA's handling of the MOD estate. Attention was especially drawn to the "built heritage"—the handling of some 500 historic buildings gives cause for grave concern. With 270,000 hectares on some 4,500 sites in the United Kingdom and abroad the MOD needs, as the Select Committee succinctly put it in recommendation (g), sharper focus of the strategic control of the defence estate and the gradual untying of its management and capital works programme from the PSA. The prospect of losing its monopoly with regard to defence estates should be sufficient to concentrate the minds of those charged with PSA management.

Hon. Members have only a limited contact with the Civil Service and few of us have an opportunity to see the PSA in operation. We tend to encounter the work of the PSA only when there has been a particularly glaring failure or shortcoming—perhaps an unusually serious time or cost over run that excites interest of the Public Accounts Committee or the Environment Select Committee. The Derby Crown court or the Hanslope park scheme for the Foreign and Commonwealth Office mentioned in the debate on Estimates on 24 June 1986—column 249 in Hansard — by my hon. Friend the Member for Hertfordshire, West (Mr. Jones) spring to mind.

We also hear of the PSA when there has been a serious fraud such as that perpetrated by the PSA staff at Hampton court — recently successfully prosecuted—or indeed the series of frauds investigated by Sir Geoffrey Wardale during the early 1980s. It is inevitable that such scandals jaundice the views of hon. Members about the PSA. They overshadow some of the best work done or supervised by PSA.

Tribute is due to the PSA. My hon. Friend the Secretary of State for the Environment, in his foreword to the PSA's report for 1986–87, said: The Property Services Agency at its best is outstanding and has a deserved reputation for its achievements. I understand that the fabled Durbar court of the Foreign Office is a magnificent example of refurbishment. However, paragraph 40 of the Select Committee's report expresses concern about the conservation of historic buildings and states: More energetic central supervision of historic buildings to prevent their deterioration or damage by insensitive treatment, must be operated by PSA. The Committee also offers robust criticism regarding general maintenance and refurbishment. In particular it is extremely critical about the unacceptable level of backlog of maintenance, regularly running at £100 million.

When speaking of the achievements of the PSA, I must pay tribute to those who were responsible for the remarkable civil engineering project in the Falkland Islands, the Mount Pleasant complex. I have seen that considerable military establishment. I visited the islands, courtesy of the MOD, in 1985 and was grateful for that magnificent runway that allowed us to travel in a wide-bodied jet instead of the more spartan circumstances of a Hercules. In paying tribute to the PSA personnel involved in one of the great civil engineering projects of the 20th century, I also applaud the consortia of our great civil engineering companies that carried out the construction. That immediately highlights another question about the PSA's operation.

In a briefing paper distributed recently by Sir Gordon Manzie, the PSA's chief executive, much was made of the fact that almost 90 per cent. of PSA's activities — measured in expenditure terms—are carried out by the private sector. I applaud that. The key components of such private sector work include 100 per cent. of new construction, although under PSA management, and 85 per cent. of maintenance. The directly-employed labour force of about 9,500 now carries out only 15 per cent. of the maintenance work. Some 65 per cent. of design work on major projects is also contracted out, with PSA in-house teams now responsible for only 35 per cent. of such work. I applaud such contracting-out, but it again begs the question of the PSA's role.

I understand that Government land and property must be vested with some definable entity. For the time being, the PSA is a suitable holder of the 8,000-plus freeholds and leaseholds of the civil estate and the 4,500 establishments that comprise the vast defence estate. However, that is by no means an immutable situation.

The National Health Service owns many hundreds of properties. It designs and builds new hospitals and it upgrades and maintains its hospitals and clinics. It does that without the influence or help of the PSA.

Paragraph 57 of the Select Committee's report points out that the performance of the Health Service in managing its capital programme — £1 billion for this year—governed as it is by the capital procedures code, Capricode, compares very favourably with the PSA's performance, particularly in relation to the important aspects of cost and time overrun.

Tens of thousands of schools are built, maintained and owned by local education authorities. There should be little difficulty in vesting property ownership, construction and maintenance functions in individual Departments. Already, the somewhat bureaucratic property repayments services system represents a first step towards making Departments more conscious of and more accountable for their property costs.

The Select Committee clearly expressed reservations about whether the PRS system represents the best way forward to commercialisation, but at least it is a step in the right direction.

I have tried, without mimicry of the Select Committee, to touch on the important responsibilities of the PSA—estate ownership, management and agency, its duties in regard to design, construction and maintenance and its supervision of the increasing private sector contracting.

I have said little about the Crown Suppliers because my hon. Friend the Under-Secretary, in his statement of 3 February, has already cast the die about the future of that part of the organisation. He has set in train a process which should be followed in respect of the PSA.

Those who are worried about the PSA feel that the problem lies with its management. It is frequently said that the National Health Service suffers from a superfluity of administration but a lack of management. That perception of stifling bureaucracy pervades when one reads the Select Committee report on the PSA or when one has contact with a local PSA office. It would be an interesting experiment to contract-out the duties of one of the PSA's district works offices to the private sector. I cannot help feeling that such an experiment would focus sharply on the difference between a commercial contractor's or consultant's office and the present bureaucratised and over-regulated operation that pertains in the DWO. Perhaps my hon. Friend the Under-Secretary will conduct such a scheme when he is searching for more commercial accountability. Perhaps he will comment on that idea when he replies to the debate.

Paragraph 72 of the Select Committee's report concisely sums up the failure of the original concept of creating an all-embracing agency providing a "total" service to client Departments. It points out that the PRS system has given Departments a taste for increasing control of their accommodation matters. That applies to Departments other than the Ministry of Defence, to which I have referred. It is clear that the PRS system of assessed rents and delegated works and maintenance gives Departments a greater sense of responsibility, although I understand from the Select Committee's report that the accompanying bureaucracy tends to dilute that benefit.

The Select Committee recognised the problems of Departments competing for accommodation if the estate were to be fragmented. The PSA has had only modest success in rationalising its highly valuable office and storage accommodation, particularly in central London. There still appears to be an unacceptable amount of vacant space, and when the Select Committee took evidence, the PSA admitted, in its supplementary note dated 3 February, that it had about 3.5 million sq ft of accommodation "surplus for disposal" or unallocated on the civil estate in September 1986. While 3.6 per cent. appears to be a relatively modest figure, it equates to the area of about 140 superstores. I should be interested to hear my hon. Friend the Under-Secretary give the relevant figure for 1987 to see what progress has been made.

If the level of voids is a performance indicator, the performance of the PSA in disposing of unwanted space still has some way to go. The initiative and impetus for that disposal must surely come from central management. The success or failure of the disposal of that vacant capacity is a measurement of the senior management's determination in this important matter.

The findings of Sir Geoffrey Wardale on financial control and management were strongly critical and are worth repeating. In section 4.2 he said: The fundamental problem which we have identified relates to management's reluctance to acknowledge that problems exist and its lack of vigour in handling them when they are identified. We believe that this indicates a degree of complacency on the part of management, which is reflected in its attitude towards dishonesty and fraud. Section 4.3 says: This problem has resulted in a failure by management to recognise that there are shortcomings in respect of a number of important matters. Section 4.5 says: The concept of financial control is not sufficiently understood. Management control techniques are inadequate either to prevent or to detect cases or irregularity. Section 4.6 says: The policy for disciplinary action against both staff and third parties is unsatisfactory. Section 4.4 says: Furthermore where management has identified that a problem exists, for example that the existing management information system is defective, prompt action has not been taken to ensure that the deficiency has been rectified. I freely admit that those words were written almost five years ago. What worries me is that succeeding reports from Select Committees and the Comptroller and Auditor General during 1984 and 1985 reinforced the Wardale findings. More sinister is the Select Committee report, which in paragraph 6 sets out what the Committee called the, PSA's weakness of attitudes and organisation and enumerates them as follows: Lack of energetic central management of the Government Estate. Lost opportunities in the property market and inadequate use of 'spend to save' schemes because of the inflexibilityof 'annuality' accounting; serious neglect of maintenance because of inadequate funding; cost and time over-runs in project control; lack of responsiveness to clients; defective performance measurement. I said "more sinister" because four years separate the Wardale report and the Select Committee report, but there seems to have been precious little improvement in those intervening years. The Select Committee was clearly impressed by criticisms levelled by the Royal Institution of Chartered Surveyors, the Federation of Civil Engineering Contractors and the Royal Institute of British Architects, which is mentioned in paragraph 5.4. The perception of problems in the management structure and process of PSA is clearly general. Furthermore, the views of the institutions were reinforced by individual firms of surveyors and contractors.

I have spoken at length about the symptoms of a deep malaise and weakness in the way in which the PSA performs its duties and responsibilities. There have clearly been improvements since the darkest days. The present management has introduced changes that have gone some way to untying the strings between the PSA and its client departments. The PRS scheme has made those Departments more aware of their accommodation costs and information technology strategy is in an advanced stage of preparation. Sir Robin Ibbs's efficiency unit has proposed far-reaching changes in project management. Resource-cost budgeting and examination of overhead costs are now playing their part in ensuring tighter financial controls. The next major change will happen in 1988 when Departments will become directly responsible for meeting from their Votes the cost of major civil building projects funded from their expenditure programmes. They will be able to commission outside agents rather than the PSA. That will be a good test of client satisfaction. That major change was announced by my right hon. Friend the Chief Secretary to the Treasury on 23 July 1987.

I fear that although those changes may improve the situation, the PSA will still be an overblown bureaucracy, insensitive to the aspirations of its client Departments from which it will become progressively decoupled. Apart from holding the Government's Crown freeholds and leaseholds, it is difficult to identify any of the PSA's responsibilities or functions that could not be performed equally well or better by the private sector. I respect the skills of many individual personnel in the PSA, but the corporate performance leaves much room for improvement. I do not wonder at that. I suspect that professionals in land management choosing between a career in which they can exercise entrepreneurial skill in the private sector or the comparative safety of the job security in the Civil Service will choose the PSA only if they are lacking in ambition.

What is to be done? I am forced to conclude that only the disciplines of the market will bring about a sea change in the PSA's philosophy, enabling it to compete successfully for its own client Departments' business and—who knows—other private and public sector business. Furthermore, from all that I have read and heard I am forced to conclude that the Government have been tardy in accepting the Deloitte, Haskins and Sells report recommendations. Conventional Vote-accounting arrangements should give way to full commercial accounts as soon as possible or as soon as the new information technology systems allow. The PSA should be converted to a trading fund under the Government Trading Funds Act 1973. Thereafter, it should be possible to determine whether the PSA is performing well or badly. Sir Gordon Manzie admitted to the Select Committee that that could not presently be done. That statement is contained in paragraph 7 of volume 1 of the Committee's report.

Once the PSA is established as a trading fund producing a proper profit and loss account and balance sheet and given a three or four-year track record, serious consideration should be given to full privatisation by way of a management buy-out. The Crown's land holdings would not be part of such a flotation or sale. Professional and trading functions and possible special refurbishment activity would represent the core of a new public limited company.

I have spoken at length and critically about the PSA. I have not done so out of malice, although I confess that the unhappy relationship between my borough council and the PSA was the catalyst that galvanised my choice of motion. I hope that some of what I have said has been positive and I hope that my hon. Friend the Minister will be equally positive. I certainly hope that his response is more positive than the Government's response to the Select Committee report published on 20 January 1988, to which I am sure that my hon. Friend the Member for Hornsey and Wood Green will wish to refer in some detail. It remains only for me to say how grateful I am to have the opportunity to move my motion.

12.3 pm

Mr. Irvine Patnick (Sheffield, Hallam)

I do not intend to paint the gloomy picture painted by my hon. Friend the Member for Gillingham (Mr. Couchman). Sadly, because of a constituency duty, I shall be unable to hear all the debate, and for that I apologise to the House now.

I shall describe the PSA as I see it. The issue is not black and white: there are varying shades of grey. The PSA has good and bad points, as would be expected but, above all, it must try harder in order to succeed.

The Order Paper says that the second report from the Select Committee on the Environment and the Government's observations thereon are relevant. Those I have read. Indeed, they are so relevant that I looked at the remarks of my hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi). On page 125 of the report of 14 January there is a lovely little phrase that bears repetition. He was talking to my hon. Friend the Minister and he said: there is at present no objective way of assessing the success … of the PSA in the round. Now, as the responsible Minister, does that give you any cause for concern, and if it does is there any solution you see to the problem of not being able to assess the efficiency or success … of the PSA? My hon. Friend the Minister, a politician to the end, said: It does cause me concern. That is an understatement. On page 126 he said: At the moment they cannot really prove that they are as efficient as the private sector. They can say it and I have no doubt that in many areas they are just as efficient as the private sector, but at the moment there is no way in which they can demonstrate that: but I think that a trading account or commercial accounts would move towards enabling them to demonstrate that. It is against that background that I continue the story.

Since 1986, the senior management of the PSA have been boosted — I could say strengthened — to include from the private sector three non-executive members, each with a separate skill. One is skilled in construction, one in finance and the other in property. It is interesting to look at the PSA's main business. I bow to the superior knowledge of my hon. Friend the Member for Gillingham, who has obviously looked at the matter through not only a microscope but a micro-microscope.

If we exclude Crown supplies, I see the PSA's main business as the management of all the Government's civil and defence estates, the management of Government maintenance, and the design and project management of all new work. The total package of work is valued at just under £2.8 billion. That is a lot of money, and is not a sum to be sneezed at.

The staffing level of the PSA was 24,000 as at December 1987. That includes 14,500 professional, technical and administrative grades. I assume that that is what they are called. Since coming to the House I have learnt of many new things. The staff of the PSA includes a glorified direct labour organisation; directly employed labour. I imagine that there must have been teams of people sitting there coming up with that phrase. The directly employed labour totals 9,500 people. The total staffing level has been slimmed down from the fat cat days of 1979, when it was 36,000.

It is interesting to examine the way in which the slimdown was achieved. It is due to a major shift of work to private sector contractors, but further changes have also been made. During my education in the House, I have also discovered the acronym FMI, which stands for financial management initiative. The House of Commons is a place where one learns a lot. I am sure that my education must have been sadly neglected before coming here. Believe it or not, the FMI was Government-inspired. It has given Departments greater responsibility, including responsibility for their own accommodation. That must be progress.

How is the £2.8 billion spent and where does it go? I discovered that 90 per cent. of it goes to the private sector and I have no worry about that. All construction work goes to the private sector. A total of 85 per cent. of the maintenance work goes to the private sector and consultants from the private sector will be executing over 66 per cent. of all design and management on new work.

I appreciate that some of the Government's building, design and construction has not been the responsibility of the PSA. However, a further part of my education has been the examination of Government buildings. I was surprised to read that PSA projects won 14 national and international awards in 1986–87 and have so far won 31 such awards for 1987–88.

Some of those that I have seen in London would not win any awards for beauty or being pleasing to the eye. Some buildings can best be described as functional, with limited—if any—architectural merit.

I have been looking at some of the buildings that the Government own. The DES building is what I would call typical 1960s. The Department of the Environment's building is like three sore bandaged fingers sticking tip into the air, and looks as rude as the image that that conveys. The building must have been designed as a sick joke, housing as it does the people responsible for the environment. If one walks from Victoria Station, one will see that they have put up some beautiful concrete walls, of which I would have been ashamed in my time as a building contractor. They are covering those walls with a creeper, which is growing at about half an inch every ten years. The crack in the wall has been there for a long time, and whenever I examine the creeper as I walk past, I see that it has still not yet crept over the crack. It might have been easier to face the structure with some of that imitation stone that they stick on the outside of decent buildings and then wonder why they are damp inside.

The modern building that houses the Home Office is a classic concrete construction; it is pretty, well done and pleasing to the eye. The new DHSS building not far from here is also good, and the Treasury building is, I suppose, the best that money can buy. In Sheffield, we have a building that is the headquarters of the Manpower Services Commission. It brings employment to the city, but it is not aesthetically pleasing. It is a crenellated structure, a mixture of Legoland and a pyramid on which a giant has stomped, squashing it to the ground. Lest anyone should think that other Government buildings, with the employment that they create, would not be welcome in Sheffield, I assure the House that they would. But taste, style and architectural merit would make them even more welcome.

I have given these examples because I appreciate that some standards need to be set and kept for Government buildings to set an example. A cadre of professional skills is needed, from architects to stonemasons, to do work, to supervise, execute and co-ordinate. They need to be London-based, but the PSA does not need to be London-based—it could be a vehicle or shelter for such work.

To continue with some of the PSA's other duties, but not exhaustively, I may say that I learned quite a lot from my hon. Friend the Member for Gillingham. Rents and service charges are a key component of the PSA. In the United Kingdom, defence work estates and overseas estates amounted to 18 per cent. of the PSA's turnover in the private sector. My education in the House has also been improved, while I have been up in London, as they say, by learning that the Government-inspired charging system has been implemented for all Government Departments and all accommodation has been subjected to internal checks for efficient usage. But the PSA is still big business, as I said earlier, despite having 1,000 civil estate holdings fewer—that is another expression that means it has a great deal of property—than in 1980 when it had just under 1 billion sq m—0.926 million sq m of space — it still holds 1,000 holdings with 11.4 million sq m of space. Some holding; some property.

The PSA is also responsible for the disposal of surplus property; this year's yield from the sale of property will be £120 million.

The location of the PSA's staff is also interesting. Two thirds of them are outside London, with offices in Scotland, Wales, London and seven other regions; it is responsible for 143 district offices, together with Ministry of Defence work overseas, mainly in Germany. That is the size of the PSA empire.

Meanwhile, Ministers may be considering a report mentioned by my hon. Friend the Member for Gillingham recommending that the agency become a trading unit and be put on a commercial footing. But the time scale must be one of the key points for consideration, as the Environment Select Committee report said in paragraph 85. Paragraphs 85 and 86 are worthy of the House's attention. Paragraph 85 states: While we are convinced of the need to open up the PSA to competition, we are equally certain that a substantial core of skills needs retaining as one unit, even if this may be on a reduced scale; and that, if central management of the estate as a property resource needs strengthening, as we believe then PSA is the only candidate for this role. But in carrying out this important strategic task, the PSA will need to have its influence strengthened. Three more points will serve to illustrate the route that the PSA needs to follow: (a) new financial arrangements should be established for the PSA based on commercial accounts and a Trading Fund and the Government Trading Funds Act 1983; (b) in any future system, a central body of PSA expertise should be retained as one unit, as a source of specialist expertise to Departments and other clients … (c) in the light of (a) and (b), the PSA should be restructured to create a leaner, fitter and more professional organisation with reduced overheads, eliminating the wasteful overlap between professional and administrative work identified in paragraphs 54 and 55, so that the PSA can compete effectively and provide an efficient service in all its traditional areas of work.

12.18 pm

Sir Hugh Rossi (Hornsey and Wood Green)

Over the years, the PSA has been the subject of much criticism, ranging from accusations of inefficiency to corruption. All is not well with the PSA — that was the impression gained by the Environment Select Committee as a result of our yearly examination of the PSA main estimates. So we embarked on an inquiry into the PSA and published our report last March, to which the Government responded in January. This is the first opportunity the House has had to discuss the report and the reply to it, and I am grateful to my hon. Friend the Member for Gillingham (Mr. Couchman) for making this possible and for the terms of his motion, which he so ably introduced and which I firmly endorse. I am also grateful to him for his kind remarks about my Committee's work and report, which he found a useful source of reference.

The general view of the PSA formed by my Committee as a consequence of our inquiry is encapsulated in the evidence given by Sir Nigel Mobbs and Mr. Idris Pearce, who were brought in from the outside property world to act as chairman and member respectively of the advisory board of the PSA between 1980 and 1986. We begin our report with the following quotation from their evidence: The PSA contains much that is good and much that is unjustly maligned. Its weakess lies in its attitudes and its organisations, rather than in its people. To rectify this the Government and the Treasury should redefine the role and purpose of the agency, give it proper authority and delegated powers and start to assess it by results rather than by its adherence to procedures. My hon. Friend the Member for Sheffield, Hallam (Mr. Patnick) reflected those conclusions in his speech.

I am somewhat disappointed that the PSA does not appear to be a possible candidate for treatment as a freestanding agency, under the recent report to my right hon. Friend the Prime Minister, entitled "Improving Management in Government: The Next Steps". Perhaps it is because the PSA has such a large budget that the Treasury does not wish to release it from its stranglehold. But it is precisely because of the dead hand of the Treasury upon it that the PSA has not been able to perform as it should.

Mr. Gow

My hon. Friend underestimates his own powers of persuasion and his eloquence. He should put his faith in the Minister. I am sure that, following my hon. Friend's unanswerable arguments, that which he wishes to happen will happen.

Sir Hugh Rossi

I wish I had such confidence in myself as my hon. Friend appears to have. Nevertheless, as a result of his encouragement, I shall return to the argument with even greater enthusiasm and force.

In giving evidence to my Committee, Sir John Cuckney, the chief executive of the PSA from its inception until 1974, told us that, when he was first asked to accept that position, he was led to understand that the PSA would be a free-standing departmental agency", but that, in the end, it was established as part of the Department of the Environment. He considers that that decision was a very great pity", and missed an opportunity to move towards a trading fund with greater freedom from vote accounting.

As our inquiry proceeded, it became more and more apparent to the Committee how great a pity that was, and how important it was that serious moves were taken to redress the initial mistake of not creating a free-standing agency along the lines of the Crown Suppliers, which have shown the value of the trading fund route and commercial accounting.

My hon. Friend the Member for Gillingham enumerated the six weaknesses of attitudes of organisation listed in paragraph 6 of our report, and I shall not repeat them. However, I draw attention to the fact that three main interlinked themes emerge from the Select Committee's inquiry and report.

The first theme I term "investment and annuality". That as much as anything else, exemplifies the effects of too strong Treasury control and, consequently, the rigid application of time-honoured Treasury conventions. The property market is not one in which strict annuality is appropriate. The existence of so-called annuality is understandable. The Chancellor of the Exchequer raises income for the Government and the various Departments in his yearly Budget. Therefore, expenditure is calculated also on a yearly basis. However, within that annual expenditure little, if any, distinction is made between capital investment and ordinary current running costs, so opportunities to acquire good properties at reasonable cost are missed.

The PSA has recently laid a supplementary estimate to cover the cost of some favourable purchases. That may be a sign of greater commercial realism, but the system that we examined is too slow and unresponsive to market opportunities, and good buys are snapped up by somebody else.

Also, annuality forces the acquisition of leaseholds rather than freeholds. The price of a good freehold may be prohibitive within the annual budget. Therefore, a lease is taken at a lower sum within the budget. In modern days, such a lease is subject to regular rent reviews which, in the long run, cost the taxpayer a great deal more for what is essentially a wasting asset. That cannot make financial sense for a continuing organisation such as the Government.

The next main theme of the report is the maintenance of property in Government ownership. Maintenance suffers from the same problem of annuality. There was a strong tendency to look for savings in a current year, at the expense of, probably, higher costs later. An example is the roof at Sandhurst. In 1972, repairs were estimated at £300,000, but they were deferred for 10 successive years. Finally, the cost was £3 million—partly, it is true, as a result of inflation, but mainly because of the effects of the neglect of essential maintenance work over the 10 years.

Another matter of concern was the evidence of inadequate maintenance of historic buildings in the defence estate. My hon. Friend the Member for Gillingham has addressed the House in some detail on that matter. It is probably understandable that the Department of Defence is more concerned to spend available money on modern military hardware than on historic royal arsenals such as that at Woolwich, which have been shamefully neglected.

Therefore, the Committee felt that the PSA should operate a more energetic system of inspection and supervision and have a landlord-and-tenant relationship with Departments on the basis of strict tenant repairing covenants. In that respect, we welcomed the increased delegation to Departments of maintenance and minor new works which, when they have acquired the necessary skills in-house, will he able to operate much more efficiently and cost-effectively than has been the case until recently.

The third theme, which recurs throughout the report, is the need for current accounting on a commercial basis. It affects not only matters of investment and maintenance to which I have referred but such things as responsiveness to clients and management performance. In their evidence, Sir John Cuckney and Sir Gordon Manzie, the present chief executive, stressed the importance of that. Evidence from other witnesses revealed continuing cost and time overruns on construction work. Much of that was due to clients making changes to their briefs, over which a stricter regime must be exercised.

Witnesses in design and construction complained of over-long lines of communication within the Department and the PSA, too much administrative cross-checking, slow decision-making, and a high staff turnover during the contract. It was difficult for the contractors to deal sensibly when the manager in the PSA would be a different person in successive months. Tendering and contracting difficulties also came in for heavy criticism.

Mr. Andrew Rowe (Mid-Kent)

When my hon. Friend refers to high staff turnover, could he tell us whether that is a function of people being promoted or moved within the organisation, or moving out of the organisation altogether?

Sir Hugh Rossi

It is a mixture of both. Natural promotion within the PSA means that the manager in charge of a contract is moved away and that somebody else comes in, who has to start all over again and who possibly has different ideas about the way in which a contract should be run. People trying to carry out their obligations under a contract find it impossible to accept that situation recurring over a period.

Another aspect of that was criticism from, for example, consulting engineers, that the manager with whom they had to deal was an administrator, and somebody who did not have the scientific knowledge to assess the advice that they were giving—often their advice was not accepted for bad reasons, and certainly not for professional reasons. Therefore, the management of contracts is an area of difficulty. We felt that those criticisms are real and cannot simply be ignored.

On construction and design a matter not before the Committee, but of which I have subsequently heard is that Richmond terrace, which was praised just now by my hon. Friend the Member for Hallam and which looks a most attractive building from the outside, nevertheless required the intervention of the Minister for Social Security and the Disabled at a late stage, asking why there was no real provision for access for the disabled to that building. I believe that about 30 variations had to be made to the architects' plans so that the Minister could ensure that he would be able to see some of his clients, who would naturally want to visit him in their wheelchairs. I also understand that not long after occupation, the temperature in that building was running at about 90 deg F. Therefore, questions need to be asked and answered.

We came to the conclusion as a Committee that the commercial approach to the PSA operations was the only way in which the necessary internal structural changes, which have been subject to constant morale-lowering tinkering over the years, could be achieved. It was at that point that we noted the success of the Crown Suppliers' trading fund arrangements and its commercial approach.

As has already been said, it is doubtful whether the PSA system as presently constituted earns its keep. It is costly to administer, and the benefits are not easily quantified, as was admitted to us in evidence. Untying is a step in the right direction but, by itself, it is not enough.

The Committee came to the conclusion that the original concept of an all-embracing agency has failed the test of experience. The property repayment service, introduced in 1985 to bring home to Departments the cost of the accommodation that they occupy, gives a confused message, which is rapidly becoming more confused as new modifications and extra categories are introduced. We believe that the office estate must be treated as a central unit, and that the PSA should continue to have a landlord-and-tenant relationship with its clients. Our principal conclusion was that the PSA should remain the central agency, but operating on a commercial basis as a trading fund.

After we had published our report in March last year, the Government received a report that the Department of the Environment had commissioned from the consultants Deloitte, Haskins and Sells. The consultants confirmed my Committee's findings. They certainly endorsed our view that the PSA adopt commercial accounts as a prelude to establishing a trading fund. If one took the Committee's recommendations seriatim they would show that, to the extent to which Deloitte's were briefed to consider the same areas looked at by the Committee, they have come to broadly similar conclusions.

What I find most disappointing is that, although the Department has had the Committee's report since March 1987, and the Deloitte report since last summer, it has not reached a decision. Certainly it had not declared a decision on those matters in its response, published but a month ago. I hope that, in the intervening few weeks, Ministers' minds will be concentrated on this subject somewhat more than they were a month ago, especially in view of this debate. I hope that I shall hear a more positive response from my hon. Friend the Under-Secretary of State than was made in the Government's observations on last month's report.

For the purposes of the debate, I have addressed my remarks to those aspects of the Select Committee's report that were raised directly by the wording of the motion, but it might be valuable for hon. Members to look at the report as a whole if they have time, because other important aspects are worthy of consideration.

Having criticised my hon. Friend the Minister for those parts of the report to which the Government have not responded, may I say that I am grateful for those positive responses that have been made to some of our other recommendations—the fact that the defence estate is to be untied from the PSA, although no time scale has been announced; the fact that staff are to be trained in Departments to be able to deal with property, management and maintenance matters; and the fact that greater resources will be made available for maintenance purposes so that there is not a rerun of the Sandhurst situation or a continuing backlog of about £100 million a year.

This has been a helpful and useful debate for ventilating a Committee report, although I should have preferred it to take place in prime time, when more hon. Members could have considered our findings. The Opposition have fielded only one lone Front-Bench spokesman, totally unsupported throughout the debate. If they expect to form a Government and to deal with administrative matters, they should consider these matters. One can think only that they do not expect to have to deal with these problems in the foreseeable future, and therefore administrative matters are of little interest to them.

If hon. Members wish to help the Environment Select Committee and feel that is reports are of some value to the House, I point out that there are two other reports—"The Planning Appeals System", in which we deal with major inquiries such as Sizewell, and "Historic Buildings and Ancient Monuments", which has attracted great attention outside the House. I should welcome any hon. Member who is lucky in the ballot choosing those as subjects, because I fear that the Government may not find themselves able to give us time to consider them. While dealing with the Government, may I ask my hon. Friend the Minister when I shall have a response to our report on water pollution, which we published last May? The Government are well out of time.

Once again, I thank my hon. Friend the Member for Gillingham for raising this subject.

12.38 pm

Mr. Julian Brazier (Canterbury)

I congratulate my hon. Friend the Member for Gillingham (Mr. Couchman) on his fascinating speech. Like him, I have a considerable defence interest in my constituency, having both Regular and Territorial units there. I should like to focus in the next few minutes exclusively on defence, principally the PSA's role within the Ministry of Defence and as it relates to district headquarters, and then refer to the relationship with the Territorial and Army Volunteer Reserve Associations.

Last year the level of defence spending through the PSA was about £1.5 billion. About £800 million was spent on new projects and rather more than £600 million on maintentance. The dissatisfaction within the armed forces of their treatment by the PSA is running high. Buildings which desperately need repairs are left unrepaired and the state of many of the quarters is one cause of the present high wastage which is primarily among officer grades and, to a lesser extent, in other ranks. Projects are running behind. It is not just a case of insufficient funding and, indeed, it is not primarily to do with the funding level; it is the enormous amount of waste resulting from mismanagement.

I shall give the House just one example of that. When I was living in Germany a friend of mine, who was a dependant of an army officer, took a temporary painting job during the summer with the PSA, which has a large labour force of German civilians. During his first week he completed his week's allocation by Tuesday night and was immediately told that he had offended the German union by doing his work so quickly. Most of us would agree that Germans are not normally known as an idle nation, and it takes a remarkable degree of mismanagement for the level of productivity to be so low. Anybody who has lived in Germany with BAOR will relate how the productivity of those who come to repair quarters is so low as to be almost unbelievable.

The worst aspect of the PSA as the armed forces see it—my hon. Friend the Member for Gillingham touched briefly on this — is its complete and utter failure to provide anything like a cheerful and responsive service to its customers. Its attitude is one of bureaucratic muddle.

The district headquarters under the Government's financial management initiative are supposed to have much greater control over the funding of operations in their area, but on the property side progress has been absolutely minimal. There is now a small sum that can be spent directly by district commanders, but the PSA is still on one side and is not in any sense under the control of the district commander.

At every level in individual garrisons there is no real relationship with the PSA. There is neither a customer-supplier relationship, because the garrisons cannot go to anybody but the PSA, nor is there a direct command relationship. The PSA is in the cosy position of being the only body allowed to organise the supply of services, yet it is not under the direct control of those whom it is supplying.

What is the solution? My hon. Friend made a good speech about the Select Committee's recommendations, and I am delighted that part of the report suggested detaching the MOD operations of the PSA—nearly half the total—from the other operations. I firmly believe that at the macro level the PSA's MOD operations should be handed over to the MOD. The Select Committee is absolutely right on that. I may mention by the by that contacts in central staffs in the MOD inform me that even for something as basic as placing their bid for the long-term costings, the PSA is always the last to get its bid in and always the most difficult to get any accurate forecast from. It would be thoroughly healthy if the entire operation were taken over by the MOD itself.

I want an end to the remaining direct labour force employed by the PSA. The Government have made much progress in this area, but about 15 per cent. of maintenance staff are still directly employed, and the figure is higher overseas. There is no need for direct labour. All the work should be put out to contract.

To move from the macro to the micro level, the maintenance side, which accounts for almost half the total budget—more than £600 million—should be handled at district level instead of centrally from Whitehall. It would be much more efficient if district commanders had substantial powers to control maintenance in their areas and, in turn, to delegate powers to garrison commanders. It would be more efficient if the manager responsible at district level and his counterparts at garrison level were made directly responsible to the district commander, instead of being part of a framework reporting directly to Whitehall. He should not only be geographically located in the district headquarters, but the district commander should be able to hire and fire the individual. Once all the work is contracted out, at least at garrison level and possibly at district level, too, we should put retired officers into those posts. They understand the frustrations of the armed forces in relation to maintenance problems. They are also trained, at least in the case of the Royal Engineers, who used to do all this work overseas, in project management in civil engineering and works.

I hope that my hon. Friend the Member for Gillingham will forgive me for mentioning the Territorial and Army Volunteer Reserve Associations because this is on the edge of his motion. A further complication is caused by the fact that Ministry of Defence works that apply to territorial units are handled by the TAVRAs. They are at least equal in incompetence to the PSA. Furthermore, those completely unnecessary bureaucratic bodies— I have never discovered anything useful that they did—are not even conterminous geographically with district headquarters. A unit that deals with one district headquarters whose companies are dispersed to separate locations may have to deal with two different TAVRAs. Paperwork is the bane of all units' life, especially territorial units where the small permanent staff are overstretched, so they have to deal with two more bureaucratic organisations to get their drill halls repaired.

Severing the Ministry of Defence work from the PSA would give the Secretary of State for Defence an excellent opportunity to reopen the debate on whether we need the TAVRAs, especially in the light of the structure that I propose for bringing the work much closer to the user.

If the Government carried out the Select Committee's recommendation to hand over the work to the Ministry of Defence, it would make an enormous difference to morale in the armed forces. Within the same budget, a much larger proportion of quarters and barracks would be brought up to standard, which would do much for our soldiers' morale.

12.49 pm

Mr. Ian Gow (Eastbourne)

I congratulate my hon. Friend the Member for Gillingham (Mr. Couchman) on the subject that he has chosen for the debate. It was chosen wisely, and my hon. Friend's speech matched its importance. You have had the misfortune, Madam Deputy Speaker, to miss not only the speech by my hon. Friend the Member for Gillingham but the speech by the Chairman of the Select Committee on Environment, my hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi). He made a speech filled with a deep knowledge of the Property Services Agency, which he gained throughout the years of his distinguished chairmanship of that Committee. Our debate has been enriched by those two speeches.

My hon. Friend the Member for Hornsey and Wood Green saw fit to rebuke the Labour party because at no stage today has there been more than one member of that party in the Chamber. However, I do not know why my hon. Friend reserved his rebuke for only the Labour party. Ought not that rebuke to have been applied even more severely to the Liberal party, not one single member of which has seen fit to attend this most important debate? Is not the absence of the Liberal party even more astonishing when it claims, rather spuriously you may think, Madam Deputy Speaker, to be the party that cares passionately about the environment and about the buildings entrusted to the care of the PSA?

I wish to make only one other preliminary observation, and that is to express my respectful disagreement with my hon. Friend the Member for Gillingham about security of tenure being one of the characteristics of those who are employed by the PSA. It is within your recollection, Madam Deputy Speaker, that not so long ago a former chief executive of the PSA, following an appearance before the Public Accounts Committee, of which I have the honour to be a member, left office on account of the most unsatisfactory replies that he had given to a Select Committee of this House. So my hon. Friend was wrong to say that security of tenure is one of the characteristics of those who work for the PSA.

Before I come to the main part of my speech, I want to address a serious question to my hon. Friend the Minister, which arises out of two answers that I received from our hon. Friend the Parliamentary-Under Secretary of State for the Armed Forces. Those replies were given six weeks ago today, on 15 January 1988. They revealed a deeply disturbing state of affairs. My hon. Friend told me: As at 30 November 1987 … the total number of service houses and flats"— that is to say, houses and flats owned by the Ministry of Defence— vacant was 15,801." —[Official Report, 15 January 1988; Vol. 125, c. 412.] Of those 15,801 empty houses, the Ministry of Defence had decided that 2,397 were surplus to its requirements. Even if one deducts 2,397 from 15,801, there are still more than 13,000 empty houses and flats owned by the Ministry of Defence. Of course, the House understands that there have to be empty houses and flats owned by any landlord. Time has to be allowed for a changeover. Sometimes there is an incoming tenant who has to be decided upon.

I should like to ask my hon. Friend who, although not the Minister responsible for housing, is an Under-Secretary of State in the Department of the Environment, whether he is quite certain that none of those 13,000-plus empty houses and flats, none of which were surplus to the requirements of the Ministry of Defence, could have provided a home for the homeless in any part of the kingdom.

Does my hon. Friend understand how absurd it would be for a house or flat owned by the Ministry of Defence, and not in a sensitive area where there might be security implications which made it impossible to use it, not to be available? Will he please consider that question? The PSA may manage those houses and flats, which is why the matter is relevant to the debate.

Will my hon. Friend inquire whether we could, under the short-hold system introduced by the Housing Act 1980, make some of those houses and flats available even on a short-term basis to house the homeless or to provide mobility, thus enabling the unemployed to move from one part of the country where they cannot get a job to another area where they may be able to get one?

The other part of the answer given on 15 January was: 2,397 houses and flats had been declared surplus to MOD's requirements and were still owned by the Ministry of Defence. Of these, PSA had been instructed to sell 844". I put it to my hon. Friend the Minister that I have little doubt—perhaps he has no doubt—that all, or virtually all, those 844 houses and flats are empty. My hon. Friend knows what happens to empty property. It gets vandalised. Local authorities tend to receive no rates and, most appalling of all, an empty house is unable to provide accommodation either for those who seek it or for those who would seek it if they knew that it was available.

Sir Hugh Rossi

I am grateful to my hon. Friend for giving way and for his kind remarks about me. Does he agree that if the PSA were established as a free-standing trading fund, it would have an incentive to realise its assets more readily and put the money in the bank so that it could be used for what the PSA wants to use it for?

Mr. Gow

I agree with my hon. Friend. I shall return to that matter.

I remind my hon. Friend the Minister that, at 15 January, the PSA had been instructed to sell 844 houses and flats. I am urging him, when he gets back to 2, Marsham street, the building whose architectural features my hon. Friend the Member for Sheffield, Hallam (Mr. Patnick) had occasion to mention, to ask his private secretary to get an answer to these questions: how long have the 844 houses and flats which the Ministry of Defence has asked the PSA to sell been empty, and how long is it since instructions to sell were received? I put that question because the Under-Secretary of State for the Armed Forces did not answer a key part of the question that I asked him last month. I asked: how many houses and flats owned by his Department are surplus to requirement; in how many cases the Property Services Agency has been instructed to sell such properties; and how many properties remain unsold (a) more than four months, (b) more than 8 months and (c) more than 12 months after the Property Services Agency was instructed to sell them. My hon. Friend the Under-Secretary replied: I regret that the information required to identify the number of the properties remaining unsold after four, eight and 12 months is not available to the PSA".— [Official Report, 15 January 1988; Vol. 125, c. 411.] I am making a grave charge against my hon. Friend the Under-Secretary of State for the Armed Forces. However, although the charge is levelled against him, it is, I am afraid, also a charge against my hon. Friend the Under-Secretary of State for the Environment, for whom I have a great regard. When Ministers give answers that involve more than one Department — something that happens frequently — the other Departments concerned are always consulted. Therefore, I think that my hon. Friend the Minister will have told my hon. Friend the Under-Secretary of State for the Armed Forces that the information was not available to the PSA.

Mr. Couchman

My hon. Friend makes an extremely telling point. I am sure that he will be interested in the question that I asked my hon. Friend the Minister earlier this week. I asked him how many outstanding planning applications the PSA had and for some detail on that. The Under-Secretary replied: The information is not available centrally and could only be obtained at disproportionate cost." — [Official Report, 22 February; Vol. 128, c. 60.] Does my hon. Friend agree that that suggests a certain lack of central control of the Property Services Agency?

Mr. Gow

Yes, I agree with every word that my hon. Friend says. His intervention reinforces my point to the Minister. The PSA knows how many houses and flats remain unsold four, eight and 12 months after instructions to sell have been received. It is deeply regrettable that my hon. Friend the Under-Secretary of State for the Armed Forces should have given a parliamentary answer which, to my knowledge, is untrue.

I have read most carefully the report of the Select Committee on Environment. I believe that that report has done a great service to Parliament and to Ministers.

My hon. Friends will note with satisfaction that the hon. baronet, my hon. Friend the Member for Ealing, Acton (Sir G. Young) is now seated in his rightful place on the Treasury Bench—a Bench from which I deeply regretted his departure some years ago. I hope that my hon. Friend will be able to contribute to the debate, because, in common with my hon. Friend the Member for Hornsey and Wood Green, he has a profound knowledge and understanding of the PSA.

I have read most carefully the report of the Committee of which my hon. Friend the Member for Hornsey and Wood Green is Chairman. I believe that the most telling paragraph is paragraph 72. Of all the paragraphs—there are many — this was the one that most caught my attention. I wish to remind the House what that paragraph said: The original concept of an all-embracing Agency has failed the test of experience. PSA was established to provide a 'total' service to Departments, but its functions are gradually being chipped away by its client Departments. It has been found to be too impotent, and too cumbersome, with lines of communication that are far too long. The concluding sentence of that paragraph — the last which I wish to read—states: As a result, PSA is facing a consumer revolt. Its clients have acquired some direct responsibility under the PRS delegations, enjoy the freedom it gives them and some at least are wanting more. I am sure that they are the words of my hon. Friend. They display the kind of clarity and precision that we have come to expect from my hon. Friend who is a distinguished lawyer as well as a distinguished author.

The House will note that we have been joined by my hon. Friend the Vice-Chamberlain of Her Majesty's Household. He is here in weekend attire to listen to this important debate, initiated by my hon. Friend the Member for Gillingham. There may be military establishments managed by the PSA in the Vice-Chamberlain's constituency — it is almost certain that there is something in his constituency managed by the PSA. If the PSA has been invited to sell something my hon. Friend should not be too anxious because I do not suppose that it will have been sold yet. However, I do not wish to be led astray, even by the most welcome presence of the Vice-Chamberlain.

I had just quoted and paid tribute to the report of the Select Committee. I wish to contrast that report, which pointed out the deficiences of the PSA, with the words of my right hon. Friend the Secretary of State for the Environment in the annual report of the PSA for 1986–87 —the latest available report.

Those words have already been quoted, quite rightly, by my hon. Friend the Member for Gillingham. If, for the second time in the debate, those words are quoted from the Conservative Benches, it is because they are words of my right hon. Friend, and, above all people, the Parliamentary Under-Secretary of State should heed the words of the head of his Department. Indeed, from time to time, the Secretary of State will be making reports on the progress of the Parliamentary Under-Secretary, and therefore I commend his words to my hon. Friend. It may be that I shall make a report to my right hon. Friend on the speech of the Parliamentay Under-Secretary when he comes to reply. One of the joys of being out of office is that one does not have reports written about oneself by Ministers.

The Vice-Chamberlain of the Household (Mr. Tristan Garel-Jones)

They are written by the Whips.

Mr. Gow

My hon. Friend says that reports about us are written by the Whips. I will have a discussion with the Vice-Chamberlain about that on another occasion because otherwise you, Madam Deputy Speaker, might rule me out of order.

In the PSA's annual report, my right hon. Friend the Secretary of State said: The Property Services Agency at its best is outstanding and has a deserved reputation for its achievements. I find myself in respectful agreement with those words.

Until two and a half years ago I had, by one of those accidents of events, ministerial responsibility for the PSA. The remainder of my speech will not be a criticism of the PSA. On the contrary, it will he directed at the sheer impossibility of the tasks that Ministers have asked it to perform.

I underline the tribute that my right hon. Friend the Secretary of State paid in the PSA's annual report. Ministers are to blame for the PSA's shortcomings, which were inevitable given the tasks that we asked it to carry out. I include in my rebuke to Ministers a rebuke to myself. I must accept my share of the responsibility for the failure of the PSA, or its diminished successor, to carry out the role that we asked it to perform.

There is a devastating sentence later in the PSA report. It was overlooked by my hon. Friend the Member for Gillingham, although he reminded the House of what appears on page 11. My hon. Friend reminded us that 85 per cent. of the maintenance work for which the PSA is responsible is carried out by private contractors. He said that all new construction work is done by private contractors. That comes as no surprise to me. If all new construction work is not done by the PSA but by private contractors, and if 85 per cent. of maintenance work is done not by the PSA but by private contractors, do we need the PSA to be involved in new construction or maintenance work?

If a Government Department wants a new building, why is it necessary to involve the PSA? If a Government Department believes that rain is coming in through its roof, would it not be sensible for it to obtain, from a builder or roofer, quotations for its repair? Do we need the PSA?

My hon. Friend the Vice-Chamberlain, who is clad in his weekend attire, may be about to make a journey to his constituency. There he may see roofs that were damaged during the storm of 15 October 1987. Will he be saying to his constituents, some of whose roofs may not have been repaired, "You must go to the PSA. It will be able to arrange for your roof to be repaired"? That advice will not be given by my hon. Friend.

If asked by his constituents about repairs to their roofs or leaking taps or about repainting a factory, warehouse or office he would not say, "Go to the Property Services Agency and have it done." On the contrary, he would suggest tht his constituents went to a builder if they wanted a new roof or a painter if they wanted their property painted. Even if one of his constituents said that he needed a new warehouse, he would tell him to go to an architect who may be able to design the new warehouse.

Do you, Madam Deputy Speaker, see why the chief executive of the Property Services Agency agrees with that? The sentence in the PSA annual report, which was overlooked by my hon. Friend the Member for Gillingham, made a deep impression on my mind. As I have said, the PSA annual report was published after my hon. Friend the Member for Hornsey and Wood Green had written his outstanding report. My hon. Friend the Vice-Chamberlain has only been able to rush in to the Chamber from his other activities. However, my hon. Friend the Member for Hornsey and Wood Green made a telling point — not within hearing of the Vice-Chamberlain—that his report had been produced by the Select Committee on 23 March 1987. Have I got that right?

Sir Hugh Rossi

Yes.

Mr. Gow

By common consent, today is 26 February 1988. My hon. Friend the Member for Hornsey and Wood Green reminded the House that his report was produced in March last year and that it was not until January this year that he received a response. I am glad that the Vice-Chamberlain is present. There are now three Ministers on the Treasury Bench. We do not always have three, so we are greatly honoured. My hon. Friend the Member for Ealing, Acton was also on the Treasury Bench a moment ago but he is no longer a member of the Administration. We can remind those three Ministers of the point made by my hon. Friend the Member for Hornsey and Wood Green. The Government have many resources, the Department of the Environment has many Ministers and the Property Services Agency has 25,000 employees. My hon. Friend the Member for Hornsey and Wood Green asked why it took from March 1987 to January 1988 to produce a reply to the report.

I have news for you, Madam Deputy Speaker. If you and I got together to prepare a reply to the report we could have completed it within 24 hours. The report is so clear and lucid. Why did it take the Government so long? How many Ministers are there in the Department of the Environment? I believe that there are six or seven. There are also some Ministers in the House of Lords.

My hon. Friend the Member for Ealing, Acton has just returned to the Chamber. That is good news. I remind hon. Members that my hon. Friend held the same position in the Department of the Environment as my hon. Friend the Member for Hornsey and Wood Green once held. If I have that wrong I hope that I will be corrected. Therefore, two former Under-Secretaries of State for the Environment are in the Chamber. If my hon. Friend the Member for Ealing, Acton was in the Department of the Environment and in charge—as he was — of the PSA and had received a report dated 23 March from the chairman of the Select Committee — one of the most senior and respected figures in the House—when does he think that he would have replied?

Sir George Young (Ealing, Acton)

I am glad to have this unexpected opportunity to intervene so early in the debate. I recall receiving several reports from the Select Committee. On one occasion, my hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi) even threatened to deduct my salary because of the PSA's performance.

I have no doubt that he would have received some response and I am sure that when my hon. Friend the Minister replies he will give a full account and a proper answer to the questions that my hon. Friend has posed, a number of which I was not in a position to listen to.

Mr. Gow

I do not want to be guilty of tedious repetition by making my speech again. That would be testing the patience of the Chair—

Madam Deputy Speaker (Miss Betty Boothroyd)

I am listening carefully.

Mr. Gow

I do not want to be led astray because I want to get to the key passage that was overlooked by my hon. Friend the Member for Gillingham. I wanted to call in my support — one may think this strange — the chief executive of the Property Services Agency and my right hon. Friend the Secretary of State. On page 2 of the report there is a picture of my right hon. Friend the Secretary of State for the Environment. The report is available to all my hon. Friends. The Parliamentary Under-Secretary keeps a copy of it by his bedside—we all know that. It is an excellent photograph. I do not know whether it was taken by a photographer employed by the Property Services Agency, but we let that pass.

On page 3 there is a picture of the chief executive of the PSA—again, an excellent photograph. I pay tribute to the photographer; again, he could have been from the Property Services Agency.

Mr. Rowe

Does my hon. Friend have any views on the possibility that the excellence of the photographs reflects the excellence of the people being photographed, and that that excellence may well depend on the fact that they are both maintained by the Property Services Agency?

Mr. Gow

I agree with my hon. Friend. A number of properties in his constituency are managed by the agency. I am paying tribute not only to the quality of the photographs but to that of the people. Who appointed my right hon. Friend the Secretary of State? My right hon. Friend the Prime Minister did. Who appointed the chief executive? My right hon. Friend the Secretary of State for the Environment did. I agree that both of them are of the highest quality, just as one would expect from appointments made by the Prime Minister or the Secretary of State.

I do not want to be led astray any more, because I want to come to the important sentence that supports what I am saying, which is that the Property Services Agency is being asked to do something that it should not be asked to do. My hon. Friend the Member for Hornsey and Wood Green could not have taken it into account because it was published after he wrote his excellent report. I hope that the hon. baronet, my hon. Friend the Member for Ealing, Acton will give me his attention. I see that my right hon. Friend the Financial Secretary to the Treasury is now in his place. I give him a special welcome because he occupies the Treasury Chambers in Great George street. That building is not a monument to brilliant management by the Property Services Agency. Alas, I was a Minister there only for 10 weeks. I add that I did not leave it because it was such a ghastly building, but I must say that it is not well maintained. I can well understand the PSA trying to get its own back on the Treasury by deciding not to treat it particularly kindly. The PSA report says: Work for the biggest customer — US forces in this country—has been increasing considerably in volume in recent years.

Mr. Garel Jones

It is on page 9.

Mr. Gow

The Vice-Chamberlain is closely following the debate. It is on page 9. If the Financial Secretary would like a copy, I am sure that we could get one for him. It says: Work for the biggest customer — US forces in this country — has been increasing considerably in volume in recent years. It goes on: That for British Telecom, formerly a very large customer, is running down and will cease altogether in the next few years as the privatised British Telecom make their own arrangements for work. Just so. British Telecom was a captive customer. It has moved sensibly, wisely and to the advantge of all into the private sector. It currently employs PSA for a great deal of its work. In the annual report, we read that in the next few years it will make its own arrangements for work. That is work currently done by the PSA. The Vice-Chamberlain will read the words "will cease altogether".

That is the theme of the debate. It was also the theme of the response that was given by my right hon. Friend the Chief Secretary in his answer to my hon. Friend the Member for Edmonton (Dr. Twinn), the Parliamentary Private Secretary to the Minister of State, Department of Energy: From the same date"— That is, 1 April this year— Departments will be able to test the market, and to use agents other than the PSA for design and project management". Later in my right hon. Friend's reply—I shall make a copy available to the Vice-Chamberlain — the word "untying" is used on two occasions. Again, that is of the greatest importance. My right hon. Friend said: The introduction of competition, by untying Departments from PSA, will provide an opportunity for Departments to test other sources of supply as well as an incentive for further improvement of the efficiency of services provided by PSA. That is what we must do. We find the word "untying" in the next paragraph. It states: Under untying"— My hon. Friend the Member for Gillingham may think that that is not a felicitous choice of language— Departments will not necessarily be expected to test the market from the outset or to use agents other than the PSA." — [Official Report, 23 July 1987; Vol. 120, c. 433.] That does not go nearly far enough. I wish that my right hon. Friend the Chief Secretary had gone further.

In the foreword to the annual report, the Secretary of State said: 1986–87 was a year of preparation for change as individual Government Departments have been getting ready to accept greater responsibility for managing their own operations, including their accommodation requirements. That should happen. Government Departments should be free to decide whether to engage the Property Services Agency or another agency. To this day, I have not understood why the Ministry of Defence does not instruct an estate agent to sell the houses, flats, land or buildings that are surplus to its requirements. Earlier, the Vice-Chamberlain nodded his assent when I invited him to agree to the proposition that if one wants to build a new building in Watford, one would instruct an architect to design it and a builder to build it.

If my hon. Friends wished to sell a house, they would not go not to the Property Services Agency, but to an estate agent. I put this point to my hon. Friend the Member for Hornsey and Wood Green. If he had a house or flat in this country that he wished to sell would he go to the Property Services Agency? Would he put a telephone call through to the chief executive or to his hon. Friend the Under-Secretary of State for the Environment asking whether he would be able to arrange for that house or flat to be sold? I do not think that my hon. Friend would do that, but I shall give way to him if I have misunderstood his intentions.

I ask myself the grave question, "Why do we still have so much tying?" I know that I have said that my right hon. Friend the Chief Secretary to the Treasury used the word "untying" twice in that telling parliamentary answer, but there is still too much that is tied between the Property Services Agency and Government Departments. The more we can allow Departments to choose who should carry out the functions that are at present too frequently still carried out on a monopolistic basis, the more we can allow freedom and competition, which will help the Property Services Agency to become a better organisation, more responsive to the needs of Departments and able to render a better service.

I hope that when my hon. Friend the Under-Secretary replies to the debate, he will explain that the Government intend to liberalise the Property Services Agency still further and that Departments will be able to choose who they wish to carry out the services that are presently carried out by the PSA. As the House knows, I look forward to the day when the Property Services Agency will be entirely in the private sector.

1.32 pm

Mr. Andrew Rowe (Mid-Kent)

When I entered the Chamber this morning, it was a lovely day. I do not know what it is like now outside in the big wide world. As I walked through St. James's park, I became increasingly aware of the pleasure that was being derived by a number of Londoners with nothing to do but exercise their dogs; by a number of tourists who were enjoying the view; and by the large number of people such as myself, who were using the paths in St. James's park to get from their home to their place of work directly through one of the more pleasant parts of this great city.

I could not help reflecting that the park would make a wonderful site for a large number of private houses. Why should a relatively small number of people enjoying themselves prevent the exploitation of that central space for private housing? We know that the royal parks are run at a loss. Indeed, if one looks at the scandalous way in which their landscape is being allowed to age, one realises that the loss at which they are run should, for the purposes of environmental conservation, perhaps be increased.

I wondered why we do not have applications for private housing in St. James's Park, Hyde Park or Richmond Park. Of course, there are two reasons. The first is that, by a happy accident of history, the royal parks are protected by a Act of Parliament and if planning applications were received they would have to be dealt with through an Act of Parliament in this place. The second reason why the threat to the London parks is not great—not yet—is that among the people who walk those paths and enjoy the sunshine are Ministers of the Crown and senior civil servants. That is why London's inhabitants enjoy this large and beautiful environment.

When one gets out to some insignificant provincial centre, such as the Medway towns, there are no senior civil servants to walk their dogs and enjoy the sunshine. Ministers come only occasionally usually under pressure from hon. Members — such as my hon. Friend the Member for Gillingham (Mr. Couchman), whose debate this so aptly is—and, as soon as they have been, they are whisked away in their ministerial cars, another troublesome assignment duly clone.

As a consequence of this London-based introversion, what happens to green spaces in places such as the Medway towns is of no importance. It takes a poor second place to the need of the Property Services Agency in this respect alone — as this debate has so well demonstrated — to act precepitately. In nothing else, as far as one can tell from this debate, does the PSA exert itself to act with any dispatch, but when it comes to putting in planning applications on the Great Lines at Gillingham, of course the PSA tries to act with such dispatch that it does not even have the courtesy to sit down with local authorities to work out the best way of dealing with their conflicting needs.

Mr. Couchman

I am especially pleased to see my hon. Friend here, because he shares this problem with me in the Medway towns. In view of the answer to my question on Monday 22 February, this week, it may not be known to central management of the PSA that any planning applications have been made for development in the Medway towns.

Mr. Rowe

That is a possibility, but one diminished by the activity of my hon. Friend, who has at least told Ministers on several occasions—on some of which I had the honour of helping him, I hope— about the threat under which the Great Lines lie.

In case you do not have this piece of knowledge, Madam Deputy Speaker, the Great Lines are a large area of green space which has remained a green space because, for defence purposes, no buildings were allowed to be erected on it. Given that this land has been insulated from any development or planning by local councils, the local councils have made shift to place their houses, shops and other buildings in other places, leaving this as a guaranteed green lung for the people of the Medway towns.

There it stands on a great hillside overlooking the Medway towns, easily the most prominent natural feature for many miles, in an area that has been sacrificed to allow the people of south London to move out into the countryside. The whole of the rest of the Medway towns is now a network of housing estates, built densely, partly because the local authorities have been able to say, "There is this large area of green space for the recreation of the people of the Medway towns."

Now we find that the Ministry of Defence no longer has a need for this open space. The Ministry hands it over, as it is bound to do, to the PSA. The PSA is under an obligation to maximise the profitability of the land it holds, although, as we have heard in the debate, its performance in that task is curiously patchy.

Without any consultation with the district councils and the people most directly concerned, the PSA submits ad hoc, haphazard planning applications in a way which will cause maximum damage to the environment. As we have heard, parts of that space could properly be developed, but oh no, we do not have any consultation with a Government agency about that. We must simply accept planning applications thrown in by the PSA as it suits it. Were it not that this debate has demonstrated that the idea of a Machiavelli lurking in the PSA is absurd, I would wonder whether these applications are as haphazard as they appear. Perhaps they have been worked out on some amazing plan, so that by developing these parts other parts will become less easy to defend. That is unacceptable, and I urge the Minister at least to give us an undertaking that the PSA will consult the people of the Medway towns about the disposition of the whole of this area.

Within my constituency there is a large farming estate which, after a great deal of searching by the MOD, was chosen as the ideal site for a training area. Everybody in my constituency welcomed the MOD application to use this area as a training area, but it will not happen—for one simple reason. The PSA was outsmarted by a neighbouring farmer simply because its procedures are so cumbersome, and, as the Select Committee report pointed out, its lines of communication so long that it was unable to respond at anything like the pace needed to conduct a simple commercial transaction in the market place.

If that is the case, what possible defence can there be for the PSA acting as the Government's estate agent? It is perfectly clear both from this example and those adduced by my hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi) this morning that the PSA is incapable of acting in the commercial market as an estate agent, and that that function should be taken from it.

If, as we have heard today, Ministers are unable to answer questions of simple fact and to comment on matters of detail in the Select Committee report, does that not suggest that my hon. Friend the Member for Eastbourne (Mr. Gow) is right and that both the task to which the PSA addresses itself, as well as the agency, are too large, too amorphous and too confused to be effective?

I had intended to restrict my remarks simply to examples from my local area, but this debate has demonstrated to me beyond peradventure the paramount need for an overhaul and a grand redistribution of functions. The PSA seems to be constitutionally incapable of performing the many functions which it is expected to perform. Most of them should be handed to other people, and the expertise which it has acquired in design and certain other areas should be concentrated on a small area and made available to anyone who chooses to use them.

One of the most interesting pieces of information that I have gleaned recently is that the local authority in Nottingham has carried out a useful experiment in using schools as joint property. As rolls fell, the authority found ways of keeping open schools by using some of the buildings as community centres for old people and as day bed centres for minor operations. Provided that people can act directly with other Departments, such joint use of buildings will occur more frequently, but it will happen rarely, if ever, if everyone must go through a third party.

For that reason, too, I believe that the role and function of the PSA should be diminished and that responsibility for making management decisions should be devolved to those who are directly concerned with the outcome.

1.45 pm

Mr. Roland Boyes (Houghton and Washington)

I shall speak briefly to give the Minister ample time to reply. I shall be asking him some questions, and if he cannot answer them immediately, I shall be happy if he writes to me.

I congratulate the hon. Member for Gillingham (Mr. Couchman) on his success in the ballot and on choosing an important subject for discussion. He said that it was the second occasion on which he had been successful, but today he is more fortunate in having adequate time for his motion to be fully discussed. He said that he did not have as much luck with the football pools, but that is shared by all of us.

Although I did not agree with everything the hon. Gentleman said—he would not expect me to—I thought that his speech was interesting and well-argued. It will certainly please his constituents. But it was no surprise to me that he made such a logical speech. The hon. Gentleman's higher education was at Newcastle university and some of his political education was gained in the north-east when he attempted to win the seat of Chester-le-Street. I believe that it was his first attempt to gain a parliamentary seat. He probably did not go there with much hope of success, but his experience there helped him to get a seat where people welcomed his views. It is unfortunate that many of the important aspects of his education in the north-east have been thrown overboard during the past few years, but from his speech today I believe that there is plenty of potential for recovery.

The fate of the Property Services Agency has been much discussed recently, and the debate is opportune. I regret that the Government have not provided time for a full debate, but have relied on a Back-Bench motion debated on a Friday when hon. Members on both sides of the House have busy schedules in their constituencies. But, as the hon. Member for Gillingham said, it requires luck for the second motion to he reached. If the first motion had been so important that many people wanted to speak on it, we should not have had even this short debate.

For too long, the future of the PSA has been dogged by uncertainty, with its fate hanging in the balance. In whatever direction the Government steer the PSA, the present position causes uncertainty and much loss of morale among the staff. There would be many advantages in retaining the PSA in the public sector. The opportunity for it to demonstrate its viability and ability is affected by the Government's constant interference. It appears to many, both inside and outside the PSA, that the Government are deliberately attempting to demonstrate that the PSA cannot work, by creating an air of uncertainty. To Opposition Members, that calculated destruction is abhorrent.

There has been a continuing reduction in the number of staff from some 39,000 to about 24,000 a cut of about 36 per cent. The maintenance arrears come to over £100 million on the civil side and over £100 million on the defence side. Although the Under-Secretary announced an expanded budget for that work in the next financial year, the PSA no longer has adequate staff to tackle the problem. It is ludicrous that the Government's policies have undermined the PSA's work in that way. If the PSA is to become a more commercially minded organisation, it must be allowed to do so without continuing and continuous ministerial interference.

It is Ministers who have decided that two thirds of PSA design work must be handled by private consultants, as a matter of policy, irrespective of whether in-house design is better and cheaper for the taxpayer. It has been demonstrated that it is about two and a half times more expensive to undertake externally the PSA's works programmes. Not only that, but the use of private consultants jeopardises the integrity of the PSA's work.

The Public Accounts Committee was recently told that the PSA had blacklisted 31 firms for fraud or performance. Many comments have been made about the staff in the PSA, but only 34 PSA staff out of over 25,000 or 30,000—the figure could be as many as 50,000 if one takes into account the turn over of staff—have been prosecuted for fraud since 1981. I believe that only 29 were found guilty of an offence. Do the Government accept that the policy of forcing the PSA to use private consultants for Government contracts is now giving rise to serious public concern?

It is ridiculous and naive for Conservative Members to suggest that the PSA should be privatised. If that happened, what arrangements would be introduced to ensure accountability for the expenditure of huge amounts of public money? The PSA's expenditure in 1986–87 was about £2 billion. The hon. Member for Eastbourne (Mr. Gow), who has now left the Chamber, made much of that. From 1 April 1988, Departments will be "untied" from using the PSA for major projects worth more than £150,000. If Government Departments still choose to use the PSA because it offers good value for money, will the Minister accept that as a good enough reason not to privatise it? That should and will be an important indicator to the Minister when he is determining the PSA's future. It is vital that the Government, like most big commercial companies, retain an in-house works, estate and design organisation. The Government must not bow to pressure from inside and outside Parliament to privatise the PSA.

The PSA has a good track record in protecting taxpayers' interests. Its good name must not be jeopardised by gratuitous privatisation mania. Yesterday during the statement about electricity privatisation my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) said that it represented a triumph of ideology over common sense". — [Official Report, 25 February 1988; Vol. 128, c. 456.] I have to say that if the Minister is considering privatising the PSA, I must echo that comment.

The Government have so far failed to give the PSA any assurance that it will be retained in the public sector. In the Southwark district works office, an experiment in privatisation is going on against the advice of senior permanent officials. Will any assurance be given that the office will not be privatised if it proves cheaper to keep the work in-house? If political prejudice forces the PSA to take non-commercial decisions, how will it be successful in the market place, as the motion demands?

It would he helpful if the Minister would stop prevaricating and announce publicly his decision about the PSA's future, following the Environment Select Committee's report. Perhaps he is under pressure from Conservative Members. This is one matter on which I hope the Minister can give us some information. It is nearly a year since the Environment Select Committee report was published on 23 March 1987. I accept that the Government's observations were printed on 20 January 1988, but it is about time that the Minister made a full statement on the Government's attitude to the report.

Will the Minister comment on what is to happen to the 65 per cent. of the PSA's work that is undertaken for the Ministry of Defence? Will he acknowledge that the PSA has an unparalleled record of securing good value for money in MOD building work? There has been much conjecture and discussion about the relationship between the PSA and the Ministry of Defence and between the Secretaries of State for Defence and for the Environment. It would be useful, if the Minister could comment on that.

When will the Minister release the report prepared by Deloitte, Haskins and Sells? Will he release it? I understand that there are matters of commercial confidence in it. Does the Minister accept that several reports that contain confidential information have, nevertheless, been published with the relevant chunks removed or blocked out? It would be useful if the report was released so that the public could have the advantage of knowing what it says. The prevarication is appalling, considering the implications for a 24,000-strong work force. There are tremendous implications for them and they want to know the Minister's intentions.

If the PSA is to be more commercially viable, it must be free to take decisions based on commercial considerations rather than the ideological prejudices of Ministers. This is not the time for a full-scale debate on the PSA. Although I welcome this opportunity to discuss the future of the PSA, we must discuss the Minister's proposals for its future. He knows from private and public statements made by the Opposition that we will oppose privatisation of the PSA should such a measure be brought before the House.

I hope that the Minister will give the work force and trade unions—not just us politicians—some idea about his plans for the PSA. We are anxious to know what they are. I hope that he can make a positive statement in the next 30 minutes.

1.59 pm

The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope)

We have had an excellent debate and some formidable contributions, not least from my hon. Friend the Member for Gillingham (Mr. Couchman) who introduced the debate with a detailed and strong analysis of the problems and difficulties to ensure that we started off on a sound footing. Certainly, his criticisms of the Property Services Agency — we have heard many such criticisms — were constructive and without rancour. That is the spirit that has typified our debate.

We also had a formidable contribution from my hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi), whose chairmanship of the Select Committee on the Environment, which reported on the PSA last year, has been referred to frequently. We have all looked at that report and thought about it seriously.

We heard a typically strong contribution from my hon. Friend the Member for Eastbourne (Mr. Gow), who has great knowledge and experience of the Property Services Agency. We have heard other contributions— all from Conservative Members—drawing attention to particular constituency issues. My hon. Friends the Members for Mid-Kent (Mr. Rowe) and for Gillingham referred to the Great Lines. My hon. Friends the Members for Sheffield, Hallam (Mr. Patnick) and for Canterbury (Mr. Brazier) made useful contributions, and apologised that, because of constituency engagements, they would not be here for the end of the debate.

This is our first debate for a long time on the Property Services Agency. Although it has been on a Friday, it has been a full half-day debate and it is disappointing that the hon. Member for Houghton and Washington (Mr. Boyes) has been alone on the Labour Benches, while the Liberals and the SDP have not been represented at all. As was pointed out in the debate, that shows Opposition Members' lack of interest in the administration of the Government. They lack interest because they do not expect to have the opportunity to participate in it again.

Mr. Boyes

Might it not show that a number of hon. Members are engaged in other activities and that it is remiss of the Minister to have allowed this debate only because one of his hon. Friends was lucky enough to win the opportunity to raise this subject in a raffle? It is not becoming of the Minister to comment on the number of hon. Members present on a Friday. There were very few Conservative Members present when I spoke, but I did not find it necessary to lower the tone of the debate by commenting on that fact. This has been a cool, calm, well-argued debate, and I hope that the Minister will not be reduced to such remarks in his speech again.

Mr. Rowe

rose—

Madam Deputy Speaker

Order. It is for the Minister to reply.

Mr. Chope

It is a matter of priorities. It was my hon. Friend the Member for Hornsey and Wood Green who first noted that, with the exception of the hon. Member for Houghton and Washington, this debate has very low priority for Opposition Members.

Mr. Rowe

The hon. Member for Workington (Mr. Campbell-Savours) spends much of his time and energy tabling motions relating to my constituency and other Kent constituencies; yet, when a motion is tabled by my hon. Friend the Member for Gillingham (Mr. Couchman), he cannot find the time to turn up.

Mr. Chope

I understand what my hon. Friend says about that.

Shortly, I shall discuss the particular issues that have been raised, including Great Lines and other pieces of land within Gillingham. In the meantime, the Government are happy to accept the terms of the motion, and I welcome the opportunity that my hon. Friend has provided of taking stock of the PSA and the way in which it is evolving.

The PSA has existed in its present form since 1972. It was established as a separate agency within the Department of the Environment to carry out many of the functions previously discharged by the former Ministry of Public Building and Works. PSA's activities cover both the civil estate, where ownership of property is vested in my right hon. Friend the Secretary of State for the Environment, and the defence estate, which is vested in my right hon. Friend the Secretary of State for Defence.

Apart from the Crown Suppliers, the PSA's responsibilities, as ordered at present, fall into three main areas. It acquires, leases and manages Government property and disposes of it once it is no longer needed. It manages the design and construction of new works, and it maintains Government property. The expenditure involved is, as we have heard, considerable. The PSA's total annual turnover amounts to £2.8 billion, with almost £550 million attributable to estate management, more than £1,300 million to design and management of new works, and more than £900 million to maintenance.

The PSA now is different from the PSA that we inherited in 1979. We have initiated sweeping changes in the management of Departments across Government under the umbrella of the financial management initiative. For PSA, that radical thinking challenged the previous conventional wisdom that all accommodation matters should be funded, organised and implemented centrally. We have also fostered, and the PSA has responded to, a policy of using the private sector where it offers better value for money than doing work in-house. We have also had to deal with particular problems affecting the PSA alone, rather than the Government as a whole. I should like to outline what we have achieved under each of those headings.

First, as a direct consequence of the financial management initiative, we have introduced for the civil estate a charging system — the property repayment services system. That acknowledges that individual civil Departments should decide what they require by the way of accommodation, and pay, annually, a charge assessed by the PSA for their occupation. Improvements to the system are still needed to ensure that it reflects more accurately the prevailing property market. But the basic principle of applying market forces through financial pressures promises a more rational and more economic use of property.

A further feature of the PRS system is the transfer of the more routine works responsibilities to Departments. Under standard rules, civil Departments now take charge, within their own vote allocations and without recourse to PSA, of jobs up to £5,000 in value and all internal decorations. The Departments of Employment and of Health and Social Security are experimenting with a more radical option, whereby they take on maintenance up to £100,000 per job and minor new works of up to £150,000 per job.

We are, as I shall explain later, still exploring the question of how departmental and PSA responsibilities for the civil estate are best divided. We can, however, justly claim that we successfully challenged the idea that all accommodation issues should he handled separately, and in isolation from other operational requirements.

On the defence estate, the position is somewhat different in that the Ministry of Defence decides. In the light of its operational requirements, on the accommodation it needs. Here also, however, responsibilities have been transferred from PSA in a number of establishments where local service commanders operate local works maintenance budgets. Under those schemes the commanders are responsible for jobs up to £1,000 in value.

Secondly, on use of the private sector—I am not sure whether the extent to which we use the private sector is generally recognized—100 per cent. of new construction is carried out by private sector contractors. More significantly, 65 per cent. of design and management of major new works is now done by private consultants, with the remaining 35 per cent. or so being done in-house by PSA. This is the exact reverse of the position in 1979, when the vast majority of work was in-house. Moreover, we have now reached the stage where 85 per cent. of maintenance of Government property is carried out by private sector contractors, with the PSA's directly employed labour force carrying out the remaining 15 per cent. That compares with 70 per cent. of maintenance carried out by private contractors and 30 per cent. by the directly employed labour force in 1979.

The switch of work to the private sector has been accompanied by a reduction of the directly employed labour force. Within an overall staff reduction in PSA of 34 per cent. since 1979 — from about 36,500 to about 24,000 — DEL has reduced by 50 per cent. — from approximately 19,500 to the present figure of about 9,500.

During the course of the debate a number of concerns about the PSA have been expressed. My hon. Friend the Member for Gillingham and others raised the issue of fraud and corruption. I must say that there is no sense of complacency about fraud and corruption in the PSA. The Wardale report of 1983 alerted us to the inadequacy of the PSA's defences against fraud and corruption. That was given substance in 1984 when the News of the World published allegations about malpractices in certain London local offices, and police inquiries were set in train. The trials that are currently taking place at the Old Bailey give fresh publicity to fraud and corruption. However, all the events that are being referred to in court took place in 1984, or earlier. The current trials are the culmination of a long and difficult police investigation.

Since 1984, the PSA has reorganised and substantially strengthened the management of its district works offices. Improved monitoring and control procedures have been introduced and regular inspections of local offices vet not only the results of their works but the procedural and technical routes that were followed in carrying them out. Detailed contract audits have been held across the organisation and computerised records of all tenders have been set up in key areas so that monitoring for unusual contractual patterns can take place on a continuously updated basis.

A special unit has been set up to help management to undertake investigations of possible irregularities and random inspections of individual offices. That unit has the task of ensuring that lessons learnt in one part of the organisation are applied everywhere else. Ministers and senior management accept that eradication and prevention of recurrence will require continued vigilance and a regular review of the defence mechanisms.

It is worth emphasising that those who are employed by the PSA are probably more concerned than hon. Members about the publicity that has been given to some of those trials and about the lack of emphasis that has been put on the fact that the irregularities date back to 1984 and before. Certainly there is a stain on the character of the PSA as a result of that fraud and corruption. I hope that, without being complacent about the matter, the House will accept that we have taken action to ensure that, so far as possible, there is no repetition of those events.

With regard to disposals, we were not satisfied that the procedures and practices of the PSA met our objective of keeping Government holdings to a minimum. Therefore, we have placed increasing emphasis over the past three years on speeding up the disposal process carried out by the PSA. Disposal receipts, which total Fed £43 million in 1984–85, are likely to amount to almost £120 million this year.

Sir Hugh Rossi

Will my hon. Friend confirm whether those proceeds go back to the Treasury or whether they can be used by the PSA for necessary maintenance and other works that may be required?

Mr. Chope

The funds that come from the Ministry of Defence belong to the Ministry of Defence, but the funds that are raised on the civil estate belong to the PSA. The expected amount of receipts is taken into account when the budget is set at the beginning of the year. Therefore, it would not be fair to say that all the receipts can be used by the PSA on maintenance of its stock.

Sir Hugh Rossi

Does that not mean that there is a lack of incentive for the PSA to dispose of properties?

Mr. Chope

Perhaps there is, to some extent, but my right hon. Friend the Secretary of State, in arguing the case for more money to be given for the maintenance budget for the next financial year, was able to secure substantial increases. The Treasury — the Chief Secretary to the Treasury in particular — expects that there will be increased income from the sale of surplus properties. It would not be right to say that the issue of selling properties is completely isolated from the need to find as much money as possible for maintenance. If my right hon. Friend the Secretary of State had not been able to satisfy my right hon. Friend the Chief Secretary to the Treasury that the PSA will be able to increase its receipts from disposals, he might not have been so successful in securing the increased level of funding for maintenance for the coming year—up from £90 million to £105 million — which is a significant improvement over the current year.

My hon. Friends the Members for Gillingham and for Mid-Kent mentioned the Great Lines. As my hon. Friends know, I have been to Gillingham to look at the situation, as has my hon. Friend the Parliamentary Under-Secretary for the Armed Forces. We are aware of the concern expressed by local people, the council and our hon. Friends. As a result, we hope that we will be able to convene a meeting soon between representatives of Gillingham borough council, the Ministry of Defence and PSA officials to consider how best to proceed with the disposal of all the MOD's local land holdings, which have been or are expected to be declared surplus. Those arrangements will be set in hand shortly.

My hon. Friend the Member for Mid-Kent seemed to suggest that there was a conspiracy to bring forward individual items of surplus land, secure planning permission on them and then bring forward some more. In order to allay his concerns, my hon. Friend the Parliamentary Under-Secretary of State for the Armed Forces and I agree that it is important that surplus MOD land holdings in the area should be considered as a whole with the local council. I hope that the discussions I have mentioned will enable that to happen.

I know that one particular planning application that has caused a lot of concern is the disposal of No. 2 Garrison sports ground. I understand that the planning application on that sports ground was rejected by the local council. As with all matters relating to surplus MOD property, the PSA acts under the instructions of the MOD. I am able to tell my hon. Friends that the instruction from the Ministry of Defence is that no appeal should be lodged against the refusal of planning permission in respect of that sports ground.

Mr. Couchman

That is good news and will be well received in the Medway towns.

Mr. Chope

I am pleased with the response. If we can look at all the other outstanding planning applications and the possibility of surplus pieces of land coming from the Ministry of Defence, there will be scope for resolving the matter once and for all, so that the balance between the needs of the local community and the objectives of the Ministry of Defence and the Government of selling the land for the best price can be achieved.

My hon. Friend the Member for Gillingham spoke of the PSA's achievements as well as its problems. I would not like to allow this occasion to pass without mentioning a few of the positive achievements that stand as landmarks to the PSA. My hon. Friend the Member for Gillingham referred to the Falklands airport. I was lucky enough to be able to go and look at that in January this year. There is also the restoration of the Temperate house and the new Princess of Wales conservatory at Kew, the concentrated programmes for construction of new prisons and new courts, the Queen Elizabeth II conference centre and the refurbishment of Durbar court. All those are cause for legitimate pride. So, too, for example, is the PSA's record in winning national and international design awards. That was mentioned by my hon. Friend the Member for Sheffield, Hallam. Those numbered 14 last year, and this year there are already over 30. I have also seen, from firsthand experience, that PSA staff are professional in the true sense of the word. The future of the organisation, to which I shall turn shortly, must depend on the quality and dedication of the people who work in it. On that basis, the PSA can face the future with confidence.

I have outlined the main areas with which we have dealt since 1979 and the changes so far made. However, we are not content to rest on our record. Provision of Government accommodation should in essence be a commercial operation with the client able to exercise choice on the grounds of quality, price and delivery time offered.

Subject to the exceptions that I have mentioned, which are so far generally at the lower ranges of expenditure, the distinction between Departments' clients, on the one hand, and a PSA supplier, on the other has not been clear enough. Moreover, the PSA as a supplier, has enjoyed an unchallenged monopoly, which is not healthy. Client Departments must have the freedom, and acquire the skills, to choose between different suppliers and we must develop a PSA whose success depends on its business ability, under competitive pressure. The PSA should not rely in business on its position as a Government Department. This is not a threat to the PSA; rather, it is a challenge that should enable it to exploit its strengths and expertise and demonstrate that it has the capacity to win and retain business on its own merits.

A number of hon. Members asked for the privatisation of the PSA. It is necessary to ask what privatisation would amount to. Would it be appropriate for the whole agency, or only parts of it? Would it be a practicable option without commercial accounts? Those are some of the questions that must be answered.

One of the key issues to be addressed is the civil ownership function. My hon. Friends the Members for Gillingham, for Eastbourne and for Hornsey and Wood Green referred to that. The Secretary of State for the Environment, on behalf of the Government, owns more than 2,600 freeholdings, and leases almost 5,300 holdings — almost 8,000 holdings. The day-to-day task of managing the civil estate has been devolved to the PSA. When the Select Committee looked at this matter it recommended: While we are convinced of the need to open up PSA to competition, we are equally certain that a substantial core of its skills needs retaining as one unit, even if this may be on a reduced scale; and that, if central management of the estate as a property resource needs strengthening, as we believe, then PSA is the only candidate for this role. But in carrying out this important strategic task, PSA will need to have its influence strengthened. The pure civil ownership function is complemented by an estates services function which could be described as maintenance, minor new works and estate services. There is clearly scope for those functions to be done in the private sector. Indeed, that is the policy that we have been pursuing since 1979.

On maintenance and minor new works there are two functions to be performed—the commissioning of work and its execution. Eighty-five per cent. of the maintenance work is executed by private contractors. The commissioning work is for the occupying Department, with PSA acting as managers and the private sector agents carrying out the bulk of the work. But the PSA's role may also be carried out by private sector agents, as in experiments, to which I shall refer, in Southwark and Colchester.

On the estate agency side, most of the purchases and sales of land are conducted by private sector agents commissioned by the PSA, but about half of the sales and purchases are done on behalf of the MOD. In such cases, the PSA operates as a middleman estate agency service on behalf of the MOD as client. I agree with the points made in the debate to the effect that the issue of whether that relationship is an ideal one needs examining.

The third main function of the PSA is project services — the commissioning and management of major building and civil engineering contracts for other Government Departments. The PSA is the largest client of the construction industry, with 100 per cent. of its construction contracts being carried out by the private sector. The project management is a key function in responsibility and has recently been the subject of a detailed efficiency scrutiny. The recommendations of that scrutiny should lead to much improved performance.

The key developments that are taking place now are several. First, on 1 April, we are about to take the important step of untying, pursuant to the announcement by my right hon. Friend the Chief Secretary last July. That announcement was welcomed by the PSA because it means that the PSA will be able to demonstrate that it can provide good quality services to other Government Departments without having to depend on a monopoly. This development will place a considerable amount of responsibility on Departments to ensure that their requirements are thought through, that changes to agreed briefs are kept to a strict minimum and that they are properly equipped with the necessary skills as project sponsors to oversee translation of requirements into finished products. For the first time, a main area of PSA activity will be exposed to outside competition.

The next issue that we need to address is how far and how rapidly other PSA activities should be similarly treated. The untying of major civil projects has set the pace. We shall need to follow that with a firm programme in other areas.

Then we have a major commission into project management, to which I referred briefly. I expect that when we see the results of that, we shall get demonstrably improved results. We are in the process of setting a timetable for an action plan. As soon as that is done, we want to get quick implementation of the recommendations.

My hon. Friend the Member for Gillingham suggested that, as an experiment, we should contract out the management of one of our district works offices. Some months ago, we initiated the start of such a procedure. The hon. Member for Houghton and Washington said that it was not popular within the Property Services Agency. I am not sure that he is right. The experiment will be useful. We shall invite tenders for the management of the Southwark district. We shall compare the results and performance of that district with other district works offices and see whether benefit is to be gained from that type of arrangement.

Mr. Boyes

In a letter dated 30 November 1987, the principal establishments officer of the PSA wrote to Mr. Williams, the vice-chairman of the DWC in Bristol, stating: this is an experiment". He went on to state: the cost of the lowest acceptable offer will be compared with PSA's own overhead costs and Ministers have agreed that we should proceed only if we are satisfied that good value is likely to be secured. On a previous occasion, when the then Secretary of State was the right hon. Member for Henley (Mr. Heseltine), an attempt to contract out was defeated by the fact that the PSA was cheaper and better value for money. Will the Minister assure us that, if the PSA's costs are cheaper at the Southwark office, there will be no contracting out? The passage that I have quoted implies that the lowest tender, irrespective of whether it is higher than present costs, will be accepted.

Mr. Chope

The purpose is to get better value for money. If there is no sign that we shall do so, we shall not proceed.

A second experiment relates to the estate management of defence lands in the Colchester area. That has already been contracted out to a private firm of agents. I shall meet them soon to assess the progress that has been made and the lessons that can be learnt from it.

My hon. Friend the Member for Hornsey and Wood Green referred to a delayed response to the Select Committee report. I heard what he said. Before Christmas, I discussed with him the relative merits of giving what. In essence, was an interim answer, as against delaying further to provide him with the definitive response once we, as a Government, have decided what to do on the Deloitte report. We have sent an interim response, and we certainly hope soon to be able to reach a conclusion on the Deloitte report. Although the report on the pollution of rivers and estuaries is rather outside my direct responsibility, I can tell my hon. Friend that we hope to be able to publish a response in the form of a memorandum in April.

My hon. Friend the Member for Eastbourne said that it had taken a long time to get out such responses. Sometimes, in Government, it takes longer to say yes to recommendations than it does to say no. I hope that he will take some encouragement from that.

This has been a useful debate and I hope that all who have participated will realise that there is no complacency on the part of the Property Services Agency. We face serious challenges, but I believe that the staff and those employed in the PSA will face the challenges and perform even better.

Question put and agreed to.

Resolved, That this House urges the Government to convert the Property Services Agency as rapidly as possible into a fully commercial organisation whose future would depend upon successful performance at the market place.