ESTABLISHMENT OF TRADING FUNDS: NECESSARY CONDITIONS (Hansard, 21 February 1990)

§ Mr. Beith

I beg to move, That the clause be read a Second time.

The new clause requires that no trading fund shall be established until the Minister responsible has published details of the performance indicators against which he intends the record of the trading fund to be judged, and clear guidelines as to the information that the fund's reports and accounts must include.

It is generally agreed that proper performance indicators must be set for trading funds. That was stressed by the report of the Public Accounts Committee, which stated: We consider it important that departments and Agencies aim to be fully aware of the types, levels and standards of service their customers are looking for. The Committee insisted that agencies should ascertain their customers' views, as should Departments before they became agencies. The report added, in paragraph (xii): we consider it necessary that Agencies should be required to demonstrate the relative success with which their activities are carried out … It is equally important that the performance indicators are known in advance, otherwise the danger is that a trading fund will be established that has as its explicit objective the provision of a service more cheaply without regard to the quality of that service or to the interests of the community as a whole.

I stress both considerations, because many of the activities undertaken in the public service by organisations that might be turned into trading funds relate to the granting of a licence or permission to an individual that has important indications for the community. Such licences or permissions can be provided much more cheaply if the public service does not examine carefully whether an individual is a fit person to hold a particular licence, a vehicle is fit to be licensed, or a passport granted—which, in the absence of adequate security, might be issued against forged documents.

In many areas, there is public interest in the job being done extremely thoroughly and carefully. There is also public interest in ensuring that the individual customer enjoys a quick response. To achieve both is frequently 1023 expensive. If performance indicators do not allow for that, there will be serious repercussions for the individuals and for the community as a whole.

Another powerful argument for knowing the performance indicators is that so many of the services involved have no competition. The benefits of a trading fund and of running part of the public service on a more commercial basis may include greater efficiency, more self-reliance, and greater autonomy for the individual civil servant. Many advantages could flow from people providing a service on an efficient basis that they have organised rather than having to conform to a centralised model.

One of the main gains to be derived from a commercial style of operation will arise only if there is competition. In many cases, that will be impossible. The list included in next steps includes the vehicle inspectorate, Companies house, HMSO, and the weights and measures laboratory. It is inconceivable that they could face any competition. There could not really be two organisations producing rival copies of Acts of Parliament to see which was cheaper. However, I am bound to say that they are now so expensive that someone should be able to produce them more cheaply. The other day I was reminded by the Clerk of the House that the daily part of Hansard, which now costs £5, cost only sixpence when he entered the service of the House. That is a pretty staggering rate of inflation, even for the Governments of both parties that have been in power over that period.

In a great many of the services listed, it is impossible to imagine competition—the Department of the Registers of Scotland, the Driving and Vehicle Licensing Directorate, the Driving Standards Agency, the Employment Service, the Passport Office, the Patent Office, and the radio communication division in the Department of Trade and Industry which gives approval for the use of certain kinds of radio equipment which might interfere with the network. In none of those services can there be a competitor. Therefore, it is open to the agency to charge what it likes and to provide indifferent service.

One reason for considering the trading fund approach has been the experience in many parts of the public service that the lack of the spur of competition makes it likely that inefficiency will persist. I have been a strong critic of the passport offices on that account. We are talking about areas of work in which there cannot, by definition, be competition. That makes them particularly inappropriate for privatisation. It also makes it all the more important that we have clear performance indicators which are discussed in advance so that we know that they will be concerned not solely with cutting the cost of the service, but also with the level of service the customer can expect—for example, how quickly he can get his passport.

The performance indicators should be concerned with the general public interest and should ensure that, where regulation, public protection or security are involved, they are attended to thoroughly and carefully. No agency should be created unless we know in advance what the criteria are. That is one aspect of the new clause.

The other aspect is that we should know what will be in the published accounts of the agency, and what an agency will be required to make available by way of information to the public. In Committee I questioned the Minister about what appeared to be a hole in the legislation which 1024 seemed to give the Treasury the ability to tell a trading fund that it did not need to publish accounts or to direct it, indeed, not to publish accounts. As the question was difficult to answer at the time, the Minister has since written to me, setting out why he believes that it would not be necessary to amend the Bill in this respect. I am grateful to him.

Having studied the matter carefully, the Minister asserts that, because section 4(6) of the Government Trading Funds Act 1973 is not being repealed, all trading funds will be required to prepare statements of account and lay them before Parliament. He says that that obligation has not disappeared. What he was concerned about in the part of the Bill to which I referred in Committee was the timing of other forms of account which the Treasury may require agencies to provide. That is all well and good, but I still think that we should know at the point when an agency is set up whether the information which the public and Parliament will get about it will be adequate to measure its performance.

Those seem to be reasonable objectives to which the Minister should agree. I see no reason why they should not be incorporated in the Bill.