§ Mr. Robert Sheldon (Ashton-under-Lyne)
I beg to move,That this House takes note of the 33rd to 42nd Reports of the Committee of Public Accounts of Session 1989–90, of the 1st to 35th Reports of Session 1990–91, and of the Treasury Minutes and Northern Ireland Department of Finance and Personnel Memoranda on those Reports (Cm. 1323, 1405, 1462, 1479, 1542, 1582, 1617, 1679, 1685 and 1686) with particular reference to the following Reports:Session 1989–90 Thirty-sixth, Restructuring and finances of universities;Session 1990–91 Ninth, Sale of the National Bus Company;Eleventh, The 1989 Statement on Major Defence Projects;Eighteenth, A new building for the British Library;Nineteenth, Privatisation of work in New Town bodies in England;
Twenty-second, Homelessness;Thirty-first, Dock Labour compensation scheme.Unfortunately, my hon. Friend the Member for Scarborough (Sir M. Shaw) cannot be here and he has sent his apologies.
As usual, what we have for debate today is a number of reports, 45 this year, and 10 Government replies. As usual, a number of the reports have been selected in the motion to draw special attention to them, although many others will be mentioned in the debate. It is extremely difficult to choose half a dozen and the House will note that there are seven on the Order Paper. However, I could have easily selected a dozen and I shall refer to some others, but rather briefly.
My thanks are especially due to the Public Accounts Committee, which meets frequently. Last year, we had the sad loss of Ian Gow, who was a most valuable member of our Committee. Those who did not have the pleasure of seeing him in action in Committee undoubtedly missed a great sight as his forensic skills were brought out to the benefit of the Committee and to the benefit of discovering the truth behind the matters we were examining. The right hon. Member for Hertfordshire, North (Sir I. Stewart) has taken his place and he is proving a valuable member of the Committee.
The most important aspect of our Committee's reports is that they are unanimous. There have been more than 300 reports since I became Chairman and every one has been unanimous. The enormous importance of that, as everybody knows, is that, despite the wide political differences in the Committee on getting value for money, we ensure that the money goes where Parliament intended and to the people to whom Parliament intended it to go. The unanimity ensures that the Government and the civil servants concerned understand the importance of our deliberations.
We welcome the knighthood of the Comptroller and Auditor General, Sir John Bourn, with whom we have an excellent relationship. Naturally, he has complete discretion in choosing investigations, but he also takes into account suggestions by members of the Committee. That also applies to the Comptroller and Auditor-General for Northern Ireland, Bill Jack, and his staff, who also do a valuable job.
In essence, the Committee's work is quite simple. When the Government decide on a programme it is generally accepted that we want to know the objective that they have 455 in mind. We want that objective quantified so that when they decide what to do about a problem or how to take into account a matter that they feel is worthy of attention, it is monitored. Thus, as time goes on, if mistakes are made or if something happens which the Government had not anticipated, they can make changes before too much money is spent. At the end of that programme or a set period after its introduction, we compare—quantitatively so far as possible—the achievement with the objective. We set out to produce a discipline in Government planning and expenditure by comparing objective with achievement.
I could cite in great detail a number of cases where that has not been done. However, in general, when an accounting officer comes before the Committee he is aware of how we approach those problems. I know the amount of time that those accounting officers, who are often permanent secretaries of Departments, spend in preparing for their visits to us. In general, that time is well spent because they learn something about their Department and provide accountability, which is an essential part of the Committee's work.
There is a continuing scrutiny of the civil service and we accept that civil servants give a great deal of time to it. Although we spend most of our time considering value for money to ensure that the taxpayer is protected as far as possible and that the accounting officer gives a good description of how he has managed his responsibilities, most important of all are questions of fraud and corruption. I always say that everything falls in the face of any questions of fraud and corruption. Many people from the Commonwealth and other overseas countries visit us and ask how we retain our high standards in those matters. I tell them that it is done through constant vigilance and that, once fraud and corruption get a hold, the trouble starts. Honest people prevent fraud and corruption, but once a unit is seething with corruption, to root it out is extremely difficult. We are fortunate to have so many high standards in those areas, but we cannot let up on them for a moment.
During the past year the Committee has noticed the increasing number of accounts that have been qualified. That is a serious matter. The most important example—it does not form part of our debate today, but will come up in the next debate on the work of the Public Accounts Committee—is the Foreign and Commonwealth Office, where there seems to have been a serious breakdown of accounting services. It came about as a result of computerisation in which there were no back-up facilities. When the computer failed, the back-up was not there. One could have expected the back-up to be there. That was a great failure to which we will turn our attention over the next few months.
At the Department of Social Security, there was uncertainty about apportioning costs. Here again there was a qualification of the accounts. Another qualification of accounts—and I give only a few examples—occurred at that Department, where there were many errors in handing out family credits. A recent example occurred at the Ministry of Defence, where there were irregular payments for entertainment. Entertainment payments are perfectly all right as long as they are anticipated and properly authorised. At the Department of Employment, there was 456 overpayment for training providers and trainees and payment was made before the evidence was received. At the Welsh Office, there was uncertified expenditure on motorways and road maintenance.
I am not saying that there was fraud or corruption in all those cases. The trouble is that, once one loses regularity of procedures, one is open to those problems. It is important that the standards that we have been able to maintain are continued. That matter will concern us rather more next year than it has done this year.
The first report among the several with which I shall deal in some detail is the 36th report of 1989–90 on the "Restructuring and Finances of Universities". The Universities Funding Council replaced the University Grants Committee in 1989. I was present in the 1960s when the accounts of the University Grants Committee were first made available to the Public Accounts Committee. I well remember Lord James of Rusholme, who was then the vice-chancellor of York university, telling the Public Accounts Committee how much he welcomed the fact that the accounts of the UGC were coming before the Public Accounts Committee because they had a good story to tell. That is important. We had a number of allies who felt that the Public Accounts Committee would study those matters with great respect because we, like most people in the country, valued the independence of the universities. When we consider the universities, the Committee is very conscious of the need to maintain that independence.
Each summer, the Universities Funding Council, as presently constituted, studies the forecasts of the financial outturn in the previous year of each university and studies the forecasts for the next four years. Since the early 1980s, the Committee has expressed its concern about the dangers of financial mismanagement in certain universities. One of the most important pieces of mismanagement occurred at University college, Cardiff, which was brought to the verge of insolvency, and we produced a report on that.
In our report on the restructuring of the finances of the universities, we pointed out that, of the 50 universities outside London, 28 were forecasting deficits for the year ending 31 July 1990. We have also pointed out that the financial forecasts for the university of London as a whole are giving rise to serious anxiety. Sixteen out of the 24 colleges and medical schools were in deficit. As of 31 July 1990, 16 colleges were forecasting that they would face cumulative deficits. The council told us that, because it had neither the powers nor the staff to do so, it had not checked the forecasts that the university had submitted. So the body responsible for funding the universities was not carrying out the sort of scrutiny of university forecasts that it needed to. This sort of reliable information is nevertheless the key to the council's taking effective action. It needs to strengthen its checking, analysis and follow-up of university financial forecasts.
Of course, we recognise the need to respect the autonomy of universities, but the funding council must ensure that it has the information to identify potential problems and to take prompt action. We risk damaging the key national asset represented by our universities if this is not done and if satisfactory monitoring arrangements are not agreed.
We understand that the financial forecasts for the university of London show that mounting deficits could reach £46 million by July 1993. The UFC is the body that looks after these matters—it is not for us to examine each 457 university. Indeed, we would not want to do so—the UFC was created for that very purpose. It should not impose its will on every aspect of the running of the universities, but it should know whether a university is viable and can arrange its financial affairs properly and, if it is not so satisfied, it should be in a position to advise, warn and, if it comes to it, to take further action.
The ninth report of Session 1990–91 deals with the sale of the National Bus Company, which was created in 1968 and which achieved 50 per cent. of local bus mileage throughout England and Wales. It was privatised under the Transport Act 1985, the main objective of which was to promote sustained and fair competition and to maintain a competitive environment.
Paragraph 15 of the report points out that ascompetition in the industry was the Government's main objective, we would have expected the Department to have taken more positive steps to see whether, in practice, competition was achieved.Of 62 sales, 18 were negotiated with single bidders. Price Waterhouse advised us that a realistic benchmark value on each of the subsidiary companies should have been established, but that advice was not followed. It is fairly obvious that assets to be sold should be valued before customers are looked for. Whatever one sells, one wants to start with an idea of its worth and then try to find a taker for it at that price—or perhaps a little more.
Price Waterhouse is a respected and well-known firm of accountants, yet its most obvious piece of advice was ignored. The report mentions our surprise that the Government approved sales without putting a value on the sale items. As a result, Midland Red (West) Ltd. recouped more than half the purchase price in the first year. We certainly advocate clawback provision because in some areas one cannot be sure of the right price. That applies especially to land for which planning permission might subsequently be granted. It is right to allow for clawback so that the taxpayer can participate in a unexpected gift.
However, clawback applied to only 18 of the 1,500 properties and we should have liked to see it apply to many more. Before the properties were sold more should have been done to identify those with an alternative use so that a realistic valuation could have been decided or claw back allowed for. We said that since only 18 of the 1,500 properties were subject to clawback, the taxpayer's interest was not fully protected.
For example, the company advised us that most of the properties in Cumbria had no significant alternative use value, but some of the bus stations that were sold were worth much more than valuation. All Departments must be aware of the real value of what they are selling and the House should instruct Departments to get a realistic valuation of everything that they sell. In certain cases the valuation may not be precise, but it is better to have that than to have no indication at all.
§ Mr. D. N. Campbell-Savours (Workington)
My right hon. Friend mentions Cumbria and covers an example in my constituency where a bus station was sold for about £70,000. By the end of a series of transactions and within a matter of months the bus station secured a value of £1 million for property development. Does my right hon. Friend agree that in that case the taxpayer lost a substantial amount?
§ Mr. Sheldon
Such matters greatly concerned us and the methods that were used must never be used again.
458 The 11th report is entitled "The 1989 Statement on Major Defence Projects". I should like to deal with some general points arising from our examination over the years of the Department. We were sorry to see Sir Peter Levene leave the job. He came to it with a great reputation and we were not sure whether it would be justified, but events proved that it was. We look forward to Dr. Mackintosh taking over and carrying on some of the valuable work that Sir Peter initiated.
The report deals with the price labelling of spares. We knew of the experience in the United States where certain articles were sold to the Department of Defence at outrageously inflated prices. I said that I could never be sure whether we were doing the same thing here and that, for example, several hundred pounds could be paid for an ashtray because nobody other than the people who had placed the order knew its original cost.
On Sir Peter's initiative, articles going into store have labels affixed showing the price that was paid. We were pleased about that because one of the best ways to counter a false price is for everybody to know the amount that was paid for an article. As a result of labelling there have been some price challenges. We welcome that.
Sir Peter also introduced a greater element of competition. There cannot be much competition for the production of a Trident submarine, but competition can be introduced among sub-contractors. Sir Peter found some ways of making sure that more sub-contracting could be subjected to competition. He then introduced a system to help competitors to get started. It is hard for people to decide that they would like to compete because they feel that contracts are sewn up among the existing contractors. However, he persuaded such people that if they moved into certain sectors, he would give them every facility. This has been useful. As a result of all this, we have seen not only more competition but more areas of activity subject to competition, and we welcome that as well.
One of the practices that Sir Peter brought with him from private industry was the use of cash flow. It is surprising to those of us who have a background of industry and commerce that in many sectors Government Departments do not understand the value of the use of cash flow as an incentive to contractors to carry out their obligation. That gives enormous power. The Government know that they will get the money, but industry does not know that and if the system is used and contractors are disciplined when things go wrong it is not done in an underhand way because it is set out in the contract—one gets greater co-operation and better adherence to the contracts.
Sir Peter also prevented gold plating. This is where extra refinements are added on a particular project—perhaps a tank. If one wants the very latest in technology, one tends to add it to a project and it can go on indefinitely with the result that one never has the tank. There will always be a new development that will improve it. Therefore, there must be a deadline. The Department must be able to say, "That is enough. We want that weapons system even though it may not be perfect." There can always be a mark 2 later on. The Committee approved the introduction of such a cut-off date.
All those developments and changes led us to praise Sir Peter highly when he finally left our investigation room. We look forward to his successor, Dr. Mackintosh, carrying on in the same way.
459 The 18th report is entitled "A New Building for the British Library". The British library is a much-loved institution. It is one of the grand features of our capital and, as we know, receives a copy of every United Kingdom publication. It is too small, so it was decided to resite it in St. Pancras, in a much larger building that would take many more books. It was agreed that it would be one of the largest civil projects undertaken in the past 100 years, so obviously it was a project of great importance to us. There would be space to carry all the books published until the year 2030.
Twenty years after the site at St. Pancras was purchased and 14 years after construction was started, the project is not finished. That is appalling. A year or two ago I was in New York and I went to the Empire State building because I wanted to check something that had been at the back of my mind ever since my boyhood. I found that I was right, although I thought that I could not be. The Empire State building, the world's most famous observatory, was started on 17 March 1930 and completed on 1 March 1931. In other words, it was finished in less than 12 months. One cannot carry comparisons too far, but to build the largest structure in the world in less than a year and then to spend 20 years building a library shows that there is something wrong. We know of the involvement of the Property Services Agency in that project.
The new British library will be much smaller than was envisaged. In the 1970s, the aim was to bring together into one building all the London-based collections, services and staff. There were to be three phases—la, lb and lc. Presumably, there were to be stages 2, 3 and 4 later—I do not know. The project had involved 200,000 sq m, with many more reader seats and storage provision to the year 2030. There is now a smaller scheme for the second and third parts of the project which will amount to not much more than half of that which was originally envisaged. The project will now amount to 108,000 sq m. Only seven to eight acres of an envisaged 12.5 acres will be required. If there is need to expand in future, outlying sites will have to be sought. The storage of books was planned to extend to the year 2030, but the building will now be full by 1996, the year in which the library will enter occupation.
There were to be 3,040 reader seats and now there will be only 1,176. All the work that I have described will have been carried out to increase the number of seats by only 7 per cent. That would be bad enough, but then we asked whether it was thought that the initial phase was the only one that would be built. "If that had been known," we said, " would there still have been a 260-seat auditorium, a very large restaurant and an enormous entrance hall?" Would those facilities have been made available for a reduced project? The Office of Arts and Libraries said that the building might have been constructed with a smaller auditorium. That is extremely important.
The work was undertaken in several phases. There is something to be said for phased construction so that it is possible to take advantage of changes as work progresses. Each phase, however, should relate to the final outcome. Therefore, the construction of a large auditorium and a large entrance hall at the expense of the storage of books and the provision of reader seats should not have been undertaken. If the project is to be short of essential amenities, those involved should have thought in terms of 460 a smaller auditorium and entrance hall. If the phases had taken into account the total result, there would have been the option to discontinue some parts of the various phases. Each block of work should have offered a balance of facilities.
The Office of Arts and Libraries said that there was a division of responsibility which was blurred and difficult to define and we found the most serious deficiency to be the division of responsibilities. We knew from our defence contracting investigations that it is enormously important to give someone prime directorship. There must be responsibility attaching to one particular area of activity. Despite the division of responsibility being blurred and difficult to define, we were able to establish that the Office of Arts and Libraries was responsible for funding and that the Property Services Agency was responsible for information on cost funding for the future.
When it came to information on progress—what is happening and how changes can be made that are based on what is happening—there was an interdepartmental steering committee, which was supposed to meet. In fact, a more junior committee sometimes met. It was the duty of the interdepartmental steering committee to provide information on progress, but at a crucial period the steering committee did not meet for over three years. That is almost unbelievable. We heard that the informationwas not as comprehensive and as detailed as would be provided in a commercial operation.I should say not. As I have said, the steering committee did not meet for over three years, and costs were increasing.
In our conclusions in paragraph 13, we state:In a major and complex project spanning 15 years and costing about £450 million, it is regrettable that four years elapsed before serious management weaknesses were identified and remedial action taken. We are disturbed that the Office of Arts and Libraries, despite having commissioned and paid for the building, did not regard themselves as responsible for keeping control of the project. In our view they should have insisted on being provided with the information needed for this purpose.That information might have steered the Office in a more sensible direction.
§ Mr. Nigel Spearing (Newham, South)
We are naturally disturbed by what my right hon. Friend has told us. Before he moves on to the next report, I hope that he will identify the lead Department and the lead Minister. Under what vote and under the surveillance of which Select Committee were the relevant funds allocated?
§ Mr. Sheldon
The Office of Arts and Libraries was responsible for funding and the PSA had responsibility to
provide cost funding as things went along. The Committee says in its conclusions:We consider that the failure of the project Steering Committee to meet for three and a half years to have been indefensible.Those who are familiar with the restrained language that the Committee of Public Accounts uses will know that that is an extremely severe indictment. The paragraph continues:If it had continued to meet, and had been supplied with proper management information, some of the project's management weaknesses might have been detected and remedied much earlier.I move on to the 19th report on new towns. There are three new towns: Milton Keynes, Telford and Warrington and Runcorn. The development corporations decided to privatise some of the work that they undertook. Between April 1987 and September 1989, the corporations 461 encouraged about 800 of their professional and support staff to form private business ventures to undertake work for the corporations under contract. By September 1989, the ventures had undertaken work worth a total of about £37 million for the corporations.
Our concern was the oversight of the Department of the Environment of these arrangements. A target date was established for the winding up of the development programmes while reducing staff and contracting out services. There was, of course, a close relationship. Those involved had previously worked for the development corporations. It was arranged that they would go outside the corporations and set up their own ventures, but still have a relationship with the corporations. That should have created a red light for everyone concerned. It should have been realised that there could be cosy relationships, which obviously we must be careful about. We are dealing with public money, which needs to be protected rather more carefully than private money because of our responsibilities.
When there is a change from one authority to another—for example, from the new towns to independent organizations—the Department of the Environment relies on general oversight and leaves operational matters to the corporations. These, however, were novel arrangements and there are questions of propriety in the conduct of public business. Consequently, there was a greater need to monitor what was going on and to decide how matters were being handled.
Independent ventures were set up by members of the staffs of the development corporations and because the corporations wanted to retain access to their expertise—I can understand that—there was no effective competitive tendering. There was no competition. Individuals set up their own organisations and retained links with their former employers.
Competition was present in all instances at Milton Keynes and there was competition in two of the six mergers in Telford. We asked why the privatisation proposals were not widely publicised, rather than being arrived at by what was described as discreet approaches. Discreet approaches may be sensible in certain cases, but not when awarding contracts. The Department explained that the corporations felt that publicity about the business ventures might have been misinterpreted by potential investors in the new towns, with an adverse effect on the development programmes. That is not sufficient reason for acting in that way.
We discovered that, despite the Department's having expressed severe reservations, Telford had privatised its post of director of finance. That is a dangerous business. It can be done, but it must be done extremely carefully. The Department's view was that the core management of a body dealing with business ventures should always be separate from, and not in any way directly involved with, those ventures. We said that we were concerned about the limited competition involved in setting up the business ventures, under which a substantial amount of contract work was virtually guaranteed to those involved. We expect all public sector bodies to observe the generally accepted principles of open competition when privatising such functions, to demonstrate the proper conduct of public business and to provide sensible means of establishing fair and reasonable prices for the work done.
462 We regarded the reliance on discreet approaches to selected firms as unsatisfactory, and I am sure that the House will agree with that.
We noted the Department's serious reservations about the privatisation of the post of director of finance in Telford and we shared its commitment to the general principle that such a post should not become part of an independent venture. The rule against such privatisations should be firmly established. I am astonished that anyone could even think that such a post could be privatised without any consequences.
Under the restructuring of Telford and Warrington, redundancy payments were made of £6.6 million. Milton Keynes did not make redundancy payments and so saved £4 million. To provide redundancy payments as well as awarding contracts to those made redundant is not only gilding the lily, but slapping gold on it. Our conclusion was that, given the novelty of the arrangements adopted by the corporation and the sensitive issues involved, the Department relied too heavily on the corporation's handling of the business ventures and did not fully discharge its overall sponsorship responsibilities.
The 22nd report, Session 1990–91, deals with homelessness. Homelessness in England has grown considerably during recent years and one estimate suggests that 300,000 people are homeless. Increasingly, homeless families have been placed in temporary accommodation, including expensive bed-and-breakfast hotels, at a cost of about £150 million a year. The full extent of homelessness is difficult to establish. There have been a number of estimates, but one of the more reliable reports suggests that the figure for 1978 was 73,000 and for 1989 was 126,000. The use of temporary accommodation has also increased considerably.
It is reasonable to say that there are a number of empty dwellings in every area and to ask whether they could be used. We discovered that only 2.4 per cent. of local authority housing was empty at any one time, whereas the figure for Government housing was 18 per cent. The Government have 35,000 residential properties empty, so obviously something can be done about that. We must not make too much of it, but at least some of those properties could be made available. Homelessness causes great distress. It has not been a great problem in my constituency because until recently it had some rather poor properties that could be bought or rented at modest prices. However, those properties have largely disappeared and, for the first time, homeless people are being accommodated in bed-and-breakfast hotels. At a recent advice bureau I discovered that a family of five—husband, wife and three children—who were housed in bed-and-breakfast accommodation had to leave their so-called hotel at 10 am and were not allowed to return until 6 pm. That is one of the horrors of the system. I am sure that London has got its act together rather better because it is more used to dealing with a problem that often causes immense misery.
Until 1988, local authorities could lease properties for up to 20 years outside the Department's capital control system. The rules were tightened and subsequently concessions have been for three or fewer years. Bed and breakfast is three times more expensive than leasing. It costs up to £15,000 a year to keep a family in bed and breakfast, which is three times the cost of keeping them in local authority or some other form of housing. The Department was asked to re-examine the matter so that 463 property could be leased to house the difficult cases, with a two thirds saving over bed-and-breakfast accommodation. It cannot make sense to pay three times as much to house people in unsatisfactory and expensive accommodation when a better alternative is available. In its response, the Department reiterated its existing advice, but I wish that it had gone further than that in this sensitive and troubled area.
The 31st report, Session 1990–91, deals with the dock labour compensation scheme. The Dock Work Act 1989 abolished the registered dock labour scheme, which had restricted work in ports to registered dock workers and employers. The purposes of the Act were to remove the rigidities, help end restrictive practices and reduce excessive manpower. It provided for the Department of Transport to contribute towards the consequent cost of redundancy payments to dock workers under the scheme.
The Department originally estimated that the total cost of its contributions towards payments to former registered dock workers made redundant under the Act would amount to about £25 million. The total cost is now expected to be £141 million, almost six times the original estimate notified to Parliament—such costs must be notified to Parliament—when the Bill was presented. The Department told the National Audit Office that the short time between publication of the Bill and its enactment gave it little time to carry out the sort of research that it now wished it had undertaken. We noted the Department's regret that the outturn of the compensation scheme was so far from the original estimate.
We were concerned that the Department had so seriously underestimated the size of redundancy payments and the introduction of compulsory redundancies. We felt that it should have carried out the necessary work to ensure the production of a rather better estimate than the one that it produced. We suggested that it might have thought of having a range of costs in those areas where there was some uncertainty. We did not accept the Department's argument that providing Parliament with a range of costs would have implied more precision than a single figure. I should have thought that it was the other way round. A single figure suggests a precision arrangement, does it not? We recognise thatthe costs of legislation cannot always be … estimated",but a range would have suggested an uncertainty, which could have been drawn out during discussions subsequently.
Under the Act employers make compensation payments to redundant dock workers and the Department reimburses 50 per cent. of the cost. We considered whether some directors of liquidated companies which had previously employed registered dock workers had set up new businesses, employing many of the same workers—a venous arrangement. The report states:The Department were unable to say how far this might have happened; they had not carried out such checks because unless there was a transfer of business it did not affect the legal question of whether dockers had been made properly redundant under the Act.We are concerned about that. If one can get money from the Department by carrying on with the same work and employing the same people, the purposes of the Act have been negated.
464 We were worried about the risk of companies seeking to avoid their compensation liabilities by going into liquidation and later re-emerging as new companies and continuing to operate in the docks. We say in the report:We therefore expect the Department to continue to he vigilant in their checks to ensure that owners of liquidated companies do not set up successor companies so as to benefit from the provisions of the Act.Finally, we state; "We are disappointed"—as indeed we were—at the very small amounts of compensation recovered under the liquidation arrangements.Our conclusion, as I said at the beginning of my comments, was this:The Committee has repeatedly called for full quantitative assessments of the objectives of the programmes so that, wherever possible, they can be compared with their achievements. We are therefore surprised that the Department had not previously started to collect the necessary data for a thorough review of the effectiveness of the abolition of the Dock Labour Scheme. We note that they now propose to do so.That should have happened in the beginning. The time to decide how effective public expenditure can be is when one decides to set up a scheme to spend public money. We continue by saying:We expect the findings of this review to be published in due course and the results notified to Parliament.I note that the Treasury Minister said that consultants have been appointed to discuss the consequences of abolition. It is a pity that that was not done at the outset.
The seventh report concerned the monitoring and control of charities in England and Wales—a most important and valuable investigation which we carried out some years ago. We discovered that the running of the Charity Commission was archaic. There is a new charities commissioner and a new system has been set up and the Committee wanted to discover how they were getting on.
We note that there are now a few accountants around. When we first considered the subject there was very little in the way of accounting controls and no computers and since their task was to examine accounts, there was hardly any means for them to do so, let alone spot fraudulent charities. There is much more accountancy provision now, but there is a long way to go and we look forward to the improvements filtering through.
The great advantage of the Public Accounts Committee is that we do not merely deal with matters where something has gone wrong or where we think that things might be improved. We come back to the same subjects again and again if we are not satisfied with the actions that have been taken. Charities are an example, but the same applies to all our reports.
After producing a report we receive a Treasury minute. It comes via the appropriate Department, but is analysed by the Treasury and then comes to the Committee and to Parliament. In the minutes we are told what is being done and how our comments and conclusions were regarded. The minute usually suggests some action and we take note of it. We keep a control on such matters and within a year or two we find out what has happened as a result of the changes that have been made. If things have not gone as well as we had hoped or there have been some fundamental variations, we can call back some of the people involved to explain the problems. That is the way in which we retain a continuing interest in the matters that we discuss.
Another report was on the new ship for St. Helena, which cost a lot of money. A major problem was that the 465 shipbuilder used he advance payment from the Overseas Development Administration to provide a guarantee. That is unbelievable. The shipbuilder was asked whether it had sufficient financial standing to complete the order—hon. Members may remember there was some doubt about it—and it pledged the advance payment to show that it was in funds and financially viable. Obviously, that should never happen. One cannot use money from one Department as a pledge to another. We are supposed to be one Government acting together.
Another problem was the choice of shipbuilder. I understand why the Scottish Development Agency was very much involved. However, we must distinguish between moneys given for sensible regional and national purposes and moneys given because we feel that a certain bid is the most competitive that we have received. There was a blurring of the two which we should want to be distinguished in future.
The 16th report was on fire protection and the Donnington fires. In 1983 there was a fire at Donnington which cost us £169 million. Five years later another fire in the same place cost £180 million. How can that be when they had five years to learn some lessons? Unbelievably, sprinklers had not been installed. Our comments on that subject were very strong indeed. The important fact to emerge is that if the Government had been a private organisation it would have had to insure the property against fire and would have received a letter from an insurance company to the effect that it would be happy to quote for cover, but would send its men along to inspect the premises and say whether they were able to cover them. When they came along they would have pointed out that sprinklers had to be installed. Government Departments do not have to bother because they can raise the money from the taxpayers. That is sensible in many ways, but Government Departments should maintain the disciplines that an insrance company would provide to a private organisation. That is where the Department failed wretchedly and we shall be examining that matter again.
The 32nd report examined the chief inspector at the Department of Health and Personal Social Services in Northern Ireland. We found out that the Department had delegated some of its responsibilities. I understand that and respect the fact that there is a good case for such delegation. However, a number of aspects of the matter were not fully known by accounting officers.
The chief executive of the Department of Health and Personal Social Services said that the matter was for one of the four authorities in Northern Ireland. We were unable to accept that. We realise that there should be delegation. Nevertheless, we believe that there should also be some responsibility and an accounting officer must be able to account for those areas of responsibility. We said that we would expect detailed answers and we hurried out our report. I am glad that we have now received a response showing that more will be made available to us in the future. That is important. We cannot exempt expenditure on the basis of others being satisfied that their subordinates are doing what is expected of them. We must have the information and be satisfied ourselves.
Finally, our 35th report deals with NHS out-patient services. We were concerned here about the quality of service—the ability to measure standards and targets. Expenditure can be related only to the performance of certain activities, so we must find a way of measuring standards and targets. Waiting time comes into that along 466 with the status of fund holders and non-fund holders. We look forward to seeing a greater concentration on some of those activities so that we can compare like with like. In other areas where responsibility is delegated, that will become even more important.
Finally, I wish to thank the Committee, which is the hardest-working Committee in the House. Anyone who knows anything about civil servants knows full well that we have a mountain of paper from them. One of my pleasures is that my colleagues nearly always spot things that I have overlooked, for which I am grateful. It means that we have a properly functioning body which works and acts on behalf of Parliament and for which the House needs to be grateful.
§ Sir Ian Stewart (Hertfordshire, North)
In recent years it has usually fallen to my hon. Friend the Member for Scarborough (Sir M. Shaw) to follow the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) to speak on behalf of Conservative members of the Public Accounts Committee and to thank him personally for the great contribution that he makes to the working of that Committee.
I am one of the most junior members of the Committee and it has been an extraordinary experience being a member of the Committee even for a matter of months since the beginning of this year. I deeply regret the circumstances which led me to join the Committee; I filled the place once held by my honourable and close friend Ian Gow, and I well understand how much the Committee misses his contribution—intellectual, forensic and personal.
The weight of work which the Committee has to handle has not been overstated by the right hon. Member for Ashton-under-Lyne. On the table before us we see only the reports, not the drafts, transcripts, National Audit Office reports and all the related paperwork which come to the Committee. I suspect that I am not the only member of the Committee to have spent a large part of the summer recess sorting through piles of paper relating to the Committee and trying to get them into some sort of coherent order.
The right hon. Member for Swansea, West (Mr. Williams), who has a room in the House not all that far from mine, has a horizontal filing system for his Committee papers and it is sometimes difficult to get into his room to have a word about what we are talking about in the Committee.
In all seriousness, however, I want to express my appreciation of the work done by the Chairman and by my fellow members and colleagues on the Committee, many of whom have served on it for a considerable number of years and whose experience and expertise are invaluable. I often feel rather amateur when I listen to the extraordinarily pertinent lines of questioning that they are able to develop. I hope that such experience and skill will come with time.
We are all grateful, too, to Sir John Bourn, the Comptroller and Auditor General, to the staff at the National Audit Office, and to the Comptroller and Auditor-General for Northern Ireland for their work not only on behalf of the Committee and the House but on behalf of the public at large. Theirs is not a function which is as well known as it ought to be, but it seems to me to be one of the most important and responsible functions in 467 British public life that there should be an effective means of keeping control over the way in which taxpayers' money is spent.
That is perhaps the Committee's greatest strength. Unlike departmental Committees, as is well known to members of the Committee but perhaps not so fully understood beyond these walls, the Public Accounts Committee has traditionally concerned itself not with the policies which have led to the public expenditure but with the way in which the money is spent once those policy decisions have been taken. It is extremely important that at least one Committee of the House should be able to look in such a dispassionate way with an entirely practical application to see where taxpayers' money is going. It is a strength of the Committee that that very fact reduces, if it does not entirely eliminate, the usual party political dimension which is so often bound to enter into our considerations in the House. It is also a strength of the position of the National Audit Office and of the Comptroller and Auditor General that he knows that that is the basis on which he is reporting to our Committee.
If the results of our Committee's reports are then taken up by other Committees or by the House, that is fine, but the process of auditing and checking that auditing and of making that auditing process accountable to the House through the Public Accounts Committee is an extraordinarily valuable aspect of the work of Parliament. The public service would be far less responsible, and accounting officers would have much less cause to ensure that they were conscientious about using public money, were it not for the fact that that process exists. They appear before the Committee frequently and know that they will be held to account by those who will be fearless in asking them questions about how they are using the money that we raise from the British public in taxes.
I was particularly glad that the right hon. Member for Ashton-under-Lyne referred to Sir Peter Levene, whose appointment and the improvements in defence procurement that he introduced illustrate how valuable it can be to introduce into the public service those with a greater knowledge of the operation of the commercial world. I think that it is fair to say that that appointment was pretty heavily criticised when it was originally made, but I agree with the right hon. Gentleman that Sir Peter's performance triumphantly justified his appointment and has saved the country a great deal of money. The repeated sessions that he had with the Committee, many of which took place before I joined it, showed how a Department could benefit from the direct application of commercial skills and understanding of the kind that he brought into it.
Lest my comments seem hypocritical, I should say that it was as a result of a meeting that I had with Mr. Levene, as he then was, when I was an extremely junior Minister in the Ministry of Defence in 1983 that I suggested that he should meet the then Secretary of State, and from that his appointment flowed. I was led to make that suggestion because I was at that time concerned about the way in which the Ministry of Defence appeared to take on trust too much of the information fed to it by firms in the private sector. Unless such firms had, as it were, someone 468 from their own culture to deal with, it was unlikely that the Ministry of Defence would be getting good value for money from its large budget.
§ Mr. D. N. Campbell-Savours (Workington)
Could not that argument be extended to health service procurement? We understand that the Department has made changes in the arrangements for the procurement of NHS supplies. Is there not an argument for appointing someone from the private sector to introduce into health service procurement the same climate to which the right hon. Gentleman refers?
§ Sir Ian Stewart
In principle, the assumption should be that such an arrangement would be welcome in whole areas of Government or Government-funded activity. I see no reason why health services should not be among them, for the reason that the hon. Gentleman gave.
The impression that I have gained from my relatively brief membership of the Committee is that many of our inquiries raise not only particular points about the Departments concerned but general points of principle having a wider application.
One or two of the cases that we examined illustrate those wider issues. My first example concerns the new British library building, to which the right hon. Member for Ashton-under-Lyne referred. The 18th report, which was published on 8 May, is a remarkable document. I was not a member of the Committee when that evidence was taken, but once I began reading the report during the summer recess, I could not put it down. I was astounded at the sequence of events that it revealed. If it is not a sell-out in the Vote Office, it ought to be. It should be required reading for all right hon. and hon. Members.
The new British library building is a lengthy project that has spanned different Governments, agencies within Governments, and Departments. It is a horrendous story. The new building was conceived in the 1970s and it is due to be completed by 1996. It will, however, bear no relation to the original concept. It will be much smaller, and because only certain phases will be completed, there will not be a coherent complex of buildings as was originally conceived. The project will cost about four times as much as was estimated, and although inflation accounts for part of that, it will not account for all of it.
Instead of providing three times as many seats for readers, the new building will offer only about 70 more places. Nevertheless, it is described as the biggest civic building project in Britain in the 20th century. Any construction project spread over 15 years is almost bound to get into a tangle. Technology, central heating arrangements, and other aspects change over 15 years, so that by the time of completion the project does not remotely resemble the original plans.
The building will be able to accommodate only material up to 1996, instead of up to 2030—which shows that if one leaves a project too long, it is overtaken by events and finishes up not serving the purpose for which it was conceived.
Part of that situation is due to the original concept, but it is largely a question of the way that the project was undertaken. The original concept of a huge complex of buildings was in itself questionable. When it was first mooted many years ago, I remember wondering, then as a member of the Opposition, whether it was necessary to have anything so grandiose. The 18th report makes reference to a great auditorium, but one does not go to a 469 library to sit in a 260-seat auditorium or to take a meal in a resplendent restaurant. There are masses of restaurants in the King's Cross and St. Pancras areas of London, and the capital is full of under-used auditoriums, yet a huge part of the new building's available space was designed for purposes not directly relating to that of a library.
When public funds are committed to such a major project, they should be devoted to the central purpose and not spent on a lot of peripheral purposes that can up-end the whole scheme. Even though, I am embarrassed to say, I was a Treasury Minister at the time the project progressed under a Conservative Government, I cannot see what role the Treasury was playing in the 1980s in its scrutiny of the process by which the project staggered forward from year to year.
The right hon. Member for Ashton-under-Lyne pointed out that the steering committee did not meet for three and a half years at a critical point. I was not the Treasury Minister responsible for public spending, but I do not suppose that the Chief Secretary to the Treasury at the time knew what was happening—I suspect because responsibility appears to have been shared by at least two main parties. They were the Office of Arts and Libraries and the Property Services Agency. Each competed with the other to avoid taking responsibility for overall control of the project.
The lesson to be learnt is that responsibility for the progress and costs of any significant project must be defined. The Treasury must know who is responsible, and keep its own tabs on the project to ensure that it is progressing properly. In the case of the British Library, there was not just weak management but a lack of management. Until the project was pulled together more tightly three or four years ago, it was allowed to progress without the central control one expects to see applied in respect of a venture that is not only an important part of British life but a major expense to the British taxpayer.
I do not understand why it takes such an enormous amount of time to construct such a building. The longer one takes to complete such a project, the more likely it is that its costs will overrun due to specification changes and the incorporation of new ideas that one interest or another wants to introduce. The whole process then becomes more diffuse and less controllable. We shall end up with a library that does not perform the function for which it was designed, and which will cost a great deal more than it should have done—though it may be quite an agreeable place to have lunch. I cannot believe that is what was intended.
The national health service is a mildly topical subject at the moment. Like many other agencies and services that receive Government money at various removes, the NHS is liable to throw up extraordinary stories of a lack of basic management perception. We took evidence, following the report of the Comptroller and. Auditor General, about the use of operating theatres. Some of the information that came to light suggested that even in respect of an important and central element in a major public facility such as the national health service, basic and sensible rules of management may fail to be implemented.
In this case we learned, for example, that operating theatre time was frequently wasted because patients did not turn up. I suppose that it is not surprising that patients sometimes do not turn up. Some patients may forget or some may be afraid of turning up for their operation, rather as one is before going to the dentist. A patient may 470 not be well enough to turn up, may have got better and therefore not need to turn up, or may have moved. There are all sorts of reasons why those scheduled for an operation may not turn up at the right time.
Yet in many cases hospital staff had not even checked with patients that they intended to attend for their operation, even if notice had been given many weeks or months before. A great deal of valuable time will inevitably be lost if accurate lists are not maintained and attendance is not checked beforehand. The simple process which most hospitals adopt is to seek positive confirmation that patients intend to turn up, keep the lists up to date, and keep a list of patients who would be available at short notice if unexpected vacancies arose. But the report says that for one type of surgery in one district almost half of the names on the list could be deleted.
Such inquiries show that there is a long way to go in many of the services which take a substantial part of the national budget. The same could be said about many other aspects of the national health service, but that illustrates again the need at all levels to have not only competent financial management but competent common-sense management of the way in which facilities and resources can best be used.
§ Mr. Tim Smith (Beaconsfield)
Before my right hon. Friend moves on to the next report, will he refresh the memory of the House? Did not the report also suggest that some operating theatre sessions were cancelled because of the failure of consultants to turn up? If so, does he agree that if we are to have improved systems, they should also apply to consultants? If in other professions even the most senior partners regularly have to complete time sheets and account for their time, there is no reason why consultants in the NHS should not also be required to account for their time.
§ Sir Ian Stewart
My hon. Friend makes a fair point. That applies at all levels and in all functions in public services of this nature. The lines of accountability and responsibility are often not clearly set out in hospital management structures, so some things are not controlled in the way they should be. It is also true to say that because hospitals have such widely different practices the amount of detailed information available to the Department of Health about the way in which things are done and how it could encourage certain standard procedures which would improve the use of resources has not advanced as far as it might otherwise have done.
The last of the reports to which I wish to refer relates to the Foreign and Commonwealth Office accounts which, as the right hon. Member for Ashton-under-Lyne said, came in for a swingeing qualification from the Comptroller and Auditor General. Well might they have done so, because the story of what happened in the Foreign Office about reconciling its accounts during a period when it was changing its computer system is again something of a horror story. The old system had no back-up. As a result, when a new system was being installed and ran into serious teething troubles and the old system happened to pack up during that transitional period, there was simply no means of identifying what the accounts should be.
The appropriation accounts report for 1989–90 says:for March 1990 there was a difference of £485 million between the Parliamentary Grants recorded as drawn and the sums shown in my records as released from the Consolidated Fund.471 That is a huge figure. The same document says in paragraph 36:The results of my enquiries led me to conclude that the system of control over suspense accounts had broken down to the extent that no reliance could be placed on the records maintained within the accounting system.That is a fairly dramatic comment by a person charged with auditing the accounts of one of the great Departments of State.
One of the problems seems to have been that the permanent under-secretary was not informed nearly soon enough of what had been going on. The passage that I quoted related to March 1990, yet he was not fully informed about what was going on until the end of July that year. It seems that there was a failure of a line of management responsibility. I am not pointing the finger at the permanent under-secretary personally but the example illustrates how the civil service head of a Department of that nature, despite all the major preoccupations that he may have about policy and other matters, must know what is happening. In view of the rapid pace at which foreign affairs have moved in recent years, it is not surprising if the permanent under-secretary had many preoccupations. Nevertheless, he is the accounting officer. His opposite numbers in other Departments carry the same considerable responsibility as him and they must have in place a structure of support from financial managers and comptrollers within their Department who can make sure that such failures do not occur and who can, if things begin to go wrong, warn them properly at an early stage.
Whether in the private sector, an industrial company or in government, anyone with overall responsibility would far rather know when things begin to go wrong than wait for many months or years until things have become much worse and the problem causes a great deal more difficulty and cannot be put right without a great deal more fuss and trouble.
In the case at the Foreign Office there was a gross failure of general record keeping. Those who were put into the accounting department appear to have been inexperienced. They appear to have been put there not because they had an aptitude for the work but because they happened to be in London for a year or two between foreign postings. It is the responsibility of the heads of such departments to ensure that the people entrusted with responsibility for the accounts and for keeping tabs on expenditure are sufficiently skilled and familiar with such work and can ensure that a complete breakdown of accounting systems does not take place.
If one has a reasonable system, it ought to be possible to reconstruct the accounts even if the accounting method collapses. If one has the right paperwork and it has been correctly recorded and filed, although it might involve a great deal of work, one should be able to reconstitute the accounts after a period. In this case, even that was not possible and disqualification of the accounts had to take place.
I hope that disqualification will not recur in the Foreign and Commonwealth Office, and I hope that it will not be repeated in other Departments in anything like a similar way. It is a salutary warning of what can happen if the accounting officers do not make themselves continuously aware of problems that may arise in the management of their figures.
§ Mr. John Wilkinson (Ruislip-Northwood)
What sanctions would Parliament impose in such cases? It is all very well lamenting over lapses of accounting that have occurred, and this example seems to be particularly lamentable, but unless at the end of the day Parliament enforces sanctions—or induces the Government to impose sanctions—on those responsible for negligence, we shall not move any further forward. Can my right hon. Friend elucidate that aspect?
§ Sir Ian Stewart
I am not sure that I can, but I am aware of the problem that my hon. Friend raises. In the private sector the chief executive or the finance director, or both, of a company that finds its accounts in that condition would not survive in post. It would not be wise to adopt that approach to the same sort of situation in the public service because, as I said, there are many other dimensions. Those responsible have many other areas of duty besides the financial one.
Perhaps there should be something more comprehensive from this House than the report of the Public Accounts Committee by way of an expression of unhappiness and criticism if something goes as seriously wrong as happened in this particular case. I hope that by placing the matter on record in this debate we make it clear as Members of this House, as opposed to just members of the PAC, how seriously we regard it that one of the great Departments of State could allow its finances to get into such a terrible and irretrievable mess. I hope that the lesson has been learnt and that we shall not have to dwell on such cases in future.
I should like to conclude by saying just a word about the role of the PAC. I have confessed to my own relative inexperience. In the short time I have been a member of the Committee I have been struck by the value of the relationship between the National Audit Office—the Comptroller and Auditor General—and the PAC. It is against this background that I noted with some anxiety the report of the Select Committee on Procedure on the NAO and PAC. The Select Committee said of that relationship:it would be regrettable and detrimental to the interests of the House, if it ever came to be seen as an exclusive relationship.It went on to say that it had sympathy with the proposal that where a particular departmentally-related Committee had an obvious interest, a report from the NAO could be taken up by that Committee instead of the PAC. My right hon. Friend the Lord President of the Council has responded with several comments to those suggestions. I should particularly like to draw attention to his remark that:The Government sees no constitutional objection to the NAO having a relationship with other committees, provided that the nature and scope of the NAO's work, and its relationship with the Government, remain unchanged.The relationship between the Comptroller and Auditor-General and the Department whose affairs he would be investigating would be likely to be altered if he felt that he was accountable to other Committees which would follow a different tack from the PAC's concern with value for money, efficiency and the proper expenditure of money, rather than with policy issues. Inevitably, in discussing with Departments the information that he would include in his report, he would be influenced. He has told us that he feels that the Departments would be influenced in the way in which they handled that relationship. A stronger case would need to be made out for a change of the type suggested by the Select Committee on Procedure before we 473 should let go of the considerable advantages inherent in the present arrangements. That is my view as a result of my brief experience of the PAC, but I believe that it may be shared.
§ Mr. Robert Sheldon
In the subsequent debate I followed exactly the course that the right hon. Gentleman put forward, and the Chairman of the Procedure Select Committee, the hon. Member for Honiton (Sir P. Emery), explained that the PAC would have an effective veto over those areas and examinations that should be carried out by other Committees. It would be impossible for a Committee to carry out the work that we do and it would be impossible if we were both to deal with the same particular report. All those propositions were accepted.
§ Sir Ian Stewart
I was about to refer to that, but I am glad to have it from the Chairman of the PAC.
From time to time it may appear as though there are advantages in opening up more widely the work of the NAO and the Comptroller and Auditor General. For the time being the effective veto, as the right hon. Gentleman described it, will preserve the position satisfactorily. From fairly limited experience of the work of the Committee it is my impression that the present arrangement is a satisfactory one which should not be altered without much better cause than has so far been demonstrated.
§ Mr. Alan Williams (Swansea, West)
I start by making a personal investment in the next Session of Parliament and congratulating my right hon. Friend the Member for Ashton-under Lyne (Mr. Sheldon) on the way in which he has chaired the Public Accounts Committee. We all have great admiration for the way in which he carries out that role.
This Saturday many thousands of people will congregate at football grounds around the country, but they will not realise that the Chairman of the PAC was the originator of the yellow card system. One yellow card is a warning, and the second sends one off. I must confess to the right hon. Member for Hertfordshire, North (Sir I Stewart) that, in the vertical extension to my horizontal filing system to which he kindly referred—I shall gladly display its merits to any hon. Member who can get in through the door—I have, sadly, a pile of yellow cards from my right hon. Friend nearly as high as the pile of National Audit Office reports.
Like the right hon. Gentleman, I am a relatively new member of the Committee. It is 22 years since I last served on it, and this is my first full Session. I have found fascinating the diversity of the issues that we have investigated. It is a genuine tribute to the diplomatic skills of my right hon. Friend that, despite the diversity of the subjects and the attitudes of the members of the Committee, every time he manages to produce a consensus report.
More often than I would wish, I have been shocked by the sloppiness and incompetence of the cases before us. I want to deal briefly with one case of what I feel is a cavalier attitude to the disbursement of the best part of £1 billion in tax concessions over the past decade, two failures to account properly to the House almost verging on contempt of the House, and one major financial failure which, even more important, revealed a gamble with national security.
474 As an aside before starting on those cases let me say that I was somewhat disappointed to find, when recently we looked into hospital waiting lists, that the chief executive of the National Health Service Management Executive, Mr. Duncan Nichol, was unaware, until I gave him and the Chairman evidence in the form of brochures, that private health schemes were offering immediate treatment—I underline immediate—in more than 400 NHS hospitals, many of which were the subject of our investigation because they had abnormally long waiting lists. I would have been more impressed with Mr. Nichol had he shown more evidence of being on top of the job.
The first issue with which I wish to deal concerns the way in which Customs and Excise administers the beer duty, and in particular the 6 per cent. concession allowed to the brewers for wastage. Every year since Gladstone—for over a century—the brewers have enjoyed a tax allowance of 6 per cent. of their beer production as being waste product. That tax concession is now worth £125 million a year. In fact, when we explore the figures more carefully, we discover that the British public have been ripped off to the tune of £50 million a year by the eight major brewers in each year over the last decade. In other words, those brewers have had virtually £0.5 billion to which they were not entitled.
Indeed, a report that we received on the subject from the National Audit Office said that it could not obtain evidence from brewers' records. That was hardly surprising. But one brewer played the nark and apparently co-operated with the NAO, and in paragraph 2.18 of that report we were told:One large brewer estimated his average losses at below 3 per cent.In other words, one large brewer reported that he was getting more than double the tax rebate to which he was entitled.
Of the £125 million given in tax rebates to the brewers, 80 per cent.—£100 million—goes to the eight biggest brewers. Because that one case might be thought to be one off, we must examine the evidence of the Brewers Society. Could it have been one off resulting from a technological advantage possessed by that one brewery using the latest techniques to avoid and reclaim waste? The Brewers Society said in paragraph 2.27 of its statement that it consideredthat, because all brewers used much the same technology, use of an average wastage rate was not inequitable as between one brewer and another.That organisation was speaking for the eight big brewers such as the one which reported that it was receiving double the tax rebate to which it was entitled.
All the big brewers, on the admission of the Brewers Society, are employing the same technology and must therefore be achieving the same savings. The result is that, last year and the year before, the eight big brewers received £50 million to which they were not entitled, and if that tax rebate were sustained over the whole decade, it would amount to £0.5 billion.
The Department was hardly over-concerned about the matter, and when I asked Sir Brian Unwin about it, he said:I do not believe the present system is fair, no.That seemed at least to be a concession, and I thought that at last we were getting action. But disillusion quickly followed, when he aded, again in reply to a question from me: 475We have had external compulsion from Brussels and we have now decided to change the system".So the £50 million a year rip-off by the brewers—which are now, instead, ripping off those who run their pubs—might have been continuing had it not been for the intervention of Brussels.
The next issue I wish to raise concerns the privatisation of Harland and Wolff. Paragraph 4.1 of the report by the Northern Ireland Office said:The Government's intention to return Harland and Wolff to private sector ownership was announced to Parliament on 29 June 1988.Observing the proprieties of the Committee, I am not talking about whether it should have been returned but what happened in relation to accountability to this House after that decision had been taken.
The paragraph continued:In a statement to the House of Commons on 22 March 1989, the Secretary of State reported that he had approved Heads of Agreement for the sale of Harland and Wolff … In his statement, the Secretary of State only detailed in financial terms the assistance to the new company … The statement outlined the mainI emphasise "main"—financial provisions of the Agreement; the investment of £60 million in repayable unsecured loan stock and grant aid of £38.75 million … the Secretary of State also referred to arrangements … for existing ship contracts … recourse facility … responsibility for liabilities … and … intervention aid. The statement did not, however, quantify the cost of these particular aspects of the Agreement, nor have details been reported subsequently to the House.It is two and a half years since the Secretary of State gave the House the impression that the main financial cost of privatising Harland and Wolff would be £98.75 million. Yet appendix 3 to the Northern Ireland Office report shows that, in addition to that sum, another £522 million was involved. In other words, over five times as much was involved as had been reported to the House. The eventual cost, instead of being £98.75 million, was £624.8 million —more than a slight oversight, and more than a slight neglect of accountability to this House. It is a major criticism of the Northern Ireland Office that the figures were not willingly and readily produced to the House.
I genuinely wish that that had been one off. Regrettably, my next example also applies to the Northern Ireland Office and also relates to a privatisation venture. In a statement to the House on 7 June 1989, the Secretary of State reported that he had approved heads of agreement for the sale of Shorts to Bombardier, and gave details of the cost implications for Government. They were summarised in appendix 3 to the Northern Ireland Office report by the Comptroller and Auditor-General on the sale of Short Brothers, except for additional items that were listed in the final section of the report. Those additional items amounted to £236 million, and they were not mentioned in the statement.
No reference was made in the Secretary of State's statement to the retention by Government of Shorts' sales financing liabilities. That was a mere £142 million, as so far costed, and that cost could increase between now and the year 2040. However, that was subsequently brought to Parliament's attention on 20 July 1989, when approval was sought for the additional expenditure required for privatisation. I have here the statutory instrument—the Appropriation (No. 3) (Northern Ireland) Order 1989. I 476 invite anyone to read that order and find in it any suggestion of, for example, the £142 million that was not mentioned in the initial statement to the House.
In a speech to the Committee about additional funding, the then Under-Secretary of State for Northern Ireland said:The Government will also retain the financial liabilities and obligations associated with aircraft sold in the past by Shorts under financing deals."—[Official Report', Third Standing Committee on Statutory Instruments, &c., 20 July 1989; c. 4.]That is all he said. There was no quantification, no spelling out of the £142 million.
That took place at 10.30 in the morning. That afternoon, after failing to give the detailed information to the Committee, in a written answer to my hon. Friend the Member for Bradford, South (Mr. Cryer) the same Minister said:I refer the hon. Member to the answer I gave earlier today to my hon. Friend the Member for Beverley."—[Official Report, 20 July 1989; Vol. 157, c. 279.]Now we must see what happened at 2.30 that afternoon, after the issue had gone before the Committee dealing with the statutory instrument. We all understand that, when a Minister prepares an answer to an oral question, until he stands at the Dispatch Box he can be sure only that he will answer the substantive question. If a Member is not present, only the substantive reply will appear in Hansard. There will be no supplementaries; the question is passed over. That same afternoon, the Secretary of State for Northern Ireland was asked by the hon. Member for Beverley (Mr. Cran)if he will make a further statement on the privatisation of Short Brothers plc.The substantive answer, again from the Parliamentary Under-Secretary, was:Since the announcement on 7 June of heads of agreement whereby Bombardier of Canada will acquire Shorts, good progress has been made on the necessary legal documentation. I am pleased to inform the House today that approval to the terms of the transaction has been given by the European Commission. It is our intention to complete the transaction in September.There was still no reference to the additional factors implicit but not explicit both in the statutory instrument and in that morning's Committee proceedings. In answering a supplementary question—his diligent hon. Friend was there to ask the supplementary—the Minister said that the cost of the transaction would be some £750 million. That is the very figure originally given when the extra costs were not admitted.
Those are two cases in which the Northern Ireland Office has failed to tell the House of extra expenditure involved in privatising firms within its remit. In one instance, those extra costs were more than £500 million and in another they were more than £140 million. That should be a matter for great concern to hon. Members on both sides of the House.
Finally, I come to the most incredible report that I have seen either in my original spell on the Public Accounts Committee or in my more recent spell. My right hon. Friend the Member for Ashton-under-Lyne referred to the affair. It concerns the Ministry of Defence, and fire protection at main store depots. If these events were written down as a story, it would be regarded as fatuous; no one would believe that anything so idiotic could have happened.
477 In June 1983, there was a fire at the Army stores in Donnington. That one fire destroyed £169 million-worth of stores. It was a sad accident, but it happened. At least one can learn by mistakes, or one likes to think that one can. In November 1983 the services informed the Minister that the total destruction of any one of 28 buildings could result in a serious or very serious loss of operational capability, which could not be recovered in the short term —this is where the story becomes important in terms of national security.
In questioning it emerged that in some cases it would take more than 12 months to make up for the damage. After the fire, there were still 28 stores described as serious or very serious risks, the loss of any one of which could have caused serious damage to the operational capability of our armed forces. That was corroborated in questioning. I shall not go into the details, but the facts were amply documented and corroborated by the questioning of the civil servants.
In December of the same year, 1983—this was in the cold war, we must remember, before there was any thaw in western Europe, when part of our strategy was intended to be the sustaining of a conventional war, if we had to, within the central plains of Europe and the year in which Ministers had been told that 28 stores were at risk, the loss of any one of which would have serious consequences, and had been warned about the critical strategic nature of each of those stores—the Ministry employed fire risk consultants.
The consultants advised that another building was hopelessly inadequate in terms of fire protection. They said that it was among the worst fire risks that they had ever seen, and that it was likely to burn out once every five years. That is a pretty clear and specific warning. The building was strategically important and expensive—the first fire had cost £169 million—and was described as one of the worst fire risks that the consultants had ever seen.
Also in 1983 the Ministry carried out its own survey at the request of a Minister of State. That survey concluded that there was a real possibility of another equally serious fire. One would expect Ministers to have been somewhat alarmed when, after a fire costing £169 million, they were told by their own Ministry that another equally serious fire was possible and when outside consultants had told them that a fire was likely in one of the stores every five years.
In 1984, the Army drew up a comprehensive programme to protect the stores. That was abandoned because of lack of funds. Five years later, in 1988, a second fire occurred—on time, as prophesied by the consultants. It cost £180 million and took place in the partner store of the one burnt down in 1983. In the five years between the first and second fires the Army had implemented no structural fire protection changes to those stores.
Those who are Ministers or who have been Ministers know what it is like when a report lands on one's desk and one knows that one must take decisions on it. What is even more worrying about this case is the fact that page 1, paragraph 6C of the main report states:Reports were made to Ministers up until February 1985.The first fire cost £169 million and the MOD consultants had already told it that another fire was likely, indeed certain, within five years. However, just about two years after the first fire, Ministers stopped receiving reports on the stores, although they knew that the Army's 478 programme to deal with a potential fire had been abandoned because the MOD was unwilling to provide the money to carry out the necessary protection.
It is beyond credibility that Ministers could have been so lacking in sheer common sense and awareness of the hazard to their own shoulder blades that they did not continue to receive constant reports to ensure that adequate changes had been made to the 28 main stores. It is important to remember that we are talking not only about the £180 million of damage that was caused by the fires, but about the severe impact that they had on the operational capability of our armed services.
After the 1988 fire, we lost tank engine blocks, components relating to the Rapier and electronic equipment. When we went to fight in the middle east, we had to cannibalise tanks and get parts from west Germany. It was admitted the other night on television that a trawl was conducted in west Germany to find enough communications equipment to sustain our operations in the middle east.
It is remarkable to look back to February 1985 when reports to Ministers were abandoned. Who was the Minister who decided to abandon those reports to Ministers? Lo and behold, it was none other than the flak-jacketed right hon. Member for Henley (Mr. Heseltine)—he who preaches to everyone else about propriety and care in financial matters; he who talks about the sanctity of the defence of Britain.
This matter is the most unbelievable and stupid example of ministerial irresponsibility that I have ever come across. However, it has provided a fascinating insight into the way in which some Ministers choose to run their Departments.
§ Mr. Tim Smith (Beaconsfield)
I begin by paying tribute to the Chairman of the Public Accounts Committee, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who, as the House will appreciate, is the only member of the Committee who turns up to every session. He is also the only member who has to listen to every word uttered and reads every draft report. It is impossible to exaggerate the quantity and quality of the work that the right hon. Member undertakes on behalf of the Committee, and all members of the Committee are most grateful to him for it.
I should also make it clear that the Committee would be unable to operate in any effective manner without the National Audit Office, which carries out the financial and regulatory audits of Government Departments and undertakes the value-for-money reports. Its work, too, is of inestimable value to the PAC. Change can be precipitated in a Government Department purely by the arrival of the NAO. The right hon. Member for Swansea, West (Mr. Williams) referred to the fact that the Treasury decided to abolish beer duty. Sir Brian Unwin suggested that that decision was largely attributable to the European Community, but I believe that the fact that the NAO started to investigate beer duty and discovered that it was an absurd anachronistic tax with a huge allowance for wastage which simply could not be justified in practice was a major factor leading to the Treasury decision to abolish beer duty.
In February this year the PAC visited the United States. The Committee is quite properly extremely cautious before it spends any money on travelling anywhere, but that visit 479 was justified because the United States has the General Accounting Office and expenditure there is probably between five and 10 times the size of pubic spending in this country. We felt that there might be some lessons to be learnt from visiting Washington, and there were. The main lesson to be learnt was that the way in which we do things in this country is extremely effective and that it would be wrong to make many changes to the system established by Gladstone some 100 years ago.
We discovered in the United States that many accounts of Government Departments in Washington are not audited at all. There is no provision in United States law for financial and regulatory audits. The GAO tends to concentrate on value-for-money issues, but much of its time has been diverted to straightforward policy issues. It is possible for a member of Congress to ask the GAO to investigate virtually any subject that he or she chooses. We discovered that the GAO has spent considerable time investigating the public sector deficit. That is an important matter, but it has nothing to do with value for money.
§ Mr. John Garrett (Norwich, South)
Surely the hon. Gentleman is aware that the legislation under which the PAC operates is the National Audit Act 1983, not the Act brought in by Gladstone. I helped to draft the 1983 Act and it is closely modelled on the Act which led to the establishment of the GAO in the United States. The powers and independence of the Comptroller result from copying the American legislation.
§ Mr. Smith
Fortunately we did not copy all the American legislation. I support the changes that have led to the appointment of an independent Comptroller and Auditor General, and it is true that that follows the American model, but in other respects we still retain many of the characteristics of the Gladstonian system and I am glad that we do. Although the National Audit Act 1983 placed a new emphasis on the importance of value for money, which I support, it is important not to lose sight of the fact that the bottom line is the financial and regulatory audits. That is where one starts from. Many of the value for money inquiries emanate from the annual statutory audits of Government accounts.
The Chairman of the PAC referred to the unfortunate fact that many of the appropriation accounts have been qualified recently for a variety of reasons. Much of today's debate has referred to appropriation accounts as much as to the green value-for-money reports. The two are complementary and perhaps debating which of the two is more important is not terribly fruitful. However, I believe that financial and regulatory audits are extremely important.
I agree with my right hon. Friend the Member for Hertfordshire, North (Sir I. Stewart) about the report of the Select Committee on Procedure. It is important to retain the integrity of the system and I have been greatly reassured to learn that it was effectively conceded by the Chairman of that Select Committee that the PAC would have a veto over certain matters.
I also agree with the Chairman of the PAC that it is important that the Government should state the clear objectives of any new expenditure programme. The public expenditure White Papers have been improved in that sense and contain clearer statements of the objectives 480 behind Government spending programmes. It is also important that, at the start of the exercise, the Department concerned should consider how it will assess at the end of the programme, or at some suitable point, just how economic, efficient and effective that programme has been. However urgent the project or political problem, consideration must be given at the beginning. We all know that Ministers are often tempted to throw money at a problem if it is urgent, but it is important that consideration be given to how, at a later stage, it can be determined whether that money was spent effectively.
Reference has already been made to the number of Government accounts that have been qualified and I should like to add to the list that has been given. The most recent is the insolvency services account, which also resulted in a major qualification because of computer breakdowns similar to the problem at the Foreign and Commonwealth Office. I hope that the Committee will be able to look into that problem later to find out exactly what went wrong. Those are all important matters. The latest account to be qualified was published on Monday by the Ministry of Defence and relates to a sum in excess of £100,000 spent on "celebrations", which I understand to mean parties. That, too, will have to be investigated.
The investigation carried out into the retail prices index was important because the RPI may have a significance that is not fully justified. However, it has great significance in the private sector in wage negotiations but also in the public sector, where many benefits such as social security are indexed every year by the increase in the retail prices index. A difference of 1 per cent. or even a tenth of 1 per cent. can result in huge increases in public expenditure, or the opposite. It is therefore important that we should get it right.
Two aspects concerned me. The first related to the costs of owner-occupation. When house prices were rising quickly from about 1985 to 1988–89, but interest rates were low, the fact that the cost of housing was rising rapidly was not properly reflected in the index. Since then, there has been a fall in house prices but a rapid increase in interest rates until recently, which has resulted in a substantial addition to the index. It is accepted that that needs to be examined. The Treasury minutes reported thatthe CSO would consider whether there was a possibility of improving the treatment of owner-occupiers' housing costs in the RPI.Will my hon. Friend the Minister say what progress the Central Statistical Office has made and whether it has any proposals to improve the housing element of the retail prices index?
The second point that concerned me was how the community charge, and particularly transitional relief, was treated in the retail prices index. The principle that is used in determining what should be included in the RPI and what should be left out is whether an item is means tested and whether it is income related. I fully accept that community charge benefits, for example, should not be taken into account in the retail prices index. I am concerned about so-called transitional relief, which was available to certain owner-occupiers, regardless of their income. It was determined by the rateable value of the property and the relationship between the previous rates bill and the new community charge bill. That was not taken into account in the RPI, even though it was not an income-related benefit. I was glad to learn that that matter had been referred to the Retail Prices Index Advisory 481 Committee, which had never previously considered it, but I was less happy to learn that that committee had accepted the way in which the community charge was treated in the index. I still think that it managed to get that wrong.
The Public Accounts Committee considers Inland Revenue matters regularly, and there are two matters on which we should like to see progress. The first is schedule D, which the Committee has considered many times in the past few years. The good news is that the Inland Revenue has now published a consultative document on schedule D and, if the proposals are implemented, schedule D taxpayers will be taxed on a current year rather than a prior year basis. That will be a major step forward in tax simplification and will, in due course, be welcomed by Committee members.
The second matter that concerns me relates to extra-statutory concessions and has also been considered by the Committee on many occasions. In the last report on that matter, which was the second report of this session, we learned that three extra-statutory concessions which were suitable for legislation were more than 50 years old and that one concession classified as temporary was also 50 years old. We were disappointed to learn that only one extra-statutory concession had been included in the Finance Bill in 1990.
Although I appreciate that the Treasury minutes were probably drafted by the Inland Revenue, they said:The Committee's concern at the growth in the number of extra-statutory concessions has been noted. The content of Finance Bills is of course a matter for Ministers".We are all well aware of that fact and we know that there are different pressures on Ministers. Some hon. Members, including me, have complained about the length and complexity of tax legislation. It is not satisfactory that so many extra-statutory concessions are left out of taxation legislation and I hope that we shall make more progress on that in future.
My right hon. Friend the Member for Hertfordshire, North and the Chairman of the PAC have already referred to the most extreme example of how the Government manage their property—the appalling story of the British Library. Two other examples have been presented to the Committee in the course of the year. The first was the new headquarters building for the Department of Energy. The second was accommodation for Customs and Excise London investigation division. Those examples have a number of common features. In the period that we were studying–1987–88—there was an appalling staffing problem in the Property Services Agency. As a result, one member of staff was responsible both for the Department of Energy head office and for the Customs and Excise building. Once we had taken evidence, PSA Services sent us a note about the poor man who was in charge. It was no reflection on the individual concerned, who could not possibly do the work allocated to him. The project manager on that scheme was Mr. Tony Stark. The note said:At the time of the Worship Street project, Mr. Stark was a Grade 7 officer. The pay scale for Grade 7 in October 1988 was £18,442 to £23,487 per annum".Mr. Stark was responsible for literally hundreds of millions of pounds' worth of taxpayers' money, and it is no criticism of him if he could not keep all the balls in the air at once. The PSA was seriously understaffed.
Following the changes made to the structure of the PSA since then, that problem should be resolved. However, my hon. Friend the Minister should give a clear undertaking 482 that there is now adequate staffing to cope with those property matters. If it is appropriate for the Ministry of Defence to hire experts in defence procurement, it is equally appropriate for Government Departments, which are now responsible for their property, to hire experts in property. It is clear from the reports that some civil servants had rings run round them by private sector developers, so perhaps more expertise would be a good idea.
The question of project responsibility arose in the context of the British Library, but it applied equally to the two projects that I have just mentioned. There was much buck-passing between the PSA and Customs and Excise, and between the PSA and the Department of Energy, regarding who was responsible for certain decisions. The situation is now better because individual Departments will have responsibility. They will be able to use PSA services if they wish or to go to the private sector. Nevertheless, there is a continuing concern that there should be adequate expertise, especially in small Government Departments which do not have frequent property transactions. The Department of Energy—unlike the Ministry of Defence, for example—would be one. It is important that such Departments should have adequate property expertise within the Department. I hope that my hon. Friend the Financial Secretary to the Treasury will be able to give us some reassurance on that matter.
§ Mr. John Battle (Leeds, West)
I do not have the privilege of serving on the Public Accounts Committee. However, I wish to comment on three of the reports before us which relate to the work of the Department of the Environment. They are the 33rd report on regenerating the inner cities, the 22nd report on homelessness and the 19th report on privatisation in the new towns.
The Department of the Environment is primarily responsible for policy action in our large cities. Today, the Archbishop of Canterbury pointed to the worsening conditions in our inner-city areas and to the gulf between inner-city and suburban areas. Over the years we have seen under this Government a series of initiatives, some of which have sparked, quickly flared and then died away, whereas others are still with us. The initiatives have included the urban programme, the partnership programme with local authorities, urban development grants, urban regeneration grants, city grants, derelict land grants, the urban development corporations, enterprise zones, estate action, housing action trusts, inner city task forces and city action teams. More recently there has been the city challenge and most recently, and as yet untitled, the competition for housing resources initiated by the Secretary of State for the Environment whereby local authorities are invited to take part in a competition for housing investment funds. Sadly, the list is restricted to certain cities and others are not invited to apply. Not all the projects have been subjected to detailed critical scrutiny.
I welcome the report by the Public Accounts Committee into regenerating the inner cities. I will focus on one tiny part of the initiatives. One section of the report deals with city action teams and task forces. Paragraph 8 says:The 16 task forces have been enthusiastically developed and are well managed, but their project management responsibilities have increasingly diverted them from their 483 primary role of stimulating the regeneration efforts of other organisations. However, the Department of Trade and Industry told us that they had recently re-emphasised to the task forces that building up the capacity of local organisations was a vital part of their role.The conclusion in the report on the co-ordination of programmes refers to a "shift of resources away" from local projects which hasresulted in some important projects being closed.That section of the report refers to the community programme. The same is happening with some of the other task force projects in which there is a shift away from the local community.
I will give one example from my city. A sight and sound project is run in conjunction with the Yorkshire Post newspaper group. It was the task force project and was based in Jamaica house in Chapeltown, Leeds. It did very good work in helping black ethnic minority groups to set up businesses and was involved in getting community economic projects off the ground.
About a year ago, everything associated with that task force project was shifted away from the local area back to the Yorkshire Post headquarters building outside the local community. In effect, the project was closed down and resources were shifted out of the inner-city area for which they were intended to elsewhere in the city. The Parliamentary Under-Secretary of State for Industry and Consumer Affairs was approached about the matter, but he refused to meet and discuss the matter with the local authority chair of the race equality committee, Councillor Fabian Hamilton, on behalf of the local Chapeltown community, and he said that nothing could be done. I urge the Treasury to investigate ways of examining how funds are used by the organisations to which they are given.
The question arising in the projects is whether the funds are used for the purpose for which they were originally intended. There are questions about public accountability. As the report makes plain, the primary purpose of projects for the inner cities should be that they are based in the inner cities so that people there can benefit from them. There is unfinished business and work that still needs to be done in the Chapeltown area. I hope that Ministers will examine the matter.
The second conclusion of the Public Accounts Committee was this:We note the efforts made to co-ordinate inner city programmes at local level; but the multiplicity of bodies and initiatives involved is potentially a recipe for confusion and overlap. We expect the departments to watch the position closely.I hope that we, as Members of Parliament, will watch the position closely and that we shall urge departments not to be complacent in the matter.
The 22nd report concerns homelessness and was published in July this year. The first conclusion states:We are gravely concerned that homelessness has more than doubled over the last decade … official statistics may well significantly understate the true scale".The report then spells out the position. It says that the number of households accepted as homeless rose from 56,000 in 1979 to 145,800 in 1990. Since that report was published in July, the numbers of homeless people have continued to escalate. The number of people in temporary accommodation has risen to 55,300 according to figures released by the Department of the Environment this September. Similarly, the numbers in bed-and-breakfast 484 accommodation have risen from 12,240 at the end of April to 13,330 at the end of August. The crisis of homelessness is worsening around us.
The report on page 17 on the action taken by the Department of the Environment concluded:We note the improvements being made in the Department's arrangements for allocating resources to local authorities for general housing purposes, and we support the aim of targeting resources increasingly on authorities with the worst housing problems, including homelessness … We note the measures the Department are now taking to tackle homelessness and we expect them to keep the position under close review and to take further action as necessary".In the Treasury minute relating to the report by the Public Accounts Committee, the Department responded by referring to the improved arrangements for the allocation of resources. It referred especially to the £300 million special allocation for the years 1990–92 which is available for local authorities and housing associations provided that they are in London and the south-east of England. Northern cities could not apply for that special allocation.
Homelessness is not limited to the south and to London. When coupled with the skewing of the Housing Corporation's allocations to housing associations—again heavily in favour of the south-east region and not even in favour of the inner London boroughs—it is not surprising that there is some bewilderment in the north about the Government's claim to be targeting resources to the authorities with the worst problems. We do not resent resources going to tackle homelessness in London and in the south-east, but it seems to us that tackling homelessness in northern cities as well may mean that homeless people do not set out on the trek south to London to add to the numbers of the homeless here.
Following the publication of the report of the Public Accounts Committee, the Department of the Environment produced a revised code of guidance on homelessness. It also revised what are now called the quarterly statistical returns which local authorities make about their action under the legislation for tackling homelessness. Since June 1991, revised reports have to be presented every quarter. That means that the latest quarterly returns are now available.
In Leeds, the quarterly returns that are just out show that there was a 60 per cent. increase in the number of homeless households who approached Leeds city council over the past year. There is an especially large increase in the scale of single homeless people. In 1991 the number of households accepted as homeless was 1,290. The figure has gone up this year to 2,066. The number of households accepted as homeless and in priority need in 1990 was 1,262; it is now 2,050.
The number of households resident in temporary accommodation has risen from 118 in 1990 to 307 in 1991. The needs of the homeless are increasing still. On top of that, the general waiting list has risen to 23,000 this year from 19,000 last year and the waiting list of people with special housing needs, as specified under the new guidelines, has also increased.
I would classify what are known as concealed households as the hidden homeless. In 1990, 650 single households were classified as concealed, a number which rose to 878. The number of married households in that category rose from 1,990 to 2,687. So the numbers of households on the waiting list have risen, as have the numbers of households with special needs, and overall 485 there has been an absolute increase in the number of registered homeless households—even under the revised guidelines.
Paragraph 15 of the report concludes:We note the Treasury's assurances that within … total resources … local authorities are free to tackle homelessness by capital expenditure rather than bed and breakfast. We recommend that the Department should issue revised guidance on what is allowable.Although the report challenges the huge waste of resources involved in bed and breakfast, there is a practical alternative that could be implemented quickly: the Government could allow local authorities to use their capital receipts from council house sales to build new dwellings for rent. I cannot agree with paragraph 7, which states that, in the Department of the Environment's view,the decline in the local authority housing sector of about 1 million units over the last decade through the 'right to buy' policy had not yet led to a significant lossin the number of rented houses available. I cannot believe that that is true. The reduction in the amount of public rented housing is a major factor in cities such as Leeds, where the declining amount of such housing–8,500 units lost—means that constituents in difficulties with their mortgages, who assume that they can be slotted into local authority housing, cannot be because of the shortage.
Leeds has one of the lowest rates of void properties, at 0.89 per cent. That compares favourably with the national average of 2 per cent. and extremely favourably with the figure for Government-owned properties—primarily owned by the Home Office—which is running at 18 per cent.
There is no room for the homeless in local authority housing, which is shrinking away. The absolute shortage of housing must be dealt with. While it remains, it is a major factor in rising homelessness in our towns and cities.
I was also surprised at the PAC report's failure to mention the denial of access to income support and hence to housing benefit or help with rent for the under–18s. That policy change was effected a few years ago by the Government and the action taken by the Department of Social Security is generating homelessness among single young people. I hope that the PAC will examine the interaction between the policies of the Department of the Environment on housing and the policies of the Department of Social Security. Between them, those Departments are adding to the problem of homelessness.
Treasury assurances on capital expenditure cannot be squared with the latest idea on which the Department of the Environment is insisting—that local authorities should compete for funds to repair council housing. The idea of competition for a restricted list of local authorities is not the way to allocate resources and it is far removed from the idea of allocation according to the needs index from which the policy originated.
The housing charity Shelter, in its recent report entitled "Urgent Need for Homes", pointed out that 500,000 new homes will be needed in the next five years to solve the housing crisis. That could be achieved with the use of funds amassed from council house sales and by reducing the exorbitant cost of bed-and-breakfast accommodation. The Government claim that they are tackling the problem of homelessness; I hope that they will concede that they are nowhere near solving it yet.
Tackling homelessness, actual and hidden, should be a top Government priority in any civilised society and the response to such homelessness should be organised on the 486 scale and with the vigour and determination of the sort of resources and task forces that were used in the Falklands and the Gulf. The homeless are being denied their basic right to a home. They are due more than Government complacency and tinkering with the problem.
The 19th report deals with the privatisation of the new towns and recommends in paragraph 3:We do not accept that the novelty of the business venture arrangements was sufficient reason for the Department not issuing early guidance on the principles and procedures to be followed.Between April 1987 and September 1989 work for the development corporations of Milton Keynes, Telford and Warrington and Runcorn was privatised, but no cost objectives were set and at Milton Keynes important costing records were not retained—that is not to be regarded as a precedent. Some of the professional and support staff were encouraged into private business ventures to undertake work for the corporations under contract. Those bodies were allowed to break the same sort of rules that the Department of the Environment now suggests should be applied to local authorities. The Treasury note states:The Department also accepts that competition should be pursued wherever practicable and that, where there is a proposal by employees to establish a business venture, they should not normally be given a privileged opportunity to secure the work. The Department considers that exceptions might be justified where, as in the case of new town development corporations approaching wind-up, a particular premium is placed on retention of access to staff experience and expertise.These are the sort of arguments that might be deployed when the Government look at the future of local government. The very Department that broke its own rules on open tendering and competition in the case of the new towns now persistently hammers local government about competitive tendering for local government services. If the principles and practices applied to the new towns are allowed to remain, why are not they to be applied to local government? Local government would not be allowed to get away with what happened in the new towns, which resulted in a shoddy deal for public money.
The dogmatic "novelty" of privatising and selling off ventures should not override considerations of real value-for-money options and genuine accountability. I hope that we shall return to that point after the Queen's Speech, when the Government produce more proposals for privatising local government services.
§ Mr. John Wilkinson (Ruislip-Northwood)
During the debate on the defence estimates on Tuesday, I argued briefly—there was a 10-minute limit—that it was imperative that we institute new parliamentary procedures to control defence expenditure more effectively. The 11th report of the PAC for the Session 1990–91. The 1989 statement on major defence projects—projects in full development or production with 20 per cent. of total costs remaining to be spent—exemplifies the need for such procedures.
In political terms, I am an amateur on the work of the Public Accounts Committee. I have not had the honour to serve on it, but I greatly admire the work of its Chairman, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), and those who do serve on it. They fulfil an invaluable function on behalf of the House. However, 487 professionally speaking, I am certainly not an amateur on the subject matter of the report, although I do not have a commercial interest to declare.
To many hon. Members who spoke in Tuesday's debate, it was an affront that major formations, proud regiments and units which they treasured, were to be disbanded or merged while the Government continued to spend so much money on defence weapons procurement. In that sense, my Damascus road came during a visit by the Select Committee on Defence to Nepal to study the Gurkhas. In the hills of eastern Nepal, I found that the outstanding British military hospital at the cantonment at Dharan, which was the only modern hospital in the whole of eastern Nepal and served a huge population, was to be closed to save £1.5 million a year.
My work in the 1970 Parliament on the Select Committee on Science and Technology and, more particularly, my Select Committee on Defence work in this Parliament have shown me how the Government were capable of wasting not tens or hundreds but in some instances thousands of millions of pounds. That money had gone for ever, and we had been unable to control it.
When I started my work on the Select Committee on Defence, it had just concluded a report on the Nimrod airborne early warning aircraft. On this project, which never saw service, about £1 billion of public money was lost. During my three year service, reports were completed on the type 23 command and control system, the EH101 helicopter and the F3 Tornado interceptor, which in its early days gained a certain notoriety for having what was called blue circle radar—solid ballast in the nose—instead of an effective airborne interception radar.
The trouble with the work of the Public Accounts Committee is evident, in that it is the study of the flow of water under the bridge. The Committee can be wise after the event and propose all kinds of remedies, but it is difficult to institute fully effective sanctions, even if it were possible to identify those who were responsible for the waste of public money that had occurred.
In defence, we need a system of monitoring expenditure of public moneys as the expenditure is incurred. There should be way points at which Parliament approves the expenditure on projects. That is to say, we need an appropriations function. We have made considerable progress in the control of the procurement process, and the competitive process has enabled significant savings to be made. As the right hon. Member for Ashton-under-Lyne has said, we owe Sir Peter Levene, who was chief of defence procurement, a great debt of gratitude.
However, the competitive process has some fundamental flaws, the first of which is that it is fully effective only for the production stage. It is much harder to have fixed-price contracting for the development stage. It is right to have a competitive process, but it is difficult to have watertight bids that will not be subject to cost overruns during the development phase. The report shows the truth of that.
Another difficult aspect is that, as defence expenditure declines in real terms, as it will if the world environment remains tolerably peaceful, it is likely that more and more contractors will either leave the defence business altogether or, because the defence business as a proportion of their total activity is reduced, will merge or form bigger 488 conglomerates. That means that there will probably be an ever smaller number of big contractors bidding and, increasingly, they will become monopolies or quasi-monopolies in their field.
Smaller contractors already find it difficult to bid for contracts, because the costs of doing so are high and sometimes the chances of success are very remote. Therefore, it will become increasingly difficult to persuade small companies to bid for defence contracts, and that will hasten the monopolistic tendency to which I have referred. The Ministry of Defence is doing something about it through the Independent European Programme Group, a body set up within the European part of NATO. It is having the contract bulletins of the respective Ministries of Defence published in other countries, so that defence industries outside this country can bid. This is all to the good, and a step forward.
However, even in Europe we see more and more transnational alignments and collaboration, leading even to international companies. Within Europe, in the long term competition may be reduced. I fear that in future we shall not see as many savings from competition as we have seen in the recent past.
The report is instructive in another matter, because it demonstrates cost overruns, especially in the development phase, and also illustrates the serious time delays that have occurred in the procurement of equipment. At a time when budgets are under strain and the Treasury is trying to reduce defence expenditure, it is tempting to allow slippage to occur and, as the jargon says, to move programmes to the right. The difficulty is that, over the life of the development and production process, total cost is increased and the operational cost to our armed forces is heightened. There is the cost of keeping in service outdated equipment that is difficult to repair and maintain, and there is also the potential risk of the armed forces having to fight with such equipment.
The report contains an excellent analysis of the statement on major defence projects on pages 15 to 18. Table A shows projects in which there is a 20 per cent. or more projected cost variation at 31 March 1989 over the original Treasury approval. We see that, at that date, there was a 75 per cent. increase, of £86 million, in the cost of the type 23 frigate. There was a 99 per cent. increase—that is, of £12.5 million—on the Tristar second batch. There was a 33 per cent. increase in the EH 101 helicopter project, and a 59 per cent. increase in the Foxhunter radar project.
Table D shows that the cost of the Trident 2400 submarine, the Upholder class, increased by 10.7 per cent. and that of the Ptarmigan communications system by 10.6 per cent. At the foot of table A is the comment:seven of the ten projects show an increase of 20 per cent. or more".That is a substantial amount.
Table B shows the net increase in cost for development, which is no less than £1,854.9 million. For that money, many hospitals in Nepal or extra regiments of the line could be maintained.
Table C gives an analysis of the slippage. For example, the Upholder class submarine slipped by two years, the Spearfish torpedo by two years, the Warrior armoured fighting vehicle by two years, the LAW 80 infantry anti-tank by five years, the Tornado GR I by three years, the Tornado ADV by two years, the Tristar by two years and the Foxhunter radar by three years. The figures are not given for the ALARM system—there are only stars 489 —but we know that it had to be rushed into service in the Gulf to enable Tornado crews to suppress enemy defences, even though the system had not been fully proved and developed.
This catalogue of overspending and slippage should cause the House the greatest concern and induce it collectively to take action to put the matter right. I shall repeat the way that I suggested on Tuesday. It is to give the Select Committee on Defence an appropriation function, so that, step by step, through the development, and perhaps even in some instances the production phase, of major pieces of equipment tranches of expenditure that are required by the Ministry of Defence, projects are approved by the Select Committee on behalf of the House, and that approval by the House should be given in the defence debate. The trouble as we work the system today is we just write a blank cheque to Her Majesty's Government The report shows that this is not good enough, and that we are not adequately fulfilling our responsibility in Parliament to the British public.
§ 7.2 pm
§ Mr. John Garrett (Norwich, South)
I shall concentrate on the 36th report on university finance, but I shall first use the opportunity of the debate to elicit the Treasury view on some aspects of the status of the Comptroller and Auditor General and the National Audit Office. I hope that I have not disturbed the Minister's rest, because the questions will be simple, but I shall find the answers useful and I hope that others will, too. In my youth, with my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) I spent 15 years campaigning to alter the status of the Comptroller and Auditor General, with some success. The effect was to bring the comptroller back under the control of the House. I should say in passing that I am glad to see that my right hon. Friend has won his boundary war with the Select Committee on Defence, which had tried to acquire analytical and research staff on the cheap by borrowing the staff of the comptroller. The Committee does not need such staff.
The National Audit Act 1983 established the Comptroller and Auditor General as an Officer of the House. To be accurate, it re-established him in that role. The Treasury was bitterly opposed to that change and fought it with all the means at its disposal. I have the impression that this status is being subtly changed back in favour of the Treasury. First, I have always assumed that not only the comptroller but his staff were Officers of the House, but I have the impression that the Treasury disputes this. It thinks that the staff are civil servants. We all know that the Government believe that the loyalty of civil servants must be to the Government of the day. Therefore, it is important that we establish to whom the staff belong.
If the Comptroller and Auditor General is an Officer of the House, why is he not a member of its Board of Management? The Ibbs report, which I found fairly insubstantial, made great play of the fact that the House of Commons services had no management information or budgetary control system, but our expert on these matters is not involved in the financial management of the House and does not serve on the management board. Strictly speaking, the Treasury should not have a view on the way 490 in which we conduct our affairs, but it is always interested in the status of the comptroller and I should like to know what it thinks about that issue.
I understand that, in an order under the Official Secrets Act 1989, the comptroller and the staff of the National Audit Office were defined as civil servants. If that is so, why was it done in that way and why are not the comptroller and his staff in the same relationship with Parliament and Government as, for example, the Clerk of the House and his staff'?
Why is the Financial Secretary to the Treasury a member of the Public Accounts Committee, although he never attends? How can it be right that a senior officer of the Executive is a member of the Committee whose job it is to audit the Executive? The Procedure Committee, in its recent report on Select Committees, proposed that he should no longer be a member of the Public Accounts Committee, but the Treasury refused to have him taken off it. That is another example of undue Government influence on the state audit body. In many countries, certainly not in France or the United States, that would not be tolerated. What justification is there for the Treasury to examine the National Audit Office corporate plan and to make observations about the cost of its staff? What has that to do with the Treasury?
Furthermore, the Treasury fixes the salary of the comptroller because it is related to that of a permanent secretary and that salary is decided by the Treasury. That is another example of interference by the Treasury in the management of our state audit body. These examples show that the relationship between the Comptroller and Auditor General and the Treasury is too close. However, there is a much more interesting example and I look forward to the Minister commenting on it.
On 4 June, there was a report in the press that the Comptroller and Auditor General, along with representatives from Marks and Spencer and British Rail, had been invited to Chequers to help to draft the Government's citizens charter. I can understand why representatives of Marks and Spencer, a firm with a well-known record of customer service, were invited along, although I am not so sure about British Rail. Perhaps as British Rail was to be affected by the citizens charter it was right that it should be represented.
The Prime Minister was quoted as saying of this meeting that it was called to form policy. It is odd that, when the Public Accounts Committee cannot comment on Government policy, the Comptroller and Auditor General can help to form it. I fail to understand his position in this matter. What happens if he is later called upon to examine the effectiveness of part of the charter—for example, the quality of service in DSS offices? Does he declare that he has an interest because he had a hand in drafting the policy? I would be pleased if the Minister would explain how an Officer of the House becomes involved in making Government policy.
When I wrote to the Prime Minister about the matter, he wrote back in an extremely shirty way. He was very sharp. He assured me that my complaint was "quite ridiculous". Oh yes. He wrote that the citizens charteris not a political exercise.
§ Mr. Garrett
The Prime Minister. Like my hon. Friend, I think that that assertion is ridiculous.
491 After the Prime Minister had completed the "quite ridiculous" part—this is really rich—he stated:I do not see how a Comptroller and Auditor General can be expected to do his job effectively if members of the PAC try to lock him up in Buckingham Palace Road poring over the books.I never suggested that that should happen. Indeed, the Prime Minister's observation is entirely irrelevant to the argument that I am advancing.
I shall quote from my reply to the Prime Minister because I believe that it sums up my position on the matter, as it should sum up the position of the House. I wrote:The duty of the CAG is to report to Parliament on government spending and the efficiency and effectiveness of its administration. It is therefore quite unacceptable that the CAG should be engaged by the Government to assist in the preparation of your Citizens Charter when his duty will he to report on its implementation.Independence of the executive and objectivity are the most valuable characteristics of the CAG and I think that you have jeopardised them.Some will say that I am proceeding down a constitutional byway that is of interest to only a few fanatics, but I think that the matter is of constitutional importance. We know that in the past the Comptroller and Auditor General was collared by the Executive for the best part of 100 years, and it seems that the Treasury is moving back in on the role of the comptroller. It is essential that we remember that he and his staff are servants of the House. They are employed by the House to examine the accountability of Government.
That is the end of my questions to the Treasury, so the Economic Secretary to the Treasury can, if he likes, send his gofer to get the answers.
In general, the Committee of Public Accounts seemed to be an especially effective instrument in dealing with parliamentary and public accountability. I have always been impressed by the quality of the Committee's reports. It seems that it and the Select Committees may be able to scrutinise the activities of 30 major Departments, but the circumstances will change when the committees are faced with 30 Departments and 100 agencies. I refer to the new so-called "next steps" agencies.
The Committee of Public Accounts may be in better shape to cope with the agencies than the various Select Committees. I am a member of the Treasury and Civil Service Select Committee and I do not think that it has a hope of tackling the agencies that will be reporting to the Treasury, let alone the Treasury itself. Some departmental Select Committees will end up with the task of scrutinising about half a dozen agencies. I think that bureaucracy is outrunning the powers of parliamentary scrutiny and this will be a considerable problem as time passes. Indeed, the departmental Select Committees are already unable to fulfil their terms of reference. They do not really examine the spending, administration and policies of the Departments that they monitor. The Committee of Public Accounts has a legitimate interest in this question and it should specify the information that Parliament requires from the agencies and the other bodies that remain when agencies are set up.
The National Audit Office has produced one report on definitions of measuring agency performance. So far, it is the only sensible attempt that anyone has made to do so. In the absence of anything else, the Committee of Public 492 Accounts should become the common standard setter for reporting on financial and management performance throughout the new agencies.
The House will know that the public expenditure annual reports now amount to 1,000 pages. When I first read them in the middle and late 1960s they were very much smaller. I think that the 1969 report amounted to 84 pages. We are supplied with over 1,000 pages of information in estimates and in the appropriation accounts. We are now to have 50 agency reports, all of which will be about half an inch thick. I do not think that we can cope with them.
The Treasury seems unable to impose any discipline in this matter. Variations in terms of performance indicators are ludicrous. It is grandly announced in the Treasury's own annual report this year that its duty is to regulate the banking system, but the report contains no performance indicators. It does not set out what has been done to regulate the banking system. There is no reference to failed banks, for example. It set out, however, the productivity of clerks at the Chessington computer centre. That is a typical mandarin's dodge. They never report on their own performance. Instead, they insist on their clerks producing quantified performance measures. The Treasury is one of the worst providers when it comes to accountability and performance indicators.
A vast amount of financial and statistical data is pouring out of Departments and agencies and the Treasury imposes no order on them of the sort that will enable parliamentary scrutiny to take place. The introduction of some order would be a useful job to undertake and it might be carried out well by the National Audit Office.
I said earlier that I would refer briefly to one of the reports that has been produced by the Committee of Public Accounts. On the whole, the report on university funding disappoints me. As a Member who represents a university seat, it is a matter in which I take a close interest. The conclusion was disappointing. Paragraph 18 states:We are concerned at the serious financial difficulties facing a number of universities and the extent to which they are operating at a deficit. It is not for us to comment on the overall level of support for universities from public funds since this is a matter of public policy.That is dodging the issue. The Committee of Public Accounts may consider that it may not comment on Government policy, but it is empowered to report on the effectiveness of Government spending under the National Audit Act 1983. Given the Government's policy to expand universities, we should return to the matter and examine whether funding allows universities to operate effectively.
Indeed, it has been found that the current level of funding does not allow universities to operate in a way that could be described as effective. Staff ratios in universities have fallen for over a decade. The universities may or may not have become more efficient as a result, but clearly there has been an effect on quality. I have a letter from the vice-chancellor of the university of East Anglia in my constituency. He says:The university system as a whole is seriously underfunded and any further expansion without adequate resources can only come at the cost of lower quality. We want to expand, we want to open our doors to more students, but we also want to give them the quality of education which they deserve and the country needs.He takes the view that with the present level of funding that is not possible.
493 The vice-chancellor sent me a useful report prepared by the vice-chancellors and principals of the universities, which makes the point even more strongly. I shall not quote too much of it, but one passage reads:There are now worrying signs in the universities that this great national asset is being damaged.In 1988 a study by the University Grants Committee showed £250 million was needed just to bring existing buildings to a satisfactory and safe condition … In 1990, the Advisory Board for the Research Councils estimated that £450 million was needed to replace old equipment and buy new if universities and polytechnics were to continue to provide first class research and advanced level teaching.
Only a small percentage of these sums has been forthcoming.Universities' own efforts to raise money are often hampered by Treasury restrictions on the use of assets and on borrowing. These rules need changing.The report adds that well-informed observers are now saying that
too rapid expansion, without proper investment, has greatly damaged the international standing of universities on the Continent. None, they say, now ranks as world class, while a number in Britain still do. They are a warning against underfunded expansion.This section of the report concludes:Throughout the 1980s UK universities have resisted pressures which would have led to loss of quality and standing. In the face of Government exhortation to take more and more students without adequate funding, they have expanded only where they could still be sure of offering students a high quality of education. They now face a greater determination from the Government and Funding Council to force expansion on the cheap.That is the message that comes from any study of university finance. I understand why it happened, but I am disappointed that the report of the Committee of Public Accounts concentrates on whether proper financial procedures exist. That is a minor issue compared with the underfunding of universities, a matter to which the Committee should now turn.
§ Mr. Terry Davis (Birmingham, Hodge Hill)
I join my colleagues on the Public Accounts Committee in paying tribute to the work of our Chairman, my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon). As several hon. Members have said, the Committee would be much the poorer without his experience and ability. We all value his chairmanship.
I join my right hon. Friend and other members of the Committee in paying tribute to Sir John Bourn, the Comptroller and Auditor General. My hon. Friend the Member for Norwich, South (Mr. Garrett) raised interesting questions about the role of the Comptroller and Auditor General as an Officer of the House. Especially urgent was his question about the circumstances surrounding the presence of the Comptroller and Auditor General at a discussion about policy. Just as the Committee must not stray into areas of policy, it is important that the Comptroller and Auditor General is not involved in developing Government policy, whichever party happens to be in power. I hope that the Treasury will explain what happened. I am sure that my hon. Friend and other members of the Committee would not wish to be critical of the Comptroller and Auditor General for being present at that meeting—the question is how that came about. I emphasise that we have been well served by him over the past year.
494 I also pay tribute to the Comptroller and Auditor-General for Northern Ireland, who is often hidden In the shadow of Sir John Bourn. I very much value his reports on the Northern Ireland Office. I think that hon. Members, the Comptroller and Auditor-General for Northern Ireland and his staff feel that we do not give sufficient time to matters relating to Northern Ireland. In fact, the matters he brings to our attention are always fascinating.
The right hon. Member Hertfordshire, North (Sir I. Stewart) referred to the saga of the British Library. My right hon. Friend the Member for Swansea, West (Mr. Williams) referred to the lack of fire precautions at Ministry of Defence stores, and said that stories about that were incredible. On the bestsellers list should also be some of the reports from the Comptroller and Auditor-General for Northern Ireland. We should pay more attention to them. Perhaps we should even have a separate debate in which, I suspect, hon. Members representing Northern Ireland would wish to take part.
I do not intend to deal with any of the fascinating reports about Northern Ireland. Nor do I intend to deal with the reports about the Ministry of Defence, other than to refer to Sir Peter Levene. My right hon. Friend the Member for Ashton-under-Lyne said that while Sir Peter had been responsible for procurement he had introduced the use of cash flow as an incentive to suppliers to deliver on time. I do not disagree with the compliments that my right hon. Friend paid to Sir Peter, but I must say that in my talks with suppliers to the defence industry I hear an increasing number of complaints about cash flow. Indeed, even more complaints come from the sub-contractors to those suppliers, who say that they are not being paid on time after they have delivered the goods.
When we talk to people in manufacturing industry about what the Government do to help their industry, time and again we hear that the most important thing is to ensure that bills are paid on time, and they refer to the late payment of bills by the Government. It may be that some of the major suppliers are hiding behind the Government and pretending that they have not been paid, in the hope of benefiting their cash flow. The PAC is not in a position to know about that. However, there should be some investigation by the National Audit Office into whether the Ministry of Defence is meeting its debts on time, as it should do. It should be setting an example to the rest of industry.
My right hon. Friend referred to the overwhelming need for Government Departments to be clear about their objectives and to quantify those objectives. During the past year, several reports have shown a woeful lack of ability to clarify and quantify objectives. A classic example of that was referred to in our eighth report on the elderly, on the information requirements for supporting the elderly, and on the implications of personal pensions for the national insurance fund. It is an expensive example because the arrangements for subsidising private pensions, at the expense of the taxpayer, are costing the Government not millions of pounds, not hundreds of millions of pounds, but £1,800 million per year. In comparison, the saga of the British Library pales into insignificance. The private pension subsidy is costing £1.8 billion this year, next year, the year after, and so on. The mind boggles at the cost, which already accounts for 1.5p of income tax.
Of course, the Government have transferred the cost of other benefits—which just happen to amount to £1.8 billion—from the national insurance fund to the general 495 fund, so the cost is funded by income tax. It is valid to say that the cost of that subsidy is being borne by taxpayers. Originally, the advice given by civil servants to Ministers at the Department of Social Security—I am not questioning the policy decision, only the advice—was that the scheme would cost £60 million a year, yet it is in fact costing £1–8 billion a year. The forecast of £60 million was based on the very lowest estimate given to the Government Actuary for the number of people who might take up the bonanza. I think that that is the worst example of a Department failing to be clear about its objectives and failing to quantify the cost of its policies.
Another impression that I have gained, and which applies to other Departments as well as the Department of Social Security, is what I would define as a lack of concern. There is a far too relaxed attitude towards the problems and difficulties experienced by people. An example of that was shown during examination of the national health service chief executive on the subject of maternity services. All hon. Members would agree that the death of babies causes great distress to the parents, and none of us would want a baby to die unnecessarily. This country has a record on perinatal and neonatal mortality rates that is simply not of the best. Even worse is the fact that the number of deaths at the perinatal and neonatal stages differs between one part of the country and another. If the level of care throughout the country were raised to the level of the best district health authority—in this case, Oxford–4,282 babies would be saved each year. We are making progress in improving the perinatal and neonatal mortality rates, but it is slow.
I have a particular interest in the matter because the East Birmingham health authority, which covers my constituency, is low in the league table. There are 215 district health authorities in Britain, and East Birmingham comes in at 212—third from the bottom. When the Committee asked Mr. Duncan Nichol what was being done, he said that it was the responsibility of regional health authorities, and that he had discussed the matter with them during his reviews. He said that the west midlands had been specially targeted because, although East Birmingham was bad, other authorities in the west midlands were also poor. He said that he had given the regional health authority general managers in the midlands a hard time about the problem, and had done so in the presence of the chairmen of those authorities.
Mr. Nichol gave some details about that to my right hon. Friend the Chairman of the Committee at the start of the examination. When we asked him what had happened it turned out that he had been so concerned that, three weeks after the review, he had written to the regional health authority to draw that serious problem to its attention and to ask for it to be given special action. He wrote on 25 October 1989 and on 25 April 1990 we were taking evidence. Six months had passed but Mr. Duncan Nichol, the chief executive of the national health service, had not yet received a reply to his letter, although it was a serious matter which needed to be examined by the Public Accounts Committee and which he had said was so important that he had followed up his review—when he gave a hard time to the regional general manager—with a special letter. I suggest that that is a matter for some concern.
496 However, the situation becomes worse. We asked him more about his procedure for dealing with the problem. He spoke to my right hon. Friend the Chairman of the Public Accounts Committee of personal account-ability for dealing with the problem. One of the lead officers of the regional health authority had been appointed to tackle it. We asked Mr. Nichol who had been appointed and he said that he did not know but that he would find out and let us know. He was as good as his word and, as we may see from the Appendix to the 35th PAC report, he identified Ms. Anne Coulson, the director of planning, as the person who was accountable for dealing with the problem. Ms. Anne Coulson subsequently left the employment of the regional health authority. I make no bones about that. What is much more important is that Mr. Nichol told us that Ms. Coulson was responsible for the problem and was accountable to the regional general manager, who in turn was responsible to him.
Unfortunately for Mr. Duncan Nichol, I and some of my hon. Friends visited the chairman and general manager of the West Midlands regional health authority before we received the letter giving us the name of the person responsible. Naturally, as we were fresh from the PAC examination we asked who was personally accountable for dealing with that most serious problem. The chairman of the regional health authority could not tell us, and nor could the regional general manager. Not only did they not bother to reply to a letter from the chief executive—I became of the opinion that they had ignored it —but there was general confusion at the regional health authority. Meanwhile the chief executive had been far too relaxed about it. He received no reply for six months—perhaps his letter had gone astray in the post—but one would have thought that he would have done something about the problem when he had regarded it as being so serious that he had given the general manager a hard time about it. It seems to me that none of them knew about it and they had certainly not been very impressed by his hard time.
In our report we said:We consider that NHS review processes … are weak and we recommend that, as a matter of urgency, the Management Executive examine and strengthen their arrangements".That is a fairly moderate comment and a modest criticism. It was a reasonable suggestion to make to the NHS executive, but what do we get in the Treasury minute? That stated that the executive recognisedthat there is always scope for improving review proceduresbut did not accept that they were "currently weak". I do not know how weak review procedures have to be before management and the executive of the NHS accept that there are weaknesses.
Other accounting officers also seem out of touch with problems experienced outside London. My hon. Friend the Member for Leeds, West (Mr. Battle) referred to the problem of homelessness and to our report on that appalling problem. He was absolutely right and I associate myself with his remarks. The only difference between Birmingham and Leeds is that because Birmingham is two or three times the size of Leeds it has two or three times more problems with homelessness.
My right hon. Friend the Member for Ashton-under-Lyne pointed out that the Committee discovered—not surprisingly—that it would be more cost effective to build a house than to keep a family in bed and breakfast accommodation. It is not merely a question of bed and breakfast accommodation. Cities such as Birmingham, 497 which avoid the use of such accommodation, still have a major problem with homelessness. Concentration on bed and breakfast accommodation tends to concentrate attention on the problems of London alone, but there is a problem elsewhere. Birmingham does not get a fair share of the resources to deal with the problem because it does not use accommodation of that kind.
Today I have been dealing with a constituent who has been homeless for two months—a woman with a 13-year-old child. It is two months to the day since the housing department accepted that she was homeless, but she has still not been offered anything. That is not surprising because she is not alone. Hundreds of homeless families have been waiting two months to be given accommodation in Birmingham. That family is accepted by the Government's definition as being homeless—they are what is called the statutory homeless. However, many more people are not regarded as homeless by the Government and therefore are not considered to be homeless by the accounting officer, the permanent secretary at the Department of the Environment, as he was constantly at pains to tell us during our examination of him. Any reasonable person and any hon. Member would accept that people and families are homeless if they have nowhere to live, regardless of whether they have children. People are living in tents in the woods around Birmingham and are not classed as homeless. It is a ridiculous situation.
I heard of another case two weeks ago in which a young couple were riot regarded as homeless under the Government's definition because they have no children although they had nowhere to live. The council could not give them any accommodation because they did not have anything and because many people, such as the constituent with the 13-year-old child whom I mentioned earlier, have been waiting for months to be given accommodation. That young couple with nowhere to live are not regarded as homeless and therefore not included in the statistics. Worse than that, they are not even able to maintain an application for council accommodation because they do not have a fixed address. They drop right through the black hole. It is like the Bermuda triangle—homeless people are disappearing from the statistics, but they are not disappearing from the streets. That applies as much in Birmingham as in London and I believe that it is true of other parts of the country. I was left with the overwhelming impression that witnesses from the Department of the Environment do not appreciate the scale of the problem.
Another problem is that when a homeless person or family is fortunate enough to be offered accommodation by Birmingham city council or by some other caring local authority, they often find that they cannot furnish it. That brings me to the social fund, which was the subject of another examination when I again found the witnesses to be totally out of touch with what is happening in the country.
We all know of people who have been refused by the social fund. We know people who are homeless and who go into hostels. I have in mind a case of a young woman with two young children. Through no fault of her own she became homeless and I obtained a place in a hostel for her. The council then gave her a flat, so she moved into it from the hostel and applied to the Department of Social Security for some money to buy furniture. However, she was refused on the ground that there was no risk of her going into an institution. One does not merely have to be 498 homeless to quality for the social fund—one also has to meet other criteria. One has to be not merely a priority but a high priority person.
When I asked the accounting officer what he regarded as essential furniture he volunteered, "A bed". The very same day I heard that an unemployed man had been refused the money to buy a bed. How can we expect people to find work if they are sleeping on the floor? What could be more essential than a bed? He had also been refused a table, a chair and other furniture. That case is not unique —it happens every day in my constituency in the city of Birmingham and in the constituencies of other hon. Members from both sides of the House. Even if homeless people are given accommodation they often cannot furnish it because they are not regarded as a high priority group.
We found inconsistencies. In some offices applicants would he lucky and get a bed. However, the situation varies and we found that it was totally inconsistent. That is inherent in the social fund system that the Government have introduced as distinct from the single payment system which applied before. Inconsistencies are inevitable. The accounting officer tut-tutted, seemed to be concerned but did not think it was a major problem. In our experience, it is a major problem. There are inconsistencies between different people at the same office at different times of the year because it all depends on how much money the local department of social security has left.
Again, the Treasury's response was totally inadequate. The Committee concluded thatthe scale of the variations in the treatment of applicants … is considerably more than is desirable";and we added:The Department should give urgent consideration to … Social Fund assistance for essential items more … generally available to eligible applicants, while safeguarding the Fund from abuseThe response was:The Secretary of State's directions and guidance to Social Fund Officers are designed to ensure a degree of consistency nationally, without restricting the Fund's flexibility to address the needs of individuals which is an inherent part of the scheme.For the homeless person without furniture or the unemployed person without a bed, that is a totally inadequate response and ought to be regarded as inadequate by all hon. Members.
My hon. Friend the Member for Norwich, South put his finger on another problem which has become clear to me during the past year. It is what my hon. Friend calls the mandarin's dodge, which I would define as a lack of personal accountability among senior civil servants. As my hon. Friend said, that does not apply to junior civil servants. When we were taking evidence from accounting officers, who are permanent secretaries, it always seemed to be junior civil servants who were disciplined. During the past 12 months I have not heard one example of someone at a senior level in the civil service being held responsible for something that was wrong and costly and had wasted taxpayers' money. We have had some classic cases. Some have been mentioned already today.
It was worrying to find at least one example of the Treasury's failure to protect taxpayers' money and interests. I refer to the Committee's report on Herstmonceaux castle. It is worth considering what happened to Herstmonceaux castle. First, it was sold by the Science and Engineering Research Council for £8.1 million, despite the fact that there were other offers, 499 including one for £14 million. I shall not enter into an argument about whether offers were good or bad, whether they came from people who had the money or did not have the money; I shall concentrate on just one aspect of the saga.
It became clear to the Committee that in April 1986 the district valuer had valued Herstmonceaux castle at £3.25 million. Hon. Members might feel that that was a good deal. It had been valued at £3.25 million and sold for £8.1 million. In the meantime, however, it had been given a planning brief which increased the value of the property, but that had not been taken into account because it happened after the district valuer's valuation and the valuation was not updated at the time of sale in 1988.
That is important because if a Government Department sells an asset at a price below the district valuer's valuation it must ask the Treasury to approve the sale before it takes place. That is the point on which I wish to concentrate. The Science and Engineering Research Council did not take that action, as it should have done under the provisions of "Government Accounting", the manual which is supposed to guide all accounting officers on the way in which they should deal with such matters.
What is more, the Science and Engineering Research Council also failed to tell the district valuer that it had had an offer as high as £14 million. The district valuer said —and, I believe, told the Comptroller and Auditor General—that that was information which he would have wished to be given and would then have reconsidered his valuation in the light of that information, taking into account possible questions about the financial viability of the offer. He was not given that opportunity, and because of that he did not revise his valuation. That meant that the Science and Engineering Research Council could go ahead and sell the asset for £8.1 million because that was higher than the valuation that it had been given on a different basis two years earlier.
What is important about that is that the Treasury did not bark. The Treasury accepted that. It accepted that its manual "Government Accounting" could be flouted and ignored.
§ Mr. Davis
Not just a hands-off approach, but a pat-on-the-back approach, as I will show.
The Committee found that the council's failure to have the property valued by the district valuer before it was offered for sale and its failure to inform the district valuer of the £14 million bid were serious omissions. The Treasury minute, however, makes the rather lame statement:
Although the council did not follow the letter of guidance in Government Accounting in that they did not seek an updated valuation from the District Valuer immediately before the property was put on the market the Council did consult the District Valuer about the £9.25 million and the £8.1 million bids"—which at that point were irrelevant. It goes on to say:The Department considers that little would have been gained by seeking advice from the District Valuer on bids which the Council had consciously discounted for other reasons.The council is not entitled to do that. Under the provisions of "Government Accounting" the council was obliged to seek the district valuer's view, but it did not do so. The 500 accounting officer was apologetic about that and the Committee accepted his apology. He recognised that he or his predecessor had made a mistake and that the council should have asked the district valuer to examine the matter.
What worries me is the Treasury's laid-back attitude. The Treasury is prepared to defend that situation. It is not apologetic and it does not think that the council has anything to apologise for. The question that arises is what can be done about such attitudes.
§ Mr. Campbell-Savours
It might also be worth mentioning that the cost to the taxpayer of that incompetence on a single transaction was 10p for every man, woman and child in Britain.
§ Mr. Davis
I am not sure how my hon. Friend does his calculation, but I accept his intervention. I am not trying to quantify the cost because often in such situations we are not so much concerned with the cost—we do not know what the cost has been—as with the risk.
That problem has been mentioned in connection with the Foreign and Commonwealth Office, a subject which I think we are to debate in a year's time. In that case, there was only a small amount of abuse. I am not even sure whether any taxpayers' money was lost through the failures of the Foreign and Commonwealth Office to introduce a proper computer system in a tidy and efficient way to provide for its accounts. What I do know, and what the Committee knows, is that there was a tremendous risk involved in the way in which that issue was dealt with, that the Department was incompetent in the way in which it introduced the new computer, and that that laid it open to abuse and fraud.
Similarly, the SERC laid itself open to criticism that it had not followed procedures which are designed not to stop them doing what they did, but to ensure that the taxpayer's interest is protected. What is disappointing is that the Treasury does not bark in such a situation.
What can be done about such problems? The National Audit Office needs another stage and I am glad that the Comptroller and Auditor General has agreed that he will follow up some cases. In other words, this debate will not be the last stage. At present, a stimulating report from the National Audit Office is then considered by the Public Accounts Committee. Two filters are involved there, so it follows that the Committee is considering only the most serious matters. Then we issue our report and then we have a Treasury minute. Then we have a debate in the House.
The National Audit Office will now introduce a further stage beyond that. It will choose—without any consultation with Government, I hope—some reports on which to go back to see what has happened, not two months but perhaps a year or two years after the event, as a result of the Committee's recommendations and Treasury minutes which may have accepted our recommendations. That will be the most effective sanction for accounting officers.
§ Mr. Nigel Spearing (Newham, South)
The debate has illustrated well the joint functions of the Public Accounts Committee and the Comptroller and Auditor General. I enter into the debate not as a member of the Committee but as a member of the public in one sense and as a 501 Member of Parliament in the other. I shall make a few general remarks as an amateur onlooker and then dwell longer on the 17th report, on ambulance matters.
It appears that the joint function of those two bodies is to encourage effective and proper use of public expenditure and to ensure that there is no over-expenditure that may develop into waste. As was evident in certain cases that were brought to our attention, their function can also be to identify marginal under-expenditure, which might render what expenditure has been incurred— which could be considerable—ineffective. The best example of that was the ordnance depot fire. The absence of a small investment in fire precautions brought enormous losses—not just in money terms.
There are also the questions of ensuring proper collective purchasing, the setting of purchasing standards and the handling of contracts, pricing and tendering. Above all, attention should be paid to correct procedures. The House is sometimes criticised outside for being careful about procedure, but that is an important aspect. We have heard about manuals not being adhered to and checklists not being kept and the absence of proper notification. In another spectacular example, cyclical meetings were not held. When that happens, one may suspect that something improper is afoot.
I have been passing the British library site for several years, wondering what was happening. Which Ministry was involved? I would not have thought that such a project could be undertaken without a lead Department being involved. Which Select Committee had that project in its range? When I served on the Foreign Affairs Select Committee, we examined, albeit hastily, the question of computerisation. Select Committees are empowered to review estimates and I should have thought that, during the construction of the new British library building, one Select Committee or another would have scrutinised the estimates and the amounts paid out, year by year.
The ambulance service was dealt with in the 17th report of the 1990–91 Session, and was referred to in the Comptroller and Auditor General's report on patient transport services, published on 20 July 1990; the Government's reply was contained in the Treasury minute, Cmd. 1617, published in August.
In the same way as we ensure that our homes have proper roofs and foundations, the ambulance service comes within the category of demand-led expenditure. It is one of the few instances where substantial sums of money collectively must be spent, related to demand. The health service itself is not necessarily in the same category, because even if we were to spend a great deal more on it than we do, it would still be a matter of judgment as to what was necessary and desirable expenditure.
The broadening base of technology in medicine provides us with a problem, but when it comes to transporting persons who are involved in accidents, taken ill at home, in hospital or in some other place of succour, or who need to be taken to and from centres of treatment—such as psychiatric day centers—there must be suitable facilities. No one to whom I have spoken denies that such a service falls within the category of demand-led public expenditure.
In the past, it has, unhappily, been a matter of cash limits. That technique has extended to the ambulance service and has on occasions been badly employed, as I will demonstrate. In any event, I wish to demonstrate the Donnington effect—if I might christen a phenomenon 502 after the name of the ordnance depot that went up in flames—whereby, for the want of a little more expenditure, care and imaginative and effective scrutiny of administration, something that is fine and good stands to be put at risk.
The reports make it clear that today, as distinct from the origins of the ambulance service, 85 per cent. of ambulance passengers are not carried in emergency circumstances. They are people being taken to out-patient departments, clinics, or day centres. It will be within the knowledge of all right hon. and hon. Members from experience of their surgeries that with the "efficiency" of hospitals today, the number of people who are sent home to recover, subject to proper visits to their doctor or consultant, is increasing. We know that that is so, irrespective of whether it is right.
The importance of such visits to the patient—who may be suffering a terminal illness—and to the healers is greater than it used to be. Therefore, the non-emergency services—which in London are called patient transport services—are by no means unimportant. Their importance relates not only to the location of hospitals, but to the conditions under which patients are transported to and from skilled medical supervision.
The National Audit Office has traditionally been concerned with value for money and expenditure as such.
Its 1990 report on patient transport stated:National Health Service patients who are medically unfit to travel by other means are entitled to National Health Service transport, free of charge. In deciding eligibility for patient transport the doctor, dentist or midwife, as appropriate, may take account of the availability of local transport.The judgment of the clinician as defined is important, for he or she sets the level of demand. In the clinician's place, any of us would probably err on the safe side, so someone scrutinising the figures unfavourably could point to 20 per cent. or 30 per cent. overuse of the transport service. As a taxpayer, I would not mind that at all, because it is surely better to have slight overuse than to cause distress of the kind that is now evident.
Before I remark further on that aspect, I refer to a matter that was specifically dealt with in the Committee's report and in the Treasury minute. The PAC concluded, in paragraph x:We expect the Management Executive to establish a timetable to implement consultants' recommendations on vehicle procurement and maintenance so that potential savings (estimated at £400,000 a year) can be realized.That is £400,000 a year for the whole country.
The Government replied in paragraph 24 of the Treasury minute:Since the C & AG's report proposals have been received from the European Comité Européen de Normalisation (CEN) standards body for producing new European standards for ambulance vehicles and equipment which will need to be taken into account in developing national ambulance procurement. This is inevitably delaying implementation of centralised procurement. However, progress has been made in agreeing a cardinal points specification within the ambulance service, and the National Purchasing Unit team is in discussion with vehicle manufacturers, to investigate the savings achievable through bulk centralised procurement.It is coincidental that the minute refers to a European standard. I am not sure whether the Commission has got round to considering one, or whether a single market specification could be applicable to the United Kingdom, let alone to a wider field.
503 Public authorities purchase about 800 ambulances a year. But what is happening in respect of standards? In the London ambulance service the reports are not reassuring. The vehicle which it is trying out is a matter of some controversy. The handling of consultations with the crews is also controversial. It is a modified van, unlike the present purpose-built ambulances, which themselves were built on a goods chassis.
An extraordinary fact about our motor vehicle industry is that, even for 800 vehicles a year—about the same level as Rolls-Royce production—we do not appear to produce a proper ambulance chassis. Many years ago the London county council ambulances were Daimlers. They were a version of that firm's chauffeur-driven car. I do not see why the British motor industry or, indeed, any other industry should not produce a proper ambulance chassis with which we might lead the world. If we cannot do that, should we be tied to a single body design in this important sphere? We badly need progress and innovation. I suggest that to set a single standard for a single type of vehicle, undoubtedly decided by four or five people in some committee deep in the heart of the Department of Health, is not the best way to achieve progress, or public confidence.
The vehicle being introduced by the London ambulance service apparently has room for only one stretcher instead of two, is diesel rather than petrol and has a bulkhead between the driver and the rear compartment. Whatever the final decision, there is a lack of confidence among at least some staff about its design.
I leave the question of central procurement and its dangers to deal with the service given to the public by patient transport services in London. As the London ambulance service is one of the largest in the world, it should be a world leader. But I am afraid that it is not. Long ago, in 1986, it became clear to London Members of Parliament that the service to our constituents faced a crisis. The number of journeys to take people into hospital was being sadly reduced. In the summer of 1986 London Members received many a heart-rending letter from old-age pensioners and sick people who could not get to hospital. Something of a scandal ensued.
I initiated an Adjournment debate on 31 October 1986 when it became absolutely clear that the number of people taken to hospital by the non-emergency ambulance services had been reduced by 44 per cent. between 1984 and 1986. When that was confirmed by the then Under-Secretary of State for Health, the hon. Member for Derbyshire, South (Mrs. Currie), I am afraid to say that she said:About 10,500 fewer walking patients were being transported—a reduction of 44 per cent. I am more than happy at that development. We are keen to have a better emergency service. We are determined that the equipment and resources are not used inappropriately."—[Official Report, 31 October 1986; Vol. 103, c. 666.]That was an extraordinary statement at any time. I suggest that it clearly demonstrated the Government's policy. I am sorry to say it, but I do not believe that their policy has changed. The House will notice the emphasis on resources.
It is clear to anyone who reads what the Minister said in that debate that she meant that the Government intended to use resources previously used for taking patients to hospital to make sure that the front-line 504 emergency service received the money that it required. They were transferring one part to another. Why? It was because the whole sum was kept at the same level and sufficient total amounts were not given to the service to provide the demand-led service for which every person in Britain would probably be willing to pay. Here we have a Donnington example, the other way round from usual—almost in extremis.
I am afraid that the tendency continued. The present chairman of the London ambulance board wrote less than a year ago to the regional and district hospital authorities. He said that it needed to ensure that money was properly used. He said:It is not our intention that this new approach should in any way deny the right of hospitals and GPs to order transport required on medical grounds by their patients. But ideally with your assistance we would restrict the use of ambulances to patients requiring a stretcher or wheelchair and to those undergoing serious treatment such as chemotherapy, radiotherapy, renal dialysis or for severe cardiac or respiratory problems.That was written as recently as a year ago in an effort to reduce this important service. A report issued by the National Union of Public Employees confirms that the trend continues. I wish to make it plain that my relationship with NUPE is that of almost any other citizen, except that one or two of my colleagues are sponsored by it. I am not sponsored by any union and certainly not by any health union. I am sponsored by the people of Newham, South and I am proud and pleased of the fact. They have suffered grievously under the restrictions that I have described.
The NUPE report shows that the reduction of 44 per cent. between 1984 and 1986 was in fact even greater. The service was reduced by between 40 and 60 per cent. in each of the London ambulance areas over those years. There has been a 40 to 60 per cent. reduction in that vital service. The amount of money sent to the London ambulance service via various routes and tortuous channels from the Department of Health may have remained the same, but it is clear that it has not been sufficient. The excuse has been that we have robbed the non-emergency Peter to keep going the necessary emergency Paul. But I am afraid that the emergency Paul has not done very well either.
I had to initiate another debate as recently as 18 April this year to point out the present deficiency in the London ambulance service. I identified the following: 10,000 cancelled out-patient journeys a month—which I am glad to say on record has been markedly reduced in the past six months—extended response times to emergency calls, continued telephone stacking of 999 calls, overtime of ambulance crews limited to two hours a week, 50 ambulance officers made redundant, and a major headquarters failure in computers which has cost a cool £2 million or £3 million. The computer failure was comparable to that at the Foreign Office about which we have just heard. The ambulance service is still subject to cash limits. The London ambulance board is still invisible and unaccountable to the London public. The patient ambulance service will be subject to competition from April 1992.
The matters that I have listed were dealt with in the Adjournment debate on 18 April. I am sorry—or in a sense glad—to say that the junior Minister who replied to the debate said that I was right and all those things were happening. He then tried to say that the Government were doing something about it by allocating more resources. He 505 grandly announced at the end of the debate that another £5 million was being made available by his Department for capital investment.
I would not go so far as to claim that winning the ballot for that Adjournment debate resulted in the £5 million announcement. The announcement certainly took the wind out of the headlines because, having admitted what was going on, the additional £5 million was good news—I am not too proud to admit that. I was grateful for it.
The recent annual report that has just been sent to London Members by, I think, the chairman of the London ambulance board—it is rather a thin annual report in most respects—shows a remarkable jump in expenditure. In 1990–91, £556,000 was spent on capital projects and vehicles, whereas for 1991–92 the sum is £3,666,000. Other investment of more than £1 million, over nothing equivalent last year, means that there is an extra £5 million investment. That is just about equivalent to what I got out of that Adjournment debate. That is welcome and nobody would quarrel with it.
What is most significant is the source of the income. In the financial year 1990–91, the income was £51 million and for 1991–92 the income is £63 million. That is a welcome increase of about £12 million. The big difference is that it is not direct funding. The income for this year comes after the implementation of the National Health Service and Community Care Act 1990, which means that it comes through contracts from regional hospital authorities or district health authorities, as the case may be, arid no doubt a trust or two. Therefore, instead of the Treasury and the Department of Health allocating money, it is down to market haggling for contracts between the London ambulance service and individual district health authorities, to which it is sensibly tied for the current year for income and services. That is only for this year. The question is what will happen next year.
Next year, the separation of the ambulance service into two will be completed. There are three contract centres in London, each of which is to reach an agreement but not with each district health authority. I understand from an authoritative source in the LAS—I do not think that it is properly in writing; it might be, but it is obscure—that the contract for next year for the patient transport service will be funded by individual contracts between the LAS and each health unit. That does not apply to the emergency service, which will be funded by the four regions comprising the London area.
I put it to Tory Members in particular, and I am glad to see at least one London Member present, that that will mean that each London centre which is fed daily by the LAS must make its own individual contract with the LAS for day care ambulances on the basis of projected need at a projected level of quality. That could be in excess of what is contracted for at a certain rate: less punctuality, cancellations, so many vehicles with tail lifts, or so many vehicles with skilled people on board. Those are the claimed standards of quality that we are becoming so used to in this market-oriented world.
I ask you, Madam Deputy Speaker, rhetorically, but I ask more than rhetorically of Tory Members, all of whom have hospitals in their constituencies: can they see their individual health units practically making an individual contract agreement with the local ambulance service about ambulances in the financial year 1992–93? If they can, how can that provider organisation, of which we are beginning to hear, estimate the cost properly?
506 If the Government have their way after the general election—that is, if they unfortunately stay on the Government Benches, which they will not—they will make such contracts open to outside bidding. Indeed, there is a suspicion that some ambulance services outside London, perhaps in the surrounding counties, may try their luck and win a contract. It will be much easier, will it not, to contract for an individual hospital than for the whole of a health district, which was the original idea? Indeed, it will be easier for a private individual to contract half a dozen ambulances to a particular hospital for its patient transport service and run them in, perhaps from Colchester or Maidstone or elsewhere. As I understand it, that may be possible. It certainly is the direction in which the Tory party wants to take the service. Naturally, they would be private firms. I invite any Tory Member to deny that if that happens—it is happening with privately run old people's homes—and there are private ambulance firms under contract, just as there are private cleaning services for hospitals, it is privatisation, at least, of a sort.
Although the report of the Comptroller and Auditor General and the Committee's commentary are valuable, they are in a sense starting from the wrong end. The Committee assumes that the task of this service is to economise a little here, perhaps looking at standardised equipment of one sort or another, which may or may not be a good thing. If the joint purpose, which was well defined by my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) in his opening speech, is to be fulfilled—to protect citizens and ensure the proper use of citizens' taxes—the Committee must ensure that there are adequate funds for and proper administration of this literally life-giving, life-saving, demand-led service.
§ Mr. D. N. Campbell-Savours (Workington)
I listened with great interest to the greater part of the speech of my hon. Friend the Member for Newham, South (Mr. Spearing). He will forgive me if I did not quite hear the end, because I was in engaged in conversation arising from something that he said. My hon. Friend has played a notable part in defending London ambulance crews, who write to me regularly and who regularly congratulate him on the work that he has done in recent months.
My hon. Friend sparked off a series of thoughts in my mind when, early in his speech, he referred to the Public Accounts Committee being a Select Committee of the House of Commons. Under the strictest interpretation of the term "Select Committee", I understand that the PAC is not a Select Committee. It has a different role, in that it is supported by about 900 personnel, one third of whom are accountants working from offices in Victoria, at the former British Overseas Airways Corporation building. Therefore, we are a highly resourced Committee. Select Committees may appoint specialist advisers, but in the main have a small staff and little expertise on which to draw.
When I explain the PAC's role to people outside the House, I try to set it in the framework of access to information which might otherwise be denied to Parliament. Without legislation on freedom of information, the PAC and, in particular, the National Audit Office play an important role. Through its powers to certify the appropriation accounts of Departments, the PAC can gain access to information which Ministers might well deny to 507 Parliament. Select Committees cannot get that information. Although they have the power to demand persons and papers, if they were to push it to the nth degree, they would need a resolution of the House of Commons to enforce that right which Parliament has given them by resolution. So there is a distinction between a Select Committee, which is formed by resolution of the House, and the Public Accounts Committee, which has a role almost enshrined in section 1(3) of the National Audit Act 1983.
I wish tonight to deal with a report which has not been commented on at length during the debate, and in particular one sentence in it. I beg the indulgence of hon. Members if I draw on matters in a report which we produced the previous year and which links with the later one. The 10th report of the Committee this year dealt with the new headquarters building for the Department of Energy.
That report dealt with the new headquarters which the Department of Energy took over in 1989 at 1 Palace street, formerly Buckingham gate. The Department's former headquarters were based on a lease at Thames house, South Millbank, SW1. The Department moved out shortly after the lease expired in 1982. The Property Services Agency took on the responsibility of finding new headquarters accommodation. It found that accommodation, but there appears to have been a comedy of errors. Grave mistakes were made over a number of years by departmental officials and others. A project which was to have cost £2.7 million exceeded £12.5 million, a 367 per cent. increase on the original estimate. That occurred as the result of a lack of management and control.
Our report which dealt with the matter identified confusion in the relationship between the PSA and the Department of Energy, the developers and the contractors, perhaps similar to the confusion over the building of the national library. We said in our conclusions:In our view, to secure value for money in the acquisition of a new headquarters building"—no matter the department concerned—it is crucially important for departments to undertake full and soundly based investment appraisals. These should identify and evaluate the costs and benefits of the main options … We consider that the Department of Energy's failure to do this was a regrettable omission … We note that a year after moving into their new building the Department of Energy intend to reconsider the location of the Department.I understand that to mean that the Department is considering moving elsewhere.
I put it to the House that the decision to move to 1 Palace street and the approach taken by the Department were wrong, and that it set a bad example for other Departments. It certainly set a bad example to the nation in terms of energy conservation policies. I say that because, in the original remit as set out in the NAO report, the Department in July 1984 formally advised the PSA of its broad requirements. They were forone single building not further than 1¼ miles from the Houses of Parliament; 90 per cent. cellular accommodation … and the building to include an energy efficiency controlled system.I shall concentrate on the final phrase, because it seems that, despite the rhetoric of Government Departments over the years, they are not addressing the issue of savings that arise from energy efficiency measures. Indeed, the 508 fourteenth report which we issued the previous year on national energy efficiency said in paragraph 34, under the heading "Departments' Own Use of Energy":the Energy Technology Support Unit of the United Kingdom Atomic Energy Authority has estimated the maximum potential energy savings in the Civil Estate at some 40 to 55 per cent. The Property Services Agency considered the Unit's estimates highly theoretical and that the investment required would not be cost-effective except in the very long term.It seems, on that basis, that the Department of Energy was not even prepared to measure its own efficiency savings in 1985. That was the year when the Government first introduced energy efficiency saving incentives to Departments, for in paragraph 35 of that report we said:We were informed that neither the Department of Energy"—the Department responsible for the savings—nor the Treasury had information on departments' in-house energy efficiency—for example, whether they had achieved the five per cent. savings target for 1985, or how many departments had appointed full-time energy managers.Until departments of state themselves apply energy efficiency savings to all the work they undertake, householders throughout the country will not consider that an example is being set, let alone local authorities fully implementing their responsibilities in this area. I understand that, at the time we published our report, the PSA had 46 other development schemes in the United Kingdom. To what extent have those properties been subject to the maximum use of insulation materials and the latest energy efficiency technology'?
Now that departments have taken on greater responsibility for their construction work and have their own training courses —I understand that there are interdepartmental committees that spread available information and expertise within Departments—one wonders to what extent the initiatives that were taken by Government are being followed in energy efficiency appraisals to see if there is a major cost benefit, or any benefit, available to Departments which introduce the latest technology.
In the summer months this year, I visited an organisation in Scotland called the Findhorn Foundation. I also visited a centre in north Wales, at Machynlleth, which deals with alternative energy and is a centre in that discipline. I was interested during my visits to see in a practical way that I could comprehend some of the latest technology being applied. Indeed, I understand that 70,000 people a year examine the potential for energy efficiency at Machynlleth.
§ Mr. Campbell-Savours
I hear my hon. Friend's comment, but those centres are demonstrating to the world that energy can be saved. One might have thought them to be a waste of money, but having visited them, I do not take that view. I was able while at Findhorn to examine four houses under construction. They were powered by gas condenser boiler systems. I asked, on noticing a boiler outside one of the properties, why it was positioned there, and I was told that that one condenser boiler was heating four houses. What interested me was that it was the same type of boiler as heats my single home in the Lake District. If the same boiler that can heat one 509 home in the Lake District can heat four houses of broadly similar size in the north of Scotland, major savings in gas consumption must be available.
Those savings could be made because of the degree of insulation in the buildings. At the Findhorn Foundation, they have done much work on applying insulation techniques to building and construction methods on a scale which far exceeds the building regulation require-ments—and those are higher in Scotland than in the rest of the United Kingdom.
I was looking only at private residential property. If we applied the same technology, including flat plate solar panel systems, to commercial buildings in the public sector, tens of millions of pounds of public money might be saved per year.
I visited a large hotel at Elgin in Scotland. On top of it were about 50 sq m of solar panels. I asked about their function and was told that they provided almost all the hot water required by the hotel. If that was possible, why can we not inbuild that technology in public sector buildings in the rest of the United Kingdom, with the inevitable savings for the taxpayer?
When I asked about savings, I was told that the technology was fitted in 1983–84. The hotel management said that the payback period for the solar panels feeding the hot water system had been only three years. That is a remarkable payback period for an investment. If that was possible in the north of Scotland, which has a very temperate climate, what might be possible in the rest of the United Kingdom, where we have more sunlight every day, even using only simple technology?
I drew attention to the need for us to consider applying that technology, and developing energy efficiency technology, in public buildings. The Department of Energy could have been a trail blazer. Instead of picking a building within a few hundred yards of Parliament, might it not have been better if it had picked somewhere a little further away, and put up a brand new building, a trail blazer and a flag-flier for all kinds of alternative and highly efficient use of energy systems available here? Why could the Department of Energy not become a centre where such systems could be displayed, generating argument about the extent to which the public sector could lead the way in implementing that new technology?
Until I went to Findhorn and Machynlleth, I was not convinced, even taking it in its most elementary form, of solar technology. But, having used boiling hot water on a cool day in a country with a temperate climate and little sunlight, and knowing that it has been heated by solar energy, one begins to wonder whether we are irresponsibly turning our backs on an area of vast potential savings. I ask Ministers to examine the possibilities in their Departments. If payback periods can be so short, despite what the PSA said in the 1990 report on energy efficiency, surely it is the responsibility of Government Departments, especially the Treasury, to find out whether large sums of taxpayers' money can be saved.
The maintenance costs of much of the equipment—certainly that for solar panel technology—are low. I understand that there is no deterioration in the insulation material, so that, once the costs are paid back, they are paid back for ever. The building remains permanently insulated so long as it survives.
My purpose today is to draw attention to the need for those now responsible for public sector buildings, especially those in Government Departments, to lead the 510 way in implementing the technology. If the Department of Energy has to move again, it should no longer think in terms of moving a mile or a mile and a quarter from the centre of London. Perhaps the Department should move outside London and build a centre at which the whole nation could at least pay tribute to the technology that it sought to apply.
§ Mr. Nicholas Brown (Newcastle upon Tyne, East)
There are recurrent themes in these debates—and, indeed, recurrent Government Departments. The scope and sheer volume of the work of the Public Accounts Committee means that it is not possible to do justice to all its reports in such debates. We must choose highlights—although if there were a corresponding term, "lowlights", I should be tempted to use it as in some cases it would be more appropriate.
This is my fifth year of responding to such debates on behalf of the Opposition. As I have done for the past four years, I thank the members of the Public Accounts Committee, especially its Chairman, my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), for the incredible amount of work that they do on behalf of the House. Last year I wished the hon. Member for Scarborough (Sir M. Shaw) well on his retirement and said that if we had a debate this year I would do so again. However, the hon. Gentleman seems to have taken early retirement and been replaced by the right hon. Member for Hertfordshire, North (Sir I. Stewart), who did the business for him. I do not know about that right hon. Gentleman's past involvement in such affairs, but I look forward to taking part in debates on Public Accounts Committee matters with him in the next Parliament.
I was especially struck, as I have been in previous debates on such matters, by the efforts made—successfully, I believe—to get to grips with the complex issues of defence procurement. The affairs of the Ministry of Defence figure regularly in our debates, and I believe that the steady and unremitting pressure, led by the Committee Chairman, is beginning to have some effect. The same can be said about the equally complex subject of social security. It is only fair to point out, as the Chairman did, that the 11th report—the 1989 statement on major defence projects—highlights the substantial delays in non-nuclear defence projects. Nineteen out of 33 of them are behind time, and 12 of those are more than two years behind time. It is indicative of the continuing problems at the Ministry of Defence that the Committee says that continued vigilance will be necessary. Having followed these debates for some time, I endorse that view.
In previous debates we have emphasised themes such as the failure to spend public money in time, thus incurring more expense later. The Department of Transport's road programme and the failure to protect art treasures in the museum service are good historical examples of that tendency. Another continuing theme of the debates has been the clash between the Government's ideological commitments and sound financial management.
Nowhere is that clash more evident than in the Government's privatisation programme. In previous debates we discussed the Rolls-Royce privatisation and the last-minute sweetener that was almost blackmailed out of the Government in the final days before that privatisation. In previous debates we have discussed the 511 royal ordnance factories' land holdings and their undervaluation before privatisation. Last year we also discussed the PAC's interim report on the sale of Rover to British Aerospace—the failure to test the market to get the best price and related deceits surrounding surpluses, sites, shareholdings and tax advantages. We also discussed what was even more disgraceful—the hidden £38 million subsidy from the European Commission.
Those matters are still alive, but this year, in spite of all that has been said in previous years, has produced its own crop of reports on privatisation. They show that the way in which those sales have been handled has resulted in the Government's ideology being put before the interests of the public purse. I agree with my hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis) that, in terms of the sheer amount of money involved, the greatest privatisation scandal is the £1.8 billion paid out to those who have chosen private pensions and opted out of SERPS. Unfortunately, there will be an extra cost to our citizens when people realise later in life that it is in their financial interest to go back into SERPS.
Among the privatisation scandals that have been highlighted in this year's batch of PAC reports, and to which my hon. Friend the Member for Hodge Hill drew our attention, was the sale of Herstmonceaux castle. I am surprised that the Chairman of the PAC did not make a passing reference to that case as it is the type of issue that he normally picks up. The report says that the castle was sold for £8.1 million but that offers of £9.25 million and £14 million were rejected. What sort of statement is that on the Government's management of such affairs? Perhaps if ptthere were sound reasons for rejecting the higher bids —if they were against the public interest or it was suspected that the people making them did not have the money—that would offer a reasonable defence, but the PAC concluded that the Science and Engineering Research Council did not give the higher bidders the real reasons for the rejection of their bids. It appears that the council did not take any steps to discover whether those bidders could come up with the money. If a local authority behaved like that, people would suspect corruption; if the authority were Labour controlled, those allegations would come quickly from Conservative Members. The entire episode leaves a rather nasty taste in the mouth. The best that can be said is that it did not represent an effective handling of public assets.
That case is not unique, although I accept that buildings such as Herstmonceaux castle do not come on to the market every day of the week. A study of the privatisation of the work undertaken by certain new-town bodies in England reveals that precisely the same thinking prevails and ideological considerations have been put before the interests of the taxpayer. Proper competition did not exist when assigning the work to certain business ventures. The decision to go ahead was taken without any basic cost criteria being calculated. A mechanism for tracking those costs was not even established. What makes matters even more "cosy"—that description has already been used in the debate—is the way in which in some instances employees were allowed to take redundancy payments and then to start work again doing exactly the same job but with strong employment safeguards. We would all like to do that, but the opportunity is not there 512 for most of us—the opportunity to do so at the taxpayer's expense certainly does not exist. Those are precisely the sort of arrangements that prevailed in those circumstances and the PAC was right to draw our attention to them in such a scathing manner.
The sale of the National Bus Company repeated the issue at the heart of the privatisation of the royal ordnance factories and the sell-off of Rover to British Aerospace —the correct valuation of assets held by an institution that is about to be privatised. One would have thought that the Government would have been alert to the issue by then, but the PAC report states:On the basis of this evidence we consider that more should have been done to identify operational and other properties that had an alternative use, and to put a realistic valuation on it. As only 18 out of 1,500 properties were subject to clawback, we do not feel that the taxpayer's interest has been fully protected".This is not a new problem; it has arisen year after year in our debates but there is still strong evidence to suggest that the ideological push for privatisation is always put before the interests of the British taxpayer.
If public assets are to be sold, they should be sold at their true value. They should not be allowed to slip away from public ownership with the return on their sale being much less than it should be. However, the report on the sale of the National Bus Company reveals that, essentially, that is what happened in that case.
My hon. Friend the Member for Hodge Hill also referred to the work of the Comptroller and Auditor-General for Northern Ireland. The affairs of Northern Ireland have been one of the continuing themes of our debates. My right hon. Friend the Member for Swansea, West (Mr. Williams) struck a deep chord with me when he referred to the arrangements surrounding the privatisation of Harland and Wolff. He also referred to the similar arrangements, dealt with in the 28th report of the PAC, surrounding the sale of Short Brothers plc.
My constituency was severely affected by the scandal surrounding the AOR1—the auxiliary oiler replenishment vessel—procurement at Harland and Wolff. Two thousand of my constituents lost their jobs because of the way in which that issue was handled, so perhaps I feel more strongly about it than many other hon. Members. The scandal surrounding that procurement is now moving towards its inevitable conclusion, with costs escalating well beyond those predicted. The unfairness and the cheating —I put it no stronger than that—surrounding that procurement is reflected, as my right hon. Friend the Member for Swansea, West has stated, in the concealment of information surrounding Harland and Wolff. There is a similar reluctance to hand over information surrounding the sell-off of Short's. The PAC states:It is important in Parliamentary accountability terms that, in privatisations such as this, the retention by Government of liabilities with a potential high cost to the taxpayer should be quantified as accurately as possible and notified to Parliament at the earliest appropriate opportunity".However, the AOR1 contract, the privatisation of Harland and Wolff and the sell-off of Short's has revealed that the bill that the British taxpayer must pick up has been inaccurately quantified.
I am not blind to the particular difficulties that relate to the governance of Northern Ireland. However, if specific arrangements are made because of the difficulties in the Province they should be declared up front. We should not be subject to the pretence that somehow or other matters 513 are dealt with in the same ruthless, competitive manner in the Province as they are in other industrialised parts of the United Kingdom. That is just not the case.
Having dealt with cases that arise from the Government's ideological commitment to privatisation, I now move one step further to cases that involve sheer fraud. The Chairman referred to the Committee's continuing work on that matter. I was slightly saddened to hear him forecast that such issues may become more prevalent in the Public Accounts Committee's work in the near future. In past years we have had many debates that focused heavily on absolute issues of fraud.
The 40th report deals with the Intervention Board for Agricultural Produce: Management, Accountability and the Prevention of Fraud. Although, in a narrow United Kingdom context, the Committee finds that we have less to worry about than our European partners, British taxpayers' money now goes into a slightly larger pool., and the fact that we are running our affairs reasonably correctly is not the assurance that we require when we find that fraud in other parts of the Community is much more extensive. The PAC rightly takes careful note of the Government's determination to reduce the risk of fraud, not only in the United Kingdom but in the Community. That is not a party-political point. The PAC goes on to say that it is concerned about the apparently varying standards against which irregularity, including fraud, is reported in other member states and it looks to the Treasury to encourage the Commission to require fuller and more open reporting of irregularity, disallowance and especially fraud across the Community. That issue is important because of the sums of money involved and we should return to it.
The continuing issue of the BBC's licence fee may seem small beer in comparison. I remember the first occasion on which we discussed a report relating to that issue. I predicted that we would discuss it again, just as I predicted that we would discuss a report on vehicle licences again. I said that little progress would be reported and the 30th report says:There has been little real progress since we last examined this subject in 1985".The report makes the point that I made last year and states:although only some 1 million households have black and white televisions, 1.8 million monochrome licences were issued last year.The PAC draws an obvious conclusion—that people are buying black and white television licences and watching colour television. Clearly that state of affairs cannot be allowed to continue.
A wider point about such licences applies to television licences, car tax and the poll tax. Where consent for paying those taxes breaks down, collection becomes very difficult. The Government have been extremely foolish in undermining the necessary consensus that links the taxpayer to those who rely on the income from the tax. They have done that in the foolish way in which they have gone about handling the poll tax affair and I am worried that the attitudes that they have engendered may spin off into other smaller taxation issues, especially those relating to car tax and television licences. For example, the region with the highest level of non-payment is Northern Ireland. We all accept that there are special collection difficulties in 514 Northern Ireland—[Interruption.] I shall content myself with saying that there are special collection difficulties in Northern Ireland.
A new crop of reports deals with issues that can only be described as negligence. The Chairman understandably highlighted the new building for the British Library. Several hon. Members have referred to it and, without going through the saga again, it seems bizarre that the number of seats to be provided increases the number that were provided by only 7 per cent., whereas the original plan provided for that number to be more than trebled. The PAC says that it is not convinced that the final building will have a proper balanced scale of provision and in apportioning blame for that, which it does very nicely, it says:We are disturbed that the Office of Arts and Libraries, despite having commissioned and paid for the building, did not regard themselves as responsible for keeping control of the project.A Government who say that they are managing the public's financial affairs with scrupulous attention to detail should at least have found someone to take control of the project and brought it to a conclusion a little more quickly than the 14 years that seem to have been spent so far. That does not appear to be a success story.
The 36th report is worrying. It refers to the problems being experienced by British universities. Last year we debated the special problems at Cardiff university and it is pleasing to see that it is making progress along the right lines. However, the report highlights a more general and worrying situation. It mentions the expenditure of £11.3 million extra, which is totally outside the conditions laid down for restructuring and retirement agreed with the universities. I am surprised that those matters were allowed to proceed in that open-ended way. The real problem was referred to by my hon. Friend the Member for Norwich, South (Mr. Garrett), who said that expenditure and the provision of funds were nowhere near in line. The Public Accounts Committee makes the same point but in a different way. It says:The Funding Council pointed out that universities were to a greater or lesser extent in financial difficulties because they had not taken sufficient steps to bring their income and expenditure into balance.It goes on to describe the conscious decision by some universities to use their reserves to ease a transitional period to a lower expenditure level. The report says:others had failed to note that by a commitment to broadly level funding in a block grant had been by reference to forecast inflation which might not match actual pay and price increases for particular universities.If that is the case, it is the sort of managerial error that leads inevitably to deficits at the end of the financial year and certainly leads to deficits at the end of the second financial year to which the wrong forecast has been applied.
The Public Accounts Committee is, of course, aware of that. It says:We are concerned at the serious financial difficulties facing a number of universities and the extent to which they are operating at a deficit.The Committee goes on to highlight a problem that it sees as more substantial than the generality—the problem faced by the University of London. The Committee tells us:We understand that financial forecasts indicate that mounting deficits could reach £46 million by July 1993.515 The Public accounts Committee is making us aware of that problem, which will require to be dealt with in the immediate future.
It is outrageous that Britain's universities are being allowed to drift into this plight. The Public Accounts Committee can see it coming if the Government do not intervene to help, yet that seems to be the case. Although we can live with coming back to reports on the BBC licence fee saying, "The position has not changed very much since we last reported on the BBC licence fee in 1985", it would be a disgrace for which future generations would not forgive us if we had another report in four years' time on the funding of universities which said, "The position has continued to deteriorate precisely as we predicted four years ago and what has happened is the inevitable consequence of Government policy". That would not be acceptable. We have been alerted to a problem that is immediate. The Government have the chance—in fact more than the chance, the duty—to respond.
The other report that fits into no other category than that of sheer negligence and which deals with a matter that was bitterly attacked by the Labour party at the time on financial grounds as well—and we were sneered at by the Government for doing so—is the 31st report, which deals with the dock labour compensation scheme. The key fact is that the House was told that the cost of redundancies for former registered dock workers who were being made redundant under the Dock Work Act 1989 would be about £25 million. The cost turned out to be £141 million—nearly six times the estimate notified to Parliament when the Bill was presented.
The Opposition told the Government at the time that they had got their sums wrong. We were sneered at by the Government who said, "That is just what the Opposition would say." The Government had their sums wrong, but they proceeded with the measure for ideological reasons. It is difficult now to defend the measure on the ground of protecting the public purse. Is £141 million value for money?
§ Mr. Brown
Really? I do not think so. If the Financial Secretary sits muttering that it is good value for money really, why does he not stand up and say, "All right, it is going to cost £141 million"? Why slip it in by saying that it would cost only £25 million, the estimate at that time?
The Chairman referred to the procurement of a new ship for St. Helena. I endorse everything that he said about that. It is not acceptable that one can use an Administration's advance payment as a guarantee to show that the yard is financially viable. Clearly that is nonsense. What is slightly more worrying and, again, so unfair to yards in England is that the Industry Department in Scotland was able to step in, to provide a guarantee and, in effect, to provide £11 million of public subsidy to finish the vessel, which finally cost £32 million. If the vessel had been procured in an English rather than a Scottish or Northern Irish yard, there would have been no agency of Government to step in, to offer the guarantee and to offer, in effect, a subsidy. The shipyards are supposed to be competing with each other on a level playing field, but that clearly is not so.
516 The hon. Member for Beaconsfield (Mr. Smith) referred to the report on the retail prices index. Although I disagree with his playing down of the significance of the RPI, his points about the report were fair and measured.
The 7th report, which may be of even more significance, returns to an earlier theme and deals with the monitoring and control of charities. That is an important issue. I remember the previous report because it expressed substantial fears concerning fraud, abuse and maladminis-tration. I clearly remember that it made the point that the Charity Commission did not even employ qualified accountants to look through the accounts of the charities that it was supposed to supervise. I wholeheartedly agree with the Chairman of the PAC that this is an important matter. Charities always lobby us before every Finance Bill seeking more tax reliefs and special privileges. The reputable charities that we all support and want to encourage advance good arguments for such special treatment. The European Commission, however, is examining the definition of charities and the privileges that that definition attracts. The United Kingdom should play a leading part in those discussions. Charities have for long had an established role in our society, which is why it saddens me to read in the 7th report that—at least by implication—although progress has been made, matters are not yet satisfactory. I believe that we could have made more progress more quickly.
The report does not bring in any new material; it merely trawls over all that was known at the time of the last report and states that some, but not enough, progress has been made. The Commission is making it clear that in the absence of legislation, for instance, it cannot enforce accounting standards or annual returns from charities. The method of enforcing annual returns is to flag up the charities that have not made their returns and—it is hoped—by exerting that moral pressure to persuade them to do so.
My hon. Friend the Member for Leeds, West (Mr. Battle) discussed the report dealing with homelessness, and it is worth repeating his point that the way to deal immediately with the problem is to allow local authorities control over their own capital receipts to use them as they see fit for local circumstances by providing for those who have nowhere to live. That common sense solution is vigorously resisted by the Conservative party, which makes great play of the 2.4 per cent. of local authority housing stock that remains empty. Surely, Conservative Members say, that should be used to house the homeless. But the report tells us that they should be asking about the 18 per cent. of central Government housing stock that remains empty. Why is it not being used for homeless people? According to the PAC, 31,000 Government residential properties stand empty. I know some homeless people who would welcome the opportunity to live in some of those properties—if they are anything like as good as I suspect they are.
The Government must tell us precisely where these properties are and why it is necessary for 18 per cent. of them to remain empty. The PAC tells us that the Government cannot give us that information at the moment. Could that be due to a lack of willingness on their part? It is legitimate to suspect as much. I hope that the PAC will pursue the Government over this matter.
The report on the inner cities is the last to which I shall refer, although I found a number of others interesting, including the two that deal with the Inland Revenue. The 517 report on inner cities tries to pull together the work being done by the city action teams, by the task forces of the Department of Trade and Industry, by the urban programme through the Department of the Environment and by the local authorities involved in that, and by the wretched urban development corporations. My hon. Friend the Member for Leeds, West was absolutely right to say that all these institutions are divorced from the public life of the communities in which they try to intervene. The PAC makes a similar point in a different way, pointing out that too much time is spent on managing projects and not enough on encouraging the regeneration of the inner cities.
Inner cities suffer from the debilitating effects of high levels of long-term unemployment. As every hon. Member who represents such areas knows, within the depressing overall area there are specific estates with sustained bleak employment prospects. Those tend to be the estates that have high levels of long-term unemployment. It is not surprising that such estates arc targeted by professional criminals and networks of petty criminals and hooligans. A fact often neglected by the Conservative party is that the main victims of the activities of such people are their fellow citizens on those estates.
The justice system has not responded adequately to the problem of crime, but the heart of the problem is not the failure of the justice system or the magistracy but the failure of Government to intervene with practical solutions to the problems of the long-term unemployed. I shall cite an example from my constituency. There is no point in the urban development corporation providing £40 million of public money to underpin the activities of a property speculator to build office blocks when the main residual problem is displaced semi-skilled manual workers who can no longer find employment in shipbuilding and heavy engineering. There is a demand for office blocks on Tyneside, but they will not be filled by those people. Market forces could deal with the demand without any intervention from the public purse. Such intervention should be for specific purposes but, as the Public Accounts Committee report shows, insufficient attention has been given to the precise objectives of such Government activities.
The debate has been dominated by Labour Members. In addition to those hon. Friends whom I have already congratulated, I commend the speeches of my hon. Friends the Members for Newham, South (Mr. Spearing) and for Workington (Mr. Campbell-Savours). Without exception, Labour contributions have been from senior and distinguished Members, which is in marked contrast to the contributions by Conservative Members. Apart from three Conservative Back Benchers, nobody on the Government side seemed to be interested in the work of the Committee. That includes those Members who have joined us to laugh at the Minister when he is winding up. It is even more disgraceful that the Liberal Democrats—[HON. MEMBERS:"Where are they?"] I seem to have united the House. Liberal Democrats are constantly using material gleaned from the work of the Public Accounts Committee in their local election campaigns. However, when it comes to carrying out some work or attending the debate to offer some views they are not only not present in the Chamber but are not in the building.
The reports highlight a catalogue of negligence. We must take seriously the waste caused by underfunding and the failure of the Government to prevent serious fraud.
518 The Opposition must pay great attention to that because after the next general election we shall inherit those problems. We look forward to working with the Public Accounts Committee to prevent some some of them.
§ The Financial Secretary to the Treasury (Mr. Francis Maude)
I was about to chide the hon. Member for Newcastle upon Tyne, East (Mr. Brown) for having introduced an unwelcome note of acrimony into this otherwise congenial and splendid debate, but, as he said, he managed to unite the House towards the end of his speech by spotlighting the double standards of the Liberal Democrats. They affect to be greatly concerned about these matters until it comes to turning up on a Thursday evening and exercising the important and proper House of Commons function of scrutinising Government expenditure. Their usual slot on the green Benches has remained vacant. The hon. Gentleman does the House and the country a service by drawing attention to this appalling lapse.
This is the second occasion on which I have had the pleasure of speaking in such a debate. It is idle to pretend that these debates generate either the interest or the electricity of other debates such as that which we shall enjoy on Monday. None the less, the holding to account by the Public Accounts Committee of the way in which public money is spent is an important part of the parliamentary calendar. I join all those who have spoken in paying tribute to the work of the Committee and in particular its Chairman, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). As others have said, he gives an enormous amount of energy and application to this exceedingly important task. I also pay tribute to the Comptroller and Auditor General and his staff at the National Audit Office, whose work is invaluable and essential.
I am sorry that I was not here to listen to the remarks of the hon. Member for Norwich, South (Mr. Garrett), but they have been reported to me in full. He spoke about the relationship between the Treasury and comptroller. We recognise the importance of the independent audit and fully support the independent status of the comptroller. which was set out in the National Audit Act 1983. It is important to stress that the staff of the NAO are not civil servants. The question whether the comptroller should be a member of the Board of Management of the House is for the House to decide, not the Government. Specific reference is made to the NAO staff in the Official Secrets Act 1989 simply because they are not civil servants. I gather that that issue was debated at length in the House during the passage of that Bill.
I was upset to hear that the hon. Gentleman was hostile to the idea of me and my successors being members of the Public Accounts Committee. This may not be a matter of fundamental importance, but the Financial Secretary's traditional and historic membership of the Public Accounts Committee is at least of symbolic importance. It reflects the close relationship of the necessary link between the Treasury and the PAC which goes back to the mid-19th century. It symbolises the fact that the PAC and the Treasury are, for these purposes, natural allies and they should be, as they are, operating on the same side, rooting out bad practice and scrutinising the way in which public money is disbursed.
519 The hon. Gentleman animadverted on the participation of the comptroller in discussions on the citizens charter. That is unfair. A number of distinguished, independent and serious people took part in such discussions and the charter is essentially about delivering more for taxpayers' money. It is about the process of converting taxpayers' money into good service for citizens. The roles of independent audit—the National Audit Office and the comptroller—of the Audit Commission and of an independent inspectorate are all important. It was vital, as we formulated the policies that make up the charter, to have the benefit of advice from the comptroller, among many others.
§ Mr. John Garrett
First, the Minister will be aware that the Procedure Committee recommended that the Financial Secretary to the Treasury should not be a member of the Committee of Public Accounts. Surely there is a direct conflict of interest if a Treasury Minister, whose responsibilities could be audited by the Comptroller and Auditor General, should be a member of the Committee to which the comptroller reports.
The Minister must be aware of the direct conflict between the comptroller advising on the contents of the citizens charter and then having to examine expenditure as a result of the charter before giving an opinion on whether that expenditure was accounted for properly. Surely the comptroller cannot help to construct policy and at the same time audit the consequences of that policy.
§ Mr. Maude
I hate to argue with the hon. Gentleman, but he is wrong about what took place. The comptroller was not involved in the formulation of policy. Policy is formulated by Ministers. An important element of the citizens charter is monitoring the performance of public services against the standards that are set. As we were looking to make that process effective and independent, it would have been odd if we had not taken advice from those involved in the process of audit, both in the Audit Commission and the comptroller's office, and from those who have experience in the schools and social services inspectorates, for example, to ascertain how the process could be strengthened. The hon. Gentleman would legitimately have been able to criticise us for being remiss if we had not taken that course, and I make no apology for its having been taken. I am sure that we proceeded in the right way.
§ Mr. Terry Davis
Surely there is a difference between the inspectorates to which the Minister referred, which are responsible to the Government of the day, and an Officer of the House.
§ Mr. Maude
It is clear that the matter is exercising Opposition Members. It seems to be one of such little importance that I propose not to pursue it any further. I have answered hon. Members' questions to my complete satisfaction and I propose that that admirable point rests my case.
Some of my hon. Friends who spoke earlier in the debate have asked me to explain to the House that they are unable to be present at this stage. My hon. Friend the Member for Beaconsfield (Mr. Smith), who is in his place, referred to the retail prices index and asked what progress was being made on the treatment of owner-occupied 520 housing. Various options are being explored, but it is right to say that the treatment of owner-occupied housing raises conceptual and practical difficulties.
The right hon. Member for Swansea, West (Mr. Williams) talked about beer duty. The Treasury has recognised for some time the need to change the system. It has now completed discussions with brewers and packagers of beer. The broad legislative framework that is necessary for the future has been established in the Finance Act 1991. Completion of the policy and administrative framework that is required is on target and implementation is planned for 1993.
We reject the main criticism of the Committee of Public Accounts about the way in which the sale of Herstmonceaux castle was conducted. We believe that the price obtained was a good one and was the best available at the time. The Science and Engineering Research Council had good reasons for doubting the financial soundness of the two putative higher offers that were received after the deadline for best and final offers. It is worth saying that the present owner attempted to resell at a higher price and has failed to do so. That lends some support to the Government's view.
§ Mr. Maude
Those bidders did not meet the standards required for financial references. We do not accept a bid simply on the raw numbers. When there is a serious sale, the Government rightly need to be assured that the bid comes from a financially sound source, and such concern is proper. I am satisfied that the Government behaved properly.
§ Mr. Campbell-Savours
How can the Minister possibly say that about Mr. Nesser? Has he read the report and the appendices to it which were based on correspondence between Mr. Nesser and the Committee? Is it not clear that no effort was made to establish whether Mr. Nesser was worth what he said he was worth? He insists that he could have purchased the castle.
§ Mr. Maude
That may be so, but the bids were late. The Treasury has carefully examined the matter and its conclusions are set out in the Treasury minute. The fact remains that the sale was made to the highest bidder who could provide the necessary financial references to support the bid. The Government do not accept the Committee's criticisms.
§ Mr. Terry Davis
Is the Minister, on behalf of the Government, saying that he rejects the opinion of the Comptroller and Auditor General, and the concurrence of the chief valuer, that the district valuer should have been told about the offer of —14 million and the reasons why it was not being pursued?
§ Mr. Maude
I can add no more to what I have already said, which is that the Government, having carefully examined the matter, are satisfied that the highest bid was accepted from someone able to provide the necessary financial references.
The hon. Member for Workington (Mr. Campbell-Savours) raised the issue of the Department of Energy building. The Department accepts that a full investment appraisal of all options should be undertaken, but obviously a number of the Department's functions are
521 closely linked with Ministers and with Parliament, so proximity is an important factor governing future reviews. The Department's current review of its accommodation requirements is being carried out on that basis and the Committee will be informed of the outcome. Being untied from PSAS and improved guidance on responsibilities will give Departments greater control over their accommodation requirements.
The 1987 efficiency scrutiny has improved the PSAS management of projects, with project managers now agreeing roles and responsibilities with clients at the outset of each project.
§ Mr. Campbell-Savours
I must press the Minister on this matter. Can we have an assurance that if the Department moves to a single building, it will apply the latest and best available energy efficiency technology? Is it prepared to consider solar technology for heating the building? Will it examine the question of payback periods? Will it consider to what extent investing in energy efficiency would save the Department money? Would it be prepared to invest, in the knowlege that other areas of the public sector might follow suit? This is an extremely important matter and Ministers should not laugh it off.
§ Mr. Maude
I am not laughing it off. The Department, by its very nature, spends a great deal of time considering solar energy and other such matters. I cannot give the hon. Gentleman the assurance that he seeks, but I will ensure that my right hon. Friend the Secretary of State for Energy is made fully aware of what he said. If the hon. Gentleman pursues the matter with my right hon. Friend, I am sure that he will receive an answer and I hope that it will be one that satisfies him.
As regards the 36th report on universities, the Treasury minute set out the Government's response and made it clear that action has been taken by the UFC to reinforce its arrangements for the financial monitoring of universities. It has reinforced professional staff, reor-ganised internal structures and provided more effective links with institutions. University accounts now conform to a statement of recommended practice, the UFC has issued a code on internal and external audit, and agreed financial memoranda are now in place between the Department of Education and Science and the UFC, as well as between the UFC and the institutions.
A number of questions were raised about the ninth report on the sale of the National Bus Company, especially matters relating to property, and it is important to deal with those. All the NBC's 1,500 properties were valued for existing and for alternative use and non-operational property was removed before the sale of companies and sold on the open market. Where property had a high alternative use value, either a mortgage charge was placed on the property, or prices for the company were negotiated upwards to reflect development value.
The Department of Transport and NBC received separate advice from professional property advisers throughout the sales process. It seems to me that the exercise was entered into on a proper basis and had very good results for the taxpayer and for the country because deregulation has been a substantial success.
§ Mr. Maude
Bus mileage has increased by 19 per cent. since 1985–86 with 83 per cent. of that run commercially, free from any subsidy. There are more operators and there is more competition and innovation in the form of minibuses, which provide more frequent services. More importantly, bus operator costs have decreased, as has local authority revenue support for buses.
§ Mr. Maude
Is it not important for bus operating costs to decrease? That means a better value service for passengers. Frankly, I am surprised that the new-look Labour party does not warmly support that approach and especially that result.
One report that the Chairman of the Public Accounts Committee mentioned was the 11th report on the 1989 statement on major defence projects—
§ Mr. Campbell-Savours
The Minister said that the NBC property sales were dealt with properly. Can he justify what is revealed in appendix 1 of the report, where it states that the Keswick station, shop and offices were valued at an existing use value of £50,000 and at alternative use value of £55,000, yet a short time later they were sold for nearly £700,000 and were later valued at £1 million? How can the Minister possibly justify that and say that the matter was properly dealt with? It is clear from those figures that the taxpayer was ripped off. Why does not he admit it to the House of Commons? Everyone in my county accepts it—even Conservatives in my constituency are disgusted by it. Why does the Minister simply ignore the facts?
§ Mr. Maude
I said that the Department and the NBC provided themselves with independent valuations on both existing and alternative use value. That is the correct approach. There is not a great deal more that any vendor of property or of a going concern can do other than to provide himself with good independent advice on valuations, and that is what was done in those circumstances.
§ Mr. Campbell-Savours
Let me put it another way. Would the Minister allow his home to be sold at 10 per cent. of its value and then sit back and watch someone else make a 90 per cent. profit? Is he prepared to treat his own assets in any way differently from those of the general public?
§ Mr. Maude
I am sure that the hon. Gentleman has nothing but help in mind, but I feel perfectly comfortable, and I am not in need of help from him.
The right thing to do was to secure independent advice and that is what was done and it was acted upon.
The 11th report deals with the 1989 statement on major defence projects. In response to specific recommendations which the Committee made in its report of the previous 523 year, a number of changes have been made to improve the statement. The Committee welcomed the acceptance of those further recommendations and the most recent statement has taken them up. In particular, projects will now remain in the statement until their in-service date has been met and until less than 15 per cent. of total estimated costs remain to be paid.
We welcome the broad endorsement given by the Committee to the Ministry of Defence's commercial approach to the procurement of equipment for the armed forces. The use of competition backed by good contracting practice using firm or fixed prices and milestone payments tied to technical achievements is intended to provide the best value for money for the Ministry of Defence, the Government and the taxpayer, and I believe that it is doing so.
A number of hon. Members have talked about the 18th report, on the British library building. It is worth making the point that this is a large project. The Government are investing £450 million in the new building. It is the largest civil public building project this century. It will meet the British library's key requirement. It will concentrate most of the British library's reference collections at one location in a controlled and pollution-free environment for the first time and it will unite its major services in a single purpose-built building providing greatly improved facilities for readers and staff making use of modern technology.
§ Mr. Maude
Let me finish the sentence. It is important that the new building should meet those objectives and I believe that it is doing so. I will deal in a moment with the specific point that has been made which may pre-empt the point that the hon. Gentleman is full of.
The Dainton committee recommended the outhousing of low-use stock and most of the vulnerable material will be stored in the new building. The British library cannot meet the high standards economically of off-site storage, but it will seek to minimise the risk of deterioration by avoiding extremes of temperature and monitoring humidity.
The new building will provide a modest increase in the number of reader seats—70 extra seats. Trends in demand have changed since the original design was drawn up in the mid-1970s and it now thought unrealistic to provide the 3,500 seats that were proposed. Automation means greater flexibility and greater density of use and it will mitigate the effects of any increased demand. The phased handover date is expected to be achieved, and many of the difficulties encountered have been dealt with.
In its 19th report on the privatisation of new town bodies, the Committee criticised the Department of the Environment for failing to issue guidance to the development corporations, but that has been remedied. It would have been difficult to do so in the early stages of the exercise as there was no body of experience on which to build. The Government's response to criticisms was to remedy matters for the future, which was the right response to make to legitimate criticisms.
§ Mr. John Garrett
At the start of his remarks, the Minister said that it was right and proper, and even 524 symbolic, for him to serve as a member of the Public Accounts Committee, which prides itself on its unanimity. However, since then the Minister has done nothing but rubbish the Committee's findings or twist, wriggle, and try to dodge the PAC's perfectly legitimate, well-founded, and well-researched observations. Should not the Minister save himself and the rest of us further excruciating pain by voluntarily resigning from the PAC? If there is some symbolic virtue in his being a member of it, will he explain what it is?
§ Mr. Maude
The Government respond to each of the Committee's reports, and in the majority of cases accept the points that it makes and act on them quickly. It is right that that should happen. However, if the Government have a legitimate answer to a particular criticism, it is not unreasonable for them to give it through a Treasury minute or during a debate in the House. I certainly will not accept lessons in humility from the hon. Member for Norwich, South.
As to the 22nd report, on homelessness, the number of unoccupied Government-owned properties has reduced substantially since the time of the report's publication. It is possible that the estimate given to the PAC was too high in the first place. The current best estimate is that unoccupied Government properties total 27,000, which is an improvement. However, I frankly acknowledge that there is a good deal more to be done.
Much of that property is of a kind that is not in great demand. I refer, for example, to prison officers' homes, Ministry of Defence barracks, and health authority staff accommodation. Some empty property is located in places where there are unlikely to be homeless people seeking accommodation. None the less, we acknowledge that the percentage should be reduced and we are taking energetic steps to deal with that situation.
As to the 31st report on the dock labour compensation scheme, the benefits of the Dock Work Act 1989 have proved substantial, bringing huge advantages to ports. The 50 per cent. reduction in the number of dock workers has meant that there is new flexibility, with productivity increasing by as much as 50 per cent. to 100 per cent. in certain places. It has amounted to a rejuvenation of the ports and has brought great economic benefit to the country. As I said to the hon. Member for Newcastle upon Tyne, East, I regard the cost to the taxpayer as extremely good value for money.
§ Mr. Maude
Yes, indeed. To coin a phrase, a price well worth paying. It was made clear that the estimate of £25 million was a loose estimate because it was difficult to predict with great accuracy how many people would take up the scheme. The results have represented extremely good value for the country.
§ Mr. Campbell-Savours
May I put a suggestion to the Minister? My hon. Friends have ribbed him tonight about his membership of the Public Accounts Committee. I wonder whether he could start attending. If he were to attend, perhaps he could develop a style of asking the witnesses helpful questions. It might help us in the production of our reports.
§ Mr. Maude
The Financial Secretary traditionally attends the Public Accounts Committee. I am bound to say that when I attended I did not see the hon. Gentleman there. Undoubtedly, he was there on every other occasion.
This is an important debate. I am only sorry that on what is normally a bipartisan occasion, when the House of Commons joins together to conduct one of its most important functions, Opposition Members have chosen to approach the debate in a thoroughly partisan, nit-picking, pettifogging way. But there it is. They are clearly no longer interested in pursuing these matters in the spirit in which they have traditionally been pursued. That is their loss, the House's loss and the country's loss.
§ Mr. Brown
The Financial Secretary is probably inexperienced in these matters. This is the fifth year that I have responded for the Opposition to these debates. I look forward to responding to the debate from the Minister's side of the Chamber. In each of my responses for the official Opposition I have joined the Chairman of the Public Accounts Committee and its all-party membership in drawing to the attention of the House matters which that Committee unanimously decided to put in front of the House. There is no breach of unanimity between the official parliamentary Opposition, the Chairman of the PAC and the membership of the Committee. The only partisan and discordant note has been that struck by the Financial Secretary.
§ Question put and agreed to.
That this House takes note of the 33rd to 42nd Reports of the Committee of Public Accounts of Session 1989–90, of the 1st to 35th Reports of Session 1990–91, and of the Treasury Minutes and Northern Ireland Department of Finance and Personnel Memoranda on those Reports (Cm. 1323, 1405, 1462, 1479, 1542, 1582, 1617, 1679, 1685 and 1686) with particular reference to the following Reports:
Thirty-sixth, Restructuring and finances of universities; Session 1990–91
Ninth, Sale of the National Bus Company;
Eleventh, The 1989 Statement on Major Defence Projects;
Eighteenth, A new building for the British Library;
Nineteenth, Privatisation of work in New Town bodies in England;
Thirty-first, Dock Labour compensation scheme.