HMSO Trading Fund (Hansard, 25 April 1994)

§ The Parliamentary Secretary, Office of Public Service and Science (Mr. David Davis)
I beg to move, That the draft HMSO Trading Fund (Amendment) Order 1994, which was laid before this House on 13th April, be approved. This order is essentially a technical accounting measure. It seeks to bring within the scope of the trading fund HMSO's growing business with public bodies overseas, chiefly in Europe, so that it can be handled in a more businesslike way. This overseas trading has hitherto been carried out on a token vote with the approval of the House. A token vote is a nominal sum, in this case £1,000, which allows much larger cash flows of income and expenditure to balance out over the accounting year.
The original trading fund order of 1980 did not envisage HMSO trading with customers based outside the United Kingdom. HMSO did, and still does, service overseas units of the Foreign and Commonwealth Office, the Ministry of Defence and so on. HMSO's ambition to extend its customer base beyond the United Kingdom was approved by the House in 1991 when it authorised a new token vote to cover exploration of public sector markets overseas. The token nature of the vote meant that income and expenditure were required to balance out over the year so that there was no substantive effect on public expenditure.
The growth of HMSO's European business is now placing severe strain on the vote accounting arrangements. The requirement for income and expenditure to balance out over the year makes no provision for the working capital that is essential in any business. The time has now come to transfer the business from vote accounting to trading fund so that it can be handled in a more normal and businesslike way.
The order will permit HMSO to continue to develop its trading with public sector bodies in Europe and elsewhere on a businesslike basis. That will benefit British industry and the British taxpayer. En passant, by a strange coincidence of geography, the order will have a mildly beneficial effect on employment prospects in the constituencies of the hon. Members for Oldham, West (Mr. Meacher) and Norwich, South (Mr. Garrett). However, it is not primarily for that reason that I commend the order to the House.

§ Mr. John Garrett (Norwich, South)
I have a strong constituency interest in the order because the largest single unit of HMSO is in my constituency and is a greatly valued contributor to the economy of the city of Norwich.
As the Minister said, the order enables HMSO to take greater advantage of its printing expertise and, by widening its ambit, to cover the public sector in the European Union and elsewhere overseas. As the Minister said, the Government Trading Funds Act 1973, which governs the financial arrangements of HMSO, excludes trading in areas that have not previously been financed by a vote under the supply procedure. This remedial measure corrects that anomaly.
To its credit, HMSO has already secured business from the French department of employment and the German post office. It has the capacity in its new state-of-the-art 75 passport assembly line to secure much more business in Europe. The order will enable HMSO to finance such business.
By any standards, HMSO has been an outstanding success since it gained trading fund status. The Treasury attempted to cripple it at birth, of course, by saddling it with a £50 million originating debt and a £20 million long-term loan. However, it has largely paid off the debt and now has a turnover of £400 million with sales per employee at a record £126,000 in 1993 and a current cost operating surplus in that year of more than £10 million. A profit of £22 million is planned for 1996. It has very high levels of achievement in customer satisfaction with very high service levels in print and publications deliveries.
However, it is far from clear why the order should be brought forward at this time, useful though it is.

§ Mr. D. N. Campbell-Savours (Workington)
Why does the Official Report cost £7.50? That is a tremendous sum of money. My hon. Friend has referred to HMSO's substantial profits, yet all the parliamentary publications are very expensive. Can my hon. Friend, or the Minister if he gets a chance, shed any light on that?

§ Mr. Garrett
I assume that it is predatory pricing. As so many institutions, such as universities and public libraries, have to take Hansard and Government publications, I guess that HMSO follows the Government's request for it to be profitable. It certainly puts profit before the provision of subsidised literature for the public. The Minister helps to set those objectives and no doubt he will satisfy my hon. Friend the Member for Workington (Mr. Campbell-Savours). My hon. Friend has made a very good point.
As I was saying, I cannot see why the order, useful though it is, has been brought forward at this time, because, at a time when HMSO is thriving, hanging over it is nothing less than a threat to its existence. I refer to the accountants' report on the commercialisation of HMSO—the so-called prior options report. I am told that the Chancellor of the Duchy of Lancaster now has that report. That makes it even more odd that the order should be introduced before the report has been published.
I understand that the report sets out a number of options for the future of HMSO. It is feared in HMSO—for very good reasons—that there will be 1,000 redundancies in the next five years amounting to no less than one third of the staff. The Minister might give us some idea whether that fear has foundation; or does he intend to make his announcement in the summer recess, which is a typical shelter for bad news?
If HMSO is to be substantially damaged by the accountants' report, it would be another case of administrative vandalism by this Government. It is not clear why such a study was commissioned from commercial accountants—a practice rather different from prior options studies in other agencies—and particularly from commercial accountants who are unlikely to grasp the sensitivity of the security of parliamentary printing by HMSO.
I cannot see any reason to change the trading fund arrangements under which HMSO has been so successful. If a further distancing from Treasury restrictions is necessary, a sensible arrangement could be to establish 76 HMSO as a wholly-owned Government corporation. HMSO needs less messing about, particularly by market testing.
It is interesting that the Government follow two contradictory policies at the same time. One is to establish agencies under the control of fully accountable and fully responsible chief executives. I see that the Chancellor of the Duchy of Lancaster and the head of the civil service now try to make a distinction between accountability and responsibility, but it is one that will not bear scrutiny.
We have a chief executive of an agency such as HMSO being told to run the show as best he might and to the best of his ability and then he is told that he must market test or contractualise on a piecemeal basis many of the agency's activities for which he is supposed to be responsible. That is a direct conflict. Of course, it is the reason why Sir Peter Kemp was fired—he had a row with the Government's efficiency adviser. The Government's efficiency adviser was keen on contracting out and Sir Peter Kemp was keen on setting up agencies. The two were in conflict, so Sir Peter Kemp, a distinguished public servant, got the bullet.
The record of HMSO in market testing has been excellent, for example, in retaining the highly efficient Bristol distribution centre and the Basildon reprographic unit.

§ Mr. Nigel Waterson (Eastbourne)
Hear, hear.

§ Mr. Garrett
I do not know why the hon. Gentleman should say, "Hear, hear" when he is in favour of privatising HMSO. Shall I give way to him? I heard the hon. Gentleman applauding the efficiency of HMSO, but he is a supporter of privatisation.

§ Mr. Waterson
To clarify the position, I was saying, "Hear, hear" to the hon. Gentleman's use of the word "Basildon".

§ Mr. Garrett
That is forgivable because I am sure that we all react—

§ Mr. Patrick Thompson (Norwich, North)
I hope that the hon. Gentleman will withdraw.

§ Mr. Garrett
I withdraw any aspersion that I may have cast on the hon. Member for Norwich, North (Mr. Thompson). I am happy to give way if he wants to make public his position on the privatisation, commercialisation and market testing of HMSO.

§ Mr. Patrick Thompson
I was listening to the hon. Gentleman's speech.

§ Mr. Garrett
Once again, the hon. Gentleman cannot make up his mind.
As I said, HMSO has retained some important functions. The Government rule is that every market-tested activity must be market tested again in three years' time. That leads to management and staff who are in constant turmoil because they are always having to bid for their jobs or resist some hostile takeover. We know that after a short time a contractor who has secured and won a market test soon finds ways of putting up the price or gouging the client in some way.
Market testing is nothing new to HMSO—,75 per cent. of its goods and services are already purchased from the private sector. HMSO has an exceptional reputation as a 77 reputable supplier to the public sector and has regularly exceeded the financial targets set for it. It has reduced its staff by some 200, mainly through early retirement.
The staff are in the dark about the future of this successful organisation. In a poll of the staff, 86 per cent. wanted to know what the prior options study team was doing because they had never been told since it was set up. Privatisation had the support of a mere 6 per cent. of the staff. A future private bidder should bear in mind the staff attitude to outside control or ownership of HMSO, as should Tory politicians in the City and the country.
HMSO's years of operating as a trading fund have produced an innovative, go-ahead and commercial organisation. It has a bright future which should not be jeopardised by political dogma. However, until we hear what the future of HMSO is, I welcome this modest measure which will enable it to expand its overseas trading.

§ Mr. D. N. Campbell-Savours (Workington)
I shall detain the House for a few moments to say a few words about the cost of Government publications and the effect of that—

§ Mr. Deputy Speaker (Mr. Geoffrey Lofthouse)
Order. The hon. Gentleman will be out of order because that matter is outside the scope of the debate.

§ Mr. Campbell-Savours
I am looking at the explanatory note. I quote precisely what it says: The additional operations now to be financed by the fund are the procurement and production of printing and supply of stationery and office machinery and related services and the publication and sale of material in printed or other form for such bodies outside the United Kingdom as are of a like nature to those for which the HMSO Trading Fund already provides goods and services. What I am about to say should fall broadly within the area that is identified in that part of the explanatory memorandum. I am dealing specifically with the cost of—

§ Mr. Deputy Speaker
Order. The hon. Gentleman must relate his remarks to overseas matters.

§ Mr. Campbell-Savours
That is possible. The publication in my hand is available not only in the United Kingdom but overseas. Indeed, I imagine that under the present arrangements, if someone overseas wishes to purchase the publication which I am holding, which is a copy of the Official Report of last Friday's parliamentary debates, they would have to find a sympathetic Member of the United Kingdom Parliament and ask him to send it to them through the post, or, alternatively, they would have to subscribe directly to HMSO in London and thereby receive a copy of it.
I am interested in the costs that such people might be required to pay wherever they are within the European Community. I am especially interested in the fact that a high price for a publication of this nature effectively restricts—

§ Mr. Deputy Speaker
Order. I hesitate to interrupt the hon. Gentleman, but he is out of order. Unless he can stick to the order under debate, he must take his seat.

§ Mr. David Davis
With the permission of the House, I shall start as best I can by staying in order and by answering the question of the hon. Member for Workington (Mr. Campbell-Savours) about the cost of HMSO publications. As I am sure he already knows, for many years the price of the Official Report was heavily subsidised. In 1983, when the subsidy stood at £6 million, the Government decided progressively to reduce the level of subsidy. HMSO is currently having a MORI survey carried out to see whether a reduction in the cost of the Official Report would lead to more purchases of it. I hope that that is of some help to the hon. Gentleman.
The hon. Member for Norwich, South (Mr. Garrett) started by paying a well-earned tribute to the operation of HMSO. There is no doubt in my mind that HMSO earned that tribute. The hon. Gentleman asked me why the order has been introduced now. The trade in Europe—certainly abroad—that is carried out by HMSO has grown in a few years from about £6,000 to nearly £500,000. As the hon. Gentleman, given his background, will appreciate, that creates a significant operating capital requirement which is difficult to meet within the remit of the current vote arrangements.
The order allows, frankly in the simplest way possible, HMSO to handle overseas trade in a more businesslike way. Of course, that brings benefits to HMSO, to the Norwich, South constituency and to the constituency of my hon. Friend the Member for Norwich, North (Mr. Thompson).

§ Mr. Patrick Thompson
I am grateful to my hon. Friend for giving way because it gives me an opportunity to say that, like the hon. Member for Norwich, South (Mr. Garrett), I welcome the order. May I take this opportunity to pay a tribute to the work of HMSO—[Interruption.] If I may be positive, unlike the hon. Gentleman, who seems to be negative all the time, I welcome the important work done by HMSO and by many of my constituents in Norwich, North in HMSO. I have had the opportunity to visit HMSO on a number of occasions. I should like to make this positive statement about the work that is done in Norwich by this excellent organisation.

§ Mr. Davis
My hon. Friend makes his case very well, as I would expect from an excellent constituency Member of Parliament.
In addition to the benefits to the direct areas, there are also benefits to British industry. Some 80 per cent. of the sales abroad come from British suppliers. The hon. Member for Norwich, South referred to the success of HMSO in market testing. He is absolutely right. HMS0 has a market testing programme which has saved it about £2.4 million—well over 20 per cent.—on what it addressed. Contrary to the hon. Gentleman's comments, those savings led to no compulsory redundancies. Obviously there will be retirements and redundancies, but they are not compulsory, and that is beneficial.
The hon. Gentleman referred to the commercialisation study. The consultants' report which we have just received is extremely complex and refers to 18 different components of HMSO. It will take some time to study it, and I cannot at this point forecast when we will come to a conclusion on it. I am sure that the hon. Gentleman would not want us to rush it, particularly since we—as much as 79 he—place great importance on maintaining the high standard of service to the House. The public availability of official information will, of course, be safeguarded.
I commend the order to House.