§ Mr. Robert Sheldon (Ashton-under-Lyne)
I beg to move,That this House takes note of the 12th to 54th Reports of the Committee of Public Accounts of Session 1992–93, and of the Treasury Minutes and Northern Ireland Department of Finance and Personnel Memoranda on these Reports (Cm. 2145, 2175, 2186, 2199, 2226, 2257, 2279, 2310, 2341 and 2354) with particular reference to the following Reports:Sixteenth, The sale of the twelve regional electricity companies; Twenty-sixth, The Chelsea and Westminster Hospital; Twenty-seventh, Quality of service: war pensions; mobility allowance; attendance allowance; invalid care allowance; Thirty-fourth, Ministry of Defence: prices paid for spare parts; Thirty-fifth, PSA Services account 1991–92; Forty-seventh, Welsh Development Agency accounts 1991–92; Fifty-second, Fire prevention in England and Wales.Today we are discussing 43 reports—the same number as last year. I am sure that we shall mention many more in debate than the seven that are set down in front of us, but almost all of them would warrant a full-scale debate on their own.
I am grateful to all my right hon. and hon. Friends who are members of the Committee for their dedication. The Committee meets more often than any other Select Committee and a commensurate amount of effort is required. Each week the Committee's members have to digest the information that is given to them in a voluminous amount of paper, to maintain the accountability for which we stand.
As an example of just one of those matters which are not so likely to be dealt with in debate, I shall mention report No. 31, Her Majesty's Customs and Excise Account Matters—an uninteresting title. The report deals with control over common agricultural policy exports; it deals with refunds of £455 million; it deals with the single European market that came into being on 1 January 1993, which presents great problems to the Customs and Excise and to all who deal with them, and its many risks. It deals with the way in which Customs and Excise handle the VAT debts of small traders and it gives instances of irregularities; it deals with the issues of time to pay and with the problems of small traders in meeting some of the Customs and Excise requirements. The costs of the Department are rising.
I deliberately singled out what may appear to be one of the less interesting reports in order to show the importance of the matters that we have to consider. I intend to deal mainly with seven reports, but I shall refer to several others, describing some of the lessons that we have to learn and giving details of how we handle our responsibilities. It is a burdensome task for all the Committee members, but it is essential.
The important thing to remember is that we have the enormous advantage of tradition on our side. Here I pay tribute to one who has long since gone: Gladstone got it astonishingly right 130 years ago. He put the responsibility on the Chairman of the Public Accounts Committee, who he said should be a Member of the Opposition. One would never get away with that today, but he had the standing to enable him to impose it on Parliament at the time, with the result that Government expenditure is monitored properly, adequately and—using the traditions that we have inherited—responsibly as well.
592 With the advent of the National Audit Act 1983, we have had to consider questions of economy, efficiency and effectiveness. On economy, we must ensure that whatever the Government buy is bought with due attention to getting the best possible price and deal for the taxpayer. The Committee also considers efficiency—to ensure that the best methods are used—and effectiveness, which covers wider activities.
Normally, the Committee takes evidence from the accounting officers, who are usually permanent secretaries. The Committee's contact with them is a big advantage because it enables us to understand some of the problems that face their Departments and to know some of the personalities involved, so that we can assess how well they are carrying out their functions. We can make comparisons and judge how they are doing. We see the strengths and weaknesses of Departments and of the people who run them.
We discover a number of very able civil servants, and their standards are a matter of great importance to us. A constant stream of overseas visitors come before me, and the Committee, to discover why we have a relatively incorrupt civil service. I always tell them that our main advantage is that we do not have, and are determined not to have, corruption in our civil service.
Fortunately, we do not have to spend much time dealing with fraud and corruption, because we do not have much of it, but when we do find it, everything has to stop—it comes before everything else. We must retain those standards. Of course we want to improve on them, but we must not allow them to weaken in any way.
In attempting to improve the standards of the civil service, we have the defence of the taxpayer in mind. That is what unites the Committee and it is one of our greatest advantages. Of course Committee members have enormous differences of opinion on policy—we are still politicians, and party politicians at that—but we are even able to deal with issues such as privatisation, on which our views differ greatly, because we do not consider policy. If something is the policy of the Government, we consider how they can achieve their objectives and how we can defend the taxpayers and the money that they have to raise. That is what gives us the power for such unanimous reforms.
During the past 10 years every one of more than 400 reports has been unanimous—not because they have been fudged in any way, but because the taxpayer is king as far as we are concerned and so we are able to produce the unanimous reports that are the foundation of the Committee's strength. When Departments study our reports they know that, however widely members may differ, we are united in defence of public money and the public interest.
The Committee is extremely fortunate in having a close and happy relationship with the Comptroller and Auditor General. The National Audit Act 1983 gave us the legislative right to propose matters to the National Audit Office for investigation. That is a very great help. Every year we go through the Comptroller and Auditor General's suggested programme, discuss it, consider matters that we may raise and come to an understanding on the areas of greatest interest.
Important though our discoveries are, our success does not merely lie with them but in what we can prevent from happening. The very fact that our presence is known and that the accounting officer is aware that matters will come 593 before us has the consequence that the officer is very careful in dealing with certain matters that might not otherwise be given the attention that they deserve.
I pay tribute to Sir John Bourn and his staff, who never fail to excite the interest, enthusiasm and acceptance of the Committee. The staff have changed enormously. When I first became a member of the PAC in 1965, most of the staff came in from the executive class and were not much more than book-keepers. Today they are auditors. That makes an enormous difference because when they visit Departments they can ask the kind of questions that any top auditor in the City, or in a big public company or institution, can raise. They are accorded the respect and understanding that is important for proper auditing of our accounts, which is of enormous benefit to us.
The Comptroller and Auditor-General for Northern Ireland, Dr. Bill Jack, also does his work very well. Last year, I mentioned the new offices that were being planned. The Committee recommended that the independence of the Northern Ireland Audit Office would be more clearly demonstrated if its staff were housed in a headquarters building separate from the Government Departments that they audit. It is clearly wrong for them to occupy a building occupied by the Northern Ireland Office Department whose accounts they were auditing. The building that the auditors shared with the Northern Ireland Department of Finance and Personnel was also inadequate for their needs. Them Comptroller and Auditor-General for Northern Ireland and his staff moved to new headquarters close to central Belfast at the end of July. We look forward to seeing the results in due course.
The number of cases that we have and the standards that we maintain have been extended because of the increase in the number of executive agencies and of non-departmental public bodies, of which there are about 1,000. It is an enormous growth industry, and it is difficult to maintain control and oversight.
I referred in my speech last year to those matters, and the Financial Secretary to the Treasury—whom I am pleased to see in his place—also expressed concern about them. Standards of public service become harder to maintain, let alone improve, when there must be oversight of so many such bodies. The number of cases perhaps means that we are not able to deal with them as thoroughly as we would wish. I shall say more about that later.
§ Dr. Kim Howells (Pontypridd)
Does my right hon. Friend agree that there is a worrying trend of cases of irregularity and hints even of corruption in a couple of nominated quangos? Does not the duty fall heavily on Government Departments to monitor quangos, for which they have some responsibility? The people of Wales in particular look to the Government to clean up their act in respect of the Development Board for Rural Wales and the Welsh Development Agency. I hope that the Financial Secretary to the Treasury can assure the House that there will be no more such nonsense at the Welsh Office in Cathays park.
§ Mr. Sheldon
I shall deal with that matter and others raised by my hon. Friend at some length later.
Our great advantage is that we have a civil service that is one of the finest in the world. We should take pride in that. A number of years ago an attempt was made to belittle 594 the role of the civil service. I am glad that that has now ceased and that people understand and respect those who enter the civil service because they believe in high standards of public service. So long as we need public servants, we must reassure them that we have their future and the standards that need to be maintained very much in mind. I will look very closely at those non-departmental public bodies, and so will the Committee. I will refer to them later.
The House should know how we go about our work. Basically, it is not a difficult task. A number of years ago we laid down that whenever a programme that will cost money is put before us, we ask the Department concerned what its objectives are—what it is trying to achieve with that expenditure—and we want it quantified. We also want the outcome quantified; we want the achievement recorded and compared with the objective. At the same time, we want the programme monitored, so that if something goes wrong the Department is able to bring it to a halt, or change it or modify it in some way. Only by comparing objectives with achievements are we able to bring Departments to account for any particular programme. That quantification has been improving in a number of cases.
The Committee has heard many horror stories. Although, luckily, some of the worst examples are in the past, unfortunately we have a few to deal with today. I need not go into those matters at the moment, but will deal with a number of other points.
First, and most important, is the proper conduct of public business—a matter raised by my hon. Friend the Member for Pontypridd (Mr. Howells)—and I will have more to say on that later. Secondly, there is value for money and how we achieve it. Thirdly, there is performance, and how we judge whether a Department is meeting its obligations in the way that we expect.
The first of the Committee reports of the 1992–93 session that I wish to deal with is the 16th report, entitled "The Sale of the Twelve Regional Electricity Companies". In December 1990, the Government sold all their shares in the 12 regional electricity companies in England and Wales —which had a total asset value of £16.1 billion—for net proceeds of £7.7 billion, of which £4.9 billion was from the sale of equity and £2.8 billion from specially created debt.
Although there are differences between members of the Committee as to how far we want the privatisation to proceed, we are unanimous in our desire to ensure that we get the best value for the taxpayer. A question that we have put time and again is this: why do privatisations have to be carried out in one fell swoop? Why can they not be phased in? The Government do not sell a year's worth of gilts —£50 billion—in one go on 1 January; they have a very sophisticated broker who knows the market, studies it and releases amounts of gilts into it at relevant periods. Privatisation cannot proceed in quite the same way, but the priniciple is similar.
We have argued time and again that there should be a similar kind of phasing with privatisation—in two or three tranches, perhaps more, depending what it is—because if it goes wrong on the first tranche we can hope to get it right on the second or subsequent tranches.
§ Mr. Rhodri Morgan (Cardiff, West)
To quote the immortal words of the late Andrew Holmes on the sale of the regional electricity companies, "It was like selling a £100 suit with a £50 note sewn into the lining." If the Government deliberately underprice a sale in order to make 595 it go with a bang, there is an enormous advantage in retaining 40 per cent. or 25 per cent. or whatever of the shares, so that, if they zoom away afterwards to double their value at privatisation—a fairly common occurrence with the main utilities—the Government and the taxpayer will get the benefit of that higher price at the sale of subsequent tranches. That was done with the generating companies but not with the electricity distribution companies, and the taxpayer has lost many hundreds of millions of pounds as a result.
§ Mr. Sheldon
My hon. Friend is right. I will deal with that point later.
In paragraph 12 of our 34th report of 1987–88 we dealt with the question of phased sales. That approach has been used on occasion, but in the event the Department decided that if it went for a partial sale it might be seen as a failure of the Government's nerve, which might have affected the climate of the sale and the proceeds. The Department judged that to be the most weighty argument against a partial sale.
That argument does not weigh heavily with me. The Government's argument is that over a period everyone would know that all the assets of these privatisation companies were to be sold off, and that therefore we would get a better sale. I suspect that a stronger argument—which was never put by the Treasury—is that at the beginning of a year the Treasury wants to know how much it will get from privatisation, and it gets a commitment from the Department as to what it will receive. Once the steam engine starts, it is hard to get it to stop. We cannot say, "Look here, things have not gone very well so we should delay the privatisation," because that would delay the receipts and therefore the objective of Government finance.
On the first day of trading, the Government decided that the privatisation was worth £5.2 billion. In the end, the market decided that it was worth £6.3 billion, and the difference was lost to the taxpayer. Such uncertainty should lead to tranches being examined more carefully and fully in the future. We have constantly asserted that to the Government, and we hope that they will accept it.
§ Mr. Robert Maclennan (Caithness and Sutherland)
In an earlier report of the Public Accounts Committee, on the sale of Forestry Commission assets, the Committee strongly took the view that a wholesale sell-off of the nation's assets would not only fail to achieve value for money for the public, but would have disruptive effects on land values. Those matters are now current once again and comparable threats are being uttered by Ministers in respect of Forestry Commission assets. The Government should take to heart the prudent words of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) when they consider the future of forestry.
§ Mr. Sheldon
I do not feel that the Government have taken fully into account the need for phased sales in the Treasury minutes provided. They have done so in a number of cases; they have paid it lip service—which is of limited value—and in some cases they have accepted it, but 1: do not think that it has really struck them as being as important as the need for speed in the selling off of these publicly owned assets.
We see in the 16th report that the Government appointed 53 advisers to deal with the sale of the electricity companies, and 16 of them were appointed without competition. We feel very uneasy about some of those 596 appointments. We feel that there should have been competition—we do not know why there was not—and we look forward to hearing what the Financial Secretary to the Treasury has to say about that.
There were 9 million shareholders on flotation; the number has now fallen to 3 million, so the objective of widening share ownership has not been very successful in that respect.
I now wish to comment on the 26th report of the Committee of Public Accounts, on the Chelsea and Westminster hospital. The Committee was dealing with a 665-bed hospital which was under construction on the site of the former St. Stephen's hospital at a total estimated cost of over £230 million. The regional health authority intended that the cost would ultimately be funded by receipts from the sale of four surplus sites. However, as things have turned out, there is now a gap of around £100 million between the total costs and the expected sales proceeds. As a result, 24 other major schemes in the region have been cancelled or delayed.
The report states the Committee's concern that the health authority assumed that planning agreement would be forthcoming and was therefore unprepared for the difficulty and delay that occurred, at a cost of £16 million. In paragraph 25, the report states that the Committee was surprised that the region should consider that the complex and important project would need only a part-time project development manager. The Committee shared the Treasury's doubts as to whether that role could be adequately discharged on the basis of one day a week. It is quite astonishing that the project was handled in that way. The manager was dealing with a £230 million hospital, and 24 other projects had to be dropped or postponed because so much more money was spent than was estimated.
The chief executive of the NHS management executive at that time, Mr. Duncan Nichol, gave evidence and was asked about the fact that the project development manager had been moved to another post within the national health service while continuing work on the project on a part-time basis. I asked him the following question:One of the biggest hospitals of its kind in the history of the National Health Service and the project development manager was moved somewhere else and managed this project on a part-time basis. Was this a sensible way to proceed?Was it sensible, in other words, that the project development manager had worked on something else while continuing to work for one day a week on the biggest development project of its kind in the NHS? The National Audit Office report stated that the work of the manager was increased to two days a week in February, butstill failed to provide adequate control.I said to Mr. Nichol:You presumably agreed that there was not adequate control.Mr. Nichol replied "I agree with that". That really is a terrible story.
The report also points out that the Committee shared the Treasury's doubts as to whether the role of project development manager could be adequately discharged on that basis. We endorsed the management executive's final conclusion that in future project development managers should give full and undivided attention to the management of major schemes.
§ Mr. Andrew Rowe (Mid-Kent)
The right hon. Gentleman is pointing out a worrying weakness in the way in which public services often operate. There seems to be an unwarranted belief that the number of people capable of 597 doing important jobs is limited. In fact, when a worker is needed to work elsewhere, there is a tendency to try to stretch thinly the resources of those capable people. I believe that the public services are full of able people, many of whom have to wait far too long for recognition. Would it not be better if people were given the opportunity to do a full-time job when such a position arises?
§ Mr. Sheldon
I could not agree more with the hon. Gentleman. Too often we underestimate the potential of the people of this country. People who are provided with a certain amount of training, background and assistance can do all sorts of jobs in the community. They fail to do those jobs because of a lack of trust, not only in the people themselves, but in the methods that can be devised for dealing with and training them.
The memorandum from the Comptroller and Auditor General stated that there were 24 delayed schemes costing more than £1 million which had received approval in principle. Those included projects within the regional health authorities of Bedford, Luton, Watford, Barnet, Napsbury and other places. Those were viable schemes which had been recommended, and were then delayed and delayed because money had been spent unwisely on other projects. The Committee thought that that was wrong and stated its views clearly and firmly.
I will now deal with the 27th report of the Committee, "Quality of Service: War Pensions; Mobility Allowance; Attendance Allowance; Invalid Care Allowance." The report deals with the Department of Social Security and with the Benefits Agency, which was established as an executive agency in April 1991. Mr. Michael Bichard, chief executive of the agency, came before the Committee to explain his responsibility and how he had undertaken it. Sir Michael Partridge, who was and is the permanent secretary at the Department of Social Security, also gave evidence.
The Benefits Agency administers a number of schemes that provide help to people with disabilities and to those who care for them. In 1991–92, there were on average around 2 million people receiving a war pension, mobility allowance, attendance allowance or invalid care allowance. Expenditure on those four schemes in that year amounted to some £3.8 billion. From April 1992, disability living allowance replaced mobility allowance and attendance allowance for people becoming disabled before reaching the age of 65, and who claim before their 66th birthday.
The Committee saw clearly that the service had been deteriorating. War pensions—if I may deal with that matter first—are different from other schemes administered by the Department. They are not social security benefits, but state compensation, which is very different, paid in recognition of the fact that disability or death was suffered during service to the country.
The report states that the average time taken to clear war pensions disablement claims increased from less than six months in 1985 to between eight and nine months in 1990–91. Despite a 30 per cent. increase in productivity in 1991–92, and a further doubling of productivity in the first six months of the following year, the surge of claims resulted in the accumulation of even larger backlogs of work. The Department has estimated that the total number of war pensions claims in 1992–93 will reach 180,000. The report states that the Committee is concerned that the 598 service to war pension claimants has been deteriorating, and also that it took the Department five years to recognise that and to take remedial action.
The report notes the progress now being made in securing improvements in the productivity of staff and the measures taken to deal with the large and unexpected growth in the number of claims in 1992–93. The Committee expects those claims to be pursued with vigour. That is important, because those people have earned their right to their pension in the strongest way possible and it is correct that we should deal with them in a proper, reasonable and efficient manner.
I turn now to disability living allowance and attendance allowance. One of the advantages that Committee members have is that they know the problems faced by those in such circumstances—not just from the voluminous and well-explained papers which they receive, but because of their constituency cases. Committee Members go to hearings with a fair understanding of the problems and are able on occasion to dispute some of the assertions made by those who are called before the Committee. We knew about the matters of which our constituents complained. For example, we all knew of the poor telephone service provided by the agency and about the frequency with which claims for disability living allowance or attendance allowance had been lost.
The agency acknowledged that there had been problems in locating the case papers. That was clearly wrong and showed that the kind of efficient operation that we might have expected was lacking. The agency could not provide even an indication of the number of lost disability living allowance or attendance allowance claim forms, as no statistics had been kept in connection with the problem.
We point out that we were concerned that an enormous backlog of 400,000 uncleared claims for disability living allowance and attendance allowance had built up by June 1992, as compared with the 130,000 that the agency had expected. The agency said that the situation had been caused by the surge of claims in the early months following the scheme's introduction. We were concerned to note that the Department believed that the implementation of disability living allowance had been rushed.
§ Mr. Alan Williams (Swansea, West)
The members of our Committee and especially its Chairman understandably try to avoid any political comment, but is it not right that people should be aware that what in fact emerged was that the surge in claims at that date had resulted from the high profile advertising campaign launched in the run-up to the election to draw claimants' attention to what was supposed to be a very generous new system? Lo and behold, that advertising was suspended at the time of the election and never recommenced once the election was over.
§ Mr. Sheldon
I am sure that my right hon. Friend would want to make that point. We noted that there had been a change in the advertising, and that had certainly resulted in more claims being made rather more quickly than had perhaps been expected.
In our conclusions, we say that we welcome the improvement in performance on invalid care allowance. I suppose that it may be some consolation to the agency —considering how critical we were of most of the rest of it—that we welcomed that improvement in performance and were pleased to note that the staff of the invalid care 599 allowance unit had received an award for one of the most improved performances in the civil service. We pay tribute to any success of that kind.
The 34th report of the Committee is entitled "Ministry of Defence: Prices Paid for Spare Parts", and concerns the £2 billion a year that the Ministry of Defence spends on spare parts—which are, of course, vital for the maintenance of defence equipment. The spares inventory comprises more than 2.7 million items. During the 1980s, the Department began to adopt a more commercial approach to defence procurement, and that included a number of initiatives relevant or specific to spares procurement. I should point out that the former chief of defence procurement, Sir Peter Levene, has now been replaced by Dr. Malcolm McIntosh.
We were pleased with one aspect of the work done in relation to spare parts—namely, spare parts labelling. We had been concerned that spare parts and control of the cost of spare parts had not been handled as well as they should have been. We were very much aware of what we had been told by a Congressman on our visit to the United States —that the one way to ensure that charges for spare parts were not excessive was to label them with their cost. That congressman would regularly hold up an ashtray and say, "This cost $1,000" or whatever. The cost was so absurd that everyone knew that the taxpayer had been ripped off. As a result of that discussion and our discussions with Sir Peter Levene, we decided to recommend price labelling so that someone going into the store could see the price marked on components.
Labelling is a highly effective way of ensuring that the customer—the taxpayer—is not overcharged. Many contractors to the Ministry of Defence did not like the idea because they felt that they were giving a much better service to the British Government than to Governments overseas and did not want those Governments to realise that they were having to pay rather more. We were somewhat sceptical of that point of view and persisted with our argument, which eventually carried the day. In due course, labelling was introduced.
The Committee is rightly very chary about giving praise. Our task is not to praise, but to ensure that the taxpayer gets value for money. In 1966, when Lord James said that he wanted to have the University Grants Committee examined by the PAC because he had a good story to tell, Sir John Boyd-Carpenter, the then Chairman of the Committee, told him, "If you've got a good story to tell, you won't tell it here."
Nowadays, things are a bit different. We are prepared to go a little further in our praise—although not much—and on one occasion I went so far as to say that I was "satisfied" with the work that Sir Peter Levene had done. When he left, however, I went even further, in a statement that I never expected to make again—although I should be delighted to do so—and said that I was "very satisfied", which is about as far as I ought to go in these matters.
The question of the cost of spare parts is an important one because is it something that everyone can understand. Even in very esoteric and technical matters, the public have a right to expect that their money will be handled properly. On matters that they can understand, however, it is even more necessary that they are given such assurances. It is the task of the PAC to provide assurances, and that is what we sought to do.
We identified a need to increase competition in spares procurement. The Department acknowledged that there 600 was scope for a further increase in competition. Given the substantial savings that can be secured, we encouraged the Department to continue its drive to increase the level of competition. The question of competition is important. Competition is not always possible: for example, one cannot have large numbers of manufacturers or concerns providing nuclear submarines. What one can do, however —and what Sir Peter Levene showed could be done—was to have a number of sub-contractors bid for competitively. One can also encourage people to compete in areas in which competition is possible, by giving certain incentives and certain help. That is a positive gesture, which we welcome.
We say in our report:We commend the work carried out by the Purchase Research Units which has resulted in the generation of significant savings. However, whilst recognising the Department's plans for disseminating the techniques used by these Units, we note that at present the techniques are by no means widely applied throughout the Department.In paragraph 16, we say:In the past, this Committee has commended the initiative to label spare parts showing the unit price charged thus making users more aware of the cost of the items concerned. We are therefore concerned that some contractors are still not complying with the requirements to place labels on spare parts. Moreover, in some cases where labels are provided these are attached to outer packaging and are therefore not always seen by the end user. Thus, the user is not aware of the price paid and is unable to challenge what might be an unduly high price.That is the whole purpose of labelling, so we urged the Department to undertake to ensure that the requirement was fully met and our recommendations accepted.
Most of the recommendations of the Committee are accepted in the Treasury minute, and we welcome that. We have our differences from time to time, but we know that the Financial Secretary and the Treasury must also be concerned with securing value for money, which gives us a common theme and a common cause.
In one other aspect in relation to competitive contracts we note the Department's acknowledgement that one way of improving value for money lies in letting fewer and longer comptitive contracts with built-in incentives to ensure downward pressure on costs. Under a long-term contract, one can get a larger quantity at a cheaper price, which is clearly desirable. We are concerned that the Department does not have a system that flags up cases where there have been large increases between orders for the same item. There should be something that calls out for a fresh examination whenever a large increase in price is proposed for any article that it may want to purchase.
I shall now turn to the 35th report of the PSA Services Account 1991–92. I have had trouble over the years with the Property Services Agency and it has been a constant theme of the Committee. The report reads:In their Twenty-second Report of Session 1991–92 our predecessors concluded that it was a most serious matter that PSA services' financial systems should have broken down to such an extent that in 1990–91 they had been unable to recover £65.6 million owed by customer departments,Our predecessorexpected PSA services to keep their invoicing up to date,It is not a difficult matter to keep one's invoicing up to date. Any business starting from scratch does that automatically. For our predecessor to have to make a recommendation of that kind is almost an insult. We pointed out: 601Further increasing difficulties in 1991–92 resulted in clients owing PSA Services £190 million when they closed their books in June 1992. Of this, £116.8 million related to works expenditure on behalf of Government departments.One might have thought that Government Departments would be paying up if those invoices had been substantiated. We further pointed out:We regard it as unsatisfactory that PSA Services could not substantiate invoices"—it was unable to prove that it had provided the goods or services totalling £12.8 million—and we find it most disturbing that some of these have been disputed for up to 10 years…We consider it unsatisfactory that PSA Services were unable to invoice the Ministry of Defence in time for them to pay £80.4 million in the 1991–92 year of account.That is a sad record, and we felt unhappy about that.
We discussed the problem of the payment of contractors. In question 31, which was put to Sir Geoffrey Chipperfield, on behalf of PSA Services, he said that the department—the PSA—are moving over to a system which the Ministry of Defence have authorised for all their contractors, which is the so-called pay-when-paid system"—one does not pay until one has been paid—whereby in the contract that we have with the contractor we shall be saying that we shall pay them when we get paid by our client. This will mean that as soon as the work has been validated there will be a change: we will not be paying the contractor until we are paid by the Ministry of Defence.That struck us as strange. We knew that the Treasury had recommended that 30 days be the period. The Treasury minute, which deals with the matter, says that theMOD have an existing obligation to pay promptly and this, taken together with the new arrangements adopted by the PSAS Building Management Businesses, should ensure that contractors will be paid within 30 days from validation.I would like to hear from the Financial Secretary that this is now the rule. It was quite disgraceful. A number of small firms accepted work from the Property Services Agency and found that they were not in a position to know when they would get their money, as it was dependent on when the PSA got its money. As the Treasury advised that it should be 30 days, the Government Departments seem to be at odds with each other. I hope that that has now been resolved and I look forward to hearing from the Financial Secretary in due course.
A particularly serious matter is the Welsh Development Agency accounts for 1991–92. At the close of the investigation, I informed the witnesses that we would produce a strong report. That is what we produced. We discovered a number of serious failings during our investigation. Under the Welsh Development Agency Act 1991, the pensions were determined by the Secretary of State for Wales. Redundancy terms were settled by the agency. The total amount paid—about which the Welsh Office knew nothing—was £2.3 million with a £1.4 million loss.
Again it was not reported to the Welsh Office, as it should have been. The report says that senior officials had the free use of their cars for their own private use.
On the retirement settlement to the agency's international director, the report says:We note that tensions which had developed between Mr. Price and his superiors".Mr. Price was given a retirement package of more than £228,000, with a confidentiality agreement. We are talking 602 about an open Government and open Departments. What are those confidentiality agreements? In private industry, of course, one can undertake all sorts of things with one's own money. What is important with public money is public accountability. Expenditure of that money must be open. If there is a price to be paid for that openness, remember that it is not just in the taxpayer's interest, as that is obvious and essential, but it is also to ensure that we have a incorrupt and fraud-free—as far as is possible—civil service and public administration. That is the task. We dispute the use of confidentiality agreements with points buried away.
We heard also that a total of 48 staff had left the agency over the past 10 years on severance packages. Some of those may have been under acceptable confidential arrangements, but we suspect that many were not.
Following the unsatisfactory appointment of Mr. Carignan, the inward investment operations manager in the United States—when he finally left the WDA, he took away £53,288 of furniture for which he was paid $15,000 —the WDA decided to have a new director of marketing, a Mr. Neil Smith. This is what we said about it:We asked the Agency about the way Mr. Smith had been recruited. They accepted that in appointing Mr. Smith, they had been 'conned'".That is an honest assessment and nobody can dispute that. We are dealing with a genuine 24-carat crook. There was no question that it had been conned, but it should not have been. It was so basic, simple and elementary. It had not complied with its own recruitment procedures. The WDA employed, in a senior position, a person who had previous criminal convictions for deception. The agency had not checked his credentials or references. Had it done so, it would have discovered that his credentials were bogus.
We asked about a number of payments that had been made. One of the more interesting payments was that made to a model agency. I shall now deal with question 19 of 14 December. Following the National Audit Office report, I was talking about the commissioning of Mr. Smith from Shapes model agency. I asked:This is an astonishing tale is it not? It refers to payments made to Shapes Model Agency who had at one time had a licence under the Employment Agency Act but this had lapsed so they did not any longer have it. It seemed there was a failure to find out about the status of the Model Agency. Mr. Smith, on a Sunday, had 11 girls from the Model Agency up to his hotel to interview them to see whether they would be suitable for an advertising promotion that he had in mind. What happens in private industry does not concern us but public money can never be used in this kind of way. Did you know anything about this beforehand?Mr. Head, of whom more subsequently, replied:No, I did not.That is unbelievable. To behave in that way with public money is an affront. I suspect that many countries that send people to discover how our system operates may handle their matters in a not dissimilar way, but for us to have such records to deal with is not just unacceptable but disgraceful.
Before becoming chairman, Dr. Gwyn Jones, who is now retired, applied to the WDA for a rural conversion grant to convert premises to workshops, and received £16,895. Following his appointment it was clear that that might not be acceptable, but nothing was done. An agency employee just happened to make a routine visit and discovered that a change in use had not been reported, as it should have been under the requirements of the grant.
603 The conduct of the chairman of the WDA is a most serious matter. There should not have been any conflict of interest. We say in our conclusion:It is clearly important that persons in high public office should ensure that circumstances do not arise which can give cause to any allegations of abuse of position.To be chairman of a body and receive funds from that body but not to fulfil properly the requirements of the grant is clearly wrong.
In Operation Wizard, £308,000 was spent on professional fees resulting from an inquiry into the possible privatisation of certain functions of the WDA. That cost was not approved by the board in formal minutes and its existence was not publicly reviewed. Some of the options identified by the consultants involved major restructuring of the agency with changes to its objectives and the possible reduction of a specific commitment to Wales. In our conclusion, we said:We are concerned that not only was Parliament denied information, but that this Committee would have remained unaware of the project's existence had it not been for unofficial revelations from within the industry.Those are serious matters, and they led us to look at some other aspects.
The Treasury has said that more than £10 billion of public money is spent each year by non-departmental public bodies. We happened to investigate one. We recognise that such bodies are statutory bodies, deliberately at arm's length from Government, and therefore that Government Departments cannot control the affairs of the bodies in the same detail as they control their own financial affairs. The Treasury told us that it recognised that, but that did not reduce the importance of proper and clear arrangements for accountability and control.
The Welsh Office told us that it expected to be consulted by its NDPBs over unusual matters concerning irregularity of public expenditure. It should have been consulted on redundancy compensation and changes to the executive car scheme. Only as a result of current investigations have problems in the redundancy scheme been discovered. Those are not just important matters—they are central to how we spend moneys and account for them.
In our report, we say:We note that the Treasury have now issued guidance on the control of staff benefits in non-departmental public bodies. We recommend that they keep under review the terms under which non-departmental public bodies operate. Finally, we recommend that the Treasury and the Welsh Office take urgent steps to ensure that problems similar to those covered by this report do not recur, and that lessons which have been learnt are notified to and applied by all non-departmental public bodies.That is a serious matter, but it is only one of many cases that may be occurring without our knowledge. With the growth of executive agencies, there may be other, different problems.
The proper conduct of public business is a matter of concern to all of us. Although not mentioned on the Order Paper, a number of those matters concerned us. First, in the 28th report on the Ministry of Defence we found irregular expenditure under the efficiency incentive award scheme. The proper conduct of public business was not clearly set out. Under the efficiency scheme, when the Department has made considerable savings certain sums of money could be spent on generally agreed aspects such as sports facilities and improvements in health provision.
Some £682,000 was spent on a coach and 56 minibuses, and money was spent on go-karts, golf club furnishings 604 and a holiday caravan, while £79,000 was spent on a party attended by 1,000 people. It must have been some party. One does not go to many parties where that amount of money is spent.
§ Mr. Michael Shersby (Uxbridge)
Will the right hon. Gentleman refresh the memory of those members of the Committee who are here today as to the cost of floodlighting that party? I seem to recall that it was about £28,000 for a non-night party.
§ Mr. Sheldon
My hon. Friend is just about right. We pay tribute to his work on the Committee, which is valuable. I thank him for that useful observation.
Public money should not be spent in such a way. We were uneasy about the way in which the spending of it had been authorised, which we thought was a most serious matter, and we dealt with it accordingly. In our conclusions, we say:We note the Department's view that the irregular expenditure arose as a result of an institutional failure and that it was not appropriate to take disciplinary action against individuals. We endorse the Accounting Officer's acknowledgement that he is ultimately responsible, and we regard such personal accountability as a cardinal principle of Parliament's controls over public expenditure.That is one of the aspects that I feel that I should draw to the attention of the House.
Another aspect is the payment of £4,700 as part of the legal expenses incurred by the Chancellor, dealt with in the 25th report of the Committee. In paragraph 23, we say:Officials had considered that assistance towards meeting the Chancellor's expenditure in this case was justified on the grounds that:—the scale and lurid nature of the press comments and the enormous consequential press interest derived from Mr. Lamont's position as Chancellor, and he incurred extra costs as a result;—it was in the public interest to make the payment because the scale of the press attention, unless effectively handled, for example to avoid libel, was having an adverse effect on the Chancellor in his ministerial role and in the effective discharge of his official duties.We took evidence from the Treasury and those concerned and made the following recommendations:
There must always be the clearest possible distinction between the use of public funds or resources used to meet expenses incurred by Ministers and civil servants in the direct conduct of their official duties or arising directly from their official position and the use of such funds for other expenses incurred in relation to the activities of Ministers.We go on to point out:There should always be a strong presumption that where there is doubt there will be no use of public funds or resources.At the end we say:It is important that, in the interest of transparency and accountability, the circumstances and grounds for decisions should be made available to the Comptroller and Auditor General at the earliest occasion. We regret that they were not highlighted in this case.There may be cases for giving Ministers money for special occasions, but the Comptroller and Auditor General must be notified. It is his task to decide whether a case requires further investigation, is acceptable or should be brought forward for examination. We have established that that is how we should proceed with such matters.
The 48th report deals with irregularities in the 1991–92 accounts of Forward civil service catering. There were control failures of between £500,000 and £1 million. Although there was a question of a police prosecution, we felt that standards were not so high as they should be in the 605 public service. We felt that the House should know that something went wrong and that money was made and squandered.
The 44th report, on police cell accommodation costs, deals with the cost of keeping prisoners in police cells. We point out:the Home Office's handling of payments to police authorities…was unsatisfactory. There was a serious breakdown in their authorisation and control of expenditure, in that they did not ensure that all claims were certified by police authority Treasurers in the way that they had themselves required…Uncertified claims should not have been made".That is extremely important, because the size and make-up of claims varied widely, ranging from £89 a day for a prisoner in Surrey to £561 a day for a prisoner in Hertfordshire. We thought that that was very wrong.
In questioning Sir Clive Whitmore, I pointed out that the variation between places was surprising. I said:The average charge for mainly food is £1.53 per prisoner day in Northampton and £18.10 per prisoner day by the South Wales police.People can understand such matters because they know how much food costs. When they see that food costs £1.53 in one place and £18.10 in another, they will ask what sort of meals prisoners receive for £18.10. One could have a good night out in a fancy restaurant in my constituency for that price. I asked what sort of meals prisoners were receiving for that sum, but we received little information on that. Payments are being made without a proper understanding of why some people are spending so much more than others.
We conclude:We regard it as unsatisfactory that for many years the Home Office have not been in a position to carry out the independent check…on the claims they authorised and paid. This was because these claims were not supported by a detailed breakdown of costs.Payments are asked for and the money is received. That cannot be the right way to handle public money. I understand the problems experienced by the police, but certain rules should be followed and accepted.
As a result of many of those matters, particularly those that I have mentioned, the Committee is to produce a general report on the proper conduct of public business. It will deal with what should happen and how those matters should be handled. Most of what has happened should not have happened, because rules exist to prevent it. Those rules were set down many years ago, so we do not have to wait until now to establish them. However, so many exceptions have been made that we must see how we can highlight the problems and bring them to the attention of those concerned. We are dealing with a number of executive agencies and departmental public bodies where the proper conduct of public business is crucial. We have yet to receive the reports from the Wessex and West Midlands regional health authorities, which deal with important and serious matters, so it is right that we should look at the problem in a wider context.
Finally, the 52nd report deals with fire prevention in England and Wales. We have a sorry record for looking after our property. There have been two fires at Donnington. The one that we commented on cost us between £150 million and £170 million and we said how bad it was. Astonishingly, a few years later another fire took place—after our report.
606 The main problem is that Departments do not have insurance assessors. If someone's home is subject to fire risk or if someone has a factory that is storing goods, an assessor will first come round and say whether sprinklers or fire doors are needed and the insurance company will not insure the property unless those requirements are carried out. That is the strongest incentive to carrying out proper fire precautions. When that does not exist—it does not exist in Departments—the easy way out is taken and normal requirements are not met.
In 1990 the fire brigade was called to more than 400,000 fires in England and Wales, 700 people were killed and 12,000 injured. The Home Office has overall responsibility within central Government for the fire service and spends some £15 million a year. The bulk of fire prevention expenditure is incurred by the fire service on inspections and certifying buildings.
In paragraph 3 of the report we point out:over the last thirty years the number of fires, fire casualties and financial losses have all increased. There were 120,000 fires in 1960 compared to 401,000 in 1990; and over the same period deaths rose from 430 to 740 a year…The UK death rate is high compared with other developed countries. Insured losses were more than £1 billion in 1991.We hope that the trend is downwards and some signs show that that might be so.
We have had the problems of the Windsor fire disaster and the serious backlog of certification work in Crown premises. Crown premises without an up-to-date certificate include the Palace of Westminster, where fire safety arrangements were found to be deficient in 1979. I hope that some improvements have been made since then, but the building was still without a certificate. We were told that the estimated date for completion of that work was mid-1994 and that the Home Office expected that a certificate would be issued soon after that. There have been several of those fires and the arrangements for dealing with them have been far from satisfactory. That matter greatly concerns us.
I look forward to the production of the report, on the proper conduct of public business, which will show how Departments should operate and how their responsibilities should be extended to cover the new areas in which that control seems to be weak. I look forward to a proper response by the Financial Secretary in due course.
§ Mr. Andrew Rowe (Mid-Kent)
It has been a privilege to listen to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). I find it gratifying that there is at least one group of Back Benchers to whom the Executive listen effectively—a rare phenomenon in this place. I pay tribute to the right hon. Gentleman and to all right hon. and hon. Members who work with him.
I believe that the Public Accounts Committee is a model for the other Select Committees. It is essential that Parliament pursue the business of how the Executive spends money and performs its task. It is a great pity that there is not more liaison between the other Select Committees, the better to co-ordinate the pursuit of the Executive. I understand that the Liaison Committee itself meets primarily to discuss where the Select Committees will travel abroad; it might be useful if it met more often to discuss where they travel at home.
It would greatly strengthen the cause of the European Community if we ensured that the ways in which it spends our money were methodically and effectively monitored. I 607 am conscious of the fact that one of the consequences of the Maastricht treaty should be a much more effective auditing system for the EC—I very much hope that that will indeed be the outcome. But one of the reasons why the EC is much less popular than it deserves in principle to be is that there is far too little liaison between national Parliaments and EC organisations in the cause of pursuing the EC's executive. I should like much stronger Back-Bench interest in the effective pursuit of how the EC goes about its business.
I welcome the general report by the PAC, and I should like to ask the right hon. Member for Ashton-under-Lyne a question about it. Is it part of its purpose to extract lessons that could be applied to similar cases in other Departments or even within the same Departments? The right hon. Gentleman told us that he was awaiting a response from the Wessex regional health authority. I understand that that is about the purchase of information technology.
One of the besetting weaknesses of both public and private sectors concerns the mechanisms for choosing information technology. I went to a seminar in the summer, where it was explained to me by a learned professor that there are usually 20 per cent. of people in an organisation who, when asked what their jobs uniquely add to the value of the organisation, find it difficult to reply. These people are to be found in disproportionate numbers among those in the organisation who work with information technology.
As the purchase of information technology by health trusts and Government agencies constitutes a huge part of their budgets, this is an area in which it is easy to make terrible financial mistakes or to set up a system that does not work at all. I hope that the general report about which the right hon. Gentleman spoke will highlight lessons for present and future undertakings.
I should like to mention the report on the disability living allowance and similar allowances. I was interested to learn that the telephone system had been so lamentably inadequate—that was also my experience when trying to get through to the agencies in question. One of the most striking features of the newly privatised utilities is that, almost without exception, their telephone answering services have been hugely improved. People who ring the electricity supply companies often get an answer before they have even heard the phone ring.
Interestingly, rapid response of this sort is an expensive operation to mount, but I am told by the chief executive of one of the electricity supply companies that complaints to the company have fallen by 78 per cent. as a direct result of the fact that the public can get through so quickly and easily. That lesson could be profitably transferred to the public sector, where telephone response rates are often still lamentable.
§ Dr. Kim Howells
Will the hon. Gentleman acknowledge that there is a critical difference here? That difference is one of emphasis, but it is also a political—with a small "p"—problem. When health authorities attempt to evolve towards models that they may perceive as operating in, say, a privatised electricity company, our investigations show that they tend to favour the kind of sweetheart deals—management buy-outs and so on—that do not entail the disciplines of the private sector. Such ventures can end up disastrously, with £63 million going to waste in Wessex or £10 million in the west midlands. So it is a problem not 608 merely of management discipline but of confusion of direction—about what management really wants a health authority to become.
§ Mr. Rowe
That is an interesting comment, although the hon. Gentleman is mistaken if he believes that that sort of confusion does not obtain in private sector companies, too. There is an element of truth in what he says, however.
One of the functions of management is to identify precisely what it is trying to achieve. Having identified that there needs to be an improvement in health service responsiveness to patients and their relatives, for instance, management must set up the sort of response service that will enormously reduce anxieties. Anyone in the health service will testify that anxiety is one of the greatest causes of the consumption of time. If anxious relatives can get through to health trusts swiftly and be put through to a person who can give them some sort of answer, those trusts will find, more often than not, that they are well regarded. Some have already achieved this; that is commendable. I was pleased to discover that the PAC draws attention to a failure of telephone communications as an important symptom of a Department or agency not working as well as it should.
Another interesting feature of the report is that self-assessment has begun to make a serious contribution to the effective working of agencies. Instead of having to go for a medical assessment, by filling in a form correctly the public can now claim the disability living allowance and have it paid simply to them—just by filling in the form well. There may be a difficulty, in that this system tends to favour those who are skilled at filling in forms. However, such a system is a promising development.
One of the most fruitful avenues for reducing the waste of money is to curb the attempt by agencies and others, often for good reasons or because the Treasury insists, to do more than they need to do. Those who are assessed as capable of managing their own affairs, and especially the severely disabled, could be allowed to make their own arrangements about spending money day by day and month by month. Such a devolution of detailed responsibility from the centre to the individual could make a tremendous contribution. It would also treat severely disabled people as adults who are capable of deciding how best to spend the public money that has been allocated to them.
The 15th report deals encouragingly with the BBC World Service. The Committee was told that there had been an increase in editorial independence. That is entirely appropriate and reassuring, because the BBC World Service is a huge asset for this country. At a fringe meeting during the Conservative party conference, I learned that, although it is impossible for the World Service to be sure, because it cannot set up auditing arrangements, it believes that it broadcasts to no fewer than 120 million Chinese. That is a formidable audience, but, as the BBC cannot audit the figure, it does not claim it in the listening figures.
As the Department of Trade and Industry knows, such an audience provides a tremendous basis for exporting British goods and British education—a subject in which I am particularly interested. It is because so many people all over the world have learnt English by way of the World Service that they develop an interest in obtaining qualifications which, increasingly, are also obtained through the World Service because of its links to, among 609 other things, the Open university. I was pleased to note that, on the whole, the Committee was impressed by the World Service.
I shall conclude, because many hon. Members who are waiting to take part in the debate know far more about the work of the PAC than I do. I hope that other Select Committees will take a leaf out of the PAC book and will hound the Executive perhaps rather more consistently than some of them have done in the past.
§ Mr. Ted Rowlands (Merthyr Tydfil and Rhymney)
In all the years that I have been in the House, I have not had the privilege of serving on the Public Accounts Committee. However, I had the privilege of being there at the concpetion, if not the birth, of the Welsh Development Agency when I was a Minister in the Welsh Office in 1975. I represent a community in which life without the WDA would be strange and difficult to imagine. That is because of the central role, gradually acquired, that the agency has played in the regeneration and redevelopment of many of our communities.
The WDA has not been unique in carrying out such functions, because functions such as land reclamation were previously carried out successfully by the Welsh Office, for which Ministers are accountable to the House. I was a Minister responsible for the land reclamation unit created after the Aberfan disaster in the late 1960s. The broking and general co-ordinating roles of the agency are vital. The Merthyr east scheme, one of the largest reclamation schemes in Europe—it is being carried out in my constituency—demonstrates the agency's value and importance.
It is right to point to those factors, because the PAC and the National Audit Office have properly revealed a sorry story. Therefore, we should feel even angrier and more distressed to see exposed in the PAC reports poor behaviour, bad standards and maladministration in the agency. Since those exposures, some agency executives have paid the price by losing their jobs. The agency has a new chairman, and it is encouraging to note that he is to establish key priorities for the agency.
I have worked closely with the agency and followed its progress and should like to suggest some priorities. But before doing so, perhaps I may dwell on a general conclusion to be drawn from the experiences and revelations of the PAC. It was quite refreshing to hear the Secretary of State for Wales make a partial confession during his statement on the report. However, there were some errors, the chief of which was that he apparently sought to exonerate and absolve almost completely the board and its previous chairman and he argued that the report virtually did so as well.
In addition to the PAC report, we have also had the report of Sir John Caines, who established an internal audit on the agency's performance. That report anything but absolves the previous board or its chairman. I hope that the Financial Secretary has read that report as well as that of the PAC. Paragraphs 31, 33 and 34 of Sir John's report speak of the board, and not of the executives who have lost their jobs. There is more than a coded reference to the previous chairman when the report states: 610Dealing effectively with conflicts of interest involves not only rules and procedures but also an attitude of mind and high personal integrity in the individuals involved.That is not about the executives. Sir John is a former permanent secretary and was brought in to follow up revelations in the Public Accounts Committee.
His report continues:We do not believe that the present policy and practice as regards the handling of conflicts of interest of Agency Board Members are adequate to ensure that the Agency maintains the reputation for integrity which it needs.Those are powerful statements, and they are made not by politicians in conflict across the Floor of the House but by a review body that was rightly praised by the Secretary of State. As I have said, those are not references to the executives, the agency's paid officials.
Paragraph 71 of Sir John's report states:When the top leadership is not perceived to attach importance to enforcing sound management, good practices are allowed to slip. Corners are cut and bad decisions are taken.That is not just a reference to Mr. Head and company. The expression "top leadership" cannot just be about the executives who have lost their jobs: it must be about the board and its chairman. The Secretary of State was pressed by hon. Members about Dr. Gwyn Jones's place on other boards, such as the BBC and S4C. He should think again and should consider his position in the light not only of the PAC report but by the report by Sir John Caines.
§ Mr. Cynog Dafis (Ceredigion and Pembroke, North)
The hon. Gentleman might be interested in the comments of John Osmond in today's Western Mail. On the role of Peter Walker and Gwyn Jones in Operation Wizard, he says:There is no doubt that this"—Operation Wizard—was motivated by Peter Walker, hand-in-glove with Gwyn Jones. Proof can be seen in a file of memos and letters lodged in the office of the Agency's chief executive Philip Head who resigned last week, a fall guy if ever there was one.
§ Mr. Rowlands
That is additional information. However, I hope that I am resting my case not on press and public comment, but on the internal audit set up by the agency and chaired by a distinguished former permanent secretary.
Paragraph 73 of the report makes a more interesting point:We believe that the prevailing culture was not one conducive to care over compliance matters and played a powerful part in bringing about the events with which we have been concerned.I listened with fascination to the report of the enormous diligence and investigative qualities shown by the PAC and the Comptroller and Auditor General.
In reflecting on what has happened over the past few years, the one conclusion to be drawn is about the prevailing culture of the 1980s—a curious culture in respect of public life and public bodies. The Government have often slagged off the role of certain groups of public servants and officials, such as those in the DSS offices at the point of service delivery. However, at the higher level, in the appointment of people to quangos, there has been not only an explosion in numbers, but a significant explosion in salaries and emoluments. The Government have justified that by saying that it is necessary to appoint more commercially minded people with entrepreneurial skills.
I wonder just where a balance will be struck. When will commercial ability and responsibility run alongside a public sense of duty? It is a privilege to be the chairman of, for example, the Welsh Development Agency. It is one of 611 the most important agencies carrying out a very important function, so the post of chairman is one of the most important appointments that can be made. The job should not be simply about leasing cars or being paid £61,000 a year for a part-time job; it should be about the role that has to be filled. The salary is more than the Prime Minister gets.
S4C is currently advertising for a new controller. It should be a vocation. I am a great supporter of S4C, which does an excellent job. I accept that the job needs someone who is a good media controller—but at £106,000 a year? That is much more than the Prime Minister gets, even taking into account his house, car and other perks. A balance must be struck between public service—a commitment to being the chairman of S4C or the WDA —and reward.
I remind the Financial Secretary that the people at the point of service delivery in DSS offices or the officials in the WDA are to have their pay increase pegged at zero. Why do not the Government make a fresh start and halve the salary being offered to the controller of S4C? We should then discover whether committed, first-class people still want the job, as I believe they will. We want someone who is committed to the spirit of public service broadcasting.
Why do not the Government halve the salary for the chairman of the Welsh Development Agency? They should advertise the post at the lower salary and then see whether people of great quality stilt come forward. They would show their sense of public duty and service and they would be paid sensibly.
The second area of concern is one that my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) dealt with at some length—the relationship between quangos and Government and quangos and Parliament, and the degree of accountability. I have in my hand a secret internal Whitehall document that deals with that very issue. It suggests that some caution would be engendered by an organisation's responsibility to appear before the PAC when its accounts and the Comptroller and Auditor General's report of his audit of those accounts are before the Committee. It states:No doubt there would be reasonable tolerance of error and the PAC would realise that it is easy to be wise after the event, but the knowledge that there would be a post mortem examination would be bound to influence theorganisationand induce a spirit of caution in approaching anything hitherto untried. Of course, the wider and vaguer theorganisation's
powers, the less scope for C and AG's criticism.That quotation came from a secret, internal Whitehall document. Alas, it is not in the Rhodri Morgan class. In fact, it was written in 1934—nearly 60 years ago—on the eve of the creation of the forerunner to the WDA, the first Commission for Special or Distressed Areas. Sixty years later, we are debating the same issue—the balance that must be struck between the role of an agency and its accountability to Parliament.
I am interested in the phraseinduce a spirit of caution".I hope that, in one key respect, the work of the PAC—the investigation, the report and the revelations—do not, in fact, induce a spirit of caution in the WDA. I am referring to the fundamental function of the agency, which is to get on with the regeneration of our industrial and manufacturing base in communities such as mine. Let us 612 have the inducement for caution and restraint when it comes to managing the internal affairs and carrying out the administration of the agency, but we do not want a consequence of the sad and sorry story that has been revealed to be an inducement of caution in regenerating industry
. Communities such as mine do not want a cautious, frightened agency; they want an agency that plays a central, fundamental role.
As I said earlier, I want to outline the key priority of the agency. It is my belief that, through the appointment of a new chief executive, we can send out a loud and clear message about what the agency's role should be. When it was established in the 1970s, its role—which I believe still holds today—was to develop the industrial, engineering and manufacturing base of communities such as the one that I represent. It was to generate jobs. There is great opportunity to do that.
People ask, "Where will the jobs come from?" They are already there in my area. Along the route of the M4 have grown up large assembly plants, such as Sony, National Panasonic and Bosch. They are large consumers of components and other manufacturing services. We need to get a greater percentage of indigenous, locally and regionally—or even United Kingdom-produced—goods because that will create jobs. One of the central functions of the WDA is to do that. The appointments that are about to be made should reflect that central priority.
There is a unit within the WDA called "Source Wales". I have pleaded for there also to be a "Source Valleys" so that we can tap into the jobs already coming to south Wales through the large assembly plants. The Source Wales team and people like Mr. David Harris currently appear to be on the margins of the agency's activities; if they are put at the heart of a revitalised agency, we can put behind us the sorry story that has been revealed in the PAC's report. We can then re-establish the spirit intended in 1975 and which has been carried forward by successive Governments—which is for an agency whose job is the regeneration of communities such as mine.
§ 6.9 pm
§ Mr. Richard Page (Hertfordshire, South-West)
I begin my contribution to this debate as I have begun my contributions to every Public Accounts Committee sitting in which I have spoken by paying tribute to the Chairman, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who kindly guides us through our affairs and ensures that we speak with a united voice. If the Committee were divided, our reports and pronouncements would be much less effective. I also thank the National Audit Office for the thoroughness of its reports under the leadership of Sir John Bourn.
When I was appointed to the PAC about six or seven years ago, I remember reading a catalogue of horrors and thinking that Departments would surely realise their mistakes and learn from them and that the flow of disasters would gradually dry up. However, I then thought that the PAC had existed for more than 100 years and that the flow of disasters was unlikely to dry up merely because Richard Page had become a member. In the six or seven years that I have been a member of the PAC, the catalogue of disasters seems to have got worse, not better. I am confident that there will be a supply of raw material for the PAC for many years to come.
613 As the Committee's Chairman said, two critical themes emerge in the report, both directly related to the introduction of market discipline and the decentralisation of the public sector. Both will threaten the continuation of the process or even reverse it if they are not dealt with properly. Of course, the two themes existed before decentralisation, but decentralisation now enables the public spotlight to be focused on them more clearly and the cover-ups to be exposed. I shall deal with cover-ups a little later.
First, we have witnessed a serious breakdown in the strategic management of publicly financed projects. Departments appear to have relinquished not only day-to-day management, as was intended, but the oversight of activities contracted to agencies under their remit. That has led to a considerable loss of taxpayers' money.
Secondly, the chain of accountability between taxpayers and the activities that they finance has been needlessly broken. Major and costly mistakes and abuses have been unearthed by the NAO, but the individuals and organisations responsible have invariably escaped scot-free or the individuals have resigned, in some cases with six-figure golden handshakes. Some of the most costly examples are to be found in the regional health authorities. I therefore trust that the Secretary of State for Health will bear that message in mind when undertaking the reform of those authorities, which she announced last week.
I have selected just four examples, each of which vividly highlights these issues and outlines an individual twist that may be of interest to the House. Members of the PAC will be surprised to learn that the Westminster and Chelsea hospital will not appear on my list; the Chairman has already dealt with the errors that took place on that project, although I believe that he did so far too gently.
The first example is what happens when one publicly financed body rips off another and, as usual, the taxpayer picks up the tab. We have already heard about some of the costs of police cell accommodation. If someone were to ask an average member of the public what the police force should charge the prison service per night for such accommodation, he might say that Surrey's figure of £89 was a bit expensive but probably about right.
Some of Surrey's senior police officials must have travelled to other counties to find what they were charging, because Surrey increased its charges from £89 a night, which was at the bottom of the table of charges. One might suppose that £120 was enough, or £140, or £160, or £180. I have to report that the average is £234 a night for a prisoner held in police cells which, as Arthur Daley would say, is a nice little earner. However, the price does not stop at £234; it goes up and up.
One can almost imagine the menu card being hung behind the door in some prison cells, requesting the prisoner to fill it in—would he care for French bread or croissants in the morning, jam or marmalade, Weetabix or porridge, haddock or kippers, egg and bacon or black pudding, coffee or tea? One can imagine a kindly Dixon of Dock Green type policemen knocking on the door at 8.30 am asking, "Would sir care for breakfast now?" In Hertfordshire such accommodation costs £561 a night, and that is the sort of service that I would expect for such a 614 sum. It is an appalling waste of public money, although I know that the Home Office is placing specified limits on certain items such as prisoners' food, as the Chairman said.
Despite the variations in the figures and despite the annual bill of about £100 million, the police authorities made little effort to check the bills. Indeed, about half the 41 police authorities did not even bother to use the standard form to submit their claims for reimbursement.
The second example is illustrated by the case of Wessex regional health authority in its attempt to introduce computerisation. Before I am called to order, Mr. Deputy Speaker, may I say that I am well aware that the PAC has not approved the final report, so I shall not mention the £43 million that was spent on a computer system, which has now been abandoned, or the £3.15 million spent on giving a soft landing to the 104 ex-employees of the health authority who, in fact, turned out to number only 60. However, I shall mention what can be described only as a cover-up, when section 30 of the Local Government Act 1992 was used to hide the red faces of public officials.
The Committee was originally to take evidence on 10 February, so it came as a surprise to read in Computer Weekly about a second secret report from the district auditor which was not drawn to our attention or made available. We made inquiries and found that the exposé in Computer Weekly was correct. The Chairman rightly deferred the meeting. We took evidence on 5 May when we were able to see the whole report.
On seeing the report, it became abundantly clear that, the health authority and the management executive should have and could have acted sooner to end the expensive saga. To cap it all, one of the managers involved was able to retire with a pay-off of more than £100,000. My worry is that a report was kept secret when there was no reason for its not being in the public domain. It was made confidential simply to hide officials' embarrassment at the way in which the case was handled.
The third example, which has already been mentioned, involves the Welsh Development Agency. The right hon. Member for Ashton-under-Lyne mentioned the necessity of the entrepreneurial spirit. Drive and efficiency are needed, but we must remember that the WDA deals with public money. The press has paid considerable attention to the fact that the WDA, for all its success in assisting the Welsh economy—I pay tribute to it for what it has achieved—has been less successful in its internal management.
The young and exuberant chairman, who was appointed in 1988 without references, has done much to stamp his personal identity on the agency, going far beyond the number plates on his fully fuelled, grace-and-favour Jaguar. The agency has been run not as an organisation funded by the taxpayer but as the personal business of its senior managers. Perks have been agreed, commercial deals have been made and staff have been hired and fired without regard to the standards of public sector accountability that we hold so dear.
It is perhaps symptomatic that a convicted fraudster was appointed as the agency's director of marketing. He was no doubt helping to cast off its public sector image when he decided to interview girls from a local, unlicensed model agency at the Celtic Bay hotel, somehow incurring a £450 bill in the process.
The agency's reputation has spread far and wide. It has done a tremendous job for Wales but, sadly, our standards of public accountability and principle, which are the envy 615 of the world, seem to have been abandoned. We need not only the flair of the entrepreneur but acceptance of the fact that public money and public office are involved.
The final example is of the failure to provide a product to original specification arose during the replacement of two auxiliary oilers by the Ministry of Defence. Given the sheer scale of the MOD budget, it is inevitable that it will regularly attract the Committee's attention. Management mistakes in the MOD can have costly long-term effects. The disappointing feature of the contract for the two oilers was that, although work on the second started a couple of years after the first, it succeeded in being commissioned a few weeks before the first.
The original specification provided that the oilers should have vertically launched Sea Wolf missiles to give protection against attack. During the Falklands conflict, we saw what happened when an auxiliary oiler was attacked. The stories and pictures of the Sir Galahad and the Sir Tristram will remain in our minds for ever. I learned then that a £100,000 missile can take out a £100 million ship just like that. It was a disgrace not to allow those oilers to have the Sea Wolf. It cost £300,000 to remove the parts of Sea Wolf that had already been fitted to the oilers when it was decided to abandon it.
The MOD has a habit of behaving in such a manner. I remember the saga of the advanced short-range air-to-air missile. The MOD delayed placing the order for years; it prevaricated, changed and negotiated. It emerged that the purpose of the Tornado, to which the ASRAAM should have been fitted, was to prevent a possible Soviet bomber attack and that the Russian equivalent to our present missile was superior. We would have been knowingly sending our Tornados—heaven forbid that it should have happened—into action against a superior weapon. The MOD delayed making a decision, not for weeks and months but for years.
It is clear from the Committee's report that decentralisation in public service must not lead to the abandonment of public sector standards. It can be achieved without stifling initiatives. We are seeing a progressive and positive improvement, but managers of executive agencies and decentralised services must continue to look for and receive clear central guidance. In addition, they must guarantee that the taxpayer will receive value for money and must ensure local and national accountability, enforced, as it would be in any enterprise, by firm disciplinary measures.
It has been far too easy to negotiate resignations using large sums of money rather than taking disciplinary action and accepting the publicity that it would attract. I hope that there will be more accountability and that there will be no repeat of a report being sumitted to us when a secret cover-up report is hidden in the background and not drawn to our attention.
§ Mr. Robert Maclennan (Caithness and Sutherland)
The hon. Member for Hertfordshire, South-West (Mr. Page) and a number of Opposition Members have rightly focused on the challenges to the Public Accounts Committee that have stemmed from the establishment of executive agencies. We should be no less rigorous in our scrutiny of our own role as a Committee of the House than we expect Departments and other agencies to be in their presentations to us.
616 I want to focus on one Department and one report about which the Public Accounts Committee has faced a baffling problem for many years. I refer to the Lord Chancellor's Department, whose representatives have appeared before our Committee a number of times and, candidly, have baffled us.
In the last Session, we were faced with an account of the Department's handling of legal aid that we found unsatisfactory. The Committee is not used to employing superlatives in our criticisms of Departments or public agencies; we choose our words with care. That does not diminish the impact of what we are saying, but superlatives alone will do do describe the cavalier approach of the Lord Chancellor's Department to the findings of the Committee and of its predecessors.
It is a joy perhaps surpassed only by the pleasure of watching "Yes, Minister" to read the evidence of Sir Thomas Legg, twice delivered to the Public Accounts Committee in his explanations of the Department's failures to monitor the growth of legal aid and of the uncertainties that the Department had in projecting the consequences for our citizens that flowed from the changes that the Department had made.
His evidence was the most ingenuous to which I had listened in many years of membership of the Committee. We must ask ourselves, arising from that study, whether the Lord Chancellor's Department is capable of doing its job.
I have read the Treasury minute supplied in response to the Committee's 46th report. The minute purports to deal with some of our criticisms about the Department's forecasting and monitoring of legal aid expenditure. The 46th report is not the first occasion when the PAC has considered the matter. A report in the 1986–87 Session expressed astonishment at the lack of control.
In the report that we are considering today, we found that the position was no better than it had been then. The Lord Chancellor's Department appeared to have made no significant improvements. Indeed, we stated that it wasunsatisfactory"—and what a modest word that is—that, given the improvements promised six years ago, the Department's forecasting and monitoring are no better today than they were then. It is still not possible to identify more precisely the causes of the increases in legal aid expenditure over the years.Candidly, invincible ignorance from the Lord Chancellor's Department is no longer tolerable. It has taken no steps to make good the deficiencies, and the Treasury minute suggests that it has nothing in mind to deal with the problem.
Paragraph 100 of the Treasury minute states:The Lord Chancellor's Department…has gained in experience and is now more confident of its forecasts than it was able to be in 1986.We discovered that, in 1991–92, the Department's estimate were £250 million more than the approved estimate of £698 million. That was an increase of 36 per cent. If the Department is prepared to rest on what it has done so far, that will not satisfy the Committee or the House.
The Department's invincible ignorance is outstripped only by its complacency. Even more horrific than the astonishing increase in expenditure—which the Lord Chancellor's Department has not explained—has been the Department's inability to explain or seek information 617 about the direct and indirect effects of what the Government propose to do in respect of legal aid costs and the administration of justice.
I will never forget the evidence of Sir Thomas Legg in which he solemnly denied to the PAC that he had any recollection of a letter which his Department had received a few days before from the Lord Chief Justice and the Master of the Rolls in which the two top judges of the realm drew attention to their concerns that self-representation by litigants would flow from the Government's proposed changes to legal aid and, as a consequence, the costs of the legal system would increase substantially. That fear of the two top judges of the realm did not come to the mind of the permanent secretary when he gave evidence about the assessments. He stretched the credulity of the Committee.
§ Mr. Terry Davis (Birmingham, Hodge Hill)
Does the hon. Gentleman accept that not only did it fail to come to the mind of Sir Thomas Legg, but it failed to come to the minds of a team of officials and advisers who were sitting behind him. It was the greatest act of collective amnesia that we have ever seen.
§ Mr. Maclennan
Yes, I remember that and I recall that the right hon. Member for Swansea, West (Mr. Williams) described it as collective amnesia. If I recall correctly, when the right hon. Gentleman suggested that to Sir Thomas Legg, he said that it was not so much collective amnesia as a collective wrong categorisation. It was bumbledom at its worst, although I have a strong suspicion that the answer on the second occasion was very carefully considered.
What happened on that occasion is less important than what has happened since and what steps are to be taken by the Lord Chancellor's Department to deal with the Committee's criticisms after hearing Sir Thomas Legg twice. The Committee drew attention to the attitude of both branches of the legal profession about what was being done, and asked in its 46th report for the closest co-operation between the Lord Chancellor's Department and the two branches of the legal profession.
The Treasury minute is very unsatisfactory, to say the least, on that point. Paragraph 112 states:The Department is taking steps to implement the proposals put forward by the legal profession, though it continues to believe that in practice their effect on the overall cost of legal aid will be small.The minute is thoroughly dismissive and shows that the Lord Chancellor's Department appears to have learnt nothing and to be determined to continue in its bad old ways.
The most disturbing aspect of the Department's response relates to the impact of the changes. The Committee found that the impact of those changes did not appear to have been fully researched or supported by thorough analysis of costs and benefits. The least that the Committee might have expected is that there should have been thorough analysis of the costs and benefits as a result of the proposed changes. However, not only has there been no such analysis: there will apparently be no analysis in future.
Paragraph 110 of the Treasury minute, in response to the recommendation that the emerging results of the changes in legal aid should be monitored, states: 618On the assessments it has made the Department has no doubt that the overall effect of the eligibility measures will be to reduce significantly over the next three years the level of public expenditure that would have occurred in the absence of these measures.That is a statement of the obvious if ever there was one. However, there is no sign of an intention to monitor. According to paragraph 111,The Department will monitor the effect of the changes"—but it does not say how.It will continue to look for ways of improving efficiency and effectiveness in the use of legal aid, the operation of the courts and the delivery of legal services. The Government is committed to ensuring that legal aid is directed at those whose need is greatest.There is not a single word in answer to the Committee's specific inquiries about the impact on individuals who might, as a result of the changes in the rules on legal aid, not be able to afford representation or to have their case heard in court.
That this matter is significant, although locked up in these arcane documents, is testified to by the speech made yesterday by Lord Woolf on the future of our legal system. When asked whether the system is failing us, Lord Woolf said, in effect, yes. He said that we must now contemplate bringing in a second-class system of civil law under which disputes can be heard, without legal representation, by judges. There is evidently no way in which we can provide effective legal representation under the present arrangements.
The Public Accounts Committee deals with what has passed and how the Departments of State have handled public expenditure. Under the new national audit legislation, we look at the efficiency and effectiveness with which that public money is made available. We have repeatedly drawn attention to the shortcomings of one of the greatest Departments of State headed by the second most senior Cabinet Minister—second only to the Prime Minister—the Lord Chancellor himself, who has brought the system—I do not speak of him personally because it is not entirely the personal responsibility of the Lord Chancellor; the problem has obtained for many years—to such a pass that we now have to talk about second-class legal solutions, and Lords of Appeal and others are having to canvass such ideas.
There is a political remedy which runs far beyond the remit of the Public Accounts Committee to consider, but the time has long since passed when it was satisfactory for such matters to be presided over by a Minister who is permanently in the upper House, who presides over the debates of the upper House, who sits as a judge in the top court of the land and who serves many other archaic functions which, candidly, are not appropriate to a Minister of Justice. The time has come to have a Minister of Justice in this House who is prepared to take conrtrol of the totally inadequate administration of a Department which we have had cause to criticise on so many occasions.
§ Mr. Michael Shersby (Uxbridge)
I am pleased to follow the hon. Member for Caithness and Sutherland (Mr. Maclennan). He has made some important points about a matter which has caused the Public Accounts Committee the greatest possible concern.
One of the things that I dislike about public life today is the phrase that we read in so many reports, "The Department will continue to monitor the situation." When 619 I read those words I know that the Department concerned intends to do absolutely nothing about the situation. I hope, therefore, that the Public Accounts Committee will return to these matters, because, within our remit, it is possible to follow up some of the points that the hon. Gentleman made in his admirable contribution.
I join the Committee Chairman, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), in his tribute to Sir John Bourn and the staff of the National Audit Office and, indeed, the Comptroller and Auditor-General for Northern Ireland. The Committee is very well served by Sir John, by his opposite number in Northern Ireland and by all members of the National Audit Office. The whole House has cause to be grateful to them all.
Only a few days ago I was extremely interested to hear on the radio a report of the substantial sums which the Public Accounts Committee has saved the taxpayer as a result of our examinations of various Departments of State during the past 12 months. I do not think that many other public bodies can demonstrate such savings. I trust that my hon. Friend the Financial Secretary to the Treasury heard those figures and that they have given him and his colleagues in the Treasury some comfort in their difficult task.
The Public Accounts Committee is a remarkable body, as the Chairman has pointed out. It has 15 Members of Parliament drawn from all quarters of the House who meet twice a week and whose lives are virtually dedicated to ploughing through very long and complex documents, examining witnesses and subsequently approving reports—about 50 of them. It is a truly gigantic task. I am very pleased that several hon. Members who are not members of the Public Accounts Committee are present and that one of them has already contributed to the debate. I hope that other hon. Members will also do so.
I should like to pay another compliment, and that is to the radio programme "In Committee", which is broadcast at 11 pm on Sundays. Whenever I am asked by my constituents or by business men what the Public Accounts Committee is all about, I say, "I will invite you to attend a sitting so that you can hear what we are doing and I will send you reports that interest you, but I recommend that you listen to 'In Committee'." That programme informs the public not only about the work of the Public Accounts Committee but about the work of other Select Committees of the House.
We spend much of our time examining waste, mismanagement and incompetence. The waste, mismanagement and incompetence to which right hon. and hon. Members have referred should be the Treasury's top target if it wants to reduce public expenditure. A great wealth of information is available to the Treasury in dealing with such matters, and I look forward to some vigorous action being taken.
I am sorry that I have to refer to mismanagement by the Treasury itself. The first report that I wish to draw to the attention of the House is not one of those to which the motion specifically draws our attention, but it is particularly significant in the light of forthcoming events because it relates to the failure of no less a Department of State than Her Majesty's Treasury to exercise proper control over the purchasing procedures of an organisation for which it and it alone has direct responsibility.
That organisation is known as Forward—forward with what I am not quite clear. Forward with the people it might be, but I am not sure about that. However, to most hon. 620 Members it is probably a somewhat shadowy organisation, and I doubt whether, if asked, many would be able to say what it does. Until a little time ago, it was known as the Civil Service Catering Organisation, for which the acronym is CISCO.
Forward, therefore, is part of the Treasury. It is supposed to operate on commercial lines with its own chief executive, finance personnel and operations directors. It runs, so we are told, or helps to run, about 175 restaurants in a wide range of Departments. Among other things, we discover that the Chancellor of the Exchequer is one of the largest restaurateurs in the country, which is also not widely known by hon. Members or the general public. Moreover, that organisation has a turnover of £30 million per annum. The Comptroller and Auditor General reported to the Public Accounts Committee on irregularities in the accounts of Forward for 1991–92 and qualified the audit certificate in the light of continuing uncertainties on key systems and controls and on the propriety and regularity of Forward receipts and expenditure.
That is a truly astonishing state of affairs, because those irregularities are the result of what the Treasury has acknowledged to be a serious breakdown in financial control. The estimated overall cost of failures in control at Forward is between £0.5 million and £1 million. Since our report to the House was published, the Treasury has agreed with the Inland Revenue that Forward's liability for unpaid tax and national insurance contributions is no less than £380,000. That, taken with £110,000 for the cost of work by Ernst and Young and up to £400,000 for cash and stock losses in the two years covered, suggests a total loss of up to £900,000.
I hope that my hon. Friend the Financial Secretary and my right hon. and learned Friend the Chancellor of the Exchequer, when he presents his Budget proposals to the House and no doubt talks to hon. Members about the stern measures that are necessary to deal with deficiency and to ensure that waste is rooted out in all Departments of State, will look to his own Department and realise that the problem of irregularities is not confined to organisations outside his own or, indeed, outside the Government. It is extraordinary that that failure of control occurred.
I shall say a few words about what happened. Fictitious employees were entered on the casual employee payroll so that the wages of real employees could be recorded as remaining below the pay-as-you-earn threshold. In other words, there was insufficient evidence to establish that the employees were genuine. That is an extraordinary state of affairs. It reminds me, and it may remind the Chairman of the Committee, of a remarkable speech in the House some years ago by the late Lord Ridley of Liddesdale when he was unearthing the irregularities in Fleet street. Workers were being paid in fictitious names such as Mickey Mouse and Donald Duck, which caused the Inland Revenue to tighten up on those irregularities.
In this case, we find an organisation directly under the control of the Treasury doing exactly the same thing. Payments to casual employees remained gross without deductions for PAYE and national insurance, records were destroyed at four locations, and so on.
The Treasury minutes that we received in response to the investigation of this sorry matter saidA report on progress in settling the disciplinary cases will be sent to the Committee in the near future. Of the original 15 cases, 11 have been concluded. Of the remainder, 1 case awaits the completion of police investigations and official investigations are 621 still in progress on the other 3. There have been two further cases, one is still under consideration, and in the other the person involved is to be dismissed following a successful prosecution.I do not regard that as impressive in view of the serious nature of the matters involved. To pick up the Chairman on his use of vocabulary in dealing with these matters, I am dissatisfied with the result.
The second case on which I must comment concerns Chelsea and Westminster hospital, which is situated in the North-West Thames region—the region in which my constituency is situated. I have always had a high regard for the North-West Thames regional health authority and the outstanding leadership of its chairman. I am sad, therefore, that we have heard today about the lack of control over a substantial hospital construction project. It is extraordinary that such a public authority proceeded with the construction of a hospital of this size without being certain that all of the necessary planning consents were firmly in place. That must never happen again.
The hospital was built on the assumption that certain income would be available from the sale of land to defray the cost. With the fall in land prices, the income was not forthcoming. It is easy to be wise after the event, so perhaps one should not be as critical as one might otherwise have been. Nevertheless, it is terrible when we read that North-West Thames relied on loans of more than £56 million from other regions to finance the project and paid interest of some £4 million on those loans, thus increasing the cost of the project. As we have heard, the whole operation resulted in a huge cost overrun. That means that other desirable projects in the region will be short of money that might otherwise have been allocated to highly desirable projects. That must never be allowed to happen again.
Another matter to which the Chairman referred briefly is the difficult and sensitive matter referred to in the Committee's 25th report, which deals with the payment of legal expenses incurred by the former Chancellor of the Exchequer. That report has shown the Public Accounts Committee at its best. I have been a member of the Committee for 10 years, and I cannot remember a previous occasion when we have taken evidence from the head of the civil service, the present permanent secretary to the Treasury and his predecessor.
The proceedings were carried out with great dignity, and the Committee investigated these matters in the greatest possible depth. I am pleased that a number of things have been made clear: first, the expenditure of public money was confined principally to the handling of the necessary press relations that resulted from the incident and, secondly, as a result of the Committee's investigation, the Cabinet Office has produced a good code of practice so that, if such events occur in the future—we all know that events of this sort can occur in public life—new guidelines lay down clearly where the division lies between personal and public duties and expenses, and private and party political activities. That must be commended.
I hope that members of the public and those who are interested in the incident will be reassured by the fact that, as a result of the work of the Committee, we now have clear and explicit guidelines which demand that, when there is any doubt, the accounting officer must be informed and the advice of the Comptroller and Auditor General should be taken. That is a satisfactory conclusion to an 622 investigation that was carried out with dignity and swiftly, and involved taking evidence from the highest officials in the civil service.
I cannot conclude my remarks without mentioning briefly the Welsh Development Agency. My colleagues have spoken about it and I do not wish to say a great deal more, except that it is one of the worst cases that has ever come before the Committee in my 10 years of membership. I was especially glad to hear the statement of my right hon. Friend the Secretary of State for Wales in the House last week in which he made it clear that the report showed that his predecessors were to blame. He accepted responsibility for the actions of politicians in his Department but at the same time drew a fair balance between the responsibilities of the political heads of the Department and its chief officers.
I was impressed by reading the remarks of the hon. Member for Caerphilly (Mr. Davies) in questioning my right hon. Friend the Secretary of State. I hope that the Committee's examination of the entire matter and the active steps that are being taken by my right hon. Friend the Secretary of State for Wales will bring the sorry tale to a conclusion. I certainly share the sentiments expressed by the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) that the time has come to get on with the work that needs to be done in Wales and that the errors of the past should not in any way be allowed to prevent useful and important action being taken by the Welsh Development Agency to stimulate investment, growth and employment in the Principality.
As a Committee, we can justifiably claim that it has served the House diligently and that it has a good record of savings. I hope very much—I say this every year—that more hon. Members who are not on the Committee will be persuaded to read the reports, to attend the debates and to speak. I have ensured that local business men, people in local government, clergymen and constituents who are interested in certain aspects of public life receive and read the Committee's reports so that they know that their interests are being protected and that we are determined to get value for money and to concentrate on effectiveness and economy in the conduct of the public service in Britain.
§ 7.1 pm
§ Mr. Terry Davis (Birmingham, Hodge Hill)
I join the hon. Members for Uxbridge (Mr. Shersby) and for Hertfordshire, West (Mr. Jones) in paying tribute to my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) for the way in which he has continued to chair the Public Accounts Select Committee during the past year, The Committee is indebted to my right hon. Friend for the skill and sensitivity with which he has guided our deliberation. I am sure that the work of the Committee has been greatly enhanced by his chairmanship and for that we are all grateful.
I also join the hon. Member for Uxbridge in paying tribute to the work in the past year of Sir John Bourn and Dr. Jack, his colleague from Northern Ireland, and their respective National Audit Offices. If I do not refer in detail to any reports published by Dr. Jack, it is only because the scandals that we have witnessed in connection with England and Wales have been much greater in scale at least than those in Northern Ireland.
623 I pay especial tribute to the staff at the National Audit Office and to those who do the less glamorous work at the Certification Office, who have produced more and more reports in the past year. The reports attached to the accounts have arisen not from the value-for-money studies but from the straightforward certification audits and have given rise, in many cases, to our hearings. There has been a definite increase in the number of occasions on which we have taken evidence from those reports compared with previous years and the staff who work on that aspect of the National Audit Office deserve congratulation.
We need reports from the National Audit Office more quickly. The preparation of the value-for-money reports are sometimes delayed by the protracted negotiations between the National Audit Office and the Departments involved. The delay is much less in the production of reports in connection with the certified accounts and I suspect that is because of the pressure to publish those accounts. That pressure limits the amount of time that we spend talking with the Departments. The Departments appear sometimes to be procrastinating to draw out the discussion and dilute the reports of the National Audit Office.
If I were to make one point of constructive criticism of the NAO, it would be that it should take a tougher line in standing up to the Departments and refusing to dilute its reports. Of course, as is proper, it should record the comments and reaction of the Deivrtments to the criticisms made by the NAO, but it should stand by those criticisms and not seek agreement at all cost. On one or two occasions in connection with the value-for-money reports, I suspected that the influence exerted by the Department over the NAO in its anxiety to publish the report was greater than we would have wished.
We need quicker reports and more rough and ready reports—which would help the speed of production. Sometimes it is important to take evidence on something that has happened before too many months or even years have passed. Far too often, the Public Accounts Committee finds itself discussing a problem not with the accounting officer who was responsible at the time but with his successor. A perfect excuse and defence which arises time after time, sometimes gently and sometimes all too obviously, is that the accounting officer was not in office at the time of the scandal under discussion. Many members of the PAC have noticed that feature.
The way to stop that failing is to have reports brought before us more quickly. The NAO should not strive too energetically to obtain agreement with a Department, and in that way we might speed up our work, hasten our deliberations and have the opportunity to talk about what went wrong with the person on the spot at the time, rather than the person promoted to the job and left holding the baby.
The hon. Member for Hertfordshire, West referred to cover-ups—especially in the case of Wessex regional health authority, which is not before us for debate today. The hon. Gentleman said that he thought that sometimes things were kept confidential to save the red faces of officials. I am sure that he is absolutely right.
All members of the Committee are conscious of the fact that that has happened far too often in the past in connection with defence scandals where there has been a colossal waste of money and delay in defence programmes. The present head of the Defence Procurement Agency is much more open than his predecessor and things have 624 improved. Dr. McIntosh is more appreciative of that desire for openness—perhaps because he comes from Australia—and is more open, not only with us but with the public; he does not try to keep secret matters that were probably known to the Russian Government long before they were known to the Public Accounts Select Committee. The desire to preserve confidentiality and to avoid embarrassment has often been the driving factor, not the need for secrecy to protect our services.
We have witnessed such unnecessary secrecy in other cases, most notably that of the Chelsea and Westminster hospital, mentioned by the hon. Members for Uxbridge and for Hertfordshire, West whose constituents are in the North West Thames region. There were two issues involved. One was the amount of money, the overrun of costs in the building of that hospital, and the other was the delay in completing its construction. That second issue has not been mentioned. I emphasise that that delay was an excellent example of an attempt to suppress information.
The information was in a report that came before us, but Sir Duncan Nichol, the chief executive of the national health service management executive contacted the Chairman of the Public Accounts Committee and asked that the table that showed the delays be kept secret, and that we ask questions only in a secret session and that the details be not made known to the public—the people who lived in the North West Thames region who were suffering from the postponement and even permanent deferment of the much needed schemes, as the hon. Member for Uxbridge mentioned, and who were to benefit from the much-awaited hospital and were made to wait much longer than they should have.
That information was to be suppressed, but it has not been, because the Chairman of the PAC, supported by the Committee, insisted that there was no reason for keeping that information confidential and that it should be published. The people who live in the region are entitled to that information, just as the taxpayer is entitled to know the way in which the Ministry of Defence has failed to get a delivery of weapons programmes on time. People should not be in fear of information becoming public knowledge, but they are because they want to save themselves from embarrassment.
Of course, the greatest embarrassment of the past year's cases, which has been mentioned by every speaker in the debate, is the case of the Welsh Development Agency. My hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) was right on the mark when, quoting from another report, he said that the real cause of the problem was the prevailing and pervasive culture that has permeated far too many public bodies in the past 14 years. It is the same culture that has affected and afflicted the West Midlands regional health authority and the Wessex regional health authority, as we shall see when we come to next year's debate on the basis of the report that is shortly to be published. I shall say no more about that now, except that it raises the same issue.
Another special feature of the Welsh Development Agency is precisely that it is Welsh, or rather that it is sponsored by the Welsh Office. In the past few years—I emphasise that because it has not always been the case —the Welsh Office has become a byword for waste, inefficiency and mismanagement and for its inability to control non-departmental public bodies. To be fair to the 625 Welsh Office, it is not the only body to have that problem. The problem seems especially to afflict non-departmental public bodies administered under this Government.
We had a similar problem with the University college of Cardiff. The matter did not involve the Welsh Office, but it was a similar problem with a public body in south Wales in which many of us felt that there were political overtones. There were problems with the Development Board for Rural Wales which were very similar to the problems with the Welsh Development Agency, which did involve the Welsh Office.
There is another body that many of us tend to confuse because it is headed by one of the previous Secretaries of State for Wales—Lord Crickhowell. That body is the National Rivers Authority. The NRA is not based in Wales, but it is headed by a man who was Secretary of State for Wales and, during his chairmanship, the PAC produced a very critical report which mentioned many features that were the same as those of the Development Board for Rural Wales and of the Welsh Development Agency. The problem seems to afflict the group of Conservatives who come from Wales, and seems to feature far too often under this Government.
I was very concerned about the way in which the Secretary of State for Wales evaded a question I put to him last week. I drew his attention to the fact that the Welsh Development Agency scandal was only the latest in a series of scandals. I then asked him whether there were any more scandals to come and he said that of course he could not guarantee that there would be no scandals in future. That was not the question. He may have misunderstood the question or have simply been evading it. The question is, how many more scandals which originated before the changes were made have yet to come before the PAC? In other words, how many skeletons are still in the closet waiting to come out? The question is not how many bodies will be put in the closet in future. Some of us are concerned about whether we have seen the end of the series of reports on Welsh bodies under this Government.
The hon. Member for Uxbridge has said that all the reports that come before us are a catalogue of waste, incompetence and mismanagement. He is right. My right hon. Friend the Member for Ashton-under-Lyne has pointed out that there are some very able civil servants. It is good to remind ourselves of that fact. We do not tend to see able civil servants; we tend to look at reports that are highly critical of what has happened and of what has been done by civil servants in implementing Ministers' policy decisions.
We have seen a series of examples of incompetence during the past 12 months. I have been concerned with the way in which many of the accounting officers have performed in front of the PAC. The hon. Member for Caithness and Sutherland (Mr. Maclennan) drew justifiable attention to the dismal—that is a mild word for it—performance of Sir Thomas Legg who is, after all, a permanent secretary at the Lord Chancellor's Department. He is not the only example to come before us in the past 12 months.
We had, for example, the permanent secretary to the Department of National Heritage, who came before us to talk about the scheduling of ancient monuments in England. There are 60,000 ancient monuments in England 626 and most of them are supposed to be scheduled. The scheduling work began in 1882. By 1984, the succeeding section, for which the accounting officer is still responsible, had managed to schedule 13,000. That figure must be seen against the background figure of 60,000. Between 1984 and 1992, another 800 were scheduled.
When the accounting officer was asked a direct question by the Chairman of the PAC about when he expected to finish the job, he said that he thought that 70 to 80 per cent. would be scheduled by 2003. [Laughter.] I hear one or two of my hon. Friends snorting at that estimate. They should not underestimate the pace at which the Department of National Heritage is now going to get on with the job. The figure of 70 to 80 per cent. out of a total of 60,000 works out at about 42,000. That means that there are still about 30,000 ancient monuments to be scheduled over 10 years, and that means 3,000 a year. When we put that figure to the permanent secretary in Committee, he was not able to disagree with it.
In a subsequent memorandum, the permanent secretary said that the numbers would be slightly lower. We asked him how he intended to increase the figure to 3,000 a year when previously the figure had been only 80 a year. He said that he was not really sure and that it depended on resources, but that he was sure that he would get there. He did not really have a clue. He did not have a plan or a programme, and he could not tell us how many monuments would be scheduled this year, next year or the year after. The figures had all the appearance of having been plucked out of the air. Fortuitously, the target date of 2003 is a year after the permanent secretary is due to retire. We have since had a supplementary memorandum giving us his programme over the next few years before his retirement. The Committee will want to return to that matter before he leaves his employment in the civil service.
We must not be too unfair to the permanent secretary to the Department of National Heritage. The permanent secretary to the Ministry of Agriculture, Fisheries and Food was not exactly clear about his programme when he came before us to discuss coastal defences in England. We pointed out that he had received a report to the effect that 16 per cent. of coastal defence works needed to be replaced over five years. We asked him—I felt that it was a fair question—how much it would cost to replace that 16 per cent. of coastal defence works so that we should then know how much we should ask the Government to spend over five years. Unfortunately, that was beyond the permanent secretary, although the Ministry has responsibility, in one guise or another, for defences against the sea. It has had that responsibility almost as long as the Department of National Heritage and its predecessors have had responsibility for scheduling ancient monuments.
We pointed out that the National Audit Office report showed that two years ago a survey said that various proportions of the National Rivers Authority defences, of local authority defences and of private or corporate owners' defences needed "significant work" which should be carried out as soon as possible. The survey came out two years ago, so it seemed reasonable to ask the permanent secretary how many miles or kilometres of sea defences were involved. He did not know that either. We asked him whether, in that case, he knew that the work had all been done, because that would have been a good reason for not knowing the figures; they would have been an unnecessary detail. He did not know whether any of the work had been done in the previous two years.
627 We were talking about coastal defences that needed significant work if they were to stop flooding. As we all know, flooding can cause people to lose their lives. It was a serious matter, yet the permanent secretary did not know what was involved. I did not have much confidence in his competence to protect us against the sea.
The hon. Member for Caithness and Sutherland has already referred to the permanent secretary to the Lord Chancellor's Department. The Department, apart from anything else, sets the criteria to be used in granting legal aid. It decides the criteria and gives them to the Legal Aid Board. Yet when the permanent secretary was asked how much income and how much in savings one had to have to become ineligible for legal aid, he did not know. That was during questioning about legal aid.
If we had been discussing something else—the administration of justice generally or something to do with the courts—that might have been reasonable, but we were there to talk about legal aid and he did not have the foggiest idea of how much money one had to earn or receive or how much one needed to have in savings to lose all eligibility for legal aid. We were not asking detailed questions about the table, just what was the limit at which one forfeited all legal aid. He had no idea.
Then there is the Home Office. The hon. Member for Hertfordshire, West referred to the way in which the Hertfordshire police authority was "ripping off"—I think it was his expression—public money by charging excessive bills for accommodating prisoners in police cells. The criticisms were justified. We had to ask, why was that happening anyway? How did it happen that prisoners were kept in police cells instead of in prison? Why were we using police officers instead of prison officers to look after prisoners? The answer was that there were not enough places in the prisons. We all know that.
It emerged through questioning that there were 45,000 prisoners at the peak in 1990–91. We were considering the next year. The peak in the next year was 48,000 people, so the number of prisoners increased by 3,000. The permanent secretary told us that that exceeded the forecast. By how much did it exceed the forecast? The forecast was originally 44,000. The Home Office projected a reduction in the number of prisoners and then, to be fair to it, revised the forecast back to the level of the previous year. There was an increase, however, so the forecast was very inaccurate.
We can understand all that, but I found it difficult to accept it when the permanent secretary to the Home Office said that he did not know why the increase had taken place. It is one thing to make an estimate and get the forecast wrong, but it is quite another not to have any theories as to why the actual figures exceeded the predicted figures. That seemed to me to be incompetent.
There were two possible theories: either the courts were sending proportionately more offenders to prison or more people were being brought before the courts and the courts were sentencing the same, or a smaller, proportion of people to prison. The permanent secretary at the Home Office had no idea. He did not know the cause. Unless one knows why increases occur, one will not be good at predicting the future. That is obvious.
The chairman of Customs and Excise came before us to talk about VAT avoidance. A report from the National Audit Office described nine cases in which allegations of VAT avoidance had appeared before the High Court. The chairman agreed that all nine cases were typical. Of those 628 nine cases, one was still sub judice so he could not discuss it. Of the other eight, Customs and Excise won one and lost seven: one to Customs and Excise, seven to the avoiders. The only case that Customs and Excise won was a case involving a publican's wife serving sandwiches. That was worth £1,200 a year. My hon. Friends will not be surprised to know that every case that Customs and Excise lost involved sums many times that amount, running into millions of pounds a year. It seemed to me that the conclusion to draw from that was that Customs and Excise is good at dealing with publicans' wives but not at dealing with big companies and banks. It is not in the same league as the banks and big corporations of this country.
The chairman said that those cases were not typical examples anyway—having previously agreed that they were typical. He gave us figures to prove that he was right and that the record of the Customs and Excise was much better. When we examined the figures that he gave us, we found another classic exercise in wool-pulling. He told us that 49 cases were lodged with the High Court during the year in question. Of the cases that were heard by the High Court during the year, Customs and Excise won seven and lost four.
On the face of it, that left 38 others, but just a minute—those that were heard were unlikely to be those that were lodged, because a hearing takes a long time in the High Court. There was a clear opportunity, in the supplementary memorandum, for us all to read about an attempt by the chairman of Customs and Excise—he has now gone, and we shall not see him again—to pull the wool over our eyes. He promised to provide those figures to justify his assertion that the report gave a misleading impression.
That was not the only occasion. We found out, when talking to the chairman of Customs and Excise about the failure to clear arrears of VAT, that Customs and Excise does not produce an age profile of VAT arrears. That is an elementary management tool. Customs and Excise must be the only business-type organisation in the country that does not produce an age profile of its debts to know whether it is collecting them efficiently; that is essential. Instead, Customs and Excise does a special exercise every couple of years. When we asked the chairman by how much the arrears had decreased, we found that they had increased. In the two years that we were considering, what are called remissions increased by a quarter—no less than £1·1·5 million.
In the very month in which we were discussing the inability of Customs and Excise to recover £115 million in VAT arrears, the newspapers were full of stories about how the Benefits Agency had failed to recover £21 million in loans to the poorest people in society from the social fund. It appears that more than five times that amount went in remissions. We asked, "Are you sure?" and "How much of that was written off and how much was collected?" But the Chairman did not know. We know, however, that more and more people enjoyed those remissions, and I do not think that they were publicans' wives.
My biggest criticism is that too often, when considering the affairs that have come before us during the past few years, we have observed a gradual shading of the role of the civil servant. Accounting officers and permanent secretaries are the same thing—some of the accounting officers are the heads of non-governmental public bodies. Increasingly, they appear before us in the role of politicians, rather than that of civil servants. Imperceptibly, the civil service is being politicised.
629 Perhaps the clearest example during the past year came from the Benefits Agency. It was mentioned by my right hon. Friend the Member for Ashton-under-Lyne—the example of the way in which the introduction of disability living allowance was rushed. There was a flood of publicity up until, but not after, the general election of 1992. When we asked why it was rushed, it became clear that it happened so that the Conservatives could boast in the pre-election period about what they were doing for people with disabilities. The resources to cope with that "surge of claims"—the phrase used by those civil servants —were not put in place.
When we asked why the resources were not provided to cope with those claims from people with disabilities, and why people were not employed so that those claimants could have the benefits to which most of them were entitled, we could not get the facts, because people were acting more politically than as civil servants before the Public Accounts Committee.
§ Mr. Morgan
Was that the Government equivalent of the Hoover free flights offer? In good public relations terms, one can provide what is called "feel good" advertising, followed by a "feel suicidal" performance by the agency that makes the offer to the public, in the hope that there are so many obstacles to getting the benefits that are advertised as available that people will not follow through and make a fuss about it. The agency gets the public relations credit for having made it seem that milk and honey and free offers are available, although they are not, but it does not intend to put the staff in to respond in a reasonable time to the demands that will result from the advertising campaign.
§ Mr. Davis
I thought that it was closer to the case of the Central Office of Information, which came before the Public Accounts Committee a few years ago, when we considered its expenditure. The variations were remarkable and there were clearly peaks and troughs. If I remind the House that expenditure on so-called information—much of which is television advertising—peaked in 1982, followed by a trough in 1984, and that it bumped alone in 1985 and again peaked in 1986, only to decline in 1988, I think that hon. Members will understand the significance of those dates.
§ Mr. Davis
The shadow Secretary of State for Wales wants to be told. I do not think that he is that naive, but the accounting officer for the COI needed to be told. Although his job is to give out information and to explain the facts of political life here to people in other countries, he did not know the dates of general elections during the past decade. We all realise what that expenditure was about and most Opposition Members recognise that the advertising for disability living allowance was in the same category.
Although I may be wrong, I think that the hon. Member for Uxbridge said that more people should attend these debates. I do not think that we need more debates on the work of the Public Accounts Committee, but the debates need to be more focused.
One of the problems in holding a debate like this at fairly short notice—we only knew about it last Thursday —is that a pile of 50 PAC reports is indigestible. It is 630 impossible to read all of them during the weekend and I can well understand that many colleagues might have more pressing duties, or more pleasurable activities. It is unreasonable to expect people to take part in these debates at such short notice.
As we believe that the work of the PAC is important, it would be easier to get greater participation and to have a better debate if we focused on a few reports only, perhaps those affecting linked Departments. For example, we could debate reports affecting the Inland Revenue, Customs and Excise and other tax-related Departments, or the Home Office and Environment. The details could be worked out through the usual channels, but we ought to be able to have more focused, sharper and better debates. That is important.
I think that the hon. Member for Mid-Kent (Mr. Rowe) said that there should be more liaison with other Select Committees; I agree, but the way to achieve it is by involving members of other Committees in debates on PAC reports on such subjects as the Chelsea and Westminster hospital, which has been mentioned so often this evening. On that constructive note, I conclude my remarks.
§ Mr. Cynog Dafis (Ceredigion and Pembroke, North)
I shall speak briefly about the Public Accounts Committee report on the Welsh Development Agency. I welcome the fact that the irregularities in that agency's behaviour have been brought to light by the report, and I warmly congratulate those hon. Members who have been instrumental in bringing that about, especially members of the Committee.
The hon. Member for Cardiff, West (Mr. Morgan) also deserves a special mention. The fact that his finger was pointing in the wrong direction when he spoke about the irregularities does not minimise the importance of his contribution to the revelations about the WDA's misdemeanours.
I entirely concur with the strength of condemnation that we have heard tonight. Having said that, however, I also agree with the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) that what happened must not be used as an excuse for damaging the work that the agency can and must continue to do for Wales. An all-Wales agency, capable of taking an overview of our economy, of developing strategies to create a prosperous and sustainable Wales, and of marshalling resources to support those strategies, is essential, and would be essential, even within the framework of a democratic, self-governing Wales of the type that we want to be established.
The strategies pursued by the agency have been criticised and it has been suggested that there has perhaps been an over-emphasis on providing factory space and physical infrastructure, important though they are. I am told that in recent years, Mr. Philip Head, the chief executive, has been influential in bringing about the new and welcome emphasis on encouraging existing enterprises within Wales, through the business services and skills development sections of the agency. New attention has been paid to local, small and medium-sized enterprises and the promotion of the use of new technology among them.
The hon. Member for Merthyr Tydfil and Rhymney mentioned Source Wales—an initiative centring on the creation of linkages between large multinationals and local 631 suppliers, strengthening the multiplier effect of inward investment. Such development of the indigenous industrial sector is vital. Its results are likely to be more long-term, less dramatically visible and not as easy to trumpet as Welsh Office successes as are other results, and perhaps not so amenable to photo-opportunities and statements at meetings of the Welsh Grand Committee. In many ways, however, that is the way forward as a strategy for industrial development in Wales.
The WDA has been able to develop that more subtle and complex strategy—a strategy which, in many ways, is more in tune with the social and cultural needs of the Welsh community as well its purely economic needs—because it has had the freedom to do so. It is essential for the agency to be able to retain the power of initiative in that way and it is essential that its budget be sufficient to enable it to use that power effectively.
The fact that there has been improper conduct in financial matters—travelling expenses, redundancy payments and so forth—is no reason for eroding the power of independent decision making on strategy, policy development and entrepreneurial initiative.
Secondly, I must refer to the recommendations of Sir John Caines's inquiry, which was set up by Mr. Rowe Beddoes, the new chairman. I shall read three of the recommendations, as reported in the Western Mail, which, put together, cause me some concern. The first is:Board members should disclose all interests in contracts",which should go without saying. The fact that it needs to be said at all seems serious. The second recommendation is:Conflict of interest rules should be tightened to cover employees' families and close friends".The rules should have encompassed that in the first place.
The third recommendation, taken together with the first two, worries me considerably, as it states:Greater efforts should be made to find board members from outside Wales, even if it means diluting the proportion of Welsh men and women.I ask you, Madam Deputy Speaker$ That is a recommendation of breathtaking impertinence. I can just imagine what the Secretary of State for Social Security would say if it were suggested that irregularities or corruption in England should be dealt with by importing people from France, Spain or Italy to deal with them.
If one puts those three recommendations together—they are juxtaposed in the report—one begins to get the picture. They portray an image of an inbred province, riddled with corruption, which has to be rescued from itself by the intervention of impeccably rigorously ethical representatives of the metropolitan power. That is what it seems to be saying to me. It is the voice of the English colonial mentality in its glory—whatever is to be done about Wales and the situation there, it certainly cannot be left to the natives. To say that I find that offensive would be the understatement of the year.
To avoid any misunderstanding, I may say that I recognise entirely—as do all sensible, enlightened and progressive people—the contribution that English people make to the life of Wales. They have done so in the past and will do so in future. Not just English people are capable of showing an understanding of our national life, culture and aspirations and of making an important contribution. However, it requires empathy, research and dialogue to gain an understanding of what kind of place Wales is—and it is a complex place.
632 The Welsh Development Agency's deficiencies spring not from the fact that it is too Welsh but that it does not properly reflect the whole spectrum of Welsh life. Neither is it directly accountable to the people of Wales—and that is true of many other non-departmental bodies. I recommend the analysis made by Sir John Caines from which I quoted earlier.
The WDA's problem is that its members are determined according to their acceptability to the Secretary of State for Wales. The agency needs not more colonialism but democracy, accountability and development policies that enhance the distinctive social and cultural traditions of Wales. We will only get that package together when Wales stops being a province, stops allowing itself to be treated as a province, and has the democratic Parliament that more and more people in Wales acknowledge as a fundamental necessity.
§ Mr. Alan Williams (Swansea, West)
I join the congratulations to my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), Chairman of the Public Accounts Committee. He is in the difficult position of chairing a Committee that, after a long period of one Government in office, is inevitably looking at problems that have arisen during the life of that Government. It is to my right hon. Friend's credit that he has created a consensus within the Committee that enables it to present unanimous reports and to enjoy an identity of interest in the way that it approaches problems.
My right hon. Friend is a man of singularly generous disposition, so criticism from him usually means being close to a situation that would cause others of us to explode. In the absence of my right hon. Friend, I may say that I do not go along entirely with his belief that there has been no lowering of standards in public life.
Last week, a newspaper reported that a former permanent secretary in the Home Office is running courses for civil servants on how to deal with the Public Accounts Committee. I found that amusing, but wondered why such courses are necessary. What is their purpose? If a civil servant is only appearing before the Committee to answer questions about a report agreed with his Department, why does he need coaching?
I believe that there has been a lowering of standards in public life in terms of propriety, honesty and attitude. As my right hon. Friend said, when we see such changes it angers us that rarely does a witness come before us who is actually responsible for the situation that he is there to defend—and rarely do we hear of anyone, no matter how grave their misjudgment, suffering any punishment or disadvantage.
Two elements are contributing to that decline. One is the proliferation of quangos, which inevitably—especially in the Welsh context—consist of ministerial placemen. Immunity is created because in criticising an appointee, a Minister would be criticising himself for making that appointment. When one considers the political background of the chairmen of the West Midlands and Wessex regional health authorities, and of those appointed to quangos in Wales, one can understand why they feel secure and enjoy a form of political protection.
An insidious, if unintended, consequence of the proliferation of quangos, which one would be foolish to ignore, is an unplanned and undesirable change in the 633 nature of the next steps agency, which is viewed by virtually everyone within it as the first step to privatisation. That produces a perhaps intentional awareness of the profit motive, but also the sublimation of a sense of public service. A consequence of that philosophical adjustment is an awareness of the opportunities of the new situation in which the management find themselves.
It is significant that the management buy-out is a major element in the privatisation that follows from quangos. I hoped to demonstrate that the advantages enjoyed by the in-house team may be an element in one appalling case. The in-house people know the warts, what is hidden, what is wrong, what fat can be cut away, and what could be a realistic bid. They have an incentive to conceal reality from those who might counter-bid.
In the West Midlands regional health authority case, the software function was being hived off and the chairman said, "We told them that if they got the contract and were successful in becoming privatised, they could have a £1.9 million annual contract for the next three years to give a soft landing to the people who worked there." Strangely enough, the two other bidders were not successful. They were not told about the £1.9 million contract. The chairman could not see that there was something unacceptable about telling one bidder in a privatisation process that it had a contract for £2 million in its pocket and not letting the other bidders know.
Intrinsic to the privatisation-via-agency route is the temptation to make the megabuck very quickly. It is the one chance that someone working in the public sector has to make it financially big—[Interruption.] That matter is, of course, of great lack of interest to members of the Treasury Bench. The Financial Secretary to the Treasury cannot be bothered to listen, and the Whip is too busy engaged in conversation with him to allow him to listen. On the one day of the year that we have such a debate, we should at least be able to expect that the Treasury Minister present would have the courtesy to put up with those of us who attended every meeting of the PAC throughout the year to produce reports—which then receive disdainful replies in the form of Treasury minutes, as I hope to demonstrate.
There is an increasing reluctance to recognise the importance of accountability to the House. Such reluctance goes back, philosophically and politically, to one particular lady, whose contempt for the House dominated political thinking for over a decade. That contempt for the House is now implicit in Ministers who have never been in opposition.
There are Opposition Members who have never been in government, and there are Conservative Members who have never been in opposition. I know that the Government Chief Whip will not be reassured, but one advantage of being in opposition is that one learns how dangerous it is to allow a Government to become arrogant and to think that they can treat the House as they wish. The arrogance at the top has spread down through the political middle, and has now begun to feed into the executive machine.
There are people in the civil service who, for the past 14 years, have served one political philosophy. I am not making a party political point—the same would apply if we had been in government for the past 14 years—but, in a 634 way, the swinging to and fro of Governments in the past helped to sustain the impartiality implicit within the civil service.
Those of us who have served in government have made friends with civil servants while working with them. We knew that while they were briefing us at the Dispatch Box, they were aware that within a short period they might be working for Members on the other side of the House.
The result of the past 14 years has been that those in the quangos feel immune because Ministers and the Government have been there for so long. Those in the civil service have become attuned to the philosophy that has prevailed in the Government for so long, and have begun to adjust to it. We are seeing a lowering of standards, which was not intended, but is inevitable. A corruption of attitude has also taken place, starting from the top and working down.
We in the Public Accounts Committee must consider whether we should call not only the present accounting officer, but the person who held office at the time when the issues that we are discussing took place. It is no good officials thinking that all they have to do is switch jobs or take an early retirement when their misdemeanours are being discussed by the Public Accounts Committee. They should not think that they can shrug, draw their earnings-related pension, take an outside job with companies with whom they dealt while in government, and earn more money with their combined pension and outside job than they earned as civil servants.
The Welsh Development Agency is an organisation in which people felt that they were protected by the Minister because they were protected by the Minister. Operation Wizard referred to a covert privatisation operation. In a written answer to my hon. Friend the Member for Alyn and Deeside (Mr. Jones), the then Secretary of State, now Lord Walker, denied that there were any plans to privatise, while at the same time, according to the evidence given to the Committee, the operation was going on with the express approval of that Secretary of State.
After the National Audit Office report was issued, and after we had had that appalling hearing in February—anyone who watched it must have been embarrassed for the witnesses because of what came out—Lord Walker's successor, the present Secretary of State for Employment, promptly reappointed the chairman. Indeed, he appointed him head of S4C, which carries with it automatic governorship of the BBC.
§ Mr. Williams
Whatever way round it is, he has got both jobs.
One of the worrying features about the WDA is that, good as the work of the National Audit Office was, it did not discover what was going on at the WDA. It found out about the cars and the pensions, but it was whistle-blowers who contacted my hon. Friend the Member for Cardiff, West (Mr. Morgan), who put them in touch with my hon. Friend the Member for Pontypridd (Dr. Howells) and myself as members of the Public Accounts Committee. People within the WDA were so incensed at the dishonesty, concealment and arrogance of the people now in control of this important quango that they felt they had to talk to us and tell us what was going on, even at the risk of losing their jobs.
635 Even the massive machine of the National Audit Office and the prestige of the Comprtoller and Auditor General was not enough to squeeze out of this protected semi-political operation what was going on in that quango—and what was going on was endorsed by a senior Minister.
I take exception to the reply from the Treasury in its minute. The sole reference to Wizard is to say that the Comptroller and Auditor General did not complain that it was improper in accounting terms. That is to miss the whole point. Yes, the money was there, it was accounted for—the £320,000 was not put in pockets and run away with—but nowhere was the word "Wizard" used; nowhere was anyone told that Wizard existed; even the board, when it took reports, did not minute the report on Wizard.
The money was deliberately spread between accounts so that the three operations would not be related in any outsider's mind, and to ensure that the House, the Comptroller and Auditor General and the National Audit Office never discovered that, at the heart of the WDA, was a group of men conspiring to distort its role to enable them to take over the profits from its property and its consultancy work.
Yet those men were and are protected. As I have said, we had the evidence in February, but only last week did we have a statement from the Government. As has been pointed out, nowhere has there been any criticism of the board or Ministers—that goes without saying. Instead, we were told that the previous chief executive, Mr. Waterstone—who was very much involved—and various other people have gone scot free. The members of the board are appointees of the Minister, and he could dismiss them immediately should he wish to do so, but they are still there—and some of them are on a number of Welsh quangos—and still holding those posts, despite what has been revealed in relation to the WDA.
We had as chairman of the Welsh Development Agency a man who had to have his arm twisted for the major part of a year before he could be persuaded to pay back the grants that he had received under the rural conversion scheme for a property in north Wales. As chairman, we had a man who benefited from the private car usage scheme, and who flew by Concorde and by helicopter so he could more quickly make the appointment with the wrong man in the United States. That wrong man eventually walked off with the funds for furniture and office equipment which had been left in the office petty cash.
No one checked the references of the chairman. The fact that he had a million was enough to impress the Lord Walker. We understand why Lord Walker was impressed, but no one asked why ICL asked the chairman to leave. No one asked why the company to which he sold his business to make his millions almost immediately went into desperate financial difficulties when it tried to use what it bought. No one asked those questions. He is still there, waving to us from the top of a hill in the sunset, and enjoying his governorship of the BBC. He should be banned from public office.
A similar situation exists with Forward Catering, the company referred to by the hon. Member for Uxbridge (Mr. Shersby). The company has been demoralised by the fact that it has been expecting privatisation for so long, and the privatisation has been deferred and deferred. The situation in this case is that a chief executive has set up a private company incorporating the name "Forward" in the names of his wife and his deputy, who is his daughter.
636 Forward Catering did not cook the books, but literally burned the books, although I do not blame the chief executive for that. The accounts were destroyed on four occasions, and ghost workers were employed. One section of the Treasury—Forward Catering—was defrauding the Inland Revenue and the Department of Social Security. Hon. Members can imagine what would happen if one of our constituents had defrauded the Department of Social Security of even £5. The full force of the law would come into play in that instance.
But what have we had here? There has been virtually no punishment for anyone. One little girl who, in fairness, deserved to be dismissed was summarily dismissed. I believe that one regional director was downgraded and one official was reprimanded. However, that is all the punishment that has resulted from an attempt to defraud the Inland Revenue and the Department of over one third of a million pounds, and from the loss of £400,000 of stock. That is £8,000 of stock a week that just walked. Recommendations—made as far back as 1983—that a proper accounting system be set up were ignored, yet the Treasury has still done virtually nothing.
Switching to a different level, it is not surprising to see the effect of Government cuts on people's thinking. My right hon. Friend the Member for Ashton-under-Lyne referred to fire prevention reports. Here again was a staggering situation, although staggering for different reasons. The situation shows the danger of combining the imposition of cuts with the protection of Crown immunity. The people responsible for 8,000 Government buildings should have had an inspectorate of 38 to ensure that the buildings were adequately protected against fire. Instead, only two of the anticipated 38 were employed. The two who were employed spent half their time dealing with administrative work, and so were able to carry out virtually no inspections.
Successive Governments in their wisdom have decided that they will not insure public buildings, but will recognise that what they save on insurance will be used to meet the costs when a building gets burned. In the case of Hampton Court, £5 million of fire damage was done six years ago, but still no fire certificate exists for the building. In the case of Windsor, people were beginning to get a bit nervous about the system, and there was a public appeal to provide the money for repairs. The money that has been saved over the previous years from not insuring buildings has not been used in those cases.
The fact that buildings are not insured presents disciplinary problems, and I use discipline in the intellectual sense. As all hon. Members will know from insuring their homes, if one wants to insure a building one must meet certain standards which are laid down by the insurers. One of the problems of not insuring Government buildings is there is no outside monitoring pressure to apply standards in the Government sector that would apply elsewhere.
For example, the administrative wing of a hospital needs a fire certificate, but the area for the poor patients does not. Her Majesty's prisons—where people are locked in—need no fire certificates at all. Those are some of the matters that the Committee has come across in its deliberations this year.
One of the worst of those matters, and one which was referred to by my right hon. Friend the Member for Ashton-under-Lyne earlier, was the privatisation of the 12 regional electricity companies.
637 I will not take long, and I will conclude with these comments. In this case, the public have been robbed twice. First, £16 billion of public assets—that was their replacement value—were sold off, not for the £8 billion which the Government claimed to have received, but for £5 billion from the shareholders. Secondly, the other £3 billion which the Government said that they had obtained from privatising electricity did not come from the shareholders at all. It came in the form of a notionally created and non-existent debt which was imposed on the day of privatisation. The money came from the people from whom the electricity industry was taken. The debt had to be paid back, but no one ever had any money for it. The money came from the consumers, and that became clear in the evidence that the Committee received.
Some £1·8 billion of the £2.8 billion has been paid by consumers. For example, in London the average consumer has already paid £141 for the privilege of someone else owning what had been his or her electricity industry. In the midlands, the figure is £24. In the northern area, it is £69, and in the southern area, it is £49. Those prices have been already paid by consumers towards what the Government call the receipts from the privatisation of the electricity industry.
Interestingly, at a time when there is a public outcry about the possible imposition of VAT on fuel, the public do not realise that they are already paying a privatisation tax on electricity. [HoN. MEMBERS: "Why is the Minister laughing?"] That is what I called the arrogance of continuous government.
§ The Financial Secretary to the Treasury (Mr. Stephen Dorrell)
I do not wish the right hon. Gentleman to conclude that I am arrogant. Will he simply explain to the House by how much the real price of electricity has fallen to the consumer since privatisation?
§ Mr. Williams
If the Financial Secretary cares to look back, he will discover that his Government bumped up electricity prices before privatisation. Before he says anything about gas, may I remind him that, for three years running, his Government imposed a 10 per cent. price increase—over and above VAT—on the gas industry, adding 33 per cent. to the price of gas, and now turn round and say, "Ah yes, but gas prices have not increased as rapidly since privatisation." They fatten industries up and after they have fattened them up they privatise them. Then they turn round and say, "There we are. Things are looking much better now than they were before."
§ Mr. Morgan
I am sure that what the Financial Secretary really wants my right hon. Friend to tell the House is that, in the five years from the commencement of the privatisation process—the publication of the White Paper by Lord Parkinson, the then Secretary of State for Energy, in February 1988—the price of electricity to domestic consumers in the United Kingdom rose by an average of 44 per cent., whereas in most European countries, it rose by between nil and 10 per cent. In other words, the cost of privatisation to the United Kingdom domestic consumer from the beginning of the process to the end was very high indeed.
§ Mr. Williams
I thank my hon. Friend. That was just the point that I intended to make and he has explained the position far more clearly than I could have done.
I conclude with my one regret—which I am sure the Chairman of the Committee will share. The Committee has suffered a great loss: in the coming Session, we shall no longer see the man whom I call the Sylvester Stallone of Whitehall because he has appeared before us so often. We shall no longer have as a witness Duncan Nichol, the head of the National Health Service Management Executive, who is now moving into the academic world. Let me offer a word of advice to his future employers: by all means take full advantage of the experience that he brings, but please, please, please do not let him buy a computer.
§ Dr. Kim Howells (Pontypridd)
I, too, congratulate the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who has conducted the affairs of the Public Accounts Committee in a terrific fashion throughout. The consensus that has emerged has been most important.
I also thank Sir John Bourn, the Comptroller and Auditor General, and his magnificent staff. I was lucky enough to be invited to the newly consecrated Cardiff office. I was given a tour of the place and an explanation of how it works. I must say that the staff there are the very antithesis of many of those whom they are paid to investigate. The office is about as far away from the Athenaeum as it is possible to get. There is none of that imperial air about them which has unfortunately cursed those occupying some key positions in this great civil service of ours—some of whom are still there, although that is another matter.
There are some worrying trends in public administration—some of them mentioned tonight—which are likely to accumulate rather than decrease. They are the result not only of privatisations and of the creation of next steps agencies but of the growth of hospital trusts and opted-out schools. All those bodies will require proper auditing, accounting and monitoring. I know from my private conversations with those in the Comptroller and Auditor General's office and other agencies that there are great worries that there will not be the staff to carry out such audits. I am afraid that in some cases there will be almost a typescript for corruption.
We must be very careful. It has already been stated tonight that our civil service—warts and all—is one of our national treasures, and the service's lack of corruption has been one of its greatest virtues. I am lucky enough to have travelled quite extensively in Italy and the last thing that I should want to see is a slide towards what one might call the Italian mode of public administration. It seems to me that that is all too possible, given the new scenario.
We must construct new ways of ensuring that there is proper accountability. In that respect, I hope that the rumours that we heard a couple of years ago to the effect that the office of the CAG was to be split among the other Select Committees and its power diluted were not true and will not re-emerge. I know that the Chairman of the Committee fought tooth and nail to prevent any such slide. It is vital that the PAC should retain its historic role and that, in seeking ammunition, it should have the full armoury of the CAG's office at its disposal.
§ Mr. Allan Rogers (Rhondda)
Does my hon. Friend accept that it is important to get the structures right not 639 merely in terms of parliamentary and civil service accountability but in terms of the accountability of the Ministers who run the Departments and who are ultimately responsible? Does my hon. Friend agree that the present Secretary of State for Wales has washed his hands absolutely of what is going on in an agency for which he is directly responsible? Nor have such occurrences been restricted to recent times. The Chairman of the PAC will recall that, some seven or eight years ago, when I was a member of the Committee, millions of pounds that went to the Parrott Corporation were never properly accounted for. There has been a history of non-accountability among politicians.
At one time Ministers would resign if something went wrong in their Department, as happened in the case of the Crichel Down episode, but the present Secretary of State for Wales does not want to know: he claims all the credit but never the blame when things go wrong.
§ Dr. Howells
My hon. Friend has made an important point and one which leads me neatly to the argument that I was about to advance. I have said some hard things about the Welsh Office in the past few weeks. I think that my criticisms are deserved and that there is a real problem with the Welsh Office. For whatever reason, the Welsh Office has not been properly managed and has not fulfilled the functions that are central to its existence, which include the monitoring and proper management of quangos that run and administer Wales from day to day.
I agree with my hon. Friend the Member for Rhondda (Mr. Rogers) that there is only one person who carries the can for the administration of the Welsh Office, and that is the Secretary of State for Wales. It ill becomes the previous Secretary of State to sit smugly through the statement that the present Secretary of State made on the débâcle of the Welsh Development Agency as though it had nothing to do with him.
It ill becomes the Treasury, too, to try to pretend that it knew all along what was going on within Operation Wizard. That is one part of the Treasury minute that really irks us. It is somehow assumed that it is all right if money is secreted away in another vote or category—if it works, that is fine, and if it does not the experiment has failed but no one will really carry the blame for it.
We had a taste of that attitude during the extraordinary period of legal aid for the former Chancellor, who ran into some personal difficulty which he had to resolve rather quickly on a Saturday night and hired London's most expensive lawyer to help him out. We discovered that little anomaly only as a result of a whistleblower, not as a result of acute and observant administration by the permanent secretary's office. It is a real shame that in such cases we have to depend on whistleblowers, which reinforces my earlier point that the Comptroller and Auditor General's department must be strengthened rather than weakened as we head further into this new era of administration.
We came across the most extraordinary examples of desperate incompetence. Under the chairmanship of Sir James Ackers, we have seen perhaps £10 million or £15 million of the West Midlands health authority's money go down the drain; under the chairmanship of Sir Robert Buchanan, we have seen perhaps £50 million or £60 million of the Wessex health authority's money go down the drain, which is the price of a district general hospital. That money has gone as a result of some sweetheart 640 management buy-out in an IT department that failed miserably and continues to fail miserably. Are those responsible being punished?
My right hon. Friend the Member for Swansea, West (Mr. Williams) pointed out one case where an employee on the shop floor was disciplined for serious wrongdoing. In the case of Wessex health authority, Sir Robert Buchanan, who was its chairman, is now the deputy director of supplies for the whole of the NHS. We look at that with a degree of incomprehension. It makes no sense whatever. We heard about Dr. Gwyn Jones, the former chairman of the Welsh Development Agency. One wonders what on earth the Welsh Office thinks it is up to in that respect.
The hon. Member for Ceredigion and Pembroke, North (Mr. Dafis), argued that English administrators have no place in Wales, which seems a particularly extraordinary and arrogant thing to say. I should hate to think that we from Wales could have no part to play in the administration of England or any other part of Great Britain. Albeit reluctantly and with great reservations, I voted for Maastricht.
§ Dr. Howells
Some people may shout, "Shame."
One of the things that it meant was that, if somebody showed talent, whether he be German, Italian, French or Belgian, he would play a part in reconstructing the life of Europe.
Such awful parochialism is a poison that infects Parliaments when they are overridden with nationalist nonsense. We must be careful about that. After all, it was Welsh administrators—even Welsh-speaking administrators—who created the chaos at the WDA through their incompetence and questionable objectives. With precious public funds, what counts is talent, honesty and flair. I do not care where the people come from so long as they know the proper way to deal with precious public funds.
My hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis) referred in his wonderful summing up to the almost farcical hearing that we had when we discussed coastal defences. I was hoping that he would make the next point, but he did not, so I shall make it now. We saw in many of those hearings that the permanent secretary sometimes arrived with the chief executive and a dozen or 15—I once counted 18—advisers from the Department. One wonders who ran the Department when the public accounts hearing was on.
When my hon. Friend asked the permanent secretary to tell us where exactly the sea defences were likely to collapse and land be flooded, the permanent secretary turned to his helpers on the seats behind, and not one of them could name a single mile of coastline where that danger existed. There was a feverish searching through of books. Nobody could name a single stretch of coast. It did not give me a great deal of confidence in the competence of those officials during that hearing.
It has already been stated—with a degree of frivolity —that courses are now held, or mock runs, before officials come before the Public Accounts Committee. They are told, "This is how you are likely to be questioned." They did not do much of a job on the Ministry of Agriculture, Fisheries and Food. It was absolutely appalling.
Another important problem that has not been mentioned so far this evening is language—almost semantics. With the next steps agencies we get a different language. I know 641 that we have got used to calling patients in hospitals "customers". Even taxpayers are customers now, although they are sometimes called punters—usually if they are about to go to gaol.
Another problem is the curse of the consultants. We are constantly being told that matters got out of hand because bad advice was received from consultants. There is a curse of consultants so far as quangos, next steps agencies and the Welsh Ofice are concerned. I remember we had a case during the hearing that was as dramatic a scandal as that surrounding the WDA. It concerned the Development Board for Rural Wales. My right hon. Friend the Member for Swansea, West, as though he were skinning an onion, peeled down to the extraordinary truth behind Mr. Ian Skewis's redundancy package. We were told that the outgoing chief executive, Mr. Skewis, had been promised guaranteed consultancy work as part of his redundancy package. It was worth a large amount of money. When we asked what the consultancy work was, no one could tell us. We were told, "We'll make up some consultancy work for him." The permanent secretary said that it would be about rural affairs. We pressed him on that and asked whether it would be about milking cows. "Possibly," he said, "but it would have been about rural affairs".
It is like a sick joke. One does not know what consultancies are going to be about. They are about keeping people on board, protecting old friends and ensuring that the bump is not too hard when one hits the ground. I fear that one of the reasons why the Secretary of State for Wales has not had the courage to take action over the former chairman of the WDA is precisely because the chairman was appointed by a Secretary of State for Wales and defended by his successor as part of the great spirit of Thatcherism which was transforming the Welsh economy. To admit that that guy had made a mess and should be taken off such an important body is far too much for them to do. They should get off their high horses and act on behalf of the people of Wales.
Finally, before I forget, I meant to say from the start that, in gracing our first session almost a year ago, the Minister did the Committee a great service. He sat patiently throughout. We appreciated that. One sometimes gets the feeling that the departmental officials are sent along to carry the can, so it was nice to see the Minister play an active role in the deliberations of the Committee.
I draw the Minister's attention to something of which I am sure he is all too well aware, because it has such a vast budget. Our 46th report deals with the administration of legal aid. For those who are not aware of it, I will spell out how big the budget is. This year, it is no less than £1.1 billion of public expenditure, and by 1995–96, even after the changes in the administration of legal aid, it will be £1.5 billion. There is no question but that those are huge sums of money. I understand that in 1993–94, 120,000 fewer civil legal aid certificates will be issued than would have been issued if the changes outlined in the report had not been instigated.
I hope that the Treasury understands that the Committee feels strongly about the disgraceful lack of information during our hearings on that investigation. The Department should have been ashamed of itself. The Lord Chancellor's Department had worked with the Bar Council and the Law Society, but representatives of both those bodies made it 642 clear to us in conversations that they were appalled by the lack of consultation before those enormously important changes were introduced. Despite all our reservations about lawyers and the old stories about licences to print money, both are eminently sensible organisations and the Public Accounts Committee values the material that they gave us when we were investigating legal aid.
We must destroy the myths about the huge profits that can be made by law firms from legal aid. That is not the case. We came across hints of some improprieties and I am glad to see that the Treasury has responded quite positively to them. I notice that it is to investigate all reports of fraud by clients.
We have to reaffirm that justice cannot be bought cheaply. It costs a lot of money. The budget is enormous, and the statistical database on which important decisions about huge expenses are made is simply not good enough. It is scandalously underfunded in that respect. Much more work must be done. Attention must be paid to the justifiable complaints by the Law Society and the Bar Council about the way in which courts are run. There are many inefficiencies in that system. Savings are being posited, but they could be disastrous. Courts will close, there will be longer waiting lists for trials and I fear that that is the other side of the coin of the proposed cuts in legal aid. Those are not cuts in the real sense, but they are cuts in the number of people who qualify for legal aid.
The reason for the rise in costs is still a mystery. The Committee's conclusion was:We remain concerned, however, that in real terms cases are much more costly today that they were ten years ago. We therefore recommend that the Department should urgently set in hand further research to seek to identify the causes of these increases; to establish whether or not they are justified; to take necessary action to reinforce effective control over the assessment and payment of costs; and to eliminate additional costs arising from delays and shortcomings within the systems of civil and criminal justice.Has the Treasury minute been acted upon? It says:In the coming months, the Lord Chancellor's Department intends to issue a public consultation document setting out proposals for a less formal (and cheaper) method than trial in open court for handling smaller personal injury claims. There will also be proposals for a concurrent increase in the small claims jurisdiction.Has that consultation document gone out? What is its status? What are the early reports, if any, on its progress? It is important that we should be told that tonight.
Treasury response No. 122 says:The results of the National Audit Office Study of the administration of the Crown Court are expected soon.Has that been published? Can we know what it contains? It also says:The Department is committed to working with other agencies in the criminal justice system to identify and reduce areas of delay and cost in the passage of cases through the courts.I have not seen any evidence that real work is being done on that. I am glad that the Financial Secretary has sent a colleague over to find out. I am sure that we all want to know.
I know that many others wish to speak. My hon. Friend the Member for Cardiff, West (Mr. Morgan) probably wants to speak about a subject that has interested him for a long time. I hope that the Minister will realise that our concerns stretch across all the reports. We all congratulate the civil service on the magnificent work that it does and we stand by it and desire to strengthen the ethos of its 643 work. We must also register that there are grave disquiets about many of the tendencies and trends that we have witnessed over the past year.
§ Mr. John Horam (Orpington)
I pay tribute to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), the Chairman of the Committee. He has been relentless in his vigilance in this respect and we all know of the conscientious way in which he approaches his task. The officials of the National Audit Office, under the Comptroller and Auditor General, produced some excellent reports in the course of the last long Session of Parliament. It is a pity that we do not have sufficient time fully to digest all the reports. Because there were so many of them, some have had to be dealt with rather quickly. Nevertheless, they have done a good job.
The members of the Public Accounts Committee have been through many of the reports. We have talked to the officials about the problems that they encountered in compiling the reports and then had two-hour sessions with the permanent secretary, the ineffable Sir Duncan Nichol, or whoever, flanked by 15 or 20 civil servants, no doubt learning how to deal with irritating Members of Parliament. We have read the draft reports containing the Committee's final recommendations. Lastly, we have come to the words of the Financial Secretary in reply to our mammoth effort.
What strikes me about the words of the Financial Secretary is that they are brief—terse and economical are other words that spring to mind. I am not against brevity. There is enough prolixity in this place to allow us to welcome any brevity. However, that otherwise admirable quality is carried to extraordinary lengths.
Let us take a typical report, which happens to come to hand, of no fewer than 44 pages of dense text on A4. The Treasury's reply is only three and a quarter pages long, most of which consists of quotations from the report, with a large margin and lots of space in between. That is carrying what I would otherwise regard as a great virtue to an absurd length. The report's brevity means that few of the substantial charges made by the Committee are covered comprehensively. Moreover, the remarks that are made are not relevant to the strength of the case made by the Committee.
One example is the Committee's 26th report into the Chelsea and Westminster hospital. Committee members will remember the background to that issue, which I still regard as a staggering example of a major Government mistake. In London there are far too many hospital beds, and far too many expensive hospital beds. The cost of treating people in London is estimated at twice or two and a half times the cost in a suburb or further afield. Many specialist units in London do a unique job and I am not discussing those. I am talking about an average hospital case in London.
Despite that background, it was decided as recently as 1987 or 1988 to build a brand-new hospital costing well over £200 million in an area with an excessive number of beds already. Moreover, it was decided to build that hospital in the most expensive part of the capital. Chelsea and Westminster is probably the most expensive location in the entire country to build a hospital. So, in a city with too many expensive beds already, we build an even more 644 grandiose and expensive hospital only some three miles from one of the newest hospitals at Charing Cross, which is only 25 or 30 years old.
My right hon. Friend the Secretary of State for Health has not been helped by that decision, which was made only five years ago. As she has said, the position in London has not come upon us out of the blue. How many reports have been issued on the hospital situation in London since the turn of the century? I cannot remember whether it is 11 or 21, but it is a substantial number. They have all come to the same conclusion as my right hon. Friend—there are too many hospital beds. Nevertheless, the Chelsea and Westminster hospital was built.
We then asked the Treasury to comment on that decision. The PAC concluded:In view of the very high costs of building in London and … that surplus beds were increasing in the capital, we are surprised that the Management Executive, in deciding to build this hospital, did not have regard to the wider pattern of hospital[s] … in London and the … Home Counties".The Treasury's response was:The Department took account of the effect of the project on hospitals within the North West Thames Regional Health Authority (the health authority) and in other Thames Regions before approving the project in December 1988. The project was approved because it would achieve improved quality of care, together with a reduction of beds in line with the Region's strategy, and would lead to significant revenue savings.My complaint about that response is that it is extraordinarily brief and does not deal with the full burden of the case put by the Committee. Furthermore, it does not deal with the PAC's point that the project should have been viewed in a wider context, not merely of the authority m question but of all the hospital provision in London and the home counties. The response does not take on board that broad picture.
The PAC's second conclusion—thatthe project should be considered in the broadest geographical and organisational context and not limited to narrow local factors, however attractive the proposals may be to local interests"—makes substantially the same point. It asks the Treasury to lift its eyes from the specific, look more broadly at the regional scene and see whether the decision was right. The Treasury's response was:The Government already recognises the importance of this"—the broader scene.Treasury guidance on project appraisal makes it clear that projects should be evaluated in this way.There is no recognition of the fact that the project clearly was not evaluated in that way but was simply a restatement of a generalised Government position, which seems to have been totally ignored in that respect.
The PAC noted that a consequence of spending all that money in one place was that other valuable projects in the north-west had to be delayed. No fewer than 24 different projects of varying sizes worth £120 million had to be delayed because all the money was being shovelled into building the Chelsea and Westminster hospital. So we concluded:We note that the North West Thames Region relied on loans of over £56 million from other regions to finance the project"—not only did it have its own money but it had to draw on other regions, which therefore suffered delays in their projects—and paid interest of some £4 million on the loans, thus increasing the cost of the project.The Treasury replied in one sentence: 645These loans incurred no extra cost for the NHS as a whole, and this practice is an appropriate way to make best use of available capital monies.Was it an appropriate way to make best use of capital moneys to take £56 million from all the other regions and shovel it into a hole when the project was vastly over-expensive, not needed and of dubious long-term value, although I am sure that it is a splendid hospital? That is being economical with the truth in a big way. Technically, the Treasury was right. With its usual skill, it seized on a technical point but ignored the wider issue, which is a pity.
I too congratulate my hon. Friend the Financial Secretary on the interest that he appears to be taking in the PAC's work. After all, we are a part—albeit a small part —of the business of trying to keep the leviathan of public spending under control. Therefore, when the Committee comes up with an example, as in the case of the Chelsea and Westminster hospital, that is scandalous in terms of how the project was managed and the strategic decision that lay behind it, the Government should give a more substantial reply.
§ Mr. Rhodri Morgan (Cardiff, West)
I am half apologetic for being yet another Welsh Member to speak in this debate—[Interruption] I said half apologetic. You, Mr. Deputy Speaker, and your predecessors who have chaired the debate may be forgiven for thinking that it was the annual Welsh day debate and that some English interlopers had fallen into it by mistake. Not so. The point is that there has been a lot of interest in the work of the PAC in Wales. Over the past two or three years the PAC has taken a great deal of interest in quangos for which the Welsh Office is responsible and in quangos operating in Wales for which United Kingdom-wide Departments are responsible.
The interest in Wales has centred in the main on the investigation into the 1991–92 accounts of the WDA, but there are many parallels with the English investigations that the PAC has carried out, too.
Tonight we are looking at how the Government responded to the criticisms levelled by the PAC. In the case of the WDA the response has come in three forms. First, we have the formal Treasury minute, but, as has already been pointed out, the Treasury tends to hide behind nit-picking technicalities when it can. We therefore do not always learn much from Treasury responses. The Treasury should be a little more frank and a little less technical and defensive when it responds, as the PAC is making good points.
The second response about the WDA was last week's statement by the Secretary of State, which also tended to be rather light, attributing all the blame to officials who have had to walk but claiming that everyone else is clean, including the previous chairman, who can stay, say the Government, in his other public appointments. Obviously, previous Secretaries of State are clean too, we are told: after all, they are previous Secretaries of State. They should not be forced to give up appointments that they have recently been given by the Government.
Lord Walker became chairman on 1 April this year of the English equivalent of the WDA—the new Urban Regeneration Agency. So the Government will not 646 suddenly agree, just because the boring old PAC has found that he has done something wrong, that they were wrong to appoint Lord Walker head of the URA, which has a budget 10 times the size of the WDA's. The Government would never do that.
Have these responses been adequate? We have also had the internal report by the WDA—Sir John Caines's report, to which my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) has already referred. These reports do not express how the people of Wales feel—which is that they have been let down by the WDA's goings on of the past few years. The all-pervasive culture of arrogance needs to be uprooted from the WDA.
I would not be speaking tonight if I felt that the three responses had been adequate. I still believe that we are underplaying the issue. I would go as far as to say that the Chairman of the PAC underplayed it, but that is to do with his personal style; it is not a criticism of him. Unfortunately, he is not in his place to hear my remarks at this moment.
My right hon. Friend the Member for Swansea, West (Mr. Williams) has already alluded to Operation Wizard and the question whether it was properly dealt with. The Secretary of State referred to it last week. The PAC has heavily criticised the operation, but it was rebuffed by the Secretary of State in his statement. He said that the Comptroller and Auditor General did not pick up any improprieties in the business of the hiring of consultants to do £300,000-worth of work. Parliament was not told what the work was for, but the Secretary of State did not find the matter irregular in any narrow accountancy sense, so we are given to believe that it did not really matter.
More broadly, though, it is surely not right that a body for which the Secretary of State is responsible can decide, with his authority but not that of Parliament, to consider privatising itself. It was not aiming to bring in private capital by increasing its activities and leasing factories to private developers—not at all. That might have been said to fall legitimately within the discretion given to a Secretary of State, or even a chairman of the agency. It can legitimately consider how to bring in private capital.
But that is not what Operation Wizard was about, as the PAC minutes of evidence make clear on page 67. In appendix 10, the PAC put the question:Did any senior executives or Board members have talks with any outside body or persons about finance for either a management buy out or a management backed buy out ?The agency's answer was:The initial studies concerned either a share placement or flotation whilst later studies considered a partnership approach".So what was under discussion was the selling of shares in the WDA and the floating of the WDA on the stock exchange.
Unless Parliament authorises a move towards privatising an agency and is given a Government explanation from the Dispatch Box, it surely cannot be right for £300,000 to be spent on consultancy fees with the intent of selling shares in the WDA on the stock exchange. That requires parliamentary approval, and it plainly did not have it. That is why the people of Wales still think that the top brass at the WDA, who were actively encouraged by Lord Walker, ought to be asked to pay the £300,000 back. If the privatisation plan had gone through, they might have been major partners in the management buy-out, proceeding to a share flotation, and they might easily have become millionaires. As the flotation did not go through, why 647 should the taxpayers have to pay for the one-way bet that the top brass took on privatisation without authority from Parliament?
In short, the Secretary of State, in total confidence and secrecy, was able to authorise a complete change in the WDA's status, as established by Parliament, without explaining anything about it to the House.
§ Mr. Alan Williams
Does my hon. Friend agree that what is singularly and worryingly devious about the whole situation is the fact that the Secretary of State authorised this not using Welsh Office money, which would have been identified by Parliament, but at arm's length via the WDA, which gave him a greater chance of concealment?
§ Mr. Morgan
Perfectly right. The point has been made that this was not explained to the House—but it goes further. The matter was specifically denied in the House when, at oral questions, my hon. Friend the Member for Carmarthen (Mr. Williams) asked the then Secretary of State, in the summer of 1989, whether the WDA had authorised Barclays de Zoete Wedd to do some studies on the privatisation of the WDA. The Secretary of State replied that my hon. Friend's information was wholly inaccurate. At least my hon. Friend got the name of the merchant bank right. We now know that Barclays de Zoete Wedd did indeed carry out the studies.
The Chairman of the PAC also referred to Neil Smith and the famous episode of the Shapes model agency. Although an extremely interesting issue, it too was underplayed in the course of this debate. Great play has been made of the fact that the Shapes model agency was unregistered. It had been registered at one time but the registration had lapsed. Is that the most important issue, or is it that the agency was run by a convicted brothel keeper? The latter is probably a better indication of the dangerous waters into which the WDA was entering. The full flavour of that has not come out in the debate. [Interruption ] My hon. Friend the Member for Pontypridd (Dr. Howells) makes the point that the ethnic origins of a brothel keeper could be considered important matters of public concern. I do not think so.
The pattern is the same whether in England or Wales when one is dealing with a failure to monitor the activities of quangos. What does Dr. Gwyn Jones have to do to get himself sacked from public office in the BBC and S4C, and what does Sir Robin Buchanan have to do to prevent his being promoted from chairman of the Wessex health authority to deputy chairman of the National Health Service Supplies Authority? What do those people have to do to prevent their being moved not simply sideways but upwards after some ghastly misdoings have been discovered by the various parliamentary monitoring processes of which we and the debate are a part? What do they have to do before they finally get the chop because Parliament has said that they are not fit and proper people to be in charge of expenditure and responsible through the Secretary of State to Parliament for millions of pounds of public money? In that context, it does not matter whether they are operating in England or in Wales.
The hon. Member for Ceredigion and Pembroke, North (Mr. Dafis), who is not in his place, reacted in a Pavlovian manner to Sir John Caines's report about what was supposed to happen in the WDA following the uncovering of the shenanigans. Page 9 of Sir John's summary report contains a reference which I think the hon. Gentleman misquoted. He 648 implied that one of Sir John's recommendations was that Welsh people should not be appointed to the WDA board. Sir John did not say that. He said:The Secretary of State should be ready to seek more widely to find board members, even if that risks diluting the proportion of Wales-based people serving on the board in order for the board to be seen to be above criticism.That could easily mean talented Welsh exiles working in industry in America, Scotland, England, Germany or anywhere else, as distinct from people of non-Welsh origin who are working in Wales as bosses of big firms. Such people often tend to be appointed to the WDA board.
The Pavlovian reaction by the hon. Gentleman was absolutely predictable. He took it to be an admission that Wales cannot run its own affairs. But that is not what the report is about. It is about how to clean up an act that has clearly been going wrong and how to prevent a recurrence of the problems.
Other matters on the same page of the report are far more important than the ethnic origins of board members. For example, it refers to procedures that I thought were already in place, but I presume from the report that they are not. That has lessons for the whole world of quangos. At board meetings, a chairman or any member of the board can declare an interest. One assumes that, from that moment on, those people take no part in the discussions, but it appears that that has not been happening.
The report recommends:No relevant papers should be provided to a board member with a declared conflict of interest.I should hope not, and I should like to think that that has been the practice in the past, but I am certain from reading Sir John's report that it has not. That means that those with a conflict of interest are still given the papers that are provided to other board members.
The report states:At board meetings once declarations have been tabled the board member who has declared an interest should exclude himself from the meeting for the discussion of the items giving rise to the conflict.That has not been happening, either. Therefore, there is no rule to say that board members should declare an interest but cannot stay there and take part in the discussions. What is the point of declaring the interest? There is nothing to stop that board member using his influence and contributing with his specialised knowledge of the project because he has an interest in it. I had hoped that that was happening all along, but evidently it was not.
Before the Treasury responds to the criticisms, it should read Sir John's document. It states:The Secretary of State should ensure that no two or more board members should have a common other directorship regardless of whether any conflict of interest exists at the time.I assume that that cannot be a reference to anything other than the problem that has arisen over Dr. Gwyn Jones becoming a board member of Tesco at the same time as the managing director of Tesco became a board member of the WDA. That is obviously thought undesirable. As far as I am aware, that is the only example on the WDA board. However, it is not a matter just for the WDA: it should become the basis of a generalised Government rule for all quangos.
We have learnt other lessons about protection for whistleblowers. Time and again, hon. Members have said how important they are in supplementing the abilities of the National Audit Office in getting behind the defences put up by Departments and quangos. We cannot work without whistleblowers. Members of Parliament are 649 dependent on them, perhaps me more than most. They are important in the process of monitoring what is happening and identifying any waste of public money.
We must deal with gagging clauses imposed on people who are asked to leave their jobs because they have fallen out with the chairman or something like that. My recollection is that last year the Treasury said that gagging clauses should be banned in the public sector, but I do not know whether any action has been taken to ensure that. Because of the fear of industrial tribunals and the fact that they are held in public, every time there is a major row involving someone who knows where the bones are buried —someone who can identify where there has been a significant waste of public money—the natural reaction of quangos and Government Departments is, as the PAC's Chairman said, to spend yet more public money on a gagging clause to cover up that waste. They want to prevent that person from revealing the waste to a Member of Parliament, a newspaper, a permanent secretary or whatever.
I hope that tonight the Financial Secretary will make a firm declaration that gagging clauses in the public sector will be banned. We must protect whistle blowers and strengthen our monitoring function and control over the waste of public money.
§ 9.6 pm
§ Mr. John Maxton (Glasgow, Cathcart)
As a Scottish Member of Parliament, I feel slightly nervous about following all the Welsh Members who have already spoken. I want to take this opportunity—and I intend to do so annually—to congratulate my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), the Chairman of the PAC, on what must be his 10th year in that position. I remember him taking over the Committee after the general election in 1983. Before that, I had served on the Committee under the chairmanship of Joel Barnett. Although my right hon. Friend has chaired the Committee for 10 years, his speech this evening has shown that he still retains his enthusiasm for the job, which he does with the same verve now as he did 10 years ago.
When I served on the Committee, one of its inquiries was into the De Lorean affair. When I was dragged by my children—or perhaps it was the other way around—to see the film "Back to the Future", I was interested eventually to see a De Lorean car in operation, even if it was only on film.
I am always sorry that more hon. Members do not take part in these debates. If they looked at all the reports, not just those listed on the Order Paper, they would realise the opportunities available to raise issues related to their constituencies or areas. They could then put on record, both here and in the local newspapers, various issues of concern. My problem with today's debate is that, because I was not in the House last Thursday, I did not know that this debate was to be held today. I did not receive my Whip until late on Friday because I had left home early in the morning before the post had arrived. Therefore, I was not able to get hold of the relevant reports until this morning. I regret that and I wish that there were some way of providing longer notice of debates.
I do not intend to speak to any of the reports that are listed for special consideration. I want to concentrate my 650 remarks on the 20th report on the national health service accident and emergency departments in Scotland—[Interruption.] Hon. Members may be expecting me to do so. It is an important report, and it may be an accurate report. My concern is that it has political implications for those of us who serve in Scotland because it could be used by a Government seeking to cut certain services within the NHS and especially within the city of Glasgow, of which I am one representative in the House.
Paragraph 8 of the report states:In Glasgow, the provision and location of Accident & Emergency services largely reflect historical factors. The rationalisation of these services would help avoid expensive duplication of facilities and result in a more efficient and effective service to the public.I do not know what that would mean to my constituents in Cathcart. Rationalisation usually means that one or two departments—if not more—will be closed and then centralised elsewhere.
Like most major cities, Glasgow is divided into south and north by a river. People on the south side want services on the south side and people in the north want services on the north side. My constituency is located on the south side of Glasgow where there are two accident and emergency services in two hospitals. One is in the Victoria infirmary and the other is in the Southern general hospital. The one that is under threat—if there is a threat—from rationalisation is the Victoria, which directly serves my constituency although the hospital is not in my constituency.
If the accident and emergency service there were to close, my constituents would have to travel by bus into the centre of Glasgow—if they called an ambulance, it would be even more expensive—and then catch another bus nearly five miles in the opposite direction to the Southern general hospital. The alternative would be to change buses and cross the river to the Royal or the Western infirmary. That would mean that they would have to travel considerably further; the risks would be much greater and more people might die. I am talking about my constituents.
Did any member of the Public Accounts Committee go to Glasgow to examine what the closure of an accident and emergency service in one hospital would mean to the people who have to travel into and out of the city? I believe that, if the accident and emergency service at the Victoria were to close, it would be the first step towards closing the entire hospital. That is the inevitable conclusion. It would mean that my constituents would have to travel greater distances, not only for accident and emergency services but for all hospital treatment.
It is not good enough for the Committee simply to say that there should be a rationalisation of services. The report states that the need for rationalisation has long been recognised—at least since 1985—but that nothing has been done. Perhaps nothing was done because Greater Glasgow health board recognises that it cannot close accident and emergency departments willy-nilly without putting something else in their place.
The report states that there are problems with what are called unnecessary attendances, although I accept that the claim is made in a survey carried out by the health board, not by the Committee itself. It is claimed that one third of patients do not need to attend the accident and emergency department. Who said so? Who judges whether someone is attending such a department unnecessarily? Let me relate a small personal story to illustrate my point.
651 About a year ago, my son was having a shower in one of those showers that is part of the bath. He slipped and cut his foot on the plug, which is one of those that go up and down. I heard him shout and I went into the bathroom. On entering, one would have thought that it was a scene from "Psycho". There was blood all over the walls and the bath. I thought that he had done serious damage to his foot, so inevitably, and rightly in my view, my wife and I put pads on his foot and I took him to the nearest accident and emergency department. When the pads were removed, staff had difficulty in finding the cut. It was a razor-sharp cut to the padded part of the foot that sent blood everywhere but quickly abated. The nurse did not even have to stitch it; all she did was put some webbed tape across it.
Was I right to take my son to hospital? Was it an unnecessary admission? In my view, it was not. I had every good reason to believe that my son required hospital treatment. That was my assumption when I saw blood everywhere, but I am sure that someone conducting a survey would have regarded it as an unnecessary attendance. Who makes such a judgment? Someone may walk into an accident and emergency department because he has pains in his chest and it may turn out to be indigestion.
There is speculation in Scotland about the helicopter ambulance service. Inevitably, helicopters are required to take people from remote areas to hospital. I have read a proposal in newspapers—I know that what one reads in newspapers is not always true—that if a general practitioner calls the ambulance service to take a patient to hospital and the hospital decrees that it was unecessary for the patient to go to hospital, the GP has to pay for the helicopter from his own funds. That is absurd and should not even be considered, but apparently it is the way that the Scottish Office is thinking.
The report does not suggest where people should go after 5 or 6 o'clock at night when most GPs' surgeries are closed and there is one doctor, who often does not belong to the practice, on duty to deal with all the patients who call. What are parents expected to do when a child falls and cuts himself so badly that he requires stitches, or breaks an arm or twists and possibly breaks an ankle? Should they go to the accident and emergency department? Would that be an unnecessary referral? If there is an alternative, I wish that the report had spelt it out.
I believe that there is an alternative. Greater Glasgow health board is considering a proposal that health centres —there is one in the major housing scheme in Castlemilk in my constituency—should provide a 24-hour service and that a doctor should always be on duty with full X-ray equipment to deal with cuts and breaks, to treat heart attacks with resuscitation equipment and to refer people to hospital; fewer patients would then use an accident and emergency department.
In many ways, that would be a more efficient way of dealing with those patients, but I do not believe that it would be cheaper if health centres had to have radiographers to work X-ray equipment or technicians to deal with plastering. It would be no cheaper than keeping open accident and emergency departments in all hospitals. That way may be more efficient, but I do not believe that it is cheaper. If we could achieve that fuller service in our health centres, I would probably welcome it. However, I do not see those proposals coming and I certainly do not see 652 a Government who are currently intent on cutting public expenditure allowing Greater Glasgow health board to do that.
The report may be perfectly adequate. However, I am afraid that it will be thrown in my face and in the faces of my Scottish colleagues when there are proposals to cut accident and emergency services in Scotland. That is my concern about the matter.
§ Mr. Nicholas Brown (Newcastle upon Tyne, East)
As my hon. Friend the Member for Cardiff, West (Mr. Morgan) said, one could be forgiven for thinking that this is a Welsh night with the occasional English and even more occasional Scottish interloper. At the beginning of last year's debate, I congratulated my hon. Friends with Welsh constituencies for making full use of the opportunities presented by this annual debate. Quite rightly, they have done the same thing very effectively this year.
However, I find it disappointing that, again like last year, only a very small number of Conservative Members have chosen to participate in the debate. Before dealing with matters of substance, I want to place on record—as other hon. Members have—my thanks to my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) for his work and for that of the Public Accounts Committee. Under his chairmanship and functioning in a bipartisan manner, the Committee continues to speak with great authority and to command respect from all parts of the House.
Depressingly, however, there are recurrent themes when one reads the Treasury replies to this year's Committee reports. I wonder just how much notice the Government take of the Committee's work. Year after year, we are assured by successive Financial Secretaries that the Government take the issues very seriously. However, there are recurring themes. I find it very difficult to equate the tough language of the Chief Secretary to the Treasury on public expenditure matters with the facts as revealed by the PAC.
Among those depressingly recurrent themes is out and out fraud. Fraud is identified in reports ranging from the Welsh Development Agency accounts investigation through the important report on countering VAT avoidance to the report dealing with the accounts of the Forward civil service catering arrangements.
Inevitably, and equally depressingly, there is yet again a report that highlights losses to the public purse as a direct result of the Government's privatisation programme. That is a recurrent theme in these debates. This year, it involves the issue of the sale of the 12 regional electricity companies. That report takes its place alongside previous reports on the sale of Rolls-Royce, the royal ordnance factories, Rover group and the water authorities.
The 26th report, on the Chelsea and Westminster hospital, also sets out a sorry tale of losses brought about as a direct result of the Conservative party's ideological absurdities, as my hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis) explained.
§ Mr. Page
To try to say that the losses of various aspects of Government, as revealed by the PAC, can be put down purely to the Government's privatisation policy is rather simplistic. If the hon. Gentleman looks back over history and considers PAC reports under a Labour 653 Government, he will find equal losses. I would hesitate to suggest that we can pin everything on one particular process.
§ Mr. Brown
One will not find losses due to privatisation or to property speculation. I am drawing the attention of the House to two areas in which the Government's ideological commitment have got the better of their other stated objective which is the sound management of public finances.
The Government's privatisation programme has led to the interests of the new shareholders taking precedence over the legitimate interests of the British taxpayer. Similarly, the Government's ideologically driven obsession with an ever-rising property market in the late 1980s led to substantial losses, absurdities and bankruptcies in the early 1990s. Any hon. Member who represents a constituency that has the misfortune to be saddled with an urban development corporation will know what I mean. Developments that are predicated on a rising property market tend to come unstuck when the property market does not rise.
On the subject of property values and safety, my hon. Friend the Member for Hodge Hill referred to coastal erosion. That was particularly selfless of him, as Birmingham is probably under no immediate threat. However, on second thoughts, if work proceeds at the present pace identified by the PAC, who knows, my hon. Friend might be congratulated on his perception. At least, as the water laps around his ankles, my hon. Friend will not face the reproaches that will be directed at the three previous Ministers of Agriculture, Fisheries and Food, all of whom represent Anglian constituencies. Presumably, the right hon. Member for Suffolk, Coastal (Mr. Gummer), who has presided over the matter, is willing to see more than his vote being eroded.
Two other firm favourites of Public Accounts Committee debates are the Ministry of Defence and, of course, the affairs of Northern Ireland. This year, the Ministry of Defence is again represented by a range of reports, most significantly those dealing with major defence projects, spare parts and the costs of the Gulf war. As well as the report dealing with the premature retirement of teachers in Northern Ireland, this year there are also reports on the Northern Ireland Local Enterprise Development Unit and on the payment of income support in Northern Ireland.
It is almost as though the Public Accounts Committee, aware of its heavy responsibilities and the detailed routine —some might even say the dull nature—of much of its work, has set out to enliven this year's debate with a little topical comic relief. As well as the report dealing with the catering arrangements at the Treasury, we have a report dealing with the Treasury's own in-house legal aid scheme as it applies to Chancellors of the Exchequer—not, of course, that there is much chance of getting the money back, even though it was described asastonishingly good value for moneyand "extremely cheap" by Sir Peter Middleton. One wonders what Sir Peter was using for comparison. I thought that the Conservative party was in favour of competitive tendering. We could certainly have used a little competitive tendering in that case.
654 However, on to more serious matters. My hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) spoke of the importance of economic development in Wales and drew upon his extensive knowledge of 20th century history. Last year, we discussed the affairs of the Development Board for Rural Wales, headed by a Conservative party political appointee, a Mr. Glyn Davies. The report criticised the outrageous retirement settlement to the retiring chief executive of the board. It criticised the £180,000 capital cost of his pension enhancements and the consultancy arrangement which enabled that gentleman, in retirement, to work for up to 150 days on unspecified work for a fee of £200 a day.
That scandal, the clear result of Conservative party political jobbery in Wales, is echoed in the equally serious report this year dealing with the Welsh Development Agency. Again, the agency is headed by a Conservative party political appointee, this time a Dr. Gwyn Jones. Again, the chief executive has gone in a welter of criticism. Again, there is a massive loss, this time £1.4 million, on redundancy payments. Again there is criticism of ineffective supervision by the Welsh Office. Again, the Public Accounts Committee criticised over-generous retirement settlements, in a manner almost identical to last year's complaints against the Development Board for Rural Wales.
Of course, there is the free personal use of cars for private motoring and what seems to be the bizarre arrangement whereby an American citizen, a Mr. Carignam, was able to remove and sell £53,000 of development board furniture and repay the board $15,000 for it. That is effectively fraud. The Public Accounts Committee tells us that the appointment of the director of marketingconstituted a major financial risk which should have been avoided.The Chairman of the Public Accounts Committee, unusually for him, went much further and said that it was a case of a "genuine 24-carat crook".
No doubt the same care and diligence was exercised in the director's appointment as was exercised in the appointment of the agency's chairman, who was chosen at a Tory party fund-raising lunch. Undoubtedly, that is what the Prime Minister was referring to last Tuesday when he told the House about the "great many secret sources" of Conservative party funding. He said:they are all cheese and wine parties up and down the country."—[Official Report, 19 October 1993: Vol. 230, c. 144.]My right hon. Friend the Member for Swansea, West (Mr. Williams) drew telling links from a number of the themes that emerged from this sorry affair.
My hon. Friend the Member for Pontypridd (Dr. Howells) drew attention to the corrosive effect of political interference on public life and the independence of the civil service. The grotesque counterpart to that unpleasant political jobbery is the squandering of some £300 million in European Community grants for party political motives. Although the Conservative party is content to see large sums of public money squandered in a most outrageous way through political jobbery in Wales, it is not willing to attract European development funds to areas respresented by its political opponents.
We have been warned by the Regional Affairs Commissioner of the European Commission thatsignificant amounts of money allocated to the UK risk being lost".655 A Member of the European Parliament, Mr. Wayne David, has warned us that his constituency—an area that is supposed to benefit from the work of the Welsh Development Agency—will lose some £11.9 million in potential European Community grants because the Government will not provide matching funding.
The issue of blatant party politicking raises its ugly head again with the Conservative party attempting to redraw Britain's list of needy areas to include such famous centres of urban deprivation as Kensington and Chelsea. This outrageous, politically driven scandal is a blatant attempt to punish poor communities for having voted Labour and to bribe marginally better-off communities to retain a misguided allegiance to the Conservative party. It is pathetic, irresponsible and wholly in character for this Government.
The topic of irresponsibility brings me to the two reports dealing with the Government's privatisation programme. The report dealing with the sale of the two generating companies, National Power and PowerGen, highlights the lack of competition in the appointment of some of the Department's 37 advisers on the sales, arid the Department's decision not to publish the sums of money paid to them. The Public Accounts Committee made the point—the Chairman of the Committee has made this point in previous debates—that the compressed timetable for the sales and the resultant pressure on Departments to do things quickly should not be used as an excuse for uneconomic arrangements.
The same point about the appointment of advisers without competition is made in the report dealing with the sale of the 12 regional electricity companies.
§ Mr. Maxton
I point out to my hon. Friend that the point about advisers also applies in the sale of Scottish Power and the Hydro Board.
§ Mr. Brown
My hon. Friend is right to draw the attention of the House to that point.
The Public Accounts Committee drew our attention to the fact that the taxpayer did not share in the higher than expected profits for the first year following privatisation. In short, the Committee told us that the interests of the new shareholders have taken precedence over the legitimate interests of the taxpayer. Nor has the Government's stated objective of achieving a broader share ownership been achieved, despite privatisation having been accompanied by the most generous arrangements yet for employee participation. As the total level of shareholdings has fallen from 9 million to 3 million since privatisation, it is clear that people have reasonably taken a short-term gain, rather than sought a long-term investment.
Increasingly, people believe that privatisation of the public utilities is like the national lottery but without the attendant risks. As the stated objective of wider and deeper share ownership is not achieved, it seems reasonable to ask why the British taxpayer should be forced to subsidise the arrangements.
My right hon. Friend the Member for Swansea, West referred to the cost to the taxpayer, and was challenged gamely, but inaccurately, by the Financial Secretary. The issue was the indexation of prices for the public utilities. I regret that my figures only go up to 1991. I had hoped to have civil servants to update them beyond that, but, alas, it was not to be. Taking 1979 to 1991, the average change per year on the 1978 base is 7·9 per cent. for electricity, 8·6 per 656 cent. for gas, 7.7 per cent. for telephones and 11.4 per cent. for water charges, although the all-items retail prices index increase is only 7.4 per cent. Public utility prices under the Conservatives have risen dramatically ahead of the inflation rate. The hon. Member for Hertfordshire, South-West (Mr. Page) is being uncharacteristically obtuse.
The Government say that they are keen on performance indicators, on publishing lists and setting targets. I wonder whether it has occurred to my right hon. Friend who chairs the Public Accounts Committee that the PAC might adopt such an approach. Lists could be provided year by year, indicating Government Departments in order of efficiency. Incidence of fraud, loss of public money proportionate to the overall budget, perhaps even a list of the individual Departments' ability to achieve stated performance indicators could be provided. Such a way of viewing things would promote healthy and good-natured competition among Ministers and senior officials. We could debate such an overview of the effectiveness of Government Departments as part of our annual debate.
No one could be in any doubt where such scrutiny would leave the Ministry of Defence. The report dealing with the major defence projects highlights a grotesque state of affairs surrounding a number of significant defence procurement decisions—especially the AOR1 . We are told that the vessel has been delayed by three years—a 74 per cent. overrun—and that extra funding of £53 million was required, which Harland and Woolf was just given by the Northern Ireland Office.
My hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) referred to the De Lorean car and its performance in the film "Back to the Future". It is not the only Northern Ireland project to perform less well than was promised. The AOR1 story is one of the biggest defence procurement scandals of the post-war era. There are currently more than 2,000 faults in it that require correction and one wonders why the Ministry of Defence does not take the obvious course and have the same vessel refitted at the same yard that delivered the AOR2 to the Ministry of Defence defect-free. The report dealing with prices paid for spare parts highlights concerns. It is not a small matter, since the Ministry of Defence spends some £2 billion a year on parts —although not, apparently, on labelling them.
What are we to make of the £79,000 that the Ministry of Defence contrived to spend on a party—not the Conservative party, but a real party with refreshments and floodlights? That is the way in which savings were spent. Is disciplinary action to be taken? No. The Ministry of Defence does not take effective disciplinary action against those who come under that Department. We know that, because a report from the Public Accounts Committee in the past year told us precisely that.
One other report to which I wish to refer is the 30th report of the PAC entitled "Countering VAT Avoidance" It drew our attention to the fact that the Committee was concerned that Customs and Excise has so little information on incidence of tax at risk from avoidance. The report continues:We are concerned that not enough has been done in the past to monitor the effectiveness of avoidance countermeasures.My hon. Friend the Member for Hodge Hill told us that the Customs and Excise had no age profile of their debt. There is clearly cause for concern in the report.
When the Government firmly intend to extend value added tax to the domestic fuel bills of the poorest in our 657 society, when they intend to make the poorest fifth of consumers spend an average of 12 per cent. on fuel and pay tax on top, while the richest one fifth pay 4 per cent. only —although they will pay 17.5 per cent. VAT on top—it is surely right that the House should look again at whether the VAT that is supposed to be paid now is collected. The Government have a duty to collect what is due—to clamp down on graft and fraud and on inefficiencies in the public sector.
The Public Accounts Committee does a first-rate job in drawing such matters to the attention of the House. However, I cannot say that the Government do a first-rate job in responding to the matters that the PAC draws to our attention because the same issues and the same themes, often in the same Departments, recur year after year after year. That disgrace is the stark truth of the matters that face the House today.
§ The Financial Secretary to the Treasury (Mr. Stephen Dorrell)
The hon. Member for Newcastle upon Tyne, East (Mr. Brown) struck an uncharacteristically partisan note in his closing comments. He did not pick up the perfectly proper remarks by my hon. Friend the Member for Hertfordshire, South-West (Mr. Page), who drew attention to the fact that the Public Accounts Committee has existed for well over 100 years and that, in that time, it has made it its business to report on the inadequacies in the public service. It is in no sense to undermine the commitment and quality of our public service to draw the attention of the House and of the hon. Member for Newcastle upon Tyne, East to the fact that the PAC throughout its history has found inadequacies and has performed the important task of reporting them to the House so that we can collectively ensure that the high standards that we set are maintained as effectively as possible.
I congratulate the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). I congratulate him personally because, as the hon. Member for Newcastle upon Tyne, East observed, he has been Chairman of the PAC for more than 10 years. As he himself said, he was first a member of that Committee in 1965, almost 30 years ago. It is a considerable record of service to the most important and the longest established of all our Select Committees and it is a record to which, I am sure, the whole House wants to give credit.
It is not merely a matter of personal service; it is also a matter of the efficient conduct of business in the Committee. The right hon. Member for Ashton-under-Lyne drew attention to the fact that the Committee has published 43 reports in the past year. During his period as Chairman, it has published more than 400 reports, all of them unanimous. That is a considerable testament to his success as Chairman of the Committee. As he said, it is a vindication of Gladstone's dictum that the way in which to make the Committee effective as a policeman of standards of propriety in the public service is to ensure that the Chairman of the PAC is an Opposition Member. The right hon. Gentleman is fulfilling that task in a way of which, I am sure, the grand old man would have approved.
As my hon. Friend the Member for Mid-Kent (Mr. Rowe) observed, the European Community might do well 658 to copy some of the systems that we have here for enforcing propriety in the expenditure of public money. One might say that that should be the case not merely in terms of propriety but in terms of the budgetary disciplines that we should all want to see in that institution.
This is the day on which the Committee reports to the House and gives an opportunity for the House to give credit to the right hon. Member for Ashton-under-Lyne for the tenure of his chairmanship of this important Committee. It is also an opportunity for the whole House to reaffirm the debt that we all owe to the quality in general of our public servants. As I said, merely to report on a few lapses, important though those are, does not undermine our recognition of the quality of the vast majority of the people who work in the civil service and of those who work more generally in the public service. We are indeed fortunate in this country in the standards of propriety and honesty that we have in the public service.
The PAC plays an important part in the support mechanism for those standards within the public service. All of us in the House want to see those standards maintained and we shall never be content until the happy day, which my hon. Friend the Member for Hertfordshire, South-West rightly believes will never dawn, when the PAC can report to the House in its annual debate that it can find no example of inadequacy in the public service.
The commitment to continue to enforce, to maintain and, where possible, to improve the standards of our public service must not be confused with a commitment to see things continue to be done in the way in which they have always been done. The public service, like every other part of our society, will change; it always has. It is changing and it will continue to change to try to ensure the better delivery of public services. It is important to stress that we have to continue to ensure that the methods of delivery change and that the methods of management change to match current best practice without losing any of the traditional values to which we all rightly attach great importance.
That was the theme with which the right hon. Member for Ashton-under-Lyne concluded his remarks, but I think that he would agree that the general theme is the most important argument that he made in drawing together the specifics that ran through his speech. He was concerned to ensure that we had a code that set out clearly what we believe to be the standards that are required for the proper conduct of public business.
He and other speakers emphasised a theme that emerged in the debate last year—that it is important for the proper conduct of public business that we define clearly the objectives that we expect all institutions in the public sector to deliver, that we set them, where possible, finite targets against which their performance can be judged and that we require them to publish reports of their performance at the end of each year against those objectives. The right hon. Member for Ashton-under-Lyne said that we had made some progress this year towards that objective.
The Government consider it very important that we should define the standards and the outputs that we seek from the public service and test the delivery of those standards against the objectives that we set ourselves. That is what the programme of the citizens charter is about. It is about defining outputs and testing performance against those outputs.
659 The right hon. Member for Swansea, West (Mr. Williams) was worried that the proper standards in the conduct of public business may in some sense be under stress as a result of a long period of Conservative Government. He was generous enough to say that it was the long period rather than the nature of the party that concerned him. He will forgive me if I do not volunteer a solution to that problem in terms of the length of tenure of the party in government, but I recognise the enhanced importance, after a long period with one party in government, of reinforcing again and again the difference between the definition of objectives, which is the proper task of the politician, and the delivery of those objectives in an economic sense, which is the proper task of the public servant.
That is where the answer to his conundrum lies, if indeed a conundrum exists: it is our job as politicians to set the objectives and it is the task of the public service and of the Executive branch of Government to deliver on objectives set by the politicians, who are themselves accountable to the House for the setting and delivery of those objectives.
My hon. Friend the Member for Hertfordshire, South-West stressed the importance, as he saw it, of strategic management—of the Department and Ministers being responsible for strategy and officials being accountable for ensuring that that strategy is carried out. That is the proper distinction that he drew and it is the answer to the argument that was made during the debate by the right hon. Member for Swansea, West.
Having reaffirmed the fact that I agree with what the right hon. Member for Ashton-under-Lyne said about the importance of rules for the proper conduct of public business, I shall now mention the specific example in which it is common ground in all parts of the House that those standards were found most wanting in the course of the Committee's work during the past 12 months. That is the concern about what has been happening in the Welsh Development Agency.
As one Opposition Member observed, it is a cause of regret to me that this is the second debate of this nature that I have answered as Financial Secretary. Last year we were discussing the Development Board for Rural Wales and this year it is the Welsh Development Agency. The hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) spoke about the importance of the work that has been done by the WDA and I agree. It has had a record of success in delivering improved economic and structural development in Wales.
That does not excuse things that were revealed by the PAC and accepted by my right hon. Friend the present Secretary of State for Wales as disclosing a state of affairs that should not be tolerated. Clearly, matters in the WDA have not been as they should. My right hon. Friend was at pains to make it clear at this Dispatch Box last week that as long as he is Secretary of State he will seek to ensure that rules are put in place to prevent a recurrence of the events revealed by the Committee.
§ Mr. Rowlands
The Financial Secretary sat patiently listening to a number of submissions made by the Opposition. Will he now say whether he believes that Dr. Gwyn Jones should remain as a governor of the BBC and S4C, given what we have told the Minister about that person's track record?
§ Mr. Dorrell
My right hon. Friend made it clear that he does not believe that the revelations about the WDA constitute a reason for doubting Dr. Gwyn Jones's fitness to continue as a governor of the BBC and of S4C. The facts revealed by the PAC did not demonstrate that he acted in any sense beyond the law. They certainly demonstrated a want of judgment of the way in which the public resources should be used by the chairman of a public body. That is not in dispute, but there is no sense in which Dr. Gwyn Jones acted beyond the law.
I want to cover a number of other issues.
§ Mr. Dorrell
It is fortunate, but the hon. Member for Merthyr Tydfil and Rhymney and the right hon. Member for Ashton-under-Lyne both thought that this was an important point. I refer to the sale of regional electricity companies.
There is nothing for which to apologise in that respect. The right hon. Member for Ashton-under-Lyne thought that the companies should have been sold in tranches, and he doubted the basis on which that approach was rejected. The Government thought that was not the correct approach because there would have been doubt in the marketplace as to whether the end result of the policy would be delivered.
The right hon. Member for Ashton-under-Lyne suggested that that was a weak argument because everybody knew that the policy would be delivered, bur that is based on hindsight. It was much less clear at the time the electricity industry was privatised that the new market would be successfully developed. We know now that the industry was successfully privatised, and that the companies trade successfully on the stock exchange. At the: time the decision was taken, it was a question whether or not that judgment was right—and at that stage it was a judgment and not a fact. I do not agree with the right hon. Gentleman's dismissal of the Government's argument, which was a perfectly proper judgment for them to reach at that time.
The right hon. Gentleman said also that he did not believe that that was the driving force behind the Government's judgment; rather, that it was Treasury concern to see the cash in its hand in a particular year. I doubt that the right hon. Gentleman can find any basis on which to support that argument in the history of the privatisation of regional electricity companies or of the rest of the privatisation programme. We made it clear from the beginning that the case for privatising large parts of the public sector in 1979 was based on a desire to make those parts of the economy work more effectively.
When one considers the effect of privatisation on the electricity and gas industries, British Telecom and other undertakings that were taken out of the politicised management of the public sector and put into the commercial context of the private sector, it is clear that we delivered the objective that we set ourselves of improving the quality of management of an important part of the British economy.
§ Mr. Sheldon
That is not the point that I was making from the point of view of the Public Accounts Committee. The point I was making was about the speed of the action, not whether it was right or wrong. If more time had been given to it, it could have been done with greater benefit to the taxpayer.
§ Mr. Dorrell
That is the right hon. Gentleman's judgment. The greatest benefit to the taxpayer has been to deliver an electricity industry that is efficiently managed and responds properly to the signals from its customers, rather than to continue under the political management from which the industry had suffered for too long. Other things being equal, there was a gain to be made by securing a quick rather than a slow transfer of the industry to a private sector structure of management.
I have to take seriously the judgment of our advisers at the time as to how the industry could most effectively be floated on the stock exchange. Their advice was that the manner in which we did so was most likely to deliver value to the taxpayer.
§ Mr. Terry Davis
Is the Minister not in danger of glossing over a part of the defence for the 100 per cent. sale? The Department told the National Audit Office that it went for a 100 per cent. sale rather than a partial sale because it was concerned about the effect of an Opposition statement on investor confidence. When pressed at the PAC, Sir Peter Gregson, the permanent secretary to the DTI, could not point to any such statement, because it had never been made.
§ Mr. Dorrell
I dealt with the argument in what I said to the right hon. Member for Ashton-under-Lyne.
What may seem obvious with hindsight was not obvious at the time the companies were floated. The question was whether they could be successfully floated and whether there would be a successful trade in the shares of the regional electricity companies under the structure designed by the Government. We now know that that was a success, but ahead of the event we could not possibly have known that it would be.
As a former Minister at the Department of Health, I have had previous dealings with the Chelsea and Westminster hospital project, although I hasten to add that I was not in office in January 1989.
My hon. Friend the Member for Orpington (Mr. Horam) quite rightly said that judgments about the development of individual hospital projects in London should now be made in the context of the London-wide hospital position. My right hon. Friend the present Chancellor of the Duchy of Lancaster set up the Tomlinson inquiry to look at that subject as a key part of NHS management.
My hon. Friend the Member for Orpington will remember that since approval in principle was given by the 662 Department of Health for the Chelsea and Westminster hospital, the NHS management structure has been fundamentally reformed, in a way that is far more likely to reveal the kind of issues to which he referred. I sympathise with my hon. Friend's concern about whether the decision would have been taken in the same way today; unfortunately, that also runs the risk of applying hindsight to an issue that was less clear at the time.
We knew at the time the judgment was made that the Chelsea and Westminster hospital project would involve the expenditure of substantial capital resources, but it would also deliver health service care to that part of London at a lower revenue cost than the existing system of care. By that yardstick, the Chelsea and Westminster hospital investment project has been a success. The budget for patient care of that hospital is now roughly £23 million lower than it would have been had the previous pattern of provision continued.
I must add that, as the Committee has rightly identified and the Treasury minute has acknowledged, there were examples of the management of the project that we would wish to see handled differently in future. It is perfectly clear that a project of such a nature should have full-time project management within NHS capacity. The project was not unmanaged but was subject to a project management contract. It involved the full-time employment of four people who managed the evolution of the project, as a result of which we delivered lower contract values than would otherwise have been the case.
This is an important annual debate which reflects the importance that we attach to propriety in the public service. It is an honour for me, as Financial Secretary, to be able to respond to it.
Question put and agreed to.
That this House takes note of the 12th to 54th Reports of the Committee of Public Accounts of Session 1992–93, and of the Treasury Minutes and Northern Ireland Department of Finance and Personnel Memoranda on these Reports (Cm. 2145, 2175, 2186, 2199, 2226, 2257, 2279, 2310, 2341 and 2354) with particular reference to the following Reports:
Sixteenth, The sale of the twelve regional electricity companies; Twenty-sixth, The Chelsea and Westminster Hospital; Twenty-seventh, Quality of service; war pensions; mobility allowance; attendance allowance; invalid care allowance; Thirty-fourth, Ministry of Defence: prices paid for spare parts; Thirty-fifth, PSA Services account 1991–92; Forty-seventh, Welsh Development Agency accounts 1991–92; Fifty-second, Fire prevention in England and Wales.