I beg to move,
That this House takes note of the First and Second Reports of the Committee of Public Accounts and of the Treasury Minute on those Reports (Command No. 3137).
I hope that the point of order of my hon. Friend the Member for Rutland and Stamford (Mr. Kenneth Lewis) is not thought to have any special relevance either to the fact that I was about to speak or to the characer of the debate. In my experience, this is not a debate in which there is very much difficulty about hon. Members getting in to speak, nor is it a debate which, if it arouses controversy, is apt to arouse it on party lines.
The Motion which I have the honour to move asks the House to take note of the two Reports of the Public Accounts Committee. The first Report deals exclusively with the grim and somewhat archaic technicalities of the law of virement, and I do not propose to inflict on the House any comments on that interesting but somewhat recondite subject.
I propose to direct such observations which it falls to me to make to the Second Report, which embodies the main effort of the Committee in dealing with the accounts laid before it with the Comptroller and Auditor General's Report for the year 1964–65. The House will realise that the Parliamentary timetable this year, with the intervention of a General Election shortly before Easter, apart from more substantial consequences, seriously interrupted the Committee's work. It was, therefore, necessary for my colleagues on the Committee and myself to concentrate our attention on a fewer number of reports and accounts than is our normal custom.
However, we sought to deal with all the issues of major importance which arose on the relevant Report from the then Comptroller and Auditor General and, as a result of very strenuous efforts by the Committee, if I may say so, I do not think we have failed to cover anything of substantial importance. But I stress that this involved very consider- able obligations on the members of the Committee in addition to the duties which fall on all of us as hon. Members, and this is, perhaps, a factor to be taken into account by those contemplating the setting-up of further select or specialist committees.
I think that it follows from what I have said that the scope of the Public Accounts Committee is very wide. Not only do we deal with the Reports submitted by the Comptroller and Auditor General. We also have the right and duty, when appropriate, to look at all accounts which, by Statute, are laid before Parliament. May I take this opportunity of stressing that that includes the accounts of the nationalised industries. If I may refer to an earlier observation of the Postmaster-General, we do not regard the discharge of the duty in that sphere as what he described as "theoretical".
The work of the Committee to which this report relates refers to its normal work on the reports and accounts of the year. I would, however, invite attention to the third paragraph of our Report which relates to a separate and distinct matter. We say there that the previous Committee
were of the opinion that it would be fitting for the Committee of the following Session"—
that is, the present Committee—
to review the working of the University Grants Committee control system and the extent to which the Government participates in it, and the continued exemption of the expenditure on universities from accountability to Parliament.
We say further that the Committee intended to consider this after the Summer Adjournment.
That Report was completed in the summer, and, though it would be inappropriate and, I would guess, out of order, if I were to tell the House how the Committee is getting on with its review of the question of university accountability, I think that, in view of what is said in the Report, I should be in order in saying that we are at present hearing evidence and that I have good reason to hope that we may be able to present a special report very early in the new year.
Before turning to one or two major subjects of the Report, I should like to refer to a few matters which have arisen during the year. We have celebrated the centenary of the Exchequer and Audit Department, which has served the Committee with extreme loyalty, skill and devotion. The Department is a few years younger than the Committee, but its centenary suggests that we have both reached the age of discretion.
I should like to take this opportunity to thank on behalf of the Committee the Comptroller and Auditor General and all his staff for the immense work which they do throughout the year in preparing the material on which our reports are based. I should like also to express the thanks of the Committee to Sir Edmund Compton. As the House knows, he resigned the office of Comptroller and Auditor General at the beginning of September to take up the appointment of Parliamentary Commissioner designate. As I ventured to say when the Prime Minister announced that appointment, we have lost and the Parliamentary Commission has gained an official of singular ability, force and skill. We have welcomed the new Comptroller and auditor General, Sir Bruce Fraser, an officer of very great experience and ability. I have no doubt that we shall work very closely with him as with his predecessor.
The House has before it not only the Report, but a copy of the Treasury Minute. This is the practice by which the Government as a whole through the Treasury reply to the Committee's recommendations. There is a small point of procedure to which I wish to refer. As the House will see, the Treasury Minute has been presented on this occasion in the shape of a White Paper. This has been done by the Financial Secretary to the Treasury, to whom I express my appreciation, at my request as I thought that it would be a convenient method of putting the Department's reply to the Committee's Report into a form which is easily available to hon. Members.
The old procedure was somewhat cumbrous. The Treasury Minute went simply to the Committee and the Committee then had to make a further special report to report it to the House. As the Committee itself reports to the House, it seemed to me and to my colleagues on the Committee convenient that the Treasury Minute should also be laid as a White Paper before the House. Unless the House disapproves, I have myself, after consulting the Committee, invited the Financial Secretary to make this a regular practice.
It is not my intention, particularly in view of the observations by my hon. Friend the Member for Rutland and Stamford on a point of order a few minutes ago, to deal with all the subjects which are dealt with in what, although shorter than usual, is still a substantial Report. Hon. Members who have looked at it will, however, see that a major element in our investigations has been the Ministry of Aviation, which is dealt with on pages xi to xxi of the Report, from paragraphs 16 to 62.
I should deal first with a point which is made by the Committee in paragraphs 16 and 17 and which is of general application although it arose in respect of the Ministry of Aviation. As hon. Members will see, we draw attention to the fact that the Accounting Officer who gave evidence before us on the highly complex transactions of this Department had, when he gave evidence, been only twelve weeks in his post and was transferred to another appointment within a day of completing his evidence before us. I do not claim that we had anything to do with that, but I suggest, as we say in our Report, that this is a highly inconvenient state of affairs.
When the Accounting Officer who gives evidence before the Committee has personally been neither responsible for the events which are being inquired into nor will continue with responsibility later for putting them right, both he and the Committee are put in a position of some difficulty. The normal designation of the Accounting Officer is Permanent Secretary, and when Permanent Secretaries become rather more transient than the Ministers whom they serve, real complications arise. This must necessarily be so in the case of a Department like the then Ministry of Aviation in which very large sums of public money are involved. The Committee was fortunate that the Accounting Officer in question, Sir Richard Clarke, is one of the most distinguished and experienced members of our Civil Service and handled a difficult situation with consummate skill.
I urge upon the Financial Secretary—I know that the other side of the Treasury is very much concerned with these matters —how very undesirable frequent changes of Accounting Officer are from the point of view of the Public Accounts Committee and, I suggest, from the viewpoint of the public service generally. I appreciate that accidents and changes make this kind of thing inevitable on some occasions, but I am glad to see that the Treasury Minute indicates an appreciation of the difficulties involved in frequent changes. I venture to express the hope that it may be possible to keep this kind of thing down to the very minimum and that future Committees may not be exposed to the difficulties with which we were faced in dealing with the affairs of the Ministry of Aviation this year.
The first part of the Ministry of Aviation's affairs with which I would like to deal is, perhaps inevitably, the Concord, with which we deal in paragraph 20 and thereafter. The first point to which we felt bound to draw attention has been the rapid escalation of costs. As we report, in November 1962, when the agreement with the French for the production of this aircraft was signed, the forecast expenditure was between £150 million and £170 million. By May 1964, the figure reported to us was £275 million, and on midsummer day this year the Committee heard in evidence that the best figure which could be given to us was £500 million.
I should say, in fairness, that the figures are not completely comparable, because we were told that the £500 million figure, unlike the earlier figures, included £80 million in respect of expenditure after a certificate of airworthiness had been granted, whereas the earlier figures were generally understood to be for production only up to certificate of airworthiness stage. Moreover, the £500 million figure contains a precise quantification of an allowance for contingencies of £50 million which was not precisely quantified in the earlier figures. None the less, when due allowance is made for that, this is a trebling of the estimated cost over a period of three years. None of my colleagues who heard Sir Richard Clarke's evidence believes that the figure will necessarily, in the final event, be as low as £500 million.
Various reasons which are set out in our Report were given to us. One is the basic change of design after the original agreement was entered into to improve the range of the aircraft to a sufficient figure to enable it to operate to commercial standards of safety across the North Atlantic.
It is not for me on this occasion to comment generally—it would be quite inappropriate—on this project, but perhaps I may be permitted to say that it is an unsatisfactory state of affairs when the decision of one Government to initiate and of another Government to continue the development of an aircraft is taken on figures which turn out to be so seriously under-estimated as in this case.
Our Report brings out some difficulties which are peculiar to the fact that the Concord is an international or Anglo-French project. I am sorry to have to invite the attention of the House to the fact that there are a number of asterisks indicating that in the evidence relating to this matter certain evidence has not been printed. As the House knows, the strength of the Public Accounts Committee rests largely on the fact that we do not ask the House to accept our conclusions simply because we have submitted them. We submit at the same time the evidence on which they are based. Such authority as the Committee's Reports are inclined to have depends, I think, largely on that fact.
It is a necessary rule that a witness can ask to have his evidence omitted from the printed Report and it is the practice of the Committee to allow this where either national security or important commercial interests of the State are involved. Since I have been Chairman of the Committee, I have always dealt with these requests strictly and in many cases have ruled against those who wished their evidence to be excluded. But it will be appreciated that where another Government is involved and the Committee is informed that the other Government would object to publication, with substantial international repercussions, one is bound to give a good deal of weight to this. One of the by-products, as it were, of this international co-operation is that we have felt bound not to publish rather more of the evidence than we would have kept out of the published version had this been a wholly British project. In particular, we were told that much of the information was the work of an Anglo-French committee in which the French have equal rights with ourselves.
But there is a more serious and substantial point on this which arose from the fact that this is a joint international project. As the House will have observed from our Report, the cost sharing between the two countries is done on the basis of a sharing of the work, and I would invite the attention of the House to paragraph 19 of our Report:
The Committee of Public Accounts of Session 1964–65 considered that the equal sharing of work might prevent contracts being placed with the firms best able to do the work and, in view of the inherent risk of inefficiency in the arrangement, recommended that an independent investigation should be made in order that the advantages and disadvantages of this arrangement might be fully weighed. The Treasury Minute of 17th November, 1965, accepted that further studies might be useful and stated that it was proposed to invite the French authorities to participate in a review at an appropriate stage. The Ministry informed Your Committee that they did not think the stage had yet been reached at which this should be done.
I am sorry to say that the Treasury Minute submitted in respect of our present Report still expresses the view that that it is
premature to proceed to this review without further experience of the arrangements in operation.
I would express regret at that for two reasons. First of all, this is a new arrangement under which work is done, not on the basis of which country or which firm can do the work most efficiently and most economically, but it is allotted on the basis of keeping the expenses even between the two. It would be a most extraordinary coincidence if that in fact worked out, so that the cost of the work being done was on the most efficient and most economical basis, and I would have have thought that that unusual arrangement did require very early inquiry into both because very large sums of public money are now being spent on this project, and also because it has been treated, and rightly, as the prototype of further projects based on international co-operation. I hope that when the Financial Secretary replies he will be able to tell the House why he feels once again, for the second year in succession, that the Treasury or the Department think it is premature to undertake this inquiry and that he can give us some indication as to when it is likely to be undertaken.
There is, of course, a further complication with which he might deal. In an aircraft designed for the international market—and it is hoped, we were told, to sell it not merely to English and French but to other airlines—there are very often items of equipment which are not best produced in either country but where standard equipment, for example, in instruments, comes most acceptably from a third country. It is not at all clear how such purchases can be fitted into the particular arrangements which I have described. The House will very well appreciate that it would really be ludicrous if, as a consequence of this, instruments less than the best were to be fitted into an aircraft which, if it is to be the success we all hope it will be, will be the leading aircraft of the world's airlines in the 1970s.
The House will not want to underrate—and I should say this in fairness after what I have said—the immense problem involved in developing a civil aircraft which at one jump takes operating speeds from about 600 m.p.h. to about 1,400 m.ph. and which at one jump takes operating heights from 35,000 ft. to 65,0000 or 70,000 ft. If I may interpose a personal matter, I did have the privilege the other day with the Parliamentary and Scientific Committee of seeing the devoted work being done at Farnborough and at Filton, on this aircraft, and the very great scientific effort being expended on it.
However, its development cost is very high, and in fairness to the taxpayer some inquiry of the kind our Committee recommended really should be undertaken in the near future. I would also, in fairness to the taxpayer, urge, as the previous Committee did, that more attention should be given to the recovery of some of these development costs from purchasers, if the aircraft is the success which the courage and enterprise which have gone into it entitle it to deserve.
I will say less about the other aircraft mentioned in our Report—comparatively little about the TSR2, partly because in the circumstances it would not be necessary for me to enter into a project which has been abandoned, partly because the Treasury Minute itself admits a mistake was made in respect of the engine contract and indicates some lessons have been learned from experience with this aircraft.
I should like to say a little about the militarised version of the VC10 which is dealt with in paragraph 53 of our Report. The Committee was informed that the military version of this highly successful civil aircraft—at the moment, as I understand it, the most popular and efficient civil aircraft in the world—costs £1·4 million extra in respect of each of the 14 military aircraft ordered. There was one figure which particularly intrigued the Members of the Committee, particularly one of my colleagues who happens in private life to be a publisher, and that was that the manual which, as the House knows, accompanies every aircraft, military and civil, will, we are told, cost £56,000 in respect of each set of documents. When it is appreciated that a manual of the civil version already exists it will be understood why we were very concerned that the production of a set of documents in respect of aircraft with military adaptations would cost £56,000 for each set, and that figure seems an extremely surprising one.
Apparently, the Financial Secretary, at any rate, is inclined to the same view in the Treasury Minute, because it is there stated that the Government are not committed either to the total figure of the aircraft or to the particular figure for the manual.
In view of the fact that the right hon. Gentleman's remarks may get reported some substantial time before I have the chance to make a speech in reply, I think it only fair to the House to point out that this is not one manual but a very large number of manuals.
Oh, yes, we saw the pictures of it. It is quite a library; but, on the other hand, while I do not know on what scale the hon. and learned Gentleman's library is, I hope I am not casting any reflection on his financial standing in suggesting that it does not run to £56,000. I am very glad to see that the Treasury Minute indicates that the Ministry is not committed to that quotation or to any of the details which it contains.
I pass to another aspect of our Report, in paragraphs 89 to 92 of which we deal with shipbuilding for the Royal Navy. Our Report deals at some length with the experience over the building of frigates in recent years. It has been the practice under the present Government, as it was under the previous one, in general to lay down three frigates of the same class each year. We therefore undertook an examination of the reason why the cost of the frigates put out to contract appeared to be substantially less than that of frigates of the same class and year which were built in the Royal Dockyards.
As our Report says, the difference amounted to figures varying between £450,000 and £750,000. When the House realises that the total cost of one of these ships runs between £4·7 million and £6 million, it will see that that is quite a substantial proportionate differential. But, when the House appreciates that something between a third and a half of the equipment for the ships consists of standard items supplied by the Navy Department separate from construction, it becomes apparent that the disparity of between £450,000 and £750,000 relates not to the total cost of a ship but to the total building at something of the order of between £3 and £4 million. There is, therefore, a substantial amount of public money involved.
In evidence, we were told and fully understood the desire of the Navy Department to keep the Royal Dockyards working, and that they thought it necessary for that and to provide experience that, at any rate, one of these ships should be built in a Royal Dockyard. Many of us understand the deep attachment of the Royal Navy to the naval dockyards. On the other hand, when there are disparities of this order in respect of public money, quite serious issues arise. It may be that, with the smaller Navy of today, it will be necessary to reconsider whether the same numbers of Royal Dockyards are required if they have to be kept in operation at such substantial additional cost to the taxpayer.
Paragraphs 4 to 15 of our Report deal with a different matter—the very difficult problems which arise in connection with aid to developing countries. There is quite a substantial matter arising in respect of the over-issue of £410,000 or so to Sierra Leone. I am bound to say that the Committee had the impression of some lack of effort and energy on the part of the Ministry of Overseas Development either in securing repayment or even in securing a precise quantification of the over-issue.
On the more general aspects of the matter, the Treasury Minute indicates that the Department accepts our view of the need for more effective control in the developing countries of money which is provided from this country. If I may venture to say so, I am sure that this is very much in the developing country's interest, in that irregularities or scandals in dealing with money provided from this country could obviously affect our willingness to go on helping on the same scale; and it would be a tragedy if the work done by the Ministry of Overseas Development should have to be diminished because proper financial controls did not exist in the recipient countries.
The Government appears to accept that view and are trying to help the developing countries in the best possible way to get efficient systems of control by lending them skilled officers to put proper systems into operation. The Government accept also the view of the Committee that, wherever possible, assistance to the budgets of developing countries should be by way of block grants rather than by way of deficiency payments.
After all, if one is told that a budget deficit is to be made up by someone else, whatever it is, plainly there is less incentive both to improve one's own taxation system and to expend the money economically than if one is given a fairly calculated block grant and knows that if one lays it out well and skilfully and contributes to it oneself, one will get more development. In general, the Treasury Minute indicates acceptance by the Government of the Committee's recommendation.
Then if I may touch briefly on one or two smaller items. As a result of an investigation of the accounts of the Agricultural Research Council, the Committee was very much impressed with the need to have proper financial controls and arrangements when research councils enter into commercial arrangements with outside firms. The particular case which came before us involved the Agricultural Research Council in losing £240,000 of public money on the manufacture of an animal vaccine which cost £407,000 to produce. That is a substantial proportionate loss. It was plainly due to the Council's failure to take advice from the Treasury about proper commercial arrangements. It is apparent from the Treasury Minute that arrangements are being made to secure that, when research councils go into commercial projects of this kind, they will take early Treasury advice.
Inevitably, we looked at the question of drugs for the Health Service and the arrangements with the pharmaceutical industry. As the House will see, the Committee took into account the fact that the Government have appointed the Sainsbury Committee and thought that it would be as well to reserve judgment on the system of voluntary price control until we have the Sainsbury Committee's report.
This debate normally is not long or controversial, but the House has taken the view for many years that it is proper that the work which is done on its behalf by the Exchequer and Audit Department and by the Public Accounts Committee should be duly reported to it, and I ask the House to take note of these Reports.
I wish to draw attention to paragraph 89 of the Second Report, on page 28, dealing with the Dockyard Accounts and the cost of new construction. I have a certain divided loyalty in this respect, being both a member of the Public Accounts Committee and representing one of the Royal Naval Dockyard constituencies.
Anyone who has read this part of the Report carefully must have done so with a feeling of the grave significance contained in what is said by the Committee. In the dockyards, we have large resources of manpower, estimated at something in excess of 35,000 men. The dockyards include a high level of skill and craftsmanship in the personnel employed, and there are considerable resources of capital equipment in them. Altogether, the yards are amongst the nation's largest industrial undertaking.
In what the Committee has to say about the cost of construction of frigates, it is relatively alarming to notice that the extra cost involved in construction within the naval dockyards may be something between£450,000 and£750,000 in excess of the cost when built under contract. The inadequacy of the explanations for the difference suggests that an exhaustive inquiry into the efficiency of the yards would be justified.
To say that is not to get things out of proportion. Unfortunately, in the Report of the Public Accounts Committee, there are references to even more alarming escalations, as its Chairman has already suggested. We have also to recognise the special problems of the yards. They have what might be termed a garage function. They must be ready constantly to deal with unexpected work, and they must do that in addition to their role as production units. All the time, they must have surplus capacity available to deal with any emergency which may arise.
Thanks to the help and co-operation of the Ministry of Defence and the local dockyard management, I have had the opportunity during recent months to make some fairly extensive visits to the dockyard in my constituency. It has been said that the yard's history is just like Topsy, "it just growed" over the centuries. It could be described, I think, without being unkind, as a rambling wilderness with a generous inheritance of thoroughly archaic facilities. Already there is a certain degree of impressive modernisation and new building going on, and there are impressive plans for a streamlined rationalisation of its administration, but as yet it is far from being an ideal basis for competitve efficiency.
The structure of its administration—and I suspect that this also applies to other yards—is also conspicuous for its haphazard evolution, although, again, important steps are being taken to improve the situation. At the moment it is conspicuous for an apparently growing army of administrators, with some inevitable duplication, if not confusion, between Service and civilian staff.
I think that in the form of management we see the traditionally impersonal attitude, the use of Whitley Committees not in the sense in which more modern industries would use them, as a means of genuine consultation, but, much more, simply as a means of informing workmen what is planned, and discussing at great length such items as lavatory facilities.
There is imperfect communication within the yard, and this results in a bad state of morale about what is planned for the future. There is too much formality in the relationship between management and employees. There is too much of what might be described as a quasi-commissioned versus non-commissioned officer relationship, even among the civilian staff. What we should have in place of this in modern times is an essentially dynamic attitude of team work.
In fairness to the local management, I think that it must be said that not enough power is delegated to the local level, and consequently not enough power is delegated to the individual departments within each yard, and this does not compare well with the flexibility and drive which one finds in industry elsewhere, even within the neighbourhood of the yard.
Morale is not good, and this is reflected in the drift of personnel from the yard. I think that this is affected very much by the rather unfortunate wage structure which exists there, a wage structure which puts an undue emphasis on incentive schemes. There used to be the job price contract scheme, which became thoroughly discredited, and which has been followed by the dockyard incentive bonus scheme. Putting too much emphasis on this sort of scheme, instead of recognising the need for a fundamentally adequate basic pay structure, results in a general atmosphere of concern and uncertainty, and it is not encouraging for all concerned in the yard to find that even last week the Ministry of Defence for the Royal Navy was denying the need for a reinvestigation of the incentive scheme. This must affect overall efficiency, and I think that there is a tremendously urgent need for the implementation of the suggestion put forward by the Prices and Incomes Board for a reorganisation of the pay structure.
At a time of economic difficulty in the country, the Government very rightly urge the priority of productivity. I think that those who know the yards would suggest to the Government that they have an important duty to give a lead by looking to productivity and conduct in their own sphere of influence. There is undoubtedly under-used capacity of manpower and capital equipment in the yards. This is wasteful in itself, and it has long-term damaging effects on the morale and efficiency of all concerned.
If we seek more dynamic, imaginative, thinking about the yards, one of the early points for consideration must be a greater use of civilian contract work. It has been suggested by the Prime Minister that work might be done within the naval dockyards for overseas development. It has also been suggested by some that the yards, with their engineering traditions and ability, would be able to make an important contribution to the pre-fabricated housing drive in the country. If the yards were to undertake more work of this kind, it would help them to reach a pitch of efficiency which would make competitive tendering for the construction of naval vessels a more viable proposition.
That will, of course, involve policy changes. It will mean the yards being held to the estimates which they make for civilian contract work, and there will also have to be a revision of the present procedure whereby any civilian contract work being undertaken in the yards involves those asking for it to be undertaken signing away almost all their rights to compensation.
But far more important perhaps than even that consideration is the need for a complete reorganisation of the administration of dockyards in Britain. They need to be disentangled from the other important functions of the Admiralty. There is a need for a higher degree of autonomy and independence, and I think that here we might make comparisons with the proposals being put forward for the Post Office.
I think that we all recognise the contributions made to the nation's defence in the past by the dockyards, by their personnel working there, and by their surrounding communities, but I think that we must also recognise that almost all the communities surrounding our dockyards lack any large-scale alternative industry. There is, therefore, a need for drastic action to ensure the future health and viability of the yards and their communities, to secure the services of their whole potential for the nation. This is particularly relevant at a time of general economic difficulties.
This is the first time that I have had the pleasure of joining in a debate on a Report from the Public Accounts Committee, and I do so with a due sense of the arduous work undertaken by the members of that Committee, its staff and its Chairman. My Committee work has been on a lighter scale, with the Estimates Committee, or with the Nationalised Industries Committee, neither of which is as well equipped with staff as the P.A.C., and therefore perhaps our reports differ in depth.
There is one part of the P.A.C. Report to which I should like to call attention, because the Chairman, for good reasons, skated over it. He told the House that his Committee was at the moment deliberating the question of university accountability, and I appreciate that in those circumstances he does not wish to prejudge the issue. However, not being a member of this august Committee, I do not find myself similarly bound, and I should like particularly to draw attention to paragraphs 70 to 78 of the Second Report.
That part of the Report refers to a fund created by London University out of public funds for the development of Bloomsbury No. 2 site. This fund has existed for a number of years. The P.A.C. called attention to it in 1953, since when it has dropped out of sight, and in fact paragraph 75 of the Report says categorically that
the matter had been completely lost sight of.
It goes on to say:
The University Grants Committee had recommended grants for building developments on the estate in complete ignorance of the existence of the Fund and of the amount of money in it. Your Committee were informed that had the University Grants Committee been aware of the existence of this fund the amount of the grants to this University might have been affected.
No one, least of all myself, is suggesting that improper use has been made of this fund by the University of London. This is another point relevant to the need for university accountability. I notice that the Treasury Minute ends up with the words:
The Treasury and the Department of Education and Science are confident that the steps now taken will ensure that the Fund is used, whenever appropriate, for the purposes laid down in the loan agreement.
I have no doubt that the cat has been well and truly belled and that this fund is now brought into the realm of
public accountability. It must raise in most of our minds doubt as to whether among the other universities similar funds of one sort or another do not still exist. I notice that in reply to Question 148, Sir Herbert Andrew, the Permanent Secretary of the Department of Education and Science, said:
The responsibility rested with the Treasury to the end of 1963. The responsibility for this Vote came to the Department in 1964, and no one concerned with the Universities Vote was aware of the existence of the agreement. So that the answer to your question is that no arrangements were made to watch over the use that was made of the fund.
I quote the following question from a member of the Committee, and the reply of Mr. Copleston, the secretary of the University Grants Committee:
… there is no question of them getting in that year an extra £600,000?—In respect of that year, yes.
This leads me to a slightly wider issue, which is this question of university accountability. This is a matter which came up very much in the course of the inquiry which I had the honour of conducting for the Estimates Committee on university grants. In a Public Accounts Committee debate on 7th December, 1965, at c. 278 of Vol, 722 the Financial Secretary is on record as saying:
There is no doubt that we want to see that the most up-to-date techniques of control and management are employed. This is not always an easy matter, … and it does not follow … that these things would be better achieved by making the University Grants Committee accountable to Parliament or that they ought to be gained—if they would be so gained—by any restriction of academic freedom."—[OFFICIAL REPORT, 7th December, 1965; Vol. 722, c. 278.]
On this question of academic freedom, we dwell in a realm of great imagination. I should have thought that most of us would accept, in terms of academic freedom, the definition of the late Sir Hector Hetherington, who said this:
I think it vital that the universities should each retain full responsibility for its own appointments: that it alone, subject to the ordinary law of the land, should choose its teachers, should settle the conditions of their tenure, and should, if need be, dismiss them. That is the primary condition of University freedom, and the only ground of assurance that its members may speak and teach in whatever way they are responsibly led to do.
Those are admirable sentiments. The defenders of academic freedom should concentrate on seeing that is achieved in
these terms. That great man, Lord Robbins, in an address which he delivered and which was published by the British Academy, said:
A university which has to submit to some central office proposals for the switching of small funds from one object to another—the appointment of a research assistant in place of expenditure on the time of a computer, for instance—is certainly not free".
I think this is an exaggeration. I questioned Lord Robbins on this and he said that I quoted him slightly out of context. The defenders of academic freedom outside this House seem unable to differentiate between the big issue referred to by Sir Hector Hetherington and those smaller issues into which Parliament inquires.
In reply to Lord Robbins I said:
The Robbins Report brought university policy for the first time in our history within the ambient of the concept of social justice. After all, the whole basis of the Report was that, quite apart from manpower needs, all those who were properly qualified for a university education should have the chance of receiving one. But it is no good advocating social justice and then complaining because people start asking whether the same justice is being meted out to universities as to, say, technical colleges and colleges of education; once one explains that universities are not just private autonomous institutions but that they also exist to serve a definite educational and even social purpose, then their whole position in the body politic is changed.
That is true. The universities in the last twenty years have changed completely. They are now drawing more than £200 million a year from the public purse. We know that their fees amount to only 10 per cent. of their expenses. They are part of a national welfare policy and I am quite sure that we can somehow bring them within a national financial policy. They will, in fact, be included in it whether or not they desire it. It is inevitable, when there is this continuous demand on resources, when the universities are competing inside the department for funds with institutes, not of high education but of secondary and primary education. It is clear that they are part of a national system, and they should be subject to the same sort of financial disciplines.
I make this point because it was not touched on by the Chairman of the Committee, for a very good reason. It does seem that the point needs emphasising. The development of the
universities over the next few years will be tremendously inhibited if they do not carry with them the confidence of this House. This matter has brought up the existence of a fund in the London University hitherto unknown to the Treasury and the Department of Education and Science. I recall that in the Sub-Committee's Report we found there was a special computer account. I quote from column 231 of the debate of 26th January, in which I said:
… it looked as if, at the end of the road, London University would have received by the back door the additional£1 million which, when it had applied for it overtly, had been refused to it."—[OFFICIAL REPORT, 26th January, 1966; Vol. 723, c. 231.]
I mention that, not as an attack on the London University—these institutes are deserving of the highest praise—but there must be recognition in the higher academic circles that the submission of their accounts to the Department of the Comptroller and Auditor General does not automatically result in the admission of a secret police; otherwise they will not have the confidence of the House to the extent that it will be necessary if they are to receive the grants which all of us know they do need and for which they are now applying. That is the sole purpose of my intervention.
The hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) gave a most interesting speech, and one whose contents will not have fallen strangely on the ears of the Public Accounts Committee at this moment. I am sure that the hon. Gentleman will understand that members of the Committee will feel rather constrained in developing some of his points at this moment in view of the very delicate and important discussions which are now taking place before the Committee. I would refer to the speech of the Chairman of the Committee, the right hon. Member for Kingston upon Thames (Mr. Boyd-Carpenter), who referred to this year being the centenary of the Royal Assent being granted to the Exchequer and Audit Departments Act of 1866.
This has been a century of very notable achievements. The experience of the workings of the Comptroller and Auditor General's Department has been one of relevance not only to this country but to many others who have moulded their own practices in some measure upon it. We have had a department established in which the scrupulous sniffing-out of anomalies and maladministration by the Comptroller and Auditor General has been the olfactory instrument for the functioning of the watchdog rôle which the Public Accounts Committee traditionally performs.
I am less of a watchdog than a watch-puppy, having yet to celebrate my first year's membership of the Committee, but I want to say how, as one of the new Members, although a watchpuppy I am certainly not a hush puppy, due largely to the encouragement which the Chairman gives to all Members of the Committee in our questioning of witneses who appear before us. I also associate myself with the remarks which he made about the former Comptroller and Auditor General, Sir Edmund Compton, as well as his successor, Sir Bruce Fraser. I also want to express my appreciation of the valuable work performed by Dr. Taylor as Clerk and the assistance given to us by Mr. Platt for the Treasury.
In reminding the House of this happy blend of expertise and thrustful inquisition, we may be hinting at one way in which effective Parliamentary reform—notably to ensure that a detailed surveillance of the executive is carried out; something which has never been more necessary than at this stage in our history—might be prosecuted. We have in the Public Accounts Committee the experts, or the accounting officers, for the great spending Departments of State, being interrogated by the laymen—the politicians, who lack technical expertise but are able to perform a most useful function because of their access to the findings of clearly independent experts.
In our concern about Parliamentary reform this aspect might be stressed, not least for its relevance to the information and help clearly required by those hon. Members who might find themselves—I hope in the not-too-distant future—serving upon a Committee responsible for the surveillance of science and technology. But in reminding ourselves of this long and fruitful partnership between the Comptroller and Auditor General and the Committee of Public Accounts, we are bound to speculate about the rôle of such an auditing department and its Parliamentary component in the years ahead.
As the Chairman has already indicated, and as he said in the debate which took place on 7th December, 1965, the Public Accounts Committee has considerably wider functions than were originally envisaged.
It now makes what I might describe as an efficiency audit and is concerned very much … with securing that the public, where there is public expenditure involved, secures value for money."—[OFFICIAL REPORT, 7th December. 1965; Vol. 722, c. 257.]
The powers and the rôle of the Committee of Public Accounts are even wider, as my right hon. Friend went on to elaborate on that occasion. I want to suggest tentatively several ways in which the next few years will inexorably demand fresh and perhaps revolutionary thinking in our approach to national auditing and its Parliamentary components.
The first point is that the relationship between financial inquisition—that is, the search for "value for money" and the inquisition which takes place—and the areas of policy and decision-making by the Government of the day is a complicated one. The speech made by the hon. Member for Walsall, South illustrates some of the complexities involved in defining this relationship in relation to the universities. We are discussing the problem of university accountability at this moment, but it would not be revealing any secrets if I mentioned that one of the aspects that we are focusing upon is the extent to which we can divorce the problems of financial methodology from the day-to-day matters of detailed surveillance which fall essentially into the academic province of the universities. However impossible it might be to define these areas—methodology on the one hand and policy-making on the other—it is quite obvious that policy itself is bound to stem in large measure from the type of cost-accounting involved.
Paragraph 45 of the Second Report, referring to the TSR2, says:
it seems to Your Committee that all concerned were at fault in not securing the earlier introduction of an adequate system of recording and reporting costs against physical progress to enable policy decisions to be made on the basis of up-to-date information on the financial effect of the technical problems encountered.
It is obvious that the function of policy itself must in large measure stem from the
financial evaluation which is taking place from time to time.
There is the more spectacular case of the Concord project, to which the right hon. Gentleman has already referred at some length. I want to develop one or two points that he has already made. The House must inevitably ask itself whether such a venture would have been embarked upon at all had the extent of the cost escalation now revealed then been properly foreseen. Here again, there is an obvious relationship between policy over a period of time, and the degree of cost effectiveness in measuring the choices involved at any moment in time.
There is another aspect of the Concord problem, which also illustrates a larger problem which the Committee of Public Accounts inevitably comes up against. Does this inquiry—the questioning which it carries out with witnesses—extend well beyond the proper limits for which the Committee is essentially designed? Where a witness appears the questions can obviously range very widely. But it is very often difficult to know where one is transgressing the procedure of the Committee. In this context I want to refer to one aspect of the Concord project which arouses a good deal of public interest and concern, namely, the problem of sonic boom. In Question No. 921 of the Minutes of Evidence taken before the Committee of Public Accounts, there is reference to the evidence given by Sir Richard Way on 18th February, 1965, before an earlier Committee of Public Accounts, when, in reply to Questions 734 and 737, which dealt with sonic boom and tolerance levels, Sir Richard Way said:
We hope to have a very much clearer idea of this problem within two years.
When this point was raised almost 18 months later with his successor at the Ministry the following answer was given, to Question No. 922:
We certainly cannot in the next few months have a clear statement of this situation. I doubt whether we shall have a clear statement of this situation for a very long time because this is a very difficult issue. It is not a straight 'yes' or 'no' situation.
One appreciates the difficulties involved, particularly for accounting officers, in answering questions of an essentially technical and highly sophisticated character.
Yet it is fairly obvious that the whole financial validity of a project like Concord must largely depend on whether or not the plane, once in the air, can be tolerated, or whether the sonic "boom" problems which it creates will make life for those on the ground utterly intolerable. Here again, I am straying from the strictly financial surveillance to the wider problems, which I do not wish to go into any further on this occasion.
This, however, takes me to a larger aspect of the difficulty of the problems involved in defining the rôle of the Committee today—to what extent its work transgresses upon or laps against the work of the Estimates Committee. The whole discussion on Concord and the escalation in costs involved arose out of a question on 21st June, when the Accounting Officer was asked by the Chairman of the Committee:
May I first of all ask you, Sir Richard, when the Committee in the 1964–65 Session dealt with this matter, the figure before them for the foreseen total cost of the project was £275 million. Does that figure still stand?
Clearly, at that stage, the question referred to that year, for which audited reports have been presented or are to be presented to Parliament.
However, the answer given now involves reference to up-to-date estimates which one might argue are not strictly within the purview of the Public Accounts Committee. Indeed, this exchange went on to show that costs had escalated to £500 million. I certainly would not argue that we should have some theological argument about where the limits are to be drawn. The important thing is that the public and Parliament should know what is going on. From this point of view at least, the question of which Committee finds it out is irrelevant.
But the problem, in any case, is inherent in the situation today, where we are dealing with the costs of development projects which extend over very long periods. The control of costs over such long periods requires not simply a posthumous evaluation of costs already incurred, but must be a rolling inquisition which can measure forecasts against achievements and test the forward estimates of any one financial year by the revisions which take place in succeeding years.
The original cost of Concord was, as the Chairman of the Committee said, between £150 million and £170 million. The revised figure is now £500 million. Clearly, the testing of whether or not the controls on cost which were being attempted in earlier years have been effective depends on the extent of the published escalation in costs.
I wish to turn to one point which concerned many of us on the Committee, and perhaps has rather a wider implication than the merits or demerits of the case. This is whether or not it was right to publish the detailed figures. Hon. Members will know that on Thursday, 28th July, It could have been argued that to provide possible competitors of this supersonic airliner with that kind of precise and at that stage, confidential information was misguided, and that the Committee should instead have been content to settle for the more general wording. I was one of those who voted to publish the figure of £500 million, and it is important to state why I arrived at this decision. It could be argued that, if the Committee were to publish information for which a request had been made by the Accounting Officer, for "sidelining" this would in future inhibit the retailing of information to the Committee which it might find useful and important.
Let us look at the sequence of events. The last figure given to the House dated from May, 1964, and no new official figure had been issued to the House or the public during the lifetime of the present Government since their Election in 1964. I recall the poignant words of the hon. Member for Woking (Mr. Onslow), whó said in the House as recently as 9th February last, with reference to the Concord:
… the rising costs must worry us. A figure of £400 million has recently been quoted
as the cost of research and development to the point of production of Concord. Probably a more responsible estimate would be nearer to £350 million".
That "more responsible estimate" was given to the House as recently as 9th February. Within three months of that responsible view, as it was then thought to be, a fresh estimate was being put forward of £500 million.
There are some perplexities about this figure. If the House will bear with me, I should like to point out one or two of the problems which have not, even now, been adequately sorted out. For example, before that meeting of the Public Accounts Committee at which the decision was taken to publish the figure of £500 million, there was a meeting in the House, on 19th July, at which figures were supplied by the British Aircraft Corporation, for which other hon. Members who attended the meeting can vouch.
These were as follows. The airframe costs estimated as of November 1964 came to £181 million, of which B.A.C. contributed £71 million and Sud-Aviation £110 million. The B.A.C. engine estimates for a later date—April 1965—came to £139 million, of which the British contribution was £87 million and the SNECMA contribution £52 million. This made a total of £320 million for airframe and engines.
Hon. Members present were also informed that to this figure was to be added an estimated £36 million for post-certification work on the airframe and another £27 million for similar work on the engines—a total of £63 million. The House will note that this is £17 million less than the £80 million post-certification estimate of the Minister announced in early September, which was given to the Public Accounts Committee some months earlier.
An even wider discrepancy is seen in a comparison of the figure of £15 million given by B.A.C. as contingencies on airframe with the £50 million given by the Minister two months later, although I accept that the £50 million will presumably include contingencies on engines, which were specifically not included in the B.A.C. figure. The £50 million for contingencies, in addition to this enormous figure of £80 million post-certification work—a;figure immeasurably higher than anything which could have been contemplated when the original agreement was signed in 1962—seems to require some explanation.
It is interesting that, even when the B.A.C. estimates of post-certification work and any contingences on the airframe are included in their global estimate as of July last, the total is only £398 million. This was presumably the figure encountered by the hon. Member for Woking when he referred to "about £400 million". There is still a discrepancy of about £100 million with the final estimate of September. This discrepancy cannot be explained by adding the post-certification and contingency sums, which we all recognise were not included in earlier official Ministry estimates of development costs. That is made quite clear in previous reports of the Committee of Public Accounts. I take slight issue with the Chairman of the Committee, because it is not clear, at any rate to me, that the £50 million added for contingencies is simply, as it were, grossing together a mass of isolated and scattered figures which had already been included in the figure of £275 million given in May 1964.
There is a problem here, because in reaching our£398 million we have already included£78 million of the£130 million which the Minister added on under these two heads in September. At best, we can add only another£50 million or so to our£398 million, and that still leaves us £50 million short of the £500 million total. Where does the difference lie? There is another problem, because in the report dealing with the revised estimate of £500 million given in The Times by its air correspondent, we find that 80 Olympus 593 engines are included in the£500 million. I have searched in vain in the Minutes of Evidence to clarify this point, and I would like it clarified.
the Committee divided upon the Question, "That the words proposed to be left out should stand part of the Paragraph". The argument was whether or not Paragraph 21, which now stands in the Second Report of the Public Accounts Committee, should remain in or whether it should be changed for wording which did not state a figure of £500 million. The alternative wording would have indicated a massive and alarming increase in the total cost.
I apologise for interrupting my hon. Friend, but I think that we were both present at the meeting to which he refers, and we have discussed the matter. In the break-up of the total figure he has given, does he remember that the stretched version produced £50 million more in cost which might fill the gap of which he talks?
With respect to my hon. Friend the Member for Glasgow, Govan (Mr. Rankin), I think that he will find that the escalation of costs which had already taken place between November 1962 and May 1964 took account of the implications of the stretched version. Therefore, this cannot possibly be included as an explanation of the increase which took place from May 1964 to May 1966 and we are back to the problem of the 80 Olympus 593 engines.
Why have these been included in the estimate of£500 million? It seems odd to include certain items such as these and not others. I am not sure of the rationale. Were they included in the mid-1964 estimate of £275 million? That was the figure then estimated as necessary to bring the aircraft to the standard required for initial certification in 1971, and this confirms the point I was trying to make to my hon. Friend a moment ago, that the figure of £275 million already included the stretched version. If they were included in the revised cost of £275 million their cost must also now be included in the revised figure of £370 million which the Minister put forward in September as relating to the £275 million earlier estimate.
That would still leave some very odd discrepancies, since a substantial part of the escalation in engine costs between 1964 and 1966 had already been accounted for in the B.A.C. estimate which the House may recall was as for April, 1965, on the figures then made available to us—I stress that they were made available to us openly and frankly by representatives of B.A.C. Those of us on the Committee were placed in a very curious dilemma. We were being supplied with figures which came to something less than £400 million, although we already knew from information given us on inquiry that the estimate was around£500 million. It seemed to me, if only to try to define why discrepancies like this have arisen, that it was important that the figure should be published, and that there should be full public discussion of what is involved. I suggest that any increase in engine costs reflects cancellation of TSR2. I strongly suspect that this has happened.
I have developed this point at perhaps greater length than the House would have wished, but I feel that this is a matter of some public concern and public interest. [HON. MEMBERS: "Hear, hear."] It is inevitable when we become involved in financial intricacies of this sort that many of us, particularly the laymen on the Committee, should feel rather bewildered and rather helpless. But in the kind of project which Concord implies, involving a highly sophisticated technology, and being, perhaps, the prototype of many such ventures upon which this country will embark not only with France but with other members of the European community in years to come, it is very important that the House should recognise some of the difficulties involved in even finding out the details, let alone controlling the escalation in costs.
It may well be that we shall now, as we approach membership of the European community, find ourselves having to recast very profoundly the whole relationship between the audit departments, not only of this country but of other countries with whom we shall be in joint co-operation, and the Parliamentary institutions of those countries within the Common Market.
The hon. Member for Bebington (Mr. Brooks) spoke in felicitous terms of the work of Sir Edmund Compton and Sir Bruce Fraser and also of our Chairman, my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) and Dr. Taylor and Mr. Platt. I join with him in those tributes.
This is the annual occasion when the work of the Committee of Public Accounts is shared with the House but I must confess, as I look around, that it is substantially a reconvening of the Public Accounts Committee on another day in another location. I was surprised that my hon. Friend the Member for Rutland and Stamford (Mr. Kenneth Lewis) should have sought Mr. Speaker's guidance about the length of speeches, because I was approached by the Whips before the debate began with earnest inquiries as to the expected length of my speech on the grounds of a basic minimum requirement. [Laughter.] It is not my intention to enlarge upon that, because I know that the hon. Member for Glasgow, Govan (Mr. Rankin) is so much more able than I could be in these matters.
There are three points on which I would like to dwell. One is, in general terms, the work of the Committee of Public Accounts and some implications it may have for us in our consideration of the work of specialist committees. Secondly, I wish to dwell a little on the work of the Royal Naval dockyards, which was touched upon by the hon. Member for Portmouth, West (Mr. Judd), and finally on the matter which undoubtedly exercised us most in the Committee, the story of the development of the Concord aircraft.
The hon. Member for Bebington felt that our experience on the Committee gave encouragement to the idea of an increase in the work of specialist committees. I am not sure that I agree with him, on severely practical grounds, because there is no doubt that whilst the work of the Committee is fascinating—I think that all Members of the Committee will agree with me that probably this must count among the most absorbing of all our Parliamentary work—it is none the less very time-consuming, and competes with a great many other demands on Parliamentary time. It is therefore hardly surprising that for eight of the 13 sessions covered by the First and Second Reports no more than half the Committee were able to attend. I am not in a position to cast stones about this, and I do not seek to do so, but I am making the point that should be made that there are very real difficulties in providing the Parliamentary time to deal with these Committees. I am by no means convinced that it will be possible to find people able to give the necessary time to pursue the work of specialist committees with the detailed application which it would deserve. I make that as a severely practical point. There are other issues which, in my view, invalidate the case for specialist committees. I believe that, ultimately, it should be the purpose of Parliament to bring controversy on to the Floor of this Chamber, and specialist committees could well militate against this.
My second point concerns the dockyards. The hon. Member for Portsmouth, West, very naturally, explained his constituency interest, but I confess to some alarm on hearing him suggest that the dockyards might take over some of the work on prefabricated housing. This is another application of the principle of finding available work to meet surplus capacity, a very dangerous enterprise to undertake without very considerable market research and detailed consideration of all the evidence on whether or not it can be profitably carried out. I earnestly ask the hon. Gentleman, before the idea is pushed a great deal further, to consult people such as Hawthorne Leslie, a company which has had a singularly unfortunate experience in trying to convert its shipbuilding facilities into capacity for the construction of industrialised housing components.
Our discussion of the dockyards threw considerable light on the term "productivity", now one of the most overused words in our political vocabulary. The argument was put forward that productivity had been increasing in the dockyards at about 2½ per cent. per annum, but the evidence which became apparent during questions was that this was the increase in output compared with the amount of labour employed. It took no account of the amount of capital employed. The real test of productivity, presumably, must be higher output from the same joint resources of capital and labour.
The difficulties explained to us by Sir Michael Cary about the measuring of productivity seemed to me to be fairly patent and obvious. His answer to Question No. 577,
The difficulty is that we have not found any way of measuring Dockyard output. This is my basic problem",
not only struck sympathy in the minds of those who heard his evidence but would, I am sure, be echoed by every manufacturer in this country who finds it extraordinarily difficult to measure the various components of output within his factory.
I hope, therefore, that the evidence will be pondered long and earnestly by those who are now making productivity or productivity agreements some kind of touchstone in the prices and incomes policy. I suspect that the word "productivity" is capable of bearing more nonsense than almost any other word which we bandy about.
I turn now to the Concord. The case elaborated by the hon. Member for Bebington is very powerful indeed, and I endorse his observations. Many of us—I am delighted to see the hon. Member for Govan in his place—had doubts about the project right from the start. I well remember an Adjournment debate on 21st December, 1962, which was initiated by the hon. Member for Govan. It makes rather interesting reading, and I refreshed my memory on it only this afternoon.
No doubt. I know, from seeing the pages open on the hon. Gentleman's knee, that he has exactly the volume with him, and I hope to pinch some of the lines before he has a chance to use it. It seems that, even if we are not being non-partisan, partisanship does not run along conventional lines. I think that the prize must go to my hon. Friend the Member for Banbury (Mr. Marten), then Parliamentary Secretary to the Ministry of Aviation, when he said:
I believe that we must grab this opportunity with both hands and dash away with the prize."—[OFFICIAL REPORT. 21st December, 1966; Vol. 669, c. 1657.]
Everything that has happened since has underlined all the doubts which were expressed on that occasion about whether there was any likelihood that the development costs could be fully recovered. The fact now that, as the Report of the Public Accounts Committee shows, probably not more than one-third of the development costs will be recovered, must lead us to a very severe and searching inquiry into the entire project, not in the sense of a malicious post mortem to see how all the money was spent and not to score too many party points—in the result, there will be questions of comparative negritude between pot and kettle—but mainly into the implications of the accounting questions in a project of international character.
This Anglo-French project was itself a pioneer, not merely a pioneer technologically but a pioneer in joint Government operation. If we are unable to face a severe scrutiny of the lessons which this project shows for us, then the many hundreds of millions of pounds will have been wasted merely as forerunners of subsequent waste of a similar pattern.
I still believe that we are right to be severely critical that such a technically advanced project pays so little regard to those areas in which at least some measurement could take place. It is the argument of so many technologists that they are all the time improving our capacity to measure. This is the great argument of the computer school. Yet here, as the answers to Questions Nos. 940–1 clearly show, there was hardly any conventional market research done to determine what might be the demand for this type of aircraft. I regard this as a thoroughly unsatisfactory state of affairs.
Moreover, it is quite clear that, even now—the hon. Member for Bebington made this point—we know very little about the implications of the sonic boom so far as it might affect the market for the stretched version. We cannot go on taking on trust that all this is bearable because of the technological fall-out. This is the sort of blackmail argument against which the layman should sternly set his face. Ought it not to be within the scope of our technologists with their supposed superior skills in measurement to give us some quantification of the technological advantages which we shall acquire from the development of this aircraft? There must be an attempt to give us some idea of what goes into the scale to offset the escalating costs about which we already know only too much.
The whole cost escalation of the Concord is a Treasury nightmare. It must have been a nightmare not to have a break clause in the original contract. It must be still, now that we learn, as the Treasury tells us on page 3 of its Minute, that
both Governments are examining jointly and with their contractors the possibilities of, and the considerable problems involved in, defining consistent and acceptable incentive schemes.
We are not here dealing with a modest project of a few million £s. If we were, I believe that this would be a major and continuing source of public and political argument and controversy. In fact, it is a subject of so many hundreds of millions of £s that it is easier to shut one's eyes to it and to try to forget all about it.
We are still talking about establishing incentive schemes. Surely we ought now to hope that some kind of discipline is being introduced into the financing of this project. These are hundreds of millions of £s, and surely the project is capable of some discipline as a result of some kind of incentive schemes. I hope that we shall hear of rather more dramatic progress to this end than we have heard hitherto.
May I refer to the point about cost sharing mentioned by my hon. Friend the Member for Kingston-upon-Thames. The Treasury and Ministry of Aviation, says the Treasury Minute,
appreciate the importance which attaches to a review of the cost-sharing arrangements for Concord but consider it premature to proceed with this review without further experience of the arrangements in operation.
I am not sure why it is premature. If it means that the costs have to go some way further yet before this final step is taken, I hope that we shall have some assurance on the point.
Undoubtedly we are seeing increasing signs that there will probably be schemes of Anglo-Continental character in all technology. Who knows, perhaps the giant computer, similar to the largest I.B.M. or C.D.C. models, may be the next project to be sponsored on a European scale. I do not know, but it is possible. We must try to ascertain the lessons of Concord before we find ourselves committed to these vast sums of money. My own feeling and prejudice is that it is desirable that these projects come under a uniform commercial management and that the sharing as between Governments and as between companies to try to obtain a fifty-fifty share on a Buggins turn system, is probably the worst of all worlds that we could have.
The development of the modern technologically based company operating on a European scale but registered in one of the constituent European countries is what we must seek to encourage and to welcome, and our procurement policies must be attached to a natural and evolved commercial structure. Beyond that I would not think it either prudent or possibly in order to go this afternoon.
I am quite sure that the mere incantation of the terms "technology" or "Europe" does not absolve the House or the Public Accounts Committee from a most rigorous and detached analysis of the control and use of public money, and to that end the Concord story can well be a salutary lesson.
I should like to take up the question of the Concord, which has already been discussed by my hon. Friend the Member for Bebington (Mr. Brooks) and the hon. Member for Oswestry (Mr. Biffen). Many figures have been mentioned this afternoon in connection with the project. I should like to "recap" on the most important figures, which were mentioned by the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) when he introduced the Report.
In November, 1962, the original agreement was signed between Britain and France and the development costs of Concord were then mentioned as being between£150 million and£170 million. By May, 1964, the development costs to the initial certificate of airworthiness had risen to£275 million. The reason given for this increase was very typical of the estimating throughout the project. Perhaps I may quote from paragraph 20 of the Second Report:
Later studies showed that the long-range version of the aircraft, in the form envisaged in the Agreement, would not be capable of operating the London or Paris to New York stages with the regularity and safety required by civil airlines and would therefore be useless for the long-range rôle; it was therefore decided to increase the basic thrust of the engines and the wing area.
One would have thought that this was such a basic consideration that it seems astonishing that it was not foreseen when the original estimating was done. Two years later in 1966 we are given the figure of£500 million.
The reason I want to raise the subject this afternoon is that the way in which the whole of the marketing of this project has been approached is very unsatisfactory, as the hon. Member for Oswestry said, and the discrepancies in the estimating are so enormous that the time has come for the ordinary people of this country, who are finding the money, to call a halt until they can be satisfied that there is no alternative to going on with the project. Any decision about ending the project would have to be a joint decision between ourselves and the French, and I can well see that with the Common Market negotiations now looming on the horizon, this would perhaps be a very difficult time to raise this matter with the French. But even if it is impossible to back out of the project at this stage, at least the lessons of Concord must be learned.
I referred a few moments ago to the surprising and very basic reasons given for the first escalation in costs from £170 million to £275 million in 1964, and I should like to turn to the next escalation in costs from £275 million in 1964 to £500 million in 1966. This is made up apparently of, first, £95 million straight escalation. In discussing Concord one becomes involved in phrases such as "straightforward escalation" in costs of the size of £95 million to distinguish them from others which have been mentioned. Next, there is £80 million, which are development costs after the initial certificate of airworthiness, and then there is a further £50 million contingencies.
It appears from the Report that this £50 million is additional to any contingencies that were written into the first £275 million. May I refer hon. Members to Question 722 on page 89:
Do I take it, therefore, that the extra £50 million is an addition to an item which is already concealed, which we might call contingencies, distributed among the various heads?—In the original estimates, yes.
The next question and answer are:
So, 50 million is on the low side if we are to regard contingencies throughout the whole £500?—Yes, there is an allowance within the other figures, certainly.
There is a figure of £80 million as development costs after the initial certificate of airworthiness. It seems extraordinary that a sum of this magnitude should first be mentioned specifically at this stage in the project. Certainly Members of the Public Accounts Committee found this very strange. May I draw attention to Question 686 on page 86? The Question is:
What I am asking is why do you think this figure is one which it is right to introduce now, when some figure in respect of that was not introduced into the earlier calculations?—All I can say is this, that at the earlier period we were scoring up to that particular date.
A little later the answer continues, to Question 690:
Of course, I would agree that if at the time when the figure of 275 million was put forward it had been thought that a substantial element was going to be incurred afterwards, this should have been put in, but, of
course, we are talking here of things that are taking place a fairly long period ahead.
If estimating is done on that sort of basis, it is easy to see how the costs escalated. I have a lot of sympathy, reading the Report, with the question put by my hon. Friend the Member for Bebington:
Would it be fair to describe this figure of £500 million as a pure guess?
These are very large sums of money and have to be provided when the vast majority of our people are less well off in real terms than they were a year ago. It is remarkable that there has not been more of an outcry against this escalation. The reason is twofold. First, the calculations themselves are very complicated. Secondly, for reasons mentioned by the hon. Member for Oswestry, the higher the figure one is dealing with in estimates of this kind the easier it is to get the sum approved and the less fuss, very often, there is.
But there are simple principles which should be applied however complicated the estimating may be. One hopes that these principles will be brought home to our people so that, in future, Government Departments will think twice before embarking on projects in this way. It is easy to see how, in part, escalation has happened. Perhaps right hon. and hon. Gentleman opposite bear some responsibility for the way in which the cost and work sharing parts of the agreement were drawn up in 1962. An example is brought out on page 102. The answer to a question included the following passage:
In this development certain parts of the airframe are produced by B.A.C., certain parts of the airframe are produced by Sud-Aviation, certain parts of the engines are produced by Bristol-Siddeley, and certain parts of the engines by SNECMA".
One can well see, therefore, that if such decisions are to be taken on perhaps political grounds in this way rather than on engineering grounds it will lead to this sort of difficulty.
Then there is the question of whether the cost and work sharing cannot be reexamined. My hon. Friend the Member for Bebington referred to questions put by the Public Accounts Committee in 1964–65—for example, the request for a re-examination, which was refused and is still being refused. But even if this project is finally a success in the engineering sense, we are certainly not going to be
able to recoup much of the developing costs because the forecast price is not apparently related to the esclating development costs anyway. When this was pointed out in the Committee, the reply was:
These are in a different field of figuring altogether.
But as the Concord story unfolds one cannot help thinking that it is typical of one of the worst aspects of British industry—that a project so often tends to be production orientated and production dominated with very little attention being paid to the marketing implications and consumer considerations of what is being done. An example of this is the question of the sonic boom and toleration levels, again referred to by my hon. Friend the Member for Bebington.
My hon. Friend has reminded us of how the Public Accounts Committee in February 1965 was told that it would be possible perhaps to give a clearer idea within two years of what the position would be, but when he put the same question this year he was told that it would be a long time before it was possible to say more about it. This is astonishing, because it is such a basic and important consideration, and certainly in London at the moment there is a rising protest by residents about the whole question of aircraft noise. We are told that the Concord, if it should fly at supersonic speeds over land, will leave a boom carpet between 20 and 40 miles wide. Anyone who lives in the region of London Airport will shudder at the thought of what noise the Concord is likely to make in landing and taking off.
One may ask, "What is all this for?" It is for a reduction, say, of the flying time between London and New York by about half—from seven hours down to about three and a half. But who is the advance to be made for? Not, in the short-term, for the ordinary man in the street or his family, people who want cheapness and safety above all in air travel, especially when it can take them to far and exciting parts of the world for their holidays. Those who will be flying in the Concord at first will be the international jet set, who are playing the power game with other people's money—politicians, businessmen and diplomats who do not buy their own tickets with their own money but simply order their clerks or secretaries to pick up the telephone and arrange for the tickets.
Surely the hon. Gentleman misses the point. The idea is that Concord could be used far more often for Atlantic crossings. By making better use of the time the aircraft is in the air, the airlines could be more profitable because the speed of turn-round would make the Concord more profitable than slower aircraft.
It is equally true that, as the development costs go up, the airlines will have to pay a higher price. That is referred to in the Report. Although it is made clear that there is no direct connection between the price the airlines will have to pay and the escalating development costs, it is also made clear that the price originally mentioned when the first options were taken out is no longer valid. It was not valid in 1965 and it certainly is not valid now. Any return of the sort mentioned by the hon. Gentleman would be offset by the increased price in the early stages which the airline will have to pay.
Does not the hon. Gentleman also agree that there are few signs that pressure from the airlines has led to the development of the supersonic airliner? Does not he agree that, on the contrary, the airlines would rather have had a longer time to amortise their latest generation of jet fleets?
I agree with the hon. Gentleman. That is certainly so. I make one final point—the question of technological fallout. When one puts forward this sort of argument against the Concord, one tends to get the reply, "But one of the main benefits for British industry is the accompanying technological fall-out". That may be all right in principle, but research and development into a project, including even the Concord, must have some limit. It cannot be entirely open-ended. At the moment it seems to be an open-ended figure, because the figure of £500 million which has been mentioned seems to be a "flexible ceiling", to use the words used in the Report.
The future of this country depends on the efficient use of our resources of manpower, money and skill. Over the last 20 years or so, we have squandered a suicidal proportion of our resources on illusory prestige projects of one kind or another. Nothing has convinced me that Concord is not just another of these.
I apologise to the House for not having been here for the whole of the debate so far, but I have only just come back from the United States of America. I hope to be able to tell the House what I have been able to pick up in the United States of the view there of whether Concord is a viable project. In the United States there is now a great controversy between Lockheed and Boeing, and the Concord is the third of the three supersonic aircraft.
Before coming to that, I want to say as a member of the Public Accounts Committee that I view with considerable alarm, as does everyone who has spoken so far, I gather, the escalating cost of this aircraft, which was originally to be about £80 million or £90 million and which has now reached £420 million. I say £420 million, because I do not think that it is right——
I have only just started. I will give way later on when I have got into my theme, but at the moment I do not have a theme. I am in a vacuum like a supersonic aircraft going across the Atlantic. I hope that the hon. Member will allow me time to unfasten my seat belt.
The whole record of research and development in this country requires severe scrutiny. I do not know of a single project of this kind since the war—and that includes periods for which both parties have been responsible—for which the original estimate has not been minute compared with the eventual cost. I speak as a very simple man who is not a technologist, or an accountant, or an economist, but I do not understand why, after 20 years of history when the estimate for every development project has been exceeded by about five to one, our advisers and experts do not say when a new project comes along, "History shows that these estimates are always up the pole and we will therefore produce an estimate which is at least two or three times bigger than we expect at the moment".
I wonder how many projects which have been undertaken would have been carried out if the House of Commons had been told in the initial stage what the cost was to be. The cost of Concord was supposed to be £80 million, but it has risen to £170 million, £275 million or £420 million, so that our experts always seem to be leading us on step by step but never a step being so big as to persuade the House to cancel the project. This seems to indicate that there is something seriously wrong in the pre-planning of these projects and in estimating how much the cost of research and development is likely to rise, and that situation is exemplified by the Concord project.
I said that the cost was to be £420 million and not £500 million, because the former figure is to make the first viable aircraft. The £80 million is to be added on for contingencies and improvements. As every successful aircraft probably has its range extended and probably almost doubled and its seating capacity, if it is a civil airliner, increased by 50 per cent. before it finishes its serviceable life, it seems to be wrong to add in those costs when assessing the costs of producing the Concord. It is forgotten now that the original D.C.3 eventually became the D.C.7, starting as a short-haul aircraft and finishing up as an aircraft which could fly the Atlantic, although basically the same aircraft. Having said that, I am very critical of these costs and, as anyone who bothers to read the Blue Book from cover to cover will find, very critical of so many aspects of estimating by Government Departments for colonial loans and many other things.
However, having just returned from the United States, it appears to me that even on the present figure it is the view of many knowledgeable people in the United States that the Concord is a commercially viable aircraft. I am sorry not to agree with my hon. Friend the Member for Oswestry (Mr. Biffen), with whom I usually fundamentally agree, who said that a lot of money had been wasted on very advanced technological projects. Talk to any American, Mr. Deputy Speaker, and you will find that he is certain that the state of the American economy has been largely brought about by the enormous fall-out of their advanced technological projects which have revolutionised the whole of the American economy. Things which would not have been dreamed of even 10 years ago are now standard operations, whether in the way a factory works or in the developments of miniaturisation of equipment and components in every kind of commercial activity, and it has all come from these very expensive technological projects.
We in this country would be making a very big mistake if, as probably the second most technologically advanced country, we opted out. Even though as a member of the Public Accounts Committee I am critical of these costs and think that far more realism should go into these projects before they are begun. I would like the House to know that so far as I have been able to gather, in the United States the Concord is regarded as having a viable economic commercial life.
This leaves out of account the question of the sonic boom. It seems odd to me that very advanced and "with-it" people seem to accept the development of projects like this without giving sufficient consideration to the sort of points which the hon. Member for Brentford and Chiswick (Mr. Barnes) made about unbearable noise. In the United States the view is taken that all the great transoceanic airlines will be very chary about taking too many Concords because of their mileage ceiling and that they are likely to wait for the Lockheed or Boeing which will do not 1,450 m.p.h. but 1,850 m.p.h., reducing the time for crossing the Atlantic from three hours to two. I am sure that the hon. Member for Brentford and Chiswick will appreciate what a saving that will be for all those pepole who do not pay for their own tickets when they send their secretaries to get them; but it may also reduce fares for him and me who have to cross on our own money.
But these faster planes are not being considered in the United States for future use on internal airlines, by the North Eastern, or American, or United. If the sonic boom is not too much for the American Continent, the Concord will be used because it will be perfectly viable for a 1,000-mile route whereas the faster supersonic aircraft, the Lockheed and the Boeing, will not.
Even when the others are in operation, it is still thought that there will be a considerable market for the Concord. What we are arguing about today is the absurdity of nationalisation. This is not a question of a nation controlling an industry. The Concord is being produced by the French and the British. This is not nationalisation but internationalisation of companies. It is very doubtful whether any project of this sort will be produced in Europe in future by a national organisation. It will be produced by a consortium of European companies.
If this is so, I am sure that the most inefficient way of doing it is to take two entirely independent companies, one French and one British, or one Italian and one German, or one Italian and one British, and to tell them that between them they have to produce a particular piece of ironmongery. I am told that Alice in Wonderland is not fit for consumption by anyone under 21, but this is Alice in Wonderland material. Half of the trouble with the Concord is that it must be more expensive to produce an aircraft at two headquarters, separated by 600 miles, with two teams, speaking a different language, and both having to get into each other's minds.
No firm in Britain would even set out to do this if it was not Government money being used. This is the road to bankruptcy and no one else would even contemplate it. The only reason why it is done is because we feel that we cannot do it, the French feel that they cannot do it, and therefore national prestige is involved. Surely the right answer is that we should have a joint company, not a joint project?
The lesson of Concord is that the sooner we get into Europe and can form such a joint company to deal with such projects, the more likely is Europe to be able to produce something which is viable against American competition, economically sound and commercially efficient.
Every member of the Public Accounts Committee, listening to the evidence about the Concord project, could sense, running through all of the answers, the frustrations and difficulties encountered by the companies and by the Civil Service as a result of this joint project. Here we are committed not to an estimate. There has been a meeting of the Ministers and it has been decided to proceed further with the project. This House no longer has to deal with an estimate, we are faced with a commitment. We are not now faced with another twelve months of development. Once the two Ministeries have met internationally then this House, whether it likes it or not, will have to vote money, because we are committed.
If that means that we vote another £200 million, that is not an estimate of the expenditure. We have committed ourselves to that expenditure. This House has lost control of the project and this is bound to happen with these joint national projects. Therefore, the House had better realise, if we are to have any more of these joint ventures, that we are not dealing with estimates, but with firm commitments entered into, long before the money has been spent and long before we can stop it being spent.
There can be no change of view when it is an agreement between Governments. Yet, at the same time, we are now committed to producing an aircraft which I still believe will be viable, despite the increases in its cost. However, it will now be only just viable, and we still do not know whether the figure is realistic or whether it is still an estimate. We still do not know what the French are thinking about this because we only hear half of the story. We do not know whether the French are enthusiastic or are dragging their feet.
We do not know whether we are pushing the French up to the fence to sign the agreement or they are pushing us. We do not know whether there is enthusiasm on both sides or a dragging of feet on both sides. We do not know whether either side is enthusiastic, and this is inevitable when one deals between two Governments. It will not be easy, but we now have to begin to evolve jointly-controlled companies which will deal with these large international development projects. The present system of an ad hoc arrangement, whereby one takes a French company and a British company and asks them to produce something, is not the way to produce anything efficient.
We are entering the international world and the sooner those people who make the mistakes about these estimates put on their other hats—when they do not make mistakes and produce agreements—the sooner they spend more time working out how future projects can be carried out with far greater control and co-ordination between the two companies—because these companies will probably be linked by financial control—the sooner Europe will begin to compete with the American aircraft industry on a far more realistic basis.
I do not want to talk much about Concord, but before I turn to my main subject I would like to say a word about it. I cannot agree with the hon. Member for Ormskirk (Sir D. Glover) that what we are really debating is nationalisation. The crucial point was that made by my hon. Friend the Member for Brentford and Chiswick (Mr. Barnes), when he referred to the danger of British industry paying too little attention to the marketing of products in comparison with the production side of industry. I made a speech in this House a month ago largely on this subject.
There is a very real danger, in the public sector particularly, that we pay too little attention to marketing. It is much easier in this sector to neglect the consumption aspect of industrial production. Perhaps there has now come a time when we should mount a campaign to make people, not only in the public sector of industry, but those who are concerned with the expenditure of public money in private industry, more aware of the need to look at the marketing aspects of production.
My main subject deals with Paragraphs 70 to 78, and paragraph 3, that is, the problem of the accountability of universities for the expenditure of public money. I understand perfectly well why it was that the right hon. Gentleman the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) was unwilling to say much about this since the Committee is investigating this matter. The Committee might find it helpful if some of us said a little about this.
I was delighted to hear the remarks of the hon. Gentleman the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), particularly on the subject of academic freedom. I speak as an ex-academic. There is a great deal of nonsense talked in the universities about academic freedom. I was in a university recently—a week ago—and already rumours were circulating that we might be attempting, in Parliament, to secure a greater measure of accountability from the universities for the expenditure of public money. There were mutters of discontent about Parliament considering interfering with academic freedom.
This is the most arrant nonsense. There is a very sharp distinction to be drawn between the essence of academic freedom, which is the right to teach what one will in the way that one will, and linked with this, as the hon. Gentleman the Member for Walsall, South, said, the right of the universities to make their own appointments—with which no one would wish to interfere—and the right of the universities to spend the taxpayers' money, without any acountability to Parliament. It is far from its being the case that there is in the House a desire to interfere with academic freedom. What is wrong is that there is perhaps too little awareness in some universities that they are dealing with taxpayers' money and should ultimately account to the taxpayer through Parliament for the way in which that money is spent.
The U.G.C. system of handing out money to the universities has, I think, worked quite well in general. There are, however, criticisms to be made of it which go both ways. When I was looking at this question from the other side of the fence as a member of the senate of one of the new universities, I used to feel, and I think I still feel, that the U.G.C. system of costing in advance, particularly costing for residential accommodation in the universities, is too tight and that it restricts unnecessarily experiment in the development of new types of residential structure for universities.
On the other hand, many of us felt that the U.G.C. visit to universities before the regular quinquennial review was, in some measure, a waste of time. It was almost like the visit of the general officer commanding to an Army barracks—when the grass is cleaned. Similarly, the universities are polished up for the U.G.C. visit. The whole day is spent in endless discussion with a whole series of bodies, with many people turning up two or three times on different committees to talk to the U.G.C., and no discussion is long enough for the ice to be cracked.
It is time that we had another look at the U.G.C. system of giving public money to the universities. The crucial point is that we should consider whether we want accountability to the Comptroller and Auditor General and the P.A.C. as well as to the U.G.C., and whether we want universities and colleges to present their accounts in a uniform way.
Another matter which I hope the P.A.C. will look at is the question of moneys other than those derived from the U.G.C. Universities handle other moneys and some of them are public. Some of them come in the shape of fees or dues from the grants paid by the local education authorities or the Department or by other public bodies to students. There are private moneys, too, which affect the question of how much public money is required by universities.
The problem can, perhaps, be most clearly seen in relation to the Oxbridge colleges. There is a long tradition of claiming that those colleges are quite independent and do not rely on public funds for their continued existence. Yet, in fact, perhaps half the salary of a fellow teaching at Oxford is derived from a lectureship, the money for which comes from the Common University Fund, largely supplied from U.G.C. sources, and, at the same time, the college relies very heavily on so-called tuition fees, so-called library dues, so-called college dues which are paid by the local education authority. These fees are, in general, calculated according to the needs of the college rather than according to the expenditure under one of these heads.
If it were not for these public moneys, such a college would have to rely much more heavily on its own endowment income to provide certain facilities in the college. The fact that it draws public money in this way means that it can spend some of that endowment income on what other universities might regard as frill projects or a bonus. I do not suggest for a moment that the Oxford or Cambridge colleges administer their funds badly or wastefully or that they waste public money. We do not know, because their accounts are not presented to the House and there is no uniform method of presenting the accounts to anybody.
I was delighted to see that the Franks Commission recommended in respect of Oxford that a new committee, called the College Accounts Committee, should be set up, one of whose duties would be to get the college to present its accounts in a uniform way so that there could be more public understanding of the sort for which the Robbins Report called of what was happening in that university. There should be not just public understanding but public accountability so that we in the House could understand why money is required for those universities as well as other universities, what it was required for and whether there was—I imagine that we all believe there is, but in fact we do not know—sensible control of the expenditure by each college of moneys derived from a variety of sources, some public and some private.
In the Franks Report, I was rather disturbed to see—I do not think that there was much Press comment on this—that, as a consequence of its admirable proposal for the equalisation of the endowment income of the Oxford Colleges, it suggested that if there was not enough money in central university funds to go round university dues should be increased to provide that money. It suggested, in fact, that the university should take a unilateral decision to milk the local education authorities for a little more money in order to provide endowment income for the colleges—in other words, to provide an income over the expenditure of which neither the House nor any other public body has any control. This seems to me very dangerous indeed. I am not at all sure that we do not need a system of public accountability which enabled the House to know exactly what was happening and why it was happening in those universities.
The P.A.C. might well consider this problem when it is looking at the whole question of university accountability, not least because if we again miss out the Oxbridge colleges and accept the argument that they are independent bodies we shall inevitably add to the store of resentment in some other institutions of higher learning—I have no axe to grind because I have been on both sides of this particular fence—that occasionally the Oxbridge colleges seem to be able to get away with murder. They get a regular supply of public money in addition to their very large private endowment income.
I am surprised to hear the hon. Gentleman say that the colleges of Oxford and Cambridge receive public money. They receive dues paid by their undergraduate members for their being there. It may be that the money which those people pay is derived from a local education authority, but that has nothing to do with the college, which is merely dealing with its undergraduate members who pay the appropriate fees or dues for being there. Those young men might equally be there with their parents paying the fees. The fact that, as it happens, some undergraduate members are deriving money from local education authorities cannot raise any question of public accountability on the part of the colleges.
I am talking about fact and not theory. It could theoretically be the case that most of this money came from parents' pockets. In fact, virtually none of it does; it is paid directly to the colleges by the local education authorities. But that is not the only source of public money to which I was referring. I pointed out very carefully that in 90 per cent. of the cases half or perhaps, in some instances, more of the salary of a fellow of an Oxford college is derived from the university appointment which is directly consequent on that fellowship and is paid from public funds. I pointed out, further, that there is a proposal that many of the colleges, in Oxford at least, should be subsidised from a common university fund which, as the Franks Commission recommended, might derive a large part of its money from public sources. Indirect subsidy seems to me to be quite as important a matter of expenditure of public money as direct subsidy. I do not accept the argument that an indirect subsidy relieves the body which receives it of the need for accountability.
We have here a serious problem. I hope that we will look at the whole of it and not just part of it and that we will come out with a system whereby we have no interference with academic freedom but we have, at long last, a reasonable system of public accountability to this House by the universities for the expenditure of public money.
I have listened with great interest to the debate and I have heard every speech which has been made. Although I disagree with many of them, I think that all of them made fairly stated cases. As I indicated in an intervention, I have discussed with my hon. Friend the Member for Bebington (Mr. Brooks) some of the points which he has made today.
There are two radically different points of view in the debate. There is my point of view and there are the other points of view. That is not stated in any cock-sure attitude. It is merely a simple fact.
I apologise, Mr. Deputy Speaker. One can circulate information but one must not circulate oneself.
There are two points of view. I happened to be one of the comparatively small band of Members, on both sides of the House, who in 1962 had to look forward. Today, I have listened to those who have prepared the Report of the Committee, which is of immense interest, and who are looking backward. That is the easier job of the two; hindsight is easier than foresight.
In 1962, on 21st December, just about a month after the conclusion of the agreement between France and ourselves, I raised the matter of the supersonic air-liner on the Floor of the House. The debate on that occasion was a fullscale debate. It went on the whole day and many hon. Members on both sides who wanted to contribute were not able to speak.
I should like to quote one or two extracts of my speech on that occasion. This is what I said:
The decision to build a supersonic airliner has been welcomed on this side of the House.
I want to make it perfectly clear that on that day I was occupying the opposite seat in the House to that which I occupy now, in the corresponding corner of the Front Bench below the Gangway, but that the fact that I was then on the Opposition side did not make any difference to my view. I think that I was speaking for most of my colleagues—and there were many of them—because none
dissented when I said that we welcomed that decision.
I went on to say:
but that does not mean that we are satisfied with the rather scanty information provided by the right hon. Gentleman the Minister when he announced, a short time ago, that the construction of the prototype was to be proceeded with.
Therefore, if hon. Members today are dissatisfied with the amount of information which is available, they should remember that from the very beginning, when the Conservative Government intimated that they were going ahead with this aircraft, we registered our dissatisfaction about the scantiness of the information that they were giving us. That lack of information was, perhaps, due to the fact that the Government of the day recognised this as a vast experiment and something which in all probability, as the days and years passed, would develop beyond any conception which they might have had at the point of departure. The information may not have been available because the Government of that day recognised that the project was an experiment.
For many months Members of the Opposition have urged the Minister to commit himself to this project.
Therefore, we were already, at least in individual effort, behind the Government in urging them to go ahead.
To continue the quotation:
Now that the decision has been finally taken we feel that too much valuable time was lost.
It may well be that the loss of that time is being paid for now. That, however, is the sort of question to which, like so many other questions, there can be no valid answer at this stage.
I went on to say in December 1962:
If this view be wrong, it is the Parliamentary Secretary's bounden duty at this stage to show me today why and where I am wrong.
I am sure that it is for the most valid of reasons that the hon. Member for Banbury (Mr. Marten), who was then Parliamentary Secretary, is not able to be with us today, for I think that his speech in a debate of this nature would have been of immense value to both sides of the House.
I then posed a question as to the purpose of air travel and why we travelled by air. Fifteen years earlier I had tried to find an answer to that question. In 1962, I quoted what I had said fifteen years before when I raised the question of air travel, air speed and all the things that cluster around those aspects of travel.
In 1947 we were coming out of the period when we had been flying reconditioned aircraft that were used during the war and which subsequently were converted to civilian use. Therefore, the question was before us of research into the type of aircraft which had to dominate the years of peace.
I asked, in December, 1962,
In that case, why should we not turn our research towards the design of an aircraft which is planned not merely for speed, but for comfort and safety in travel; and able to be operated at low and stable fares, with low landing speed and light wing loading?"—[OFFICIAL REPORT, 21st December, 1962; Vol. 669, c. 1627, 1632.]
That was what I asked for again, in a House that was very full for a Friday, and when I was sitting on the other side.
I did not get it, and we are paying for that today. It may, of course, have been absurd to have talked about limiting the speed and thereby limiting the development of aircraft, because at the same time as I was arguing that our manufacturers were producing military aircraft which were moving faster and faster and finally reached supersonic speed, and whether we like it or not, it was almost impossible for designers, because of investment costs, to separate military and civil design, to have different staffs and different technical experts, and so on; the two were linked together.
So we went on from the 90 m.p.h. of the Rapides to the 200 m.p.h. of the Dakotas up to the Viscounts and on to the 400 m.p.h. of the Vanguard and now the 610 m.p.h. of the Trident. We rejected the idea of stabilising speed and concentrating on other characteristics. That was done by both sides.
Now today we have an important Committee which looks backward to all this and tells us what should have been done and what ought not to have been done. I have spent eight years in one of these Committees of the House and I know the type of dedicated work which goes into them and the time that is spent on these investigations; but how helpful they are now, when the money has been spent, is another matter altogether.
Cost, of course, is reaching proportions which, naturally, cause us to pause and think. But we have, I think, got to put the cost into what we may call the financial background. When we are talking about the expenditure on this particular plane let us remember that in 1962 we had a gross national product of £25,000 million. That was in 1962. In 1964 that had risen to £29,000 million and I think there is no doubt that by the end of this financial year it will be in the region of £33,000 million. On our gross national product Government demands have risen correspondingly, from £6,000 million to what I believe by the end of this financial year will be some £8,000 million.
So that figure which we spoke about in 1962, £75 million, related to the figure we are talking about today, bears a reasonable relationship to the change in the national income. Costs have gone up; so has our national income. National income goes up in a manner similar to the increase in the price of this commodity. Because costs go up, we get a higher national income.
In 1962 we ventured a thought about costs. I said:
The bulk of the cost of the development must be borne by the taxpayer and his liability in Britain will be not less than £75 million.
That was generally accepted, though I am not sure that I can commit the Minister of that period to the figure which I had been guided to accept. But I went a little further and I said:
The figure I gave represents the minimum amount of money which will need to be invested, but it is already being suggested that we will require to think of another 25 per cent. beyond that minimum for what are being called contingencies.'
I ventured this further observation:
When one looks into the matter one realises that even this additional percentage may be insufficient."—[OFFICIAL REPORT, 21st December, 1962; Vol. 669, c. 1628.]
May I ask my hon. Friend two points on this very interesting relationship between the gross national product and the cost of the Concord scheme? The first point is, did I understand him to say that the gross national product in 1962 was £25,000 million and two years later was £29,000 million, because this seems to me to be a rate of increase of some 8 per cent. a year in two years and I am wondering if he thinks it is the sort of rate of development which took place in that period?
I am sorry if I have misled my hon. Friend. What I was trying to establish was that there was this growth in the national income which, to some extent, was not keeping pace, but was part and parcel of the growth which was taking place—not to the same extent, of course—in the cost of the Concord.
I am not taking any defensive attitude in pointing to these facts, but those of us who tried to envision this particular project and its possibilities and what it would mean to us as a nation did try to peer into the future and to make attempts at assessing the costs and I think the House ought to be reminded of these things.
As I said, our job was much more difficult than was the job of the Public Accounts Committee. I pay tribute to the Committee for the work it has done. Indeed I do. Nevertheless it is always, as I said, a much easier matter to look back on what has been done than it is to look forward—into what was a blank space. There has been a tremendous jump forward. It was not like that from 1947 to 1962 which kept us still at sonic speed. It was a jump that took us from sonic into supersonic speed, into a new atmosphere altogether and a new environment. Consequently, if the cost which faces us comes somewhat alarmingly before us, we have to realise that we have put our hands to this effort—I cannot say "to this plough", although it may plough the skies. With it is joined the good will of two nations.
I am sorry that the hon. Member for Ormskirk (Sir D. Glover) is not in his place, because I should like to join issue with him about the difficulties which he alleged exist between British and French technicians, designers and aircraft workers on this project. The manner in which this joint venture is proceeding at floor level, in the offices and at board level, is remarkable. There is wonderful good feeling and co-operation. Even the difference in languages is no barrier to the progress which the project is making. I am certain that from this House tonight no single word will go forth from either Front Bench that would tend to discourage either our French friends, who are doing their bit, and our own people, who have been working well at home.
The purpose of this debate is to discuss not so much the Concord or any other particular aeroplane in its own right, but the control of public expenditure in respect of some of these projects. I do not intend to say anything about the merits of an aeroplane such as that, because I do not feel qualified to do so.
Before turning to the control of university expenditure, which is what I caught your eye to speak about, Mr. Deputy Speaker, I wish to make the comment that the speech of the hon. Member for Glasgow, Govan (Mr. Rankin) has tended to show me, at any rate, how dangerous public control of technical development can be. If I understood his quotation within a quotation correctly, in 1947 he was trying to limit the speed of aeroplanes, approximately, I assume, to the levels then existing. I must say that I think that an extremely unwise thing to do. If the Parliamentary control of public expenditure were ever to be used for purposes like seeking to circumscribe scientific development according to lines of policy laid down by reference to public expenditure, the result of such control could only be to the disadvantage of the human race.
The hon. and learned Member for Buckinghamshire, South (Mr. Ronald Bell) is taking what I said too far. I thought that I had made it clear that I wanted to see built into aircraft the characteristics of safety, cheap fares and other features first. Speed would have been controlled and would not have grown so quickly, but it was bound to grow.
That is only a difference in degree from what I am saying. Broadly speaking, what the hon. Gentleman was saying was that the system of public accountability for development to which the State was a financial contributor should be subject to considerations like this where the growth of speed, if not stopped, would be greatly limited by Parliamentary control. That is a thoroughly bad thing, and I do not think that Parliament is fit to impose such guidelines on the development of natural science or the applications of it.
That leads me to the point which I wanted to make, which was about the control of university expenditure. It was referred to by the hon. Member for The Wrekin (Mr. Fowler) in his speech.
The argument between the Public Accounts Committee and the University Grants Committee is an old one. It arises with considerable frequency, though not every year, and usually The Times writes an angry leading article beating down the arrogance of the Public Accounts Committee and supporting the cause of academic freedom.
I dare say that there is something to be said on both sides. Obviously, the fish which the Public Accounts Committee caught and referred to in its Second Report was one which supports its case for public accountability. It caught a loan of£1 million from public funds to the University of London which had simply been lost sight of. All of us as individuals must have a feeling of envy that someone can be lent £1 million and have the lender forget about it. It is not the kind of thing which happens to us in our lives.
It is the result of an obvious breakdown in the Parliamentary control of public expenditure. Unfortunately, the episode takes its place in a rather long perspective—in a battle array—and the hon. Member for The Wrekin carried the implication a good deal further than just looking after loans of public money when they have been made. He pressed, in particular, for the accountability to go back to the Oxford and Cambridge colleges.
I should like to take up that point, narrow though it is, because it illustrates the danger of this argument. The Oxford and Cambridge colleges do not receive public funds. Very largely, the money helps to support the universities of which they are the component parts, and one of the main glories of the Oxford and Cambridge system has been the clear distinction established between the universities and the colleges.
Many of those who have been to either of the two universities feel that the university should be firmly and properly kept in its place. There is much danger in the university growing too powerful in relation to the colleges which the public grants system tends to bring about and which the public accountability system emphasises still further, because it leads to standardisation.
The hon. Gentleman wanted to make the colleges accountable to the Public Accounts Committee, and he said that that could be done without encroaching upon academic freedom. I have grave doubts whether even making the University Grants Committee accountable to the Public Accounts Committee to the extent that it is now is really compatible with academic freedom. Over the past years, we have seen a long drawn out battle between the Public Accounts Committee and the University Grants Committee, of which this Second Report is only the latest episode.
One cannot get away from the fact that if people are to be made to account precisely, academic freedom becomes illusory, because people will say, "You have had public money. You must use it for purposes which carry forward public policy as expressed in the Parliament of the day." That is a very dangerous doctrine. If we carry it one stage further and make the component parts of universities separately accountable, will the result be academic freedom or uniformity? One set of criteria will be applied to the policy of each college, and they will all be made to justify it. There is, unhappily, in our days only one set of fashionable values, and unless people relate their activities to the fashionable values, it will be said, not that they are wasting the money, but that they are not applying it to the best advantage.
Can the hon. Gentleman clarify one point of fact? He said that the colleges support the university. How can he justify that in 1966, as opposed to 1866? So far as I know, that is untrue.
It is true because the colleges pay capitation fees to the university. Out of their endowments, they pay a contribution, which used to be proportionate to the size of the endowment, to the central fund of the university which, until 1939—and it may have been later—was dependent on them for it. I was not at Oxford in 1866, even though I may look as though I was. The colleges have always been self-supporting and have largely supported the university, though I know that public funds have taken over the major rôle.
I think that there is a great danger here. The House is properly jealous of the use of public money, and realises that some academic accounting procedures have been enthusiastic, I think is the right word. After all, it will be remembered that a few years ago we considered that the accounting in relation to the Jodrell Bank telescope was a little odd, but the enthusiasm was undoubted, and the product was eventually highly praised.
I beg the hon. Member for The Wrekin to reconsider his attitude in this matter, whether it is really worth nagging at these bodies because they are independent, because they are not answerable to the State, and trying to take something away from them, to take away a difference. The hon. Gentleman said that there was considerable resentment at the fact that the colleges might be getting away with something. Getting away with what? As they do not receive any direct public subvention, that is not involved. If they did not take undergraduates who were receiving local education authority grants, they would have no difficulty in filling the colleges with those who were not.
I repeat my question, getting away with what? The answer must be getting away with spending money at their disposal—college dues and so on—in the way that they think most appropriate to carry forward a variegated university life. What is the resentment? I am afraid that it can only be a somewhat envious resentment by those who are under close discipline from the U.G.C., under pressure by the P.A.C., and they look enviously at those who do not have to work under such pressures.
The lesson which that leaves in my mind is that perhaps we ought to give to the others what they so much envy in the Oxford and Cambridge colleges, namely, a feeling that somebody is not looking over their shoulders all the time trying to apply the pattern of public policy to all their visions and aspirations. I am an unrepentant believer in a wide degree of academic freedom. If, occasionally, the result of that is that some money slips through the net, I think that it is a price which is well paid, and which this country ought to afford to pay.
It is a pleasure to join the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) and others in congratulating the Exchequer and Audit Department on celebrating its centenary this year. There is no doubt that this Department has become a familiar part of the Whitehall scene, and it would be hard to picture now how the Whitehall machine would function without it.
There may be times when Departments feel a little irked at some of its activities, but I think that these are rare feelings. Perhaps, occasionally, when the Department unearths some misapplication of funds which a Department has discovered for itself, we try to comfort it from the Treasury by pointing out that it is better that the Department concerned should have unearthed something, rather than that the Treasury had not found it.
The people concerned are highly respected. They take a great professional pride in their work, and justifiably, perhaps, the greatest tribute is that so many other countries have followed our example in setting up a body of this kind. Our Department has helped to train many Exchequer and Audit Departments overseas.
This year of centenary also marks the retirement as Comptroller and Auditor General of Sir Edmund Compton, and gracious tributes have rightly been paid to him. Fortunately, the House of Commons is not to lose him, as he is to be the first of the Parliamentary Commissioners when the legislation now before the House goes through, as I think one can confidently predict it will.
As the Minister in charge of that Bill, I am perhaps in a better position than most already to express an opinion about how much the House will benefit from his wisdom and skill in that office, and of course reference has been made during our debates on that Bill to the fact that the scheme for the Parliamentary Commissioner and his relationship with this House has been closely modelled on the relationship between the Comptroller and Auditor General, the Public Accounts Committee, and the House, and we have gained greatly from this experience.
It is also proper for us on this occasion to welcome the appointment of Sir Bruce Fraser as Sir Edmund's successor. I am certain that anyone who has worked with Sir Bruce will have not the slightest doubt that he has all the qualities of fairness and independence of mind which will go to make him a worthy successor to Sir Edmund.
I should also like, on behalf of the Treasury Officer of Accounts, who cannot speak for himself, to thank hon. Members for the kind words they have said about him.
The functions of the P.A.C. are to see that moneys paid by Parliament are properly applied in accordance with financial propriety, and also that there is effective financial control to ensure that the public gets the best value for money for those funds. It is in accordance with the current shift that of the 16 main topics dealt with in this year's Report by the Committee, ten are primarily concerned with the question of value for money, three exclusively with questions of propriety, and three are mixed.
Perhaps I might select for comment those matters on which I intend to try to reply briefly in the order in which they appear in the Report, and begin with the questions of overseas aid which were dealt with by the right hon. Gentleman the Chairman of the Committee.
There are two points here. First, there is the question of shortcomings in the financial control and accounting of overseas aid, in particular with reference to the problems which have been experienced in Kenya. The Treasury Minute makes it clear that we are at one with the Committee in regarding proper financial control by the recipient countries as a matter of fundamental importance to the aid programmes. This is being made clear on all appropriate occasions to the countries concerned, and also, where appropriate—and again this is in line with the recommendations of the Committee—we are seeking to replace the deficiency grant by the block grant system.
Regarding the Kenya case, there is little that I need add to what is in the Treasury Minute, other than to point out that a lot of the accounting difficulties in this case arose in connection with the agricultural settlement schemes. It is only fair to Kenya to remember that something approaching an agricultural revolution has been carried out with little if any public disturbance and under great pressure of time. It is perhaps not a little surprising if, under those circumstances, the complicated accounting systems which were introduced to deal with the situation proved to be beyond the capacity of the available staff. In any event, the staff has now been strengthened and a special adviser has been appointed to advise on settlement accounting systems generally.
The second point to which the right hon. Gentleman referred dealt with the question which the Committee examined further, of the over-issues to territories which have become independent, with particular reference to Sierra Leone. This is a matter which had been considered before. The Committee expressed concern that the matter had not been dealt with more expeditiously. I think that the Accounting Officer confessed to standing in something of a white sheet over this matter. The accountant to the Ministry of Overseas Development visited Sierra Leone in May of this year and, as the Treasury Minute shows, the amount outstanding has been reduced to £417,000.
The Ministry is discussing with the Treasury the terms on which Sierra Leone may be asked to repay this money. An approach may be made to the Government and we hope to have the matter concluded by the end of this year or very early next year. Naturally, our consideration of this date has, to some extent, been overshadowed by the emergence of a serious financial position in Sierra Leone which has led them to call in the International Monetary Fund. We shall obviously have to take account of this in considering how to recover the amount over-issued.
These issues, although they add up to quite a large sum in the aggregate, tend to be relatively small amounts individually, covering quite a large number of territories. The Ministry of Overseas Development, however, is determined to ensure that, as far as possible, these audited statements are received at the proper time, and the delays which have been involved here will not be repeated.
I turn now to those matters which have been the main subject of debate today, namely, those concerning the Ministry of Aviation. Before I do so, I should like to mention something that I overlooked in my preliminary remarks, which is to thank the right hon. Gentleman for the remarks he made about the publication of the Treasury Minute as a White Paper. I am sure the House will agree with the right hon. Gentleman in thinking that this is a convenient procedure, and, if this is the wish of the House, we shall be very glad to make it a regular practice. I think it saves time, and we are grateful to the Committee for its suggestion.
The main subject of debate has been the question of the escalation of costs of these aviation development projects, in particular those related to Concord and the TSR2. Rather more has been said today about Concord than about the TSR2, though some similar problems arise with both.
First, the Concord project was wholly unparalleled both in scale and in complexity, because of the technical problems involved in production of the aircraft, and because it was an international project. It is fair to say that the starting point of the failure to obtain effective control over commitments and expenditure was really the nature of the original Anglo-French Treaty on this matter, which was an open-ended Treaty. It contained only a very vague definition of the aircraft to which it related. As was commented by one hon. Member, and as is well known, there are no break clauses in it. It did not provide for any step-by-step commitment. There was one irrevocable commitment running right through to production with this ill-defined project.
Secondly, the two Governments concerned entered into this Treaty before the firms concerned, which were to produce the aircraft, had really been effectively tied in. Some very wide questions have been raised during the debate, on which I do not think it would be useful or proper for me to comment—questions like the sonic boom, the suggestion that it would be preferable if we had a joint Anglo-European corporation dealing with projects of this kind, and so on.
The issue with which we are concerned today is, of course, the machinery for the control of public expenditure. The Committee, in its Report, has emphasised again the need for effective control on projects of this kind, and commented that the arrangements in hand should be continuously reviewed. The Treasury Minute endorses this comment.
It is right to remember that the Concord project, although a civil project, is subject to the full control machinery which is associated with military projects. Although French methods differ, the French have been equally concerned with us to try to establish proper control machinery. Development costs plans have been submitted by the major contractors in both Britain and France. In order to strengthen the Ministry's management, a separate division has been set up within the Ministry of Aviation combining the administration, the financial and technical functions in reporting to a single head—the Director-General of the Concord programme, whose appointment was recently announced by the Minister of Aviation.
It is recognised that detailed control of expenditure must remain the responsibility of industry, and firms are being encouraged to use the best methods. This is a contractual requirement. A major Anglo-French review was carried out at the beginning of this year. It is indicated that the methods used were an improvement on past practice. Difficulties arose, mainly over this matter of methods, and the operation of these methods is being kept under close review.
It is right and important to distinguish between the increase in the total estimated cost, which is due to previous under-estimation, and faulty cost control. Estimates deal essentially with the likely future expenditure, and it does not follow that rising estimates imply faulty control of present expenditure. The Committee has returned to its recommendation that a thorough study should be carried out as soon as possible on the sharing of work and expenditure by the
French and United Kingdom Governments under the work-sharing agreement. The Treasury Minute, in reply, says that the matter of this review is appreciated, but that it is:
premature to proceed to this review without further experience of the arrangements in operation.
A number of hon. Members have asked me to comment further on this, and to say why we consider this to be premature, and to indicate when we think is the right time. The main division of work under this agreement was, of course, decided on at the outset in the Treaty. Sud-Aviation was to have 60 per cent. of the airframe work and B.A.C. 40 per cent., and in respect of the engine Bristol-Siddeley was to have two-thirds and SNECMA was to have one-third.
The physical division of the tasks which make up these proportions is a very satisfactory one technically, and its overall result is expected to be approximately a 50–50 financial division. I do not think that the general division is called into question; what the Committee—both in its earlier Reports and again this year—is more particularly concerned with is the question of the sub-contracting of equipment. The position at the moment is that the placing of major sub-contracts requires the joint approval of both British and French officials, and the choices have in general been based on technical specification and tender estimates without seeking an exact 50–50 split. In the event the division of the work so far subcontracted is likely to be about equal, but since the equipment represents only one-tenth of the total development cost of a complete aircraft any inequalities would have only a marginal effect upon the total division of work.
I hope that this will help to dispel any idea that there might be that either technical specifications or tender estimates are being disregarded, or approached in an unnatural way, for the purpose of trying to achieve a 50–50 split. That is not the case.
Virtually all the sub-contracted work has been allocated, but it is the view of both the British and French authorities that until we are much nearer completion and actually have fully-equipped aircraft flying and have proved that they are satisfactory we will not be in a position to judge whether or not the original decisions taken, on the whole, were good.
The prototype aircraft is due to make its first flight early in 1968. In our view it will be some time before we shall have reached the stage where it will be a useful exercise to try to review the system which has been adopted for work sharing, in order to see what defects it might have and in what way it can be improved upon in other projects.
Meanwhile, the progress on equipment development is constantly being watched by British and French officials, and if at any time they think that the wrong choice has been made they will not consider themselves bound to continue it.
I made the point that this agreement might be regarded as a prototype for others. Does the hon. and learned Gentleman's indication that the Government are not proposing to have a review of the cost-sharing arrangement mean that they are also not going to make any similar provision in a future agreement until they have had this review?
The right hon. Gentleman knows that other projects are being discussed with the French Government for the joint production of aircraft, and in these cases they are not always, for other reasons, following the exact work-sharing arrangements which are contained in the Concord Treaty. It may be useful at a later stage to compare the arrangements under different schemes in order to see what are the advantages or disadvantages. We do not feel that for the purposes of considering those other projects, however, there will be any great additional experience than the experience already gained by those managing this project to be obtained by carrying out a review of this kind at present.
One of the chief subjects of comment in the debate has been the increase in the estimated cost of the project. The figure of the total present estimate for the development is £500 million, which was published by the Committee in its Report. My hon. Friend the Member for Bebington (Mr. Brooks) commented upon the fact that the Committee had disclosed this figure, and the right hon. Member for Kingston-upon-Thames referred to it in opening. The Accounting Officer properly asked that his evidence on this point should be sidelined, but in my view the Committee was quite right to publish the figure. I am a member of the Committee, but a non-playing Member on most occasions, so I do not take part in votes of this kind. But if I had been present and had voted I would have voted for publication here. The Committee will always be very alive to the importance, whether on grounds of national security or commercial confidence, of not publishing matter which should not be published, but this was a question of obvious importance, and appart from anything else it might have caused even greater concern and alarm of the Committee had expressed its concern about the increase without saying what the increase was.
Perhaps the hon. and learned Gentleman would make clear what he knows to be the fact, that although we did take the view that the figures must be published we were able to help the Government position with the French in respect of the timing of publication of the Report.
Yes. I am most grateful to the Committee for its cooperation in this matter. It would have been embarrassing if a matter like this had been disclosed without our officials being able to have an opportunity to discuss the matter first with our French allies. Owing to the co-operation of the Committee we were able to do that.
The figure of £500 million is not a true comparison with the last estimate given publicly, namely, £275 million, in May, 1964. This is made clear by implication in the Report, and although it does not, in terms, state the exact comparison figures, they can be obtained by simple arithmetic. The true comparison with the £275 million figure for 1964 is now £370 million, the balance being made up of £80 million for the estimate which is now made—and which it was not possible to make usefully earlier—of the cost of post-certification and airworthiness development, and, secondly, of £50 million as a general contingencies allowance, which the Anglo-French party working on this project jointly thought it right to make.
Much of the increase from £275 million to £370 million is due to the effects of design improvements which have taken place during the period and, secondly, to wage and price increases. There is undoubtedly an element of under-estimation, but it was to be expected that as the work moved from the design stage to prototype construction the full extent of technical difficulties on this advanced project would become clearer.
The programme of post-certification and airworthiness work which I was asked about is designed to improve the economics of the aircraft, and will be concerned mainly with increasing the thrust of the engines and the consequent airframe modifications. I was asked about a newspaper——
When the hon. and learned Gentleman says that they are designed to improve the economics of the aircraft, is it not true that this, in turn, must depend upon the acceptability of the sonic boom? Therefore, can he not give us a little more information about when we might expect some further evidence on the effect of the sonic boom upon the sales?
I cannot. I can only invite the hon. Gentleman to put any Questions on that matter to my right hon. Friend the Minister of Aviation.
I was asked a question about a newspaper report concerning an alleged number—I think 80—of engines which would be, it was said, involved in this development, including the post-certificate of airworthiness work. I have not seen the report and cannot comment on it in detail. I do not know whether the hon. Member who mentioned it was suggesting that this was an unbelievably high figure, but it is right to remember that we are talking of an engine development programme which is extending to 1973, that each aircraft concerned has four engines and, in addition, will need spare engines to support the flight test programme, as well as engines for bench testing and engine development on the ground——
My hon. and learned Friend suggested that the hon. Member for Oswestry (Mr. Biffen) should put down a Question to the Minister of Aviation on the problem of sonic boom. I am one who has put down such a Question recently. Would my hon. and learned Friend now confirm that no field tests have been carried out in this country which in any way indicate the reaction of the civil population to this expected problem?
I am not able to assist my hon. Friend or any other hon. Member on problems of sonic boom. I am quite ignorant on that subject and can only repeat my invitation to hon. Members to address any questions which they have to my right hon. Friend.
The Committee also referred to the introduction of incentive contracts. A great deal of consideration has been given to this problem as it relates to development work. By definition, incentive contracts place both parties at risk and, since the Government cannot compel industry to accept their terms, difficult and lengthy negotiation is inevitably involved. There is a need to define closely the technical requirements and the tests by which the product can be shown to meet them before incentive becomes in any way meaningful.
On advanced projects like Concord, this limits considerably the area which is available for incentive contracts. It must also be accepted that, with incentive contracts, the degree of control exercised by the Government over design and management is limited. These are the difficulties about applying incentive contracts to development work.
However, in spite of these difficulties, the Government have agreed that we should seek to negotiate incentive contracts even at the price of not having the same degree of supervision, but doing so with a much more detailed identification of the technical requirements and of the work concerned. We think that this conclusion is in line with the recommendation in Plowden, that the Government should not seek to exercise too great a degree of control over the industry.
In its comments on the TSR2 contracts, the Committee draws attention, critically, to the way in which there was insufficient control over the development of the Olympus engine contract on the TSR2. This might, at first sight, seem to conflict with the previous point, because that was a form of incentive contract, but it was not a true incentive contract, because it contained a provision by which the company was able, under certain circumstances, to carry forward any losses which it incurred under that contract.
The result, therefore, was that—as is agreed in the Treasury Minute—insufficient control was achieved in that case, but that does not alter the basic decision to which I have referred, that we want to try, wherever we can, to introduce incentive contracts in this sphere.
I should like to turn now to the TSR2, about which less has been said by hon. Members in the debate. A very genuine effort was made here to control costs, but the complexities of the project, it is now claimed, had been seriously underestimated. It is equally clear that a project of this size and complexity needs more study and initial work before full development proceeds.
Among the lessons which we have learned from both these cases are, first, to be cautious not to go for over-ambitious projects and to reorganise the project management so as to achieve greater co-ordination of activities in the various fields. As my right hon. Friend the Minister of Aviation has made plain, we have now appointed a project director with technical and executive authority over the main areas of the project and co-ordinating authority over the smaller areas. This scheme for project management is something which is still evolving and no doubt will develop further.
Third—the point which I have just been making—we have learned the need for greater emphasis on incentive contracting. Fourth, we have learned the need for longer project definition and also the definition of projects with a step-by-step approach. Finally, we have learned the need for a greater degree of control over modifications as the project develops.
My right hon. Friend the Minister of Aviation announced on 21st November last that there has been set up a steering group on development cost estimating. This is a group of senior officials from both the Ministry of Aviation and the Department of Defence, who are going deeply into this whole problem of estimating and controlling costs of development projects with the aid of consultants and in consultation with industry. However, as my right hon. Friend has said, he will consider whether, when he receives the group's report, it should or should not be published.
On the subject of cost control over these aircraft and aero-space projects, we hope to be able to achieve better cost control if we are successful in achieving greater equality of information through post-cost information. This is a matter raised again by the Committee in connection with the Buccaneer contract, but has not been referred to in terms in the debate today.
The Government still adhere to the view that the rights to equality of information and post-costing are essential. We hope to have discussions about this with the industry. The industry has made it clear that it wishes to raise, in this connection, the profit formula and we have invited the industry to submit its views on this subject. We have been awaiting them for about eight months, and have not yet received them, but we hope to be able to make progress with the industry in these matters.
The other question which was raised on the Ministry of Aviation front in the debate was that of the VC10 publications and the cost of the manuals for the military version which are required for maintenance purposes. The figures which have been produced—and which are the contractors' estimate of the cost at this stage, because nothing has yet been agreed—seem surprisingly large, but some of that surprise is dispelled when one realises what is involved in producing those documents.
There are civilian versions of the manuals for the maintenance of the VC10 aircraft, but quite apart from the question of military modifications the civilian versions would not be adequate, or would not meet the needs of the Services; maintenance problems for the Services are different from those of civilian companies. For the most part, civilian maintenance is done at highly-equipped airfields, with specialised staff and much of the major overhaul work is done by returning the aircraft to the makers. The Services require manuals which will enable their maintenance men, who may be dispersed all over the globe and who do not have the same facilities, to carry out necessary maintenance on the aircraft. The manuals must be adapted to and be in a form that will meet those needs.
Some of the manuals are enormous. I think that two of them are over 10,000 pages long and include a great number of technical drawings. Anyone who has ever been involved, as I was once, in an inquiry arising out of an aircraft accident, and who has gone into detail of what is involved in the maintenance of an aeroplane, will know what a myriad of minute drawings is involved, and how the whole safety of an aicraft will depend on proper maintenance of very small parts.
What is involved here in producing the manuals is going through this whole series of documents literally page by page—I think that 16 classes of manuals are involved—making the necessary alterations that are required as a result of the military adaptations of the aircraft, and putting them in the form that is required for military purposes. This is where the cost is involved. It is not the cost of production; it is not the cost of printing or publication, which is done by the Stationery Office. We are concerned here with the payment for the man-hours of the skilled technical people employed by the manufacturers—who must produce the material—it is only they who can do it. In fact, if we are taking the comparison of a publisher, it is the authors' fees and not the cost of production.
However, the figure which has been referred to for these publications, which I think is a total of some £784,000, is still being examined by the Ministry of Aviation's cost experts. The cost of the publications will be completely scrutinised as part of that exercise. The sum involved here is comparable with the quotations which have been received for other aircraft. I think that there was a reference in the evidence before the Committee to the maritime Comet.
I take it that the hon. and learned Gentleman is also saying, as I read the Treasury Minute to say, that the larger figure of £.1·4 million for the militarisation of each of these aircraft is also not yet agreed, and is subject to scrutiny?
That is quite correct. It is the whole cost which is subject to scrutiny and is not yet agreed.
Turning to the question of the new construction in the dockyards, to which a number of hon. Members referred, it is right to make clear at the outset that we are not here comparing like with like; we are not comparing cost with cost. We are comparing the cost to the dockyards of the production of the frigates which they produce with a contract price which was agreed with outside contractors at an earlier date. The disparity referred to by the right hon. Gentleman is a disparity between two different things.
I think that the point was made by the Accounting Officer, Sir Michael Cary, in his evidence that if the figures had been comparing cost with cost we would have got a very different result from that of the £450,000 to £750,000 which is referred to in the Report. The Committee concluded that it was not satisfied that the cost differentials in this case were justified. In the Treasury Minute we have recognised the desirability of keeping these differentials within reasonable limits.
There is a number of reasons why the Royal Dockyards should build warships. These are practical and management reasons, apart from the question of financial cost, which we must weigh in the balance with any additional expenditure involved. First, such building provides essential knowledge and experience of shipbuilding technique required for the most effective execution of refits and repairs, which itself has financial implications. The Royal Navy considers, and has for a very long time considered, that for it to discharge its responsibilities it is essential to have its own dockyard for refitting and repairing its ships. Clearly, if it did not do any production work the problem of equipping and training its own yards and its own men to do this work would be very much greater.
The production work also provides training for designers and overseers who will subsequently be employed on new construction work at headquarters and the shipyards, and it also provides a useful yardstick against which contractors' prices may be measured. Some hon. Members may think that this applies vice versa. But even in a case such as this where the cost may be greater than the contract price—and it has not always been so, for it has sometimes been the other way round—a useful yardstick is still provided because it provides experience to go by both in fixing further contracts and in negotiating alterations to contracts.
There is also the point which has been made today that the work makes the best use of valuable capital facilities which are available in the yards, and helps to provide a steady, balanced labour loading in these establishments, where the repair work is peculiarly liable to fluctuations. I think that my hon. Friend the Member for Portsmouth, West (Mr. Judd) stressed that there was an under-used capacity of manpower and equipment in these shipyards. This practice helps to make for a more economic use of that manpower and equipment.
Those are the reasons which are judged sufficient to justify some additional payment for new construction, but, of course, there has to be a reasonable relationship between dockyard and contract prices. In the case of the frigates with which we are here concerned, the reasons for the apparent disparity—I stress "apparent" because it is a somewhat unreal one—were as follows. First, the contracts were placed at a time of particular difficulty for the shipbuilding industry in this country, and they covered quite a considerable period ahead.
The shipbuilding companies would probably consider that they did not make sufficient provision for increases in costs in the years ahead when the frigates were being built. Second, it is clear that they did not make full provision in their contracts for overheads. At Question No. 529 there is reference to a comment by the chairman of Thorneycroft's who explained to his shareholders that the company had failed to get a contract in spite of having tendered "at a level which would have involved recourse to the company's reserves"—which, the accounting officer pointed out, was a polite way of saying that it had tendered at a loss.
Thus, we are comparing prices in contracts won in those circumstances with what proved to be the actual costs when other ships were being built in the dockyards, with full allowance being made in those costs for the overheads involved and with the actual increases in prices, wage rates and so on included as well.
I think it right to make those remarks to put the comparison in perspective, but, of course, I accept and agree in general with the Committee's comments on the importance of weighing these considerations carefully in any case when it has to be decided whether a contract should be put to outside firms or whether construction work should be done in the naval dockyards.
My hon. Friend the Member for Portsmouth, West, raising a number of general questions about the naval dockyards, commented on the wage structure, which he considers to be antiquated. I think that this view was shared by the National Board for Primes and Incomes in its Report on the M rate. As a result of that Report, negotiations and discussions are going on with a view to revising the wage structure, and, as appears from Sir Michael Cary's evidence, the Navy Department is very much alive to the importance of all these questions in efficient management of the yards.
I come now to the "Bloomsbury No. 2 account". This led one or two hon. Members to yield to the temptation, which the right hon. Member for Kingston-upon-Thames resisted, to discuss the wider question of university accountability and the dangers or otherwise to academic freedom in trying to extend it. I shall not yield to any temptation to comment on that, and, as the right hon. Gentleman pointed out, it is a matter which is being considered in much greater depth by the Committee this year.
What we are concerned with here is a particular matter of an unusual nature which was brought to light by the Committee. A loan was made a long time ago—in 1953, I think—of about £1 million to the University of London to assist it in acquiring certain land in Bloomsbury which it would require later for building purposes. In the meantime, the university was drawing rents from the premises, and the agreement provided that those rents were to be used, first, to make a contribution towards the cost of the purchase and, thereafter, to form a fund which was to be earmarked for essential building developments on the estate. This second stage was not reached until about 1958, and that was when the fund began to develop and to build up.
In fact, no project for building arose to which the moneys could be applied before the one to which they are now to be applied, but, as the Committee has pointed out, the existence of the fund was lost sight of within both the University Grants Committee and the Treasury, with the result that the supervision over the fund which there should have been was lacking.
The Treasury was very properly censured by the Committee for this failure. I think that it is an unusual circumstance for the Committee to use that term, and ever rarer, perhaps, to use it against the Treasury. Usually, the Public Accounts Committee and the Treasury march very much hand in hand in these matters, having a common interest to see that Departments control their public expenditure properly. Perhaps this is an object lesson, if one were ever needed, in the unwisdom of the Treasury becoming a spending Department or having any quasi-spending Department responsibilities. I do not suggest that this incident is in any way the cause of responsibility for the University Grants Committee having been transferred from the Treasury to the Secretary of State for Education and Science, but in any event it provides a perfect justification if one were needed. The Treasury also has done something unusual, that is, it has expressed its regret in the Minute for what happened, and, on behalf of the Treasury, I stand in the white sheet suitable for this occasion.
Perhaps I ought to give an explanation. I think that the explanation is that this loan was a very unusual transaction. It called for a special procedure to be devised in order to watch what happened to the fund when it sprang into existence in 1958. Owing to an unfortunate failure, this drill was not laid on in 1953, with the result that the machine failed to operate to supervise the fund and keep watch on it as it began to grow. I hope that I shall never again have to stand at the Dispatch Box to apologise on behalf of the Treasury for failure to exercise proper control over a fund, even if I do so, as I am now, in respect of a period for which I was not personally responsible.
This is a suitable opportunity for me to repeat how much we in the Treasury as well as in the House of Commons are indebted to the Public Accounts Committee for its work. I am sure that it was a great pleasure to the right hon. Gentleman the Chairman of the Committee to hear the tribute paid to him by some of the younger members of his Committee.
The success of these Committees over the years has depended enormously upon the influence of the Chairman, who, among other thing, has to ensure and maintain traditions not only of independence but of non-partisanship and nonparty non-partisanship in the activities of the Committee. This is one of its great strengths, and I hope that it will be followed and copied in the machinery which we shall set up to deal with the Reports of the Parliamentary Commissioner for administration. They are tow comparable matters. They are both concerned with Parliamentary control of the executive in a technical and specialized field, and we shall learn the great wisdom of following the precedent of the public Accounts Comsmittee on a non-party basis.
As I have made clear in Standing Committee, it is the Government's intention in due course, when that Select Committee is set up, to invite a back-bench Member from the Opposition to be Chairman of it. I hope that he discharges his duties as successfully as the right hon. Gentleman is plainly doing in the Public Accounts Committee.