I beg to move,
That this House takes note of the First, Second and Third Reports from the Committee of Public Accounts in the last Session of Parliament and of the Treasury Minute dated 4th November, 1968 on those Reports (Command Paper No. 3818).
I understand that the views of the Government on this debate will be given towards its end by the Chief Secretary, whom I should like to take the opportunity of congratulating on his, in my view very belated, promotion to the Cabinet. As the Chief Secretary is the Minister charged with what some of us know to be the peculiarly difficult job of dealing with public expenditure, it may be appropriate if I begin by indicating what it seems to me at any rate is the relationship between the work of the Public Accounts Committee and the great problems of public expenditure.
The House has often heard the quotation from Sir Winston Churchill, "Expenditure is the result of policy". Of course, the Public Accounts Committee is not concerned with policy. It is concerned with the adequacy of systems of financial control and with the avoidance of waste and inefficiency in the public service, and it conducts what is sometimes described as a kind of efficiency audit. It is not concerned with the major questions of policy which determine the major increases or decreases in expenditure.
Nevertheless, as the Reports before the House show, during the course of our investigations this year we have dealt with a number of items some of which involved by any standards very substantial figures of public expenditure. There are two items involving sums in excess of £30 million and one, as the Chief Secretary knows, in which the sum involved is certainly in excess of £100 million. Therefore, although our efforts have sometimes been described in Gladstone's phrase, as "the pursuit of candle ends", they are sometimes substantial candle ends.
The effectiveness of the Committee's work is largely dependent on two things. The first is that it operates, as my colleagues will agree, completely and wholly on non-party and non-partisan lines. The second is that it has the inestimable advantage, unique among the Select Committees of the House, of being served by a complete Department, the Exchequer and Audit Department.
I pay my tribute to the staff of that Department, who, throughout the year, with great devotion to duty, are engaged in detailed and close investigation inside and outside the Departments of State. I acknowledge publicly that we have the very greatest advantage in having in the Comptroller and Auditor General one of the most distinguished public servants of the generation.
I want to make this point, too, because it has some relevance to what was passing in the House a few minutes ago. I suggest from our experience on the Public Accounts Committee that it is very largely a waste of time for anybody to set up numbers of Select Committees unless adequate staffs are provided for them. Our experience on the Public Accounts Committee is that we could not hope to tackle the mass of material which has to be investigated, if Government expenditure Is to be surveyed in this way, unless we were served throughout the year by an effective Department of State. What I have just said has a good deal of relevance to the point made a few minutes ago in a question to the Leader of the House by my hon. Friend the Member for Guildford (Mr. David Howell).
Since the Report in question was submitted, the former Clerk of the Committee, Dr. Eric Taylor, has been transferred to other duties. I know that I express the views of all my colleagues when I say how grateful we are to him for his devoted services over a number of years. Equally, I am sure that I carry my colleagues with me in welcoming his very able successor, Mr. C. J. Boulton.
I must acknowledge, too, the help of the Treasury. I am glad that the Chief Secretary is here. The Committee works very closely with the Treasury. We had the advantage of a Treasury officer of accounts attending the Committee in the person of Mr. A. J. Platt, who, until last summer, when he left the public service, did a great deal of work with the Committee, for the Committee, and for the country, in that capacity. He has a most able successor in Mr. Phelps. I want, through the Chief Secretary, to express our gratitude to the Treasury.
There are about 30 items dealt with in our Report. I should be convicted of repetition which would be intensely tedious, not only for the House, but even for myself, if I were to attempt to deal with all of them. The Motion relates in form to our First, Second, and Third Reports. The Second Report is largely a formality dealing with the exercise of the powers of virement. I am glad to say that it is my understanding that this wholly obsolete procedure is on the way out.
The First Report deals with matters of slightly more substance in respect of excess Votes. There is, indeed, quite an important issue which I hope that the Chief Secretary has studied, as to estimates of purchasing by the Army Department in the United States and the Department's conduct of these. I shall not weary the House with this.
I go straight to the Third Report, from which I shall simply select a number of items to which I would invite the attention of the House and on which I seek the reply of the Chief Secretary, conscious of the fact that I must inevitably leave a good many very important topics unmentioned, though no doubt they will be mentioned in the debate.
The Report itself is, I think, in sheer bulk, when taken with the evidence attached, the largest for a number of years. My colleagues and I asked in all 5,119 questions in pursuit of our inquiries. The Stationery Office, with its very nice capacity for putting a price on everything, sells the volume at the rather interesting figure of £3 16s.
Turning to the first of the topics, I will go straight to what was in many ways, as I think all members of my Committee will agree, the most difficult of them all. This is the matter dealt with at the beginning of our Report, of the losses to the Inland Revenue arising from false claims in respect of Income Tax allowances for dependants, mainly for children, by certain categories of immigrants to this country.
The history of the matter, as appears from our Report, is briefly this. In 1966, the Inland Revenue instituted a test check in 20 tax districts about such claims from immigrants from India and Pakistan. A sample investigation, which proved very laborious and difficult, was undertaken, which disclosed that out of a total of 638 such claims for Income Tax allowances for dependants, 332 had either to be disallowed or put on to further investigation, possibly with a view to prosecution. This is a percentage of 52.
The conclusions to be drawn from a sample even of this magnitude must obviously be tentative, but the Inland Revenue, in its evidence to us, put forward as a tenative conclusion based upon this sample that, applying this proportion to the total of immigrants from the two countries concerned, the money in issue amounted to an annual loss to the Revenue of between £5 million and £7 million a year and that up to 1967 it had been proceeding at that rate for four years. In other words, coming only to 1967, we are talking of a sum between £20 million and £28 million.
Equally serious, as I am sure that the House will agree in a matter of this sort, is the possible effect of a state of affairs like this on relations between the immigrants and the indigenous inhabitants of this country, because the House knows that nothing is more sensitive than these questions of taxation and any possibility of a feeling that the burden of taxation is not being fairly shared between different sections.
Therefore, both because of the size of the sum involved, or possibly involved, on the Revenue's tenative conclusion, and because of the broader social and political aspect, the Committee gave as careful study as it could to this very difficult and delicate issue. The social and political aspects appear to have been very well recognised by that great statesman, Field Marshal Ayub Khan, who happened to be in this country shortly after our Report was published and who, in his characteristically robust way, addressed a very strong appeal to his fellow countrymen on the subject.
The evidence relates to immigrants from India and Pakistan, not to other immigrants. The reason is quite easy to see. In the West Indies, for example, the former British administration left behind an extremely efficient system of registration of births, deaths and marriages. Such systems do not exist, at any rate with the same measure of efficiency, or—I am sorry to say—integrity—in the Asian Commonwealth, largely because of the fact, as the House will appreciate, that the numbers involved are immeasurably greater and the administrative problems, therefore, plainly enormously more complex. The problem is, therefore, one related to those countries.
I do not think that I can do better than indicate this difficulty by asking the House to allow me to read paragraph 3 of our Report:
The Department" —
that is, the Inland Revenue—
informed Your Committee that the verifications, either through the High Commissioners or direct, of the documentary evidence had had disquieting results. There were false certificates; genuine certificates falsely attested; affidavits which, while properly attested, included details which appeared to relate to other children; and genuine certificates, prepared by the appropriate officials, which proved to be inaccurate. One of the difficulties was the primitive nature of the registration system, the right to give birth certificates being widely diffused down to minor village officials".
In evidence before us the Inland Revenue made it clear that, on the basis of the present law, it was not able to tackle this problem in the immediate future, or perhaps for many years, without an expenditure of manpower and effort which would have been wholly disproportionate.
The Committee, therefore, although we were divided—I think that this is the only point on which we were divided—as to the precise form of action which we should recommend to the Government, was unanimous in the view that the Government should give urgent consideration to the matter, for the reasons which I have stated. I hope that the right hon. Gentleman will, in the light of our view, have something to say on the point. The division of opinion was between those members of the Committee who felt that the responsibility should be placed firmly on the Government, without our recommending any specific action, and those—a minority of members—who took the view that, possibly, a remedy lay, and should be considered by the Government, in a withdrawal of dependants' allowances in respect of children not domiciled in this country. This would, in fact, follow what has for many years been the rule in respect of family allowances.
As Chairman, I took no part in the making of that decision since, mercifully, the only vote which I have is a casting vote and that was not called for. But I thought it fair to both points of view to put the matter before the House. As the Committee was unanimous in asking the Government to give urgent consideration to the matter, I hope that this will be done. I appreciate that, as taxation matters are involved, a precise answer from the Chief Secretary would, I suppose, indicate that he was not himself. However, I hope that he will give some indication of the Government's view on this important issue.
As usual, the Committee had to deal with a number of matters related to defence expenditure. Perhaps the most conspicuous was one not mentioned in the Comptroller and Auditor General's Report, but picked up from the Navy Accounts by members of the Committee, namely, the question of the aircraft carrier "Ark Royal". It appeared in evidence that this famous ship was undergoing a refit at Devonport at an estimated final cost of £30 million—a figure considerably larger than her original cost—and that, on conclusion of this refit, in 1970, she was to be given an operational life of two years and then be phased out. The Committee draws attention to this matter in its Report and also, in fairness, to the evidence given on behalf of the Ministry of Defence that a great deal of this expenditure was involved in the overhead costs of the dockyard.
This brings me to another aspect of the matter to which the Committee referred in a previous Report. Last year, the Committee drew attention to the fact that frigates were being built in the Royal dockyards at a cost of roughly £1 million each in excess of the cost of frigates put out to contract. Then, as on this occasion, evidence was given to the desirability of providing sufficient work for the Royal Dockyards. The House and the Government must face the fact that the modest sized navy of today hardly needs as many Royal dockyards as were required to service the massive fleet with which we entered the war in 1939.
In those days, as the House recalls, there were about 15 capital ships, 50 or 60 cruisers, and comparable numbers of smaller craft—a totally different scale of naval effort that that which, for better or worse, is provided today. There is at least a question—it is particularly appropriate for the Chief Secretary to the Treasury—whether, in these circumstances, the same number of dockyards is required.
The next matter on the defence side, though of infinitely less significance in financial terms, conveys an element of warning. It arises from an issue which aroused a certain amount of rather derisory publicity at the time of publication of our Report. I refer to Army boots. This is an example of what can happen if there is any let-up in strict financial supervision of ordering by a Government department.
The facts are simple. A few years ago, the Army Department evolved a form of Army boot which, on all the evidence, is infinitely superior to that with which some hon. Members were painfully acquainted some years ago. However, despite the proposal to introduce it, the old type continued to be ordered, with the unhappy consequence that, although in 1965–66 issue of the new boot had been made to all Regular units, there were nearly 1 million pairs of the old boot in stock, and, to make matters worse, the stocks were badly balanced in the sense that there were far too many small boots and far too few large.
We had serious evidence to the effect that the soldier's foot has grown over the years, and evidence, also that the Army Department had not observed this fairly gradual medical phenomenon, with the result that by merely ordering again on the basis of previous orders it had amassed a stock which was not only far too big, but was badly balanced. Indeed, had the use of the old boot been continued, it would have been necessary to order in the larger sizes a considerable number more even though there were 1 million in stock.
That is a good example, though the sums involved are not large, of failure by a Government Department to follow changing circumstances and to secure that those ordering supplies on behalf of the Department are aware of such changes. To put it in the context of a literary allusion, there was published not long ago a book called, "At the Feet of the Young Men", but, somewhat unfortunately, the Army Department had not realised that they were getting bigger.
I turn now to another defence matter. There are paragraphs in the Report dealing with the sale of land at Woolwich Arsenal to the Greater London Council. No one disputes the merits of the decision, which will give, I believe, considerable relief to housing problems in London. Nevertheless, in view of the magnitude of the sale, the business seems to have been conducted in an extraordinarily amateurish fashion. Anyone who sold his own back garden by the same methods as those adopted by the Ministry of Defence to sell land valued even some years ago at £6½ million would be subject to considerable criticism on grounds of negligence.
All those who have read our Report will know that even in a transaction of this magnitude there was no firm written agreement undertaking that the land would be taken at any particular time or be paid for at any particular time. As a result of changing developments, including restrictions on building, the Greater London Council required less land, and, less early, than had been expected. The Army Department had no firm contractual rights to enforce. As a result, the Exchequer lost the interest on a substantial sum of money for some years and suffered further loss on a sale of land years after it had been contemplated and at a price, no doubt, appropriate years ago although, obviously, with rising prices, less adequate now.
I hope that the right hon. Gentleman will be able to tell us that, in dealing with public assets of that kind, the Treasury has secured that the same rather cheerful but distinctly amateur approach will not be adopted again.
The matter goes even further. At a time when there was no certainty that the G.L.C. could be compelled to take up the land, the Ministry of Defence went straight ahead and spent £3 million on building elsewhere facilities to replace those being lost on the land which it was proposed to give up. I make no criticism of the general concept of the transaction, which was sensible. I am directing attention to the manner in which it was conducted and the lack of the normal safeguards which any hon. Member would himself adopt in dealing with his own property, even though for most of us that property is likely to be of considerably less value.
Inevitably, aircraft figured conspicuously in our dealings with witnesses. The biggest financial issue in the Report, the purchase of American aircraft, is dealt with in paragraphs 53 to 62. Leaving out the 50 F111s, which were subsequently cancelled and, therefore, do not come into the picture, the transaction which we reviewed concerned the purchase of 170 Phantoms and 66 Hercules transport aircraft at the not inconsiderable price of £610 million. There is a very clear lesson to be gathered from these two transactions taken together. That is—I express no opinion on the merits of it—that would not be appropriate on this occasion—that if a decision is taken to purchase foreign aircraft for the Royal Air Force it is enormously more economical to buy the aircraft "off-the-peg" and to take it as it is produced for and by the manufacturing country than to buy it and make substantial modifications in it.
On the evidence before us, the Hercules transport aircraft, although there had to be some minor modifications, I understand, in the navigational apparatus, was bought for the Royal Air Force at substantially the same price as the American Air Force pays for it. For that and other reasons, we made no criticism of the transaction.
In respect of the Phantom, however, the position was very different. In the first place, a decision was taken to incorporate a good deal of equipment which was required on operational grounds for the Royal Air Force planes which differed from that required for the American aircraft. Secondly, a decision was taken that some of the aircraft which were bought for this country should be equipped with Rolls Royce engines. This involved substantial research and development costing, we were told, about £100 million, and the incorporation of a new engine inevitably involved substantial and expensive modifications to the airframe. As a result, the cost escalated substantially.
I would like to read one or two passages from our Report, first, from paragraph 57:
Your Committee were informed that the production cost of the United Kingdom versions of the Phantom is about 50 per cent. more than it would have cost to purchase the U.S. version, and that if the development costs amounting to some £100 million are taken Imo account the unit cost of the 170 United Kingdom Phantom aircraft ordered becomes nearly double that of the U.S. version.
In paragraph 58, we say:
When the increased estimates for developing and producing the aircraft incorporating the Spey engine"—
that is, the Rolls Royce engine—
and other United Kingdom requirements were reviewed in the summer of 1965 the Navy and Air Departments both stated that in view of its high cast they would be prepared to accept the U.S. Phantom with the American engine which by that time had been improved. It was decked, however, to go ahead with incorporation of the Spey engine in view of its superior performance, its potential for further development and the technological and industrial advantages to be gained.
And in paragraph 59
Your Committee have no wish to question the decision to continue with the Spey-engined Phantom in spite of the large increase in unit cost, but they regret that the earlier decisions, and in particular that made in 1965, to purchase the United Kingdom versions should have had to be made on the basis of totally unreliable estimates and before the costed technical programme for the engine was received
There appear, therefore, to be two clear lessons from this very unhappy affair. One, which I have ventured to put, is that if one buys a foreign aircraft, one should accept its limitations as well as its qualities and buy the aircraft substantially as it stands. Secondly—this is a matter which the House has discussed before and may well consider again—it is unfortunate when Ministers are placed in the position of having to take decisions involving large expenditures on the basis of estimates which, in the event, turn out to be completely inadequate.
Compared with the expensive questions of the Phantom, the question of the Basset aircraft is a relatively light relief. None the less, your Committee was very critical of a decision to impose upon the Royal Air Force—which, we were told, would have been perfectly happy to continue to use the Devon as a communica- tions aircraft—the Basset aircraft, a militarised version of the Beagle.
In the event, as our Report brings out, once military equipment was put on board the Basset turned out to be incapable of meeting the specifications. Indeed, to meet the specifications and put the Royal Air Force load on board, under certain conditions of temperature its effective range was nil. It seems a pity that this money should have been spent on the development of this aircraft when the Royal Air Force was satisfied with the Devon.
Perhaps the only redeeming feature of the whole matter is the question of nomenclature. Those familiar with Beagles and Bassets, know that as compared with the Beagle the Basset is slower, heavier and feels the heat, and it seems to me that there must have been a humorist with canine knowledge in one or other of the Departments at the relevant time.
We dealt also with the provision of married quarters for officers. The Minister of Defence is now in a wholly illogical position. It still insists on the provision of these quarters being in accordance with rank rather than family responsibilities everywhere except in London, where, I have no doubt, the Chief Secretary could tell us—although he will not—as the result of pressure from the Treasury. the Department has accepted that family responsibilities should play a more important part.
The Committee fully accepted that in the case of commanding officers of units, there are obviously special circumstances which require them to be adequately and appropriately housed. But we criticised strongly in our Report a system under which a childless major has to be provided with quarters including four bedrooms whereas a more philoprogenitive captain has considerably less accommodation at his disposal.
I hope that the Chief Secretary will be able to tell the House that with all proper regard for military tradition, and with complete regard for the special position of commanding officers, none the less a more sensible attitude in the second half of the 20th century will be adopted by the Ministry of Defence in this respect.
The only other item in our Report to which I desire to refer is the evidence, which appears at pages 26 to 46, of a laxity in financial control by the Department of Education for Scotland. I have no doubt that the Treasury must have been as concerned as was the Committee at the state of affairs which was revealed.
Briefly, grants were being paid to the managers of schools for buildings, works, and so on, without taking proper steps to ascertain whether payments needed to be made. The money was paid over and in many cases invested, substantial balances being held by some of the schools. On the evidence, the Department, so far from trying to keep any check on the money or to secure that interest was obtained on the balances, was, on the contrary, particulary towards the end of the financial year, urging the managers to take additional payments. Although the sums involved are not large, I am bound to add the personal opinion that, with some experience of Whitehall, I have never seen a similar attitude towards the handling of public funds adopted by any other Department as that which on its own evidence, was shown by the Scottish Education Department in respect of this matter.
Inevitably, I have had to leave out, or I would have wearied the House, a good many other of the important issues which the Committee discussed. We report in substance on 30 matters ranging in financial importance from sums in excess of £100 million down to sums directly involving small amounts, but often involving important questions of principle and control.
This is the occasion on which it is our duty to report these matters to the House, to ask the House to consider whether this is the way it wishes the business of the Committee to be conducted, and to seek from the Government some indication of their views on these matters.
I had not anticipated that I would have the honour of following the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) who, as Chairman, has displayed before the House the vigour, authority and perspicacity which regularly delights his colleagues on the Committee.
It is perhaps one of the sad commentaries upon this annual stocktaking of the work of what I think may fairly be described as a hard-working Committee that this annual debate often seems like a wake from which nearly everyone, including on this occasion many of the mourning members of the Committee, has fled. It is perhaps true to say that this year our colleagues have been more than usually dismayed by the sheer bulk of the volume which is before the House.
The Report is a massive document which seems inexorably to expand as do the soaring costs of Concorde. Or perhaps the House feels that denunciations of extravagance in public spending should not be muddled with those humdrum facts which the Committee spends its time investigating. At all events, our annual debate is held once more in a House which, perhaps more than usually in certain parts, looks like a morgue, and it is inevitable that at times like this those of us who serve on the Committee should wonder what is the point of all our work.
I should like to devote a few remarks to this aspect. It may be said that the discipline of the P.A.C. lies less in the actual dramatising of financial scandal as in the deterrent which the threat of such exposure presents to inefficiency in the corridors of power. The presence of the Comptroller and Auditor-General in Room 16 on the twice-weekly day of judgment is bound to loom large in the great spending departments of State and lends authority, I am sure, to the accounting officers in their day-to-day control of the activities of colleagues.
In one sense, the value of the Committee lies less in what it does than in the fact that it exists. It might be remembered by those who sometimes stridently doubt our democratic institutions that we have succeeded in evolving a remarkably effective instrument of persuasion rather than coercion in the Parliamentary surveillance of spending.
At this point I think it is appropriate to add my thanks and gratitude to the Comptroller and Auditor-General and his staff, to the Treasury and its representatives and to the Clerk of the Committee for the unfailing courtesy and help which they gave us. But when all these evident virtues have been stated, I have a growing feeling of uneasiness about the ability of Parliament, particularly through the Public Accounts Committee, to impose a truly effective deterrent against financial extravagance and inefficiency. This uneasiness springs from the vast complexity of financial accounting in a mixed economy and a welfare State.
This ancient Committee, now in its second century, has lived through dramatically changing times. Nowhere has this been more obvious than in the growth of the power of the State. There may be some of my hon. Friends who equate such a growth with the approaching millennium, but I do not share such optimism. I believe that the State should still be regarded with caution as a potential leviathan which needs to be tamed by democracy.
Accountability, the requirement that, unlike Mr. Baldwin's harlot, power must be matched by responsibility, is of vast and rapidly increasing importance at this time when the State, irrespective of which party is in power, is encroaching on all sectors of society. I wonder whether the Committee, despite its excellent work, has all the resources, expertise and procedures to cope with the hugely extended sphere of State enterprise.
There is some disturbing evidence in our Report this year that all is not as well as it might be, and I want briefly to indicate one or two examples. The first example lies in the history of the Concorde venture, where repeated and massive escalations of cost have, quite naturally, worried the Committee, and doubtless the House and the country. In our Report we do not devote, as has become the custom in recent years, a great deal of space to analysing this particular project, although in Appendix 12 there is an interesting, if short, memorandum submitted which at least tries to clarify yet another of the ambiguities involved in this project—the relationship between expenditure incurred in research and development, which is well in excess of the total estimate of £500 million, and expenditure incurred in the initial stages of the production programme.
We must ask ourselves why this enormous escalation has been taking place, despite the efforts of the Committee, the House, and the Ministry of Technology. Clearly this must lie in the technological novelty of. the enterprise, which is at the frontiers of engineering science. Yet neither the Committee nor the Comptroller and Auditor-General—nor that matter, and I mean no disrespect, the Accounting Officer of the Ministry—really have the expertise which ensures that we put the right questions. Even if, perhaps inadvertently, we managed to put the right questions, I am not sure whether we would fully understand the answers, particularly if, as might well happen in certain cases, they had to be expressed in sophisticated mathematical form or engineering terminology.
It may be that some of these obvious difficulties of probing public expenditure in an increasingly scientific period would be removed or reduced if certain recommendations of the Fulton Committee were implemented—for example, the appointment to senior posts in the major technical departments of a chief scientist or engineer, or the establishment of planning units with senior policy advisers. But it would require a deliberate change in the procedures of the P.A.C. if full value is to be gained from such changes in the Civil Service system of accountable management.
Apart from anything else, there might otherwise be a danger of these new, and no doubt high powered, senior scientists completely fooling a lay committee relying solely upon the sort of ad hoc interrogation which inevitably proceeds upstairs twice weekly. Even the staff of the Comptroller and Auditor-General's Department might be blinded with science and be prepared to accept, uncritically, excuses for overspending whose credibility lay solely in their incomprehensibility.
The fact surely is that in the great spending Departments, such as Technology, which are constantly under scrutiny by the Committee, it is becoming all too easy to circumvent Parliamentary control over spending.
I recall an occasion many years ago when a massive investment programme in nuclear energy was proposed in another place. I think I am right in saying that throughout the debate "kilowatts" were substituted for "megawatts" and, what is more significant, no one apparently noticed the point of difference.
It is easier to describe the malady than to suggest an effective solution, but it is clear that we need procedures for combining financial auditing techniques with efficiency auditing techniques. If Fulton is implemented, such efficiency auditing should become more effective within Departments. But, just as the value of the C.A.G.'s work lies in its external check upon the Departments, so we need to provide external efficiency checks by those qualified to recognise scientific and engineering fallacies. It might be worth setting up a special inquiry, to which consultants could be appointed, to check on issues under dispute.
A second example of the Committee's difficulties lies in the concept of what we sometimes term "reasonable profit" and here we have some examples to quote from this year's Report. The Bristol Siddeley affair has already been debated, I think adequately, in the House, and my remarks on that occasion, none of which I have subsequently had cause to regret, were related to the difficulties which arise when a Committee such as the P.A.C. finds itself conducting a quasi-judicial probe into excessive profiteering by a private company. We simply have not devised appropriate procedures for such interrogations, which may recur in the future, and it is surely inexcusable that individuals whom we might happen to select as witnesses out of a large potential field should find themselves, and themselves alone, exposed to a degree of public pillory. But Bristol Siddeley was a special, and I trust unique case.
The difficulty which I should like to emphasise on this occasion is less dramatic, but likely to be increasingly troublesome as the State becomes more intimately interwoven with private enterprise. It is a difficulty illustrated in the section of the Report dealing with the voluntary price regulation scheme for proprietary preparations, pharmaceutical products.
I endorse the recommendation of the Committee which urges prompt corrective action "taken if necessary with retrospective effect", and I also agree that the Minister should not be too bashful about fixing prices where profits are demonstrably unreasonably high. But if we are to justify such a managed economy, a sort of State capitalism in which the jungle beasts have been tranquilised, if not fully domesticated, or put out of their misery, we need to give more thought to the concept of "reasonable profit".
The Treasury has spent many weary months, and even years, in dialogue with the C.B.I. and others over this vexed problem, and I do not want to distort the issue by minimising the value of the quid pro quo which has been achieved. We may, indeed, have gone some way to resolving the old dilemma, of which the Committee was well aware, involving the relative advantages and disadvantages of cost-plus and fixed price contracts. I welcome such developments as post-costing, particularly where the State is dealing with, and to some extent maintaining in business, a monopoly or semi-monopoly supplier. Yet is there not a danger that we shall come, in the Committee and in the House, to regard certain profit levels, not so much as the maximum permissible ones, but as normal and wholly acceptable?
The value of the capitalist system, historically, lay in its ability to separate the wheat from the chaff. The inefficient firm—at least in the golden days of long ago when perfect competition reigned—went to the wall. Today, as far as I can see in my more gloomy moments, the inefficient firm boosts its profit margins by going to a development area with massive State subsidy, is encouraged to hoard labour because it gains the regional employment premium, and then, when the State negotiates prices with it, the norm is set by the profit margins we are prepared to tolerate in contracts with efficient firms.
I have no special brief for the particular firms discussed in the Report, but even if the prices negotiated had led to what we would accept as reasonable profits, this would not have meant the State was avoiding the subsidy of an inefficient firm whose high costs were masked by the protection of patents. The problem is complicated still further when we deal with industries, such as the pharmaceutical industry, which require sustained and substantial research investment.
What is the P.A.C. to make of such a misleadingly simple phrase as "excessive profits" applied across the board, without much explicit regard to the degree of risk in the particular industry, or the years of prolonged, and initially no doubt unrewarding, research which finally produced a revolutionary new wonder drug?
I suppose my real point is that once we remove the disciplines of the market economy—and with due respect to the right hon. Member for Wolverhampton, South-West (Mr. Powell) I do not see these decrepit disciplines being rejuvenated in their former and romanticised vigour—we have to devise alternative disciplines which ensure maximum efficiency as well as financial probity. One of my criticisms about the Concorde during the whole time that I have been in the House has arisen out of this sense that we have not devised such disciplines. The danger of our present system of State capitalism is that we are neither flesh not fowl, and until we clarify the role of the profit motive in our mixed economy the P.A.C. is a Parliamentary watchdog, forced, for much of the time, to howl at the moon.
In the case of the first example, which, in cost terms, to use the aeronautical bestiary which the right hon. Member for Kingston-upon-Thames referred to a moment ago, is the St. Bernard of our age, I should have thought that we have a history which gives us more than enough warning about the dangers of relaxing market disciplines and profit criteria without having equally ruthless disciplines to counterpose to the escalating costs of prestige.
A third problem which the Committee encounter is the measurement of sophisticated, but often hazy, concepts such as social cost benefit. I often think that accountancy is less of a science than one of the black arts, with the devil looking after his advocates, and the special pleading which tries to turn base deficits into golden, but concealed social, gains, makes me wonder whether accountancy is the alchemy of the 20th century. Anyone who tries to follow a take-over bid knows how indispensable is the accountant's Midas touch, and I felt something of the same admiration and incredulity when the Committee tried to find out why we continue to plant forests in Britain.
I find myself agreeing with the stern tone of the Committee's paragraph 146 when, in discussing the Forestry Commission, it concluded that the
losses, current and prospective, indicate the need for consideration whether the Commission's non-commercial activities, the social benefits of which have yet to be quantified, justify the heavy expenditure involved.
In other words, I think we need to take with a pinch of salt the vague, and sometimes woolly, talk about social need, without making any effort to quantify the total balance sheet. And this applies generally, certainly not just in terms of the Forestry Commission, which perhaps is having somewhat undeserved attention focused on it because we happened to investigate it in the past.
Would not the hon. Gentleman agree that this is an excellent example of the need to present the Government's accounts much more in terms of objective and programmes and less in terms of vague categories of administrative activity, as this would allow a more effective focus on Government spending decisions?
I am sure that the hon. Gentleman will forgive me if I do not develop that argument, from which I am not necessarily dissenting. I am sure that he will have an opportunity to put his argument to the House. It is very much in terms of the point made by the hon. Gentleman that I have tried to raise in this debate these wider considerations of terminology, presentation of accounts, and the basic disciplines which we as Members of the House are competent to understand.
I agree that it is time we combined sentiment with statistics, and the right sort of statistics. In some fields we are beginning to do this. The classic examples, I suppose, are the decision to go ahead with the Ml motorway, which was analysed with far greater rigour than has habitually been the case in this sort of project, where there are hidden benefits to the community which are not necessarily immediately apparent, and the building of the Victoria-Euston line in London, although one wonders why the same techniques are not applied to a railway system in an area such as Merseyside, where apparently no such hidden benefits are stressed.
But in the case of the Forestry Commission, which is in narrow accounting terms long since bankrupt, we have yet to make the effort to quantify the hidden factors of cost and benefit which might well show that investment in forestry is wholly right for the nation.
From my slight knowledge of the factors involved in afforestation, such as the advantages which may arise relatively in terms of hydrology, run-off, and the effects of dam siltation in upland areas, I suspect that the Forestry Commission is a sound investment. But suspicions are not good enough. They need to be confirmed—or, if necessary, invalidated—if we are to make the right decisions about public expenditure in the years ahead.
I have tried to illustrate my feeling that our procedures for checking public expenditure need to be re-examined in the light of a growing sophistication of economic and technological decision-making. Terms which we sometimes use in analysing various problems, such as—to give a recent example—discounted cash flow analysis as a means of attempting to evaluate the economics of the operation of the Atomic Energy Authority are not necessarily used in other fields of public expenditure. I am not sure that we always have sufficient regard for the depreciation in the value of money across periods of time, such as the fall in the internal purchasing power of the £ sterling of one-eighth between 1963 and 1967. There is a danger of making a too glib examination of the costs of long term development projects.
I conclude with specific but by no means comprehensive examples. My view is that the Committee, or representatives of it—perhaps including the Comptroller and Auditor-General's Department—should be sent to investigate the procedures for financial accountability being used in other advanced countries. I am thinking in particular of neighbouring states in Europe, where fresh complexities are added to the problem by the integration of State with State and, in the Common Market, of firm with firm, in the development of vast international companies.
The Committee would do well, as a general principle, to go out into the field occasionally. Some time ago I was able to visit the Farnborough and Bristol centres working upon Concorde, and I know how valuable this detailed, firsthand investigation was in subsequent interrogations of the Ministry of Tech- nology. The provision of plans and other visual aids is also worth considering, since it is extremely difficult to ask the right questions concerning a site unless plans are available for the Committee.
Indeed, the facilities available to me in local government as a member of a planning committee before coming to this House were immeasurably superior to the facilities enjoyed by the Public Accounts Committee for looking at places where there is a strong hint of dubious happenings which it is our task to unravel. To take one example only, I am sure that our investigation of Swynnerton would have been aided if a plan of the site had been exhibited.
Many of these suggestions can more properly be discussed in the Committee in detail, but the House is the arena in which Committees report and where it is right to raise procedural matters which affect Parliament's efficiency. The control of public expenditure is desperately important, for this country cannot afford to waste resources in the competitive years that lie ahead.
I apologise to the Chief Secretary if I am not able to be here when he replies, since I have another engagement. It is not my intention to repeat anything of the wide survey which my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) gave of the work of the Public Accounts Committee; nor shall I follow in detail the speech of the hon. Member for Bebington (Mr. Brooks), because I agree with it about 100 per cent. I shall have to read it very carefully and then I may find something to disagree with, but at the moment I agree strongly with what he said.
However, as to procedure, the Committee has enough to do without visiting too many sites, or even watching the Concorde being built. To do that would have taken the Committee even more hours than occupy its time already. With certain exceptions the work of the Committee is immensely successful, for reasons that we all know. It is a threat to the extravagant rather than an attempt to punish the guilty.
Recently I read the Report of last year's debate on the work of the Public Accounts Committee. It was interesting to look back. Apart from the Committee's attention to aviation matters which form a recurrent theme in our debate there were two other interesting investigations, namely, the question of New Scotland Yard's new building and of university accountability.
Alas for New Scotland Yard, that whiter than white elephant in Victoria Street is still there, as a standing reproach to someone, but not to the Public Accounts Committee. On the other hand, the accountability of the University Grants Committee, which was so hotly debated, has now come to pass, and as far as I know none of the feared repercussions have yet been seen, although it is early days. In my opinion it was a triumph for the Public Accounts Committee that after many years' work it managed to bring about this big change in procedure.
I want to refer to three matters which arose in the course of the year. As usual, I find myself fascinated by the varying tones of the Treasury Minute in its comment. It is possible to read between the lines and to deduce when the Treasury really agrees and says so and when, although it agrees, it does not like to say so.
I want first to refer to the paragraph concerning selective employment repayments. This is a backlash from what I regard as a very foolish tax. In our report we state that
The Selective Employment Payments Act made it a condition of payment of premium or refund that the claimant has paid the tax.
It seems to be a basic principle of taxation that a person should not receive a refund until he has paid his taxes, yet a test examination showed that in many cases this had not been done. It is difficult to quantify the exact loss to the Exchequer when such cases occur, but it would have been more easy to assess—we did so to a certain extent—the cost to the Government of checking this kind of provision.
It is a small but very significant point that as a result of this refund the number of Ministry of Social Security inspectors alone had to be increased from 1,200 to 1,300. At that, we were told, the Ministry's inspectors can get round all the employers only once in five years.
The Ministry of Labour and the Department of Agriculture, which have comparable responsibilities, can get round the employers with whom they are concerned only once in every 20 years, since they check only 5 per cent. of the employers per annum. In the course of the inspections carried out by the Ministry of Agriculture and Fisheries it was discovered that in about 155 of the cases the premium had been repaid before any insurance contributions had been paid in. We were told that there had been one prosecution and that another prosecution was pending.
The loss to the Revenue is small as far as I know—and the Committee accepted that a 100 per cent. check of all employers would be far too costly. But is it unreasonable to suggest that this is not only an expensive tax to collect, together with the repayment of the refund, but also a very expensive one to administer? Can the Minister give the House some idea of the true cost, not only to the Government but to employers, of collecting the Selective Employment Tax and making the refunds? The Committee's experience illustrates that the complexity of our present tax system is almost as great a burden as the tax itself.
I agree with what the hon. Member for Bebington said about the Forestry Commission. We should have an entirely new look at its workings and constitution. I am not saying this because I believe that at the end of a critical examination we should necessarily wish to change it very much, but it is high time that Parliament began to appreciate that a State-financed body like the Commission becomes autonomous and begins to move under its own steam without Parliament and the public realising how great a change has occurred. It was founded for strategic reasons and has been continued for both strategic and social reasons. That is not necessarily wrong. The Report says that the social benefits have yet to be quantified, and meanwhile there are substantial current losses and poor prospects. One sentence smacks of "pie in the sky", saying that one day the Forestry Commission might, given certain prognostications being fulfilled, prove very profitable.
It is time that this policy was totally reconsidered, with regard to uneconomic planning. In Question 2909, it was elicited from the Treasury that they normally expect 5 per cent. as a long-term profit on the total capital costs of a plantation but that, in the case of development areas, they expect only 2 per cent. The difference is a straight subsidy to the development areas. Again, I do not say that that is wrong, but that subsidy should be shown on the Votes of the responsible Ministry and examined by the House as such, and not merely smothered in the trading accounts of the Forestry Commission.
Furthermore, the Forestry Commission should be able to bargain with the Government about whether or not they will undertake a particular planting unless they think that it is ultimately profitable on the subsidy which might be given.
The right hon. Gentleman has great experience in Government, and I am listening to him with interest, but how does one quantify factors such as the long-term prognostications of the F.A.O. and the other rather incoherent factors which were given to the Committee?
That was not quite my point. I was saying that, if the Treasury expects 5 per cent. return on certain plantations and only 2 per cent. on others, that 3 per cent., which is a straight subsidy, should he shown as such in the accounts of the Government Department which is demanding money, rather than in the Forestry Commission's accounts.
The last issue with which I want to deal is the false claims to personal reliefs from income tax. This was in our Report and received considerable and restrained comment in the Press. There must be understandable concern when, in one particular community, it appears that 52 per cent. have been claiming reliefs under false pretences. Surely, evasion on such a scale is, to put it mildly, unusual. The Committee's comments on this startling disclosure seemed to me rather weak, although the Committee had been very shocked. It noted that the results of the amnesty were not encouraging. Indeed, they were almost negligible, but the Committee failed to appreciate that the Inland Revenue itself is frankly at the end of its tether to find a solution. The Committee ended by saying that it trusted that this matter would be given urgent attention.
That reaction is totally inadequate. I was the Member responsible for forcing the Committee to divide on this issue and I should like to draw attention to the orginal draft which was before the Committee, which read as follows:
From the evidence furnished to them, it is clear to your Committee that tax avoidance on this scale cannot be dealt with by administrative action except at disproportionate cost in money and manpower".
It ended by saying:
Your Committee therefore recommend that urgent consideration be given to the alternative of legislation designed, for instance, to limit dependants' allowances to dependants resident in this country.
I still believe that that is the right course and I hope that we shall hear tonight what the Government have in mind.
I said earlier that the Department was at the end of its tether. Again, I refer to Question 2800, when the Treasury Officer of Account said:
I think I would sum up the Accounting Officer's evidence by saying that one either tightens up on administration at a disproportionate cost or one has legislation. Those seem to be the choices.
However unpleasant it may seem, the House must demand that the Government act quickly in this matter, and make its choice.
There is a very good reason why. Any failure to act quickly will be unfair, first, to the other taxpayers, second, to the leaders of the Indian and Pakistan communities, who have co-operated very well with the authorities in trying to eliminate this evasion, third, to the Governments of India and Pakistan, who have tried to stamp out this nuisance, and, above all, to other immigrant communities, such as the West Indians, with whom no such evasion problem exists, and against whom no charge is levied. So I hope that we shall hear that the Government are contemplating legislation on this point.
I do not propose to follow the right hon. and learned Member for Reigate (Sir J. Vaughan-Morgan) in his excursions on the tax evasion problem or the Forestry Commission. It is in the nature of these debates that we tend to focus attention on the problems with which we are immediately interested, and the debate must be disjointed.
I want to deal with what the Committee said about the Forth Road Bridge. I was not a member of the Committee, but I have a vital constituency interest in what it said about the project. As the Committee rightly underlined, in purely monetary terms, the finances of the bridge are in a mess. Second, judged by comparisons with the old ferry charges before the bridge was built, which varied from 4s. to as much as 57s. 6d. for a heavy commercial vehicle, the 2s. 6d. flat rate now charged on the bridge represents considerable savings in time and money for its users.
As the Committee reminds us, the bridge, plus the approach roads, cost £20 million and, under the terms of the 1958 Forth Road Bridge Order, the Government undertook to provide a grant of £4,650,000. The six local authorities concerned were to provide £500,000 and there was to be a loan of over £14½ million. Since the Exchequer took no interest on the loan during construction, that was worth another £1½ million, SC there was really an outright grant of over £6 million.
The loan of £14½ million, plus interest, had to be repaid over 30 years, and it is that sum which had to be financed entirely by tolls on the users of the bridge. The toll agreed by the Joint Board was a flat rate of 2s. 6d., and it has remained unchanged since the bridge was opened in September, 1964. It is clear from the evidence adduced in the Report that it was suspected almost from the outset that such a toll would he inadequate to repay the loan, plus interest, plus the cost of the maintenance of the bridge for the agreed period of 30 years. Nevertheless the Forth Road Bridge Joint Board managed to persuade both the Scottish Development Department—and, presumably, the Treasury—that reconsideration of tolls should be deferred until September, 1966.
By then, of course, the Government's standstill on prices and incomes had come into effect, and that operated until the end of 1966. Then, early in 1967, there was the period of what was called "severe restraint". That meant that for a variety of reasons, including those that I have mentioned, there was no change in the toll. At that point the Treasury made it quite clear that plans for increases in tolls should go ahead as soon as possible.
Various schemes for increasing the revenue from tolls were put forward in late 1967, including a flat rate of 3s. or 3s. 6d. for private cars and a variety of differential tolls for commercial vehicles. From the evidence in the Report, it seems that after 30 years of the existing flat rate of 2s. 6d., and making certain assumptions about traffic growth—the assumption was, in general terms, an average growth of 8 per cent. increase compound—there would still he £16 million outstanding; that even in the 56th year—that is, in 2020 A.D.—there would still be between £12 million and £13 million outstanding, and that annual expenditure in that year would exceed revenue. That is the information par excellence.
It is true that my right hon. Friend the Secretary of State for Scotland has power, exceptionally, to increase the period of repayment beyond 30 years. It is rather interesting to note that the period of repayment on a very expensive capital project like the Forth Road Bridge is 30 years, but that the period of repayment on a council house is 60 years. I shall return to that point in a moment.
It seems to me that the answer to this problem does not lie in the direction of increased tolls—in fact, it does not lie in tolls at all. My hon. Friend the Minister of State for Scotland yesterday indicated that a public inquiry was to take place, but there is no guarantee that the calculations on which such future increase might be based would be any more reliable or accurate than those on which the original toll was based. On simple arithmetical and accounting grounds, an increase in tolls, whether flat rate or differential, would appear to be a satisfactory solution to the Public Accounts Committee, sitting here in Westminster and concerned, as it was, solely with £ s. d. matters, but the issue is very much more complicated and less straightforward than that, and I do not see any reference made to it in the Report.
When, in 1946, the Government originally offered the grant of £4·65 million towards the cost of building the bridge, that sum represented three-quarters of the then estimated total cost. By the time the bridge was built the total cost was £19½ million, but the Government grant remained static and therefore represented less than one-quarter of the total. The grant is less than the cost of the approach roads, which have also to be financed out of the toll money.
I believe that the approach roads should at least be regarded as trunk roads or motorways chargeable to the Exchequer. That is what they are, and that is how they should be financed. To do that would also leave the finances of the bridge alone to be put on a more realistic basis, and that might be done by a series of differential tolls, if tolls there are to be. I would hope that they would be differential, but my own consistent view has been that they are not the way to finance such a project. In my view, increases in tolls would not do anything to help, and might conceivably hinder, the economic development at Fife and the East of Scotland generally. They would clearly add to the overall cost of transport, and to the cost of individual daily commuters across the bridge.
It is true that in 1958 an agreement was reached—this was the argument advanced by my hon. Friend the Minister of State yesterday—between the Joint Board and the Government, and it had to be honoured. But circumstances alter, and agreements have often to be altered to take account of changed circumstances. I must apologise to the House and to my right hon. Friend at this stage because I shall have to disappear from the Chamber almost immediately I sit down, but I shall be back later. I hope that the House will understand that. My right hon. Friend the Chief Secretary will recall that the various nationalisation Acts laid down in general terms that each nationalised industry or undertaking had to pay its way taking one year with another. Those may not be the exact words but that was the general meaning. But these statutory agreements have never been adhered to. The finances of the nationalised corporations have frequently been reorganised in the light of changed circumstances.
On 3rd December I put down to the Chancellor of the Exchequer a Question asking how much of the capital debt of the nationalised industries had been written off over the last five years, include- ing the proposed writing off of 90 per cent. of such debt owed by London Transport. The figures I got were quite startling. The British Overseas Airways Corporation has had £110 million written off; the National Coal Board—£415 million; British Rail—£1,262·1 million and the British Waterways Board has had £15·5 million written off. London Transport, assuming that the Bill goes through, will have £243 million written off.
If these vast capital debts can be written off—in the case of London Transport written off in the most prosperous area of the country—how much more relevant is it to think about writing off the £16 million capital debt on the Forth Road Bridge, which is situated in the middle of one of the most difficult development areas of the United Kingdom?
I have stated the view, and I repeat it now, that these bridges and tunnels should be regarded simply as extensions of our road networks. There does not appear to be any consistency in the policy of financing these ventures. The Mersey Tunnel has tolls, the Clyde Tunnel has no tolls, and the Forth Road Bridge has tolls and the unpaid interest is capitalised, while that in respect of the Tay Bridge is not. Repayment for the Forth Road Bridge is to be over 30 years while on the projected Erskine Bridge it is to be 20 years.
We have all these anomalies and inconsistencies because we seek to treat a bridge such as the Forth Road Bridge quite differently from any motorway or trunk road because it happens to cross a stretch of water. I have never accepted that it should be so treated. I hope that the Treasury, in view of its obvious determination to solve the problems of the development areas, will regard the Forth Road Bridge as an essential part of the road network of Scotland and will give it the same treatment as it gives other projects in the development areas.
I congratulate my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), not only on the quite brilliant speech he made this afternoon in putting the Report before the House, but on the work he has done as Chairman of the Public Accounts Committee, on which I have had the privilege of serving for many years. It has always been an amicable relationship. The Chairman has never had to call me to order, contrary to what happens on some occasions in debates on the Floor of the House.
My right hon. Friend is a superb chairman. He extracts from witnesses the maximum amount of information which is of tremendous value to his colleagues on the Committee. It must be something of an ordeal for a Government Department or organisation to be summoned before the Committee knowing that the first inquisitor will be my right hon. Friend.
I am sorry that the hon. Member for Bebington (Mr. Brooks) has left the Chamber. I felt a wee bit jealous of his speech as it was very much the sort of think I wanted to say. I cannot devote too much of my time this year to the Report because, as many hon. Members will be aware, in March, April, May, June and part of July I was absent from the Committee. Therefore a great deal of its activities were achieved without my able, or unable, assistance. I am sorry if I put an additional strain on the Committee as it was necessary for its members to be more assiduous in attendance than otherwise might have been the case.
What the hon. Member for Bebington said is very true. Even in the Public Accounts Committee I do not think it would do any harm to take a severe look at our procedures. The hon. Member said that the Committee has been in existence for 200 years. He also said that the Chamber on this occasion looked rather like a morgue. I wondered whether he thought that we were all corpses which hid been here for 200 years, but I pointed out to an hon. Friend that the Committee had not had the same membership all that time. The Committee has been in being for a very long time and perhaps we ought to think of some innovations, for instance, about the Swynnerton site.
I do not want the Committee to get into the position of some other Select Committees which seem to spend a great deal of time travelling round the world, but it would not be a bad thing if on some occasions the Committee went, or sent one of its representatives, to look at a problem on the ground. I am thinking particularly of the case we discussed last year of the Post Office building in Durham. We all felt that we would have had a clearer view of the problem had we gone to see it or if we could have had official photographs of the area. It is difficult to appreciate some of the aspects of these problems simply from a description given in evidence.
I hope that the hon. Member for Bebington will read my speech for I think that he was a little pessimistic in what he said about the workings of the Committee. I do not think he gave nearly enough appreciation to the amount of work done by the Comptroller and Auditor-General and his Department. It might be a good idea if some time as a Committee we inquire into the workings of the organisation of the Comptroller and Auditor-General's Department. It appears that the Department acts as an accountancy or audit branch, whereas, I agree with the hon. Member, there are problems which go wider than that. Perhaps the Department could be given responsibility for providing information such as the plan of the Swynnerton site for the use of the Committee and the responsibility of providing photographs of certain buildings and areas which would make the evidence we are to receive much more clear to the members of the Committee.
I am often very critical of Government expenditure. I do not at all withdraw my criticism that we are running today with far too heavy a burden of bureaucracy. This is a great disadvantage for the nation. Yet we are dealing with a budget running into tens of thousands of millions of pounds, and we have a Comptroller and Auditor-General's Department with a staff, I believe, of about 600. My right hon. Friend might confirm that——
That is the sort of figure. That staff is delving into all the great Departments of State. Then it provides a number of problems for our Committee of 14 to investigate during a year. It says a great deal for the calibre and attention to duty of the great mass of civil servants throughout the country that the cases thrown up are so moderate in size and I take the opportunity of paying tribute to them.
One thing which I have found when working on the Committee is that heads of Departments in the Civil Service do not stay in their positions for a long enough time. We often find when evidence is being given that my right hon. Friend says "Sir Marmaduke", or "Sir Wilfred", or whoever it may be, "I know that you were not there when this dreadful thing happened, but can you tell us about it?" The person who was responsible can rarely be called over the coals for a failure of administration. I have thought for some time that if a case is bad the person who was the accounting officer at the time when the trouble arose should be called upon to give first-hand information about how the thing happened. If that procedure were adopted, it would do a great deal for the morale of the Civil Service.
The problem is—and Fulton may have something to do with it—that the changes of responsibility in these great Departments happen at such a quick rate. A man will only just be seized of the problems of his Department when he is moved somewhere else and has to hand over to a colleague. We are never dealing with the man who was there when the problem with which we are concerned first arose.
I agree that that is one of the problems. But I do not think that any alteration of the Service will change that. The only way to alter it would be to alter the age of retirement. It is a problem which is faced by any system. However, it does not apply in all cases. A lot of those whom we would like to see are moved to other offices of State and are not left to deal with the problems which they have helped to create. This is very frustrating to the Public Accounts Committee.
For a few minutes, I want to refer to some of the items discussed in the Report. The first of them is the Royal Ordnance Factory at Swynnerton. I am certain that, had it not been for the Public Accounts Committee, that would still be a more or less derelict site, and no action would have been taken. As a result of the matter coming before the Committee, the Departments responsible took some action. That shows, in that case alone, that the Departments concerned knew that we should demand action and began to get things moving.
The section of the Report dealing with forestry is very disturbing. I was not present when the subject was debated, but it appears to be one where the idea is born that a certain policy will be good for the nation, it goes on rolling with no one reviewing it or checking on it enough, and, after a time, the whole situation has altered. It is clear that it is necessary for the whole of the Government's policy and expenditure on forestry to be reviewed. It may be that it is a very good investment for the nation, taking into account not only the wood grown in the forests but all the social and other benefits accruing to the nation. But it appears that it is not a very profitable venture from the Treasury's point of view. It may be that the accounting system of valuation is wrong. Trees are growing, and it may be that we are not writing up the assets sufficiently. It may be a great advantage to the nation, and I hope that that was what would come out in the Report. However, I think that we have disclosed enough in the Report to demand a deep and searching review into the whole subject.
My final comment relates to what has been said already about false claims for personal relief from Income Tax. We have had a great many debates in the past two years about immigration. We have created the Race Relations Board and we have passed legislation in many other spheres. We have made it an offence for people to take any action which is discriminatory against anyone of another race. When we debated the Representation of the People Bill, I was able to say quite seriously to the Under-Secretary of State for the Home Department that, in considering minorities, he had better be careful to include them all and that, if he did not, he would be guilty of racial discrimination.
We have a problem here. As people begin to understand that this kind of avoidance is taking place, it may create more ill-feeling and whip up more misunderstanding in racial terms than almost any other issue. It is obvious that the Inland Revenue cannot do any more. Therefore, it is up to the Government to take action to see that this evil stops. If they do not, this one chapter in the Report could do more damage to race relations than almost anything else.
After all, one of the most common unthinking remarks of many people today is that people are coming here and enjoying the benefits of our Welfare State without contributing to it. When it becomes widely known that £20, £30 or £40 million in a sample packet is being fiddled away from the Inland Rvenue, it will create great feeling in the country. It is a matter of urgency for the Government to legislate about it very soon to make sure that tax allowances are paid only where they are controllable; that is, to dependants in the United Kingdom. I hope that the Chief Secretary will be able to offer some encouraging comments about that when he replies to the debate. Despite the fact that it is not the greatest amount of money which is being misapplied, for the future of the nation, it is probably the most important stone that we have turned over in the past 12 months.
In most cases, I have given notice to the Departments concerned that I should be raising certain subjects. However, before the right hon. Member for Reigate (Sir J. Vaughan-Morgan) leaves us, and, as he has indicated that he is in a hurry, I want to follow him and the hon. Member for Ormskirk (Sir D. Glover) on the very important issues raised by them relating to false claims for personal relief from Income Tax.
As I understood it, the right hon. Gentleman referred to his own Amendment, which reads:
"From the evidence furnished to them, it is clear to Your Committee that tax avoidance in this scale cannot be dealt with by administrative action except at disproportionate cost in money and manpower. Indeed, even at disproportionate cost, it is apparent that verification of claims would be ineffective owing to the absence of the necessary basic records in certain overseas countries. Your Committee therefore recommend that urgent consideration be given to the alternative of legislation designed, for instance, to limit dependants' allowances to dependants residing in this country."
That would be a very important Amendment.
I understood the right hon. Gentleman to say that a number of the members of the Committee, one of whom is his hon. Friend and some of whom are mine, are perhaps minimising the seriousness of this matter. That is the gravamen of his charge. It strikes anyone who has read through the evidence that, if the right hon. Gentleman's Amendment had been carried, he would be penalising the innocent as well as the guilty. It occurs to me that the limited practical effect of his Amendment would be to create a situation where there was a sudden influx of dependants into the country. Had the Public Accounts Committee agreed with him, surely there would have been very practical difficulties in a sudden influx. I wanted to make that point because I know that the right hon. Gentleman has to go and, in the circumstances, it is only fair to give way to him.
The hon. Gentleman exaggerates a little if he imagines that a Report of the Public Accounts Committee is studied so closely in India and Pakistan that its publication would immediately provoke a flow of dependants to this country. However, all that he has said makes no difference, in my view, to the case I was trying to put, that the matter cannot be altered except by legislation, and the House and the Committee ought to face that.
The right hon. Gentleman will, perhaps, forgive me for thinking that the Report of the Public Accounts Committee is important, since the next subject, a very different one, namely, the increase in tolls on the Forth Road Bridge, had a dramatic and, in my view, deleterious effect. No one can doubt the effect which the Committee's Reports have, and I wonder whether the right hon. Gentleman the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) would agree that they are unimportant. Although, heaven knows, the importance of the Committee's work may not be reflected by the attendance at the debate today, any Amendment which had been carried would be of some weight in this matter.
Perhaps it is a somewhat sterile argument, and I apologise if I misunderstood the right hon. Gentleman. None the less, I am sure that these things are noted in the Press and certainly could be made to appear as of considerable importance.
I have given adequate notice to the Government Departments concerned that I wish to raise several topics. The first is the question of the Forth Road Bridge, the southern and financially productive end of which is in my constituency of West Lothian. Given that the terms of reference of the Public Accounts Committee required that it look at the problem simply in the context of the Forth Road Bridge Order, 1958, one can hardly challenge its concern at the level of tolls, the inadequacy of which was suspected by the Department at the outset has since been confirmed. Perhaps, as my hon. Friend the Member for Fife, West (Mr. William Hamilton) said, one could comment on the acceptance by the Department of an agreement which, according to the Public Accounts Committee, it regarded as inadequate in the first place to cover the assessed charges which the bridge would impose. What the Public Accounts Committee could not take into reckoning was that the Forth Road Bridge Order—here, it is no different from the Severn Road Bridge Order—is, perhaps, the most lopsided bargain since Esau sold his birthright for a mess of potage.
How did it come about that the then Secretary of State for Scotland, John Maclay, for whom many of us have a high regard, whatever our politics, accepted such a bargain? Perhaps in questioning this I am taking advantage of hindsight, and being unfair, because the climate of the time was different and the bridge was a priority. But, granted the road programmes of the 1960s, it is certain that, if the bridge had not been included in the schedule of the early 1960s, it would, as part of the highway, have been included in the schedule of the late 1960s.
The nub of the 1958 agreement was, as I understand it, and as my hon. Friend the Member for Fife, West, understands it, "You will get your bridge more quickly if you have tolls", and speed, rather than the eventual carrying out of the project, was what determined the decisions of the men of the late 1950s. That was certainly the basis on which the local authorities agreed.
Therefore, in so far as we should have toils at all, they should represent payment of the interest between the time when the bridge was opened in September 1964 and the time when a bridge in the scheduled ordinary programme would have been completed had events taken their course. This sum should come approximately to payment for five years' use of the bridge. On the other hand, it is possible to argue that, at a time of rising costs, the building of the bridge in the early 1960s rather than the late 1960s might have saved the Exchequer some millions of pounds.
The real issue, an issue upon which the Public Accounts Committee, because of its terms of reference, could not reflect, is whether the collection of tolls is a sane way of raising revenue in a modern State. Of course, it is not, unless one has unskilled manpower, as in Italy, or enormous stretches of turnpikes without turnoffs, as in the United States. In fully employed Germany, tolls went out with the mediaeval Rhine barons around Königsberg and St. Goar. We should have the same attitude towards tolls in this country.
The Chief Secretary may recall that in an Answer of 26th November the Financial Secretary told me that the average cost of collection of Inland Revenue taxes was £13,800 per million, or 1·38 per cent., and for the Selective Employment Tax the cost is much lower, at 0·385 per cent. The question I put now to my right hon. Friend, of which I have given his office notice is: what is the cost of raising for the Revenue £1 million from tolls on a bridge such as the Forth or the Severn Bridge? My submission is that it is a much more expensive way of raising revenue in terms both of manpower and resources than any other way which the State has for raising revenue. Perhaps my right hon. Friend will be able to put a figure to it.
The present tolls on the Forth crossing are an irritant causing annoyance out of all proportion to the revenue gained, and increased tolls would be more harmful still. In this connection, it is legitimate to turn to Question No. 2461, asked by my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon):
May I take it that no studies of elasticity of demand were undertaken on this matter, also?"—
to which the answer was to the effect that the working party had considered it.
I have news for the working party, if may put it in that way. If tolls were to go up, then, according to my constituents and many of those who live in the constituencies of my hon. Friends the Members for Fife, West, and Dunferline Burghs (Mr. Adam Hunter), a great many people would cease to use the bridge or would go round by Kincardine.
In a sense, it is a justified cri-de-coeur that those who have got into the way of life of commuting across the bridge either to work at Fife or from Fife to work in Edinburgh or The Lothians would be hit in their pattern of employment if there were any changes. I have letters from school teachers and others who live south of the Forth and who now have posts of responsibility north of the Forth and who, if tolls went up, would have to search for another job. If that is true of school teachers, it is true of a number of other people, too.
I appreciate that no one wants to pay increased tolls, but is it not fair to say that those who are travelling across at the present level of tolls are making a considerable monetary saving on what they used to pay for a ferry and are saving immeasurably in time?
Is this not also true of those who live close to any recently constructed motorway? One comes to the point, in answer to the hon. Member for Fife, East (Sir J. Gilmour), when burdens and increased charges will not increase the number of vehicles crossing the bridge, but will encourage them to by-pass it and to reduce its usefulness, just as, in the same way, better communications across land will make mobility easier. This is the sort of development that we welcome. I ask the hon. Gentleman: is this situation, in which we need mobility, consistent with the Government's regional economic policy? Is there consistency here?
That is a question to which the Chief Secretary, who has done so much for areas like mine, and to whom I have reason to be particularly grateful, especially for his help over the B.M.C. works at Bathgate, should address himself. How can the granting of Government assistance to attract new industries to the East of Scotland be reconciled with the imposition of tolls on the many arterial roadways? Arterial roadways are constructed to make mobility more possible. Why should those who have to travel over water rather than over land suffer in this respect? This is the kind of question to which the hon. Member for Fife, East ought to address himself.
I have also given notice to the Chief Secretary of another question, and it is: why has the situation been made worse by charging the cost of the approach roads to this particular bridge? When he comes to answer my hon. Friend the Member for Fife, West and myself, will he break down the interest paid on the approach roads and the interest paid on the bridge proper? It clearly is not right that the cost of the approach roads should be included in the total cost. What is the basis of the anomaly that a road which has to be carried across water is treated differently from ordinary trunk roads, or indeed a bridge over land?
For example, the estimated cost of the elevated section of the M.4 between Chiswick and Boscombe Manor alone is £7,840,000. This includes work on the approach roads, and the estimated cost of the approach roads, and the estimated cost of acquisition of land not yet completed, but excludes the cost of land at the Chiswick roundabout and the flyover. It is a question of what is sauce for the goose is sauce for the gander. If the policy is to charge a toll, there shuld be a charge on the Chiswick fly-over and on many other of the modern constructions that we all welcome.
Good luck to those who signed the Public Accounts Committee's Report, my hon. Friend the Member for Heywood and Royton (Mr. Barnett), my hon. Friend the Member for Ashton-under-Lyne and my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) when they get the Manchester-Sheffield trans-Pennine motorway, for which bridges and cuttings alone will outdo the Forth crossing. I imagine that my hon. Friends have little desire that their constituents should pay tolls. These capital projects, such as the trans-Pennine motorway, are exceedingly expensive, out of all proportion to any construction costs that this country has known in communications.
There has to be a consistent policy. It is either one thing or the other. There is really no difference between difficult mountain roads and crossings of estuaries, such as the Forth and the Tay. I do not wish to be personal, because I sat under the chairmanship of the right hon. Member for Kingston-upon-Thames, but I shall take kindlier to the recommendations of the P.A.C. on the Forth tolls, and the proposal that they should be inceased, the day that we hear that the right hon. Member is holding public meetings in his constituency advocating to the people of Kingston-upon-Thames that they pay 10 cents or "a bob" a time on the Kingston by-pass.
Is there any qualitative difference between tolls on the Forth Road Bridge and tolls on the Kingston by-pass? I will willingly give way to the right hon. Gentleman if he feels he would like to focus his mind on this important logical matter.
If the hon. Gentleman invites me I must respond. First of all, I would invite his attention to the fact that those who live in the Royal Borough of Kingston upon Thames are the least likely of our fellow citizens to wish to by-pass it. They will, on the contrary be using the roads into it. Secondly, if the hon. Gentleman can find administrative methods of collecting tolls on the immense variety of traffic which enters the by-pass, not by one road, not at just two points at either end, but at innumerable points along it, then he is an even greater administrator than I think he is.
One can always rely on the right hon. Gentleman's wit. What he says about turn-offs is true, and that is why I am against tolls on motorways as such—because there are to many exits end entrances. But just because ours is over water, why should we be taken advantage of? This is the nub of the argument. Surely, in our heart of hearts, we would really all agree that this policy was ill-conceived at the beginning and that it ought to be changed in the way suggested by my hon. Friend the Member for Fife, West.
Any Member of Parliament who advocates either increased public expenditure for a pet project or the loss of revenue to the Treasury through taxes should specify precisely where he would make up the alternative revenue. That seems to be a very proper condition for making speeches of this sort. I would point out that the Government have poured money into Scottish industry. Much of it has been well spent, some of it has not. Perhaps the figures speak for them-Selves. In 1963, the Government brought in £7 million of identifiable financial assistance, excluding agriculture and fishing. In 1965, it was £8 million and by 1967 it was £79 million—a tenfold increase.
There is no doubt that my constituents, and many others, have benefited vastly from this Government's spending. The fact is that, whereas five years ago, there was serious unemployment in our area, the situation is greatly improved today. The Secretary of State for Employment and Productivity was able to give the most heartening figures 10 days ago on the youth employment situation in Scotland. All this is to the good, but I ask the Chief Secretary whether the time has not come to change the appliance of help to the development areas, partly away from industry and into infrastructure. I would have thought that the abolition of tolls would have been an example of how infrastructure can be improved in the East of Scotland development area.
I do not want to digress, but to close this argument a little I think that the policy of giving money to industry is one which the P.A.C. could look at in its next session with a considerable degree of scrutiny. Many Scottish managements we are told should he put into more effort in education and training of managers. This is from a report by a Working Party set up by the British Institute of Management and the Confederation of British Industry. Facilities for management education and training offered by Scottish universities and technical colleges are being under-used by Scottish managers, says the report.
It is in the light of this kind of evidence that perhaps there should be some scrutiny into the way in which public funds are used when they are put directly into private industry. I ask the question whether projects such as "detolling" our bridges and improving the quality of our airports are not better ways of helping the East of Scotland than by giving money direct, and sometimes almost regardless, to private industry?
Finally, on this point I wish to raise a slightly different question. In Question 2497, reference is made to the revenue from commercial vehicles. It tells us that the information was given to the Committee but it was not printed. Perhaps because I am no longer a member of the Committee I understand the situation, but it seems to me that this could be an example of the unnecessary secrecy which too often dogs our public documents. Last month, when my right hon. Friend the Prime Minister was reviewing the Government's attitude to the Fulton Committee's Report, I asked him:
Is my right hon. Friend prepared to say anything about getting rid of unnecessary secrecy or of inquiring into unnecessary secrecy both in policy-making and in administration?
My right hon. Friend replied:
I have studied reports on this question. That might be the point which my hon. Friend might make some suggestions on today, but it is one which I would rather leave to my right hon. Friend to take up, though as yet I do not think that she will have much more to say on it than I have just said."—[OFFICIAL REPORT. 21st November, 1968; Vol. 773, c. 1556.]
My right hon. Friend was referring of course to my right hon. Friend the Paymaster-General. Here, I thought, was a minor, perhaps rather trivial, but, nevertheless, still an example of the sort of information that would be interesting to those studying these affairs, which I can see no conceivable reason for not giving.
I am relying on my memory concerning the precise circumstances involving the information. The hon. Gentleman himself has indicated the probable reason why it does not appear in the Report. As he knows, some material is not printed on either security or commercial grounds. The Committee has submitted to it a great deal of material relating to points not of the first importance, and if we were to print the lot this enormous volume would be of excessive size. I would not like to say without notice—I make no complaint that the hon. Gentleman has not given me notice—why the decision was taken to which the hon. Gentleman refers, but I would guess that it was on de minimis rather than on security grounds that we did not include it.
In general terms, the problem of secrecy is better dealt with by the P.A.C. than by another Committee of which I have experience in that P.A.C. documents which are secret are kept in the room available to right hon. and hon. Members of the Committee, but are otherwise under lock and key. Members of the Committee are quite clear as to what is secret and what is not. It is one of the Committee's great virtues. At the same time, from my recollection of the P.A.C., is it not the case in general that a good deal more information could be made available to those who study the reports than is made at present? Perhaps the Committee as a whole and the Comptroller and Audtor-General are a little over sensitive to problems of commercial secrecy.
The second feature I wish to raise is the case of the approved schools. There may seem, on superficial reading, all the evidence to justify the rather black conclusions in paragraph 35 of the Committee's Report. The Scottish Education Department is accused of having shown a lack of responsibility in the handling of public funds. Coming from the P.A.C., this is indeed a damaging charge.
Before I start on a defence, or what seems to me a defence, of the Department, I had better admit at once that, in certain respects, there was clearly fault. The witness was unwise not to appear with detailed figures of the sums involved at each school on which the Comptroller and Auditor General had reported, and, as my hon. Friend the Member for Bebington (Mr. Brooks) has suggested, any money held could have been placed somewhere where it would have attracted interest.
But having taken these factors into account, I reflected that this summer I was arraigned before another Select Committee of the House—the Committee of Privileges. I know better than most hon. Members how difficult it is to sit in the witnesses chair in Room 16 and do one's case justice. It is too easy to be made to look stupid and negligent, arrogant or a concealer of the truth by fastidious, sometimes pedantic and sometimes irrelevant questions put by members of the Committee to whom one cannot put questions in return. Indeed, it is salutary for hon. Members sometimes to take some of their own medicine. I thus have a fellow feeling for those whose fault, or what appears to be a fault, is that they have shown too much zeal.
I attended the debate on the Fulton Report and I think that right hon. and hon. Members must think a bit straight and make up their minds. Do we or do we not want the Civil Service to show more initiative? In the case of the approved schools, there is no indication at any time that the Scottish Education Department or any of the parties involved have been dishonest. Furthermore, there is no indication in the Report of the Comptroller and Auditor-General that, in the main area of expenditure—control of school building—there is any lack of proper control.
I know that it is part of the philosophy of the P.A.C. that no sum is too small to be considered, but I think that perhaps one of the shortcomings of a report of this kind is that it does not put the whole picture into context and there is no reference to what many of us would conceive to be the considerable achievements in cost control by the Department. Reading the Report, one would not get a picture in any kind of totality. This detracts from the value of the work of the P.A.C.
Having made generalisations, I must now be specific. According to Question 3878, the Chairman asked the witness:
I think you said in some cases this representation by the managers was made orally?
The witness, Mr. N. W. Graham, replied, "Yes". The Chairman then asked, "In how many cases?" Mr. Graham replied:
I am not sure that I have the precise number of the cases, but it was certainly in a considerable number of cases oral.
Question 3880 was:
But do not your Department's own regulations provide that money is only to be issued in response to a written request?
Mr. Graham replied:
That is so, but these bodies, as I have said, are very lightly manned; they have no full-time staff on this side and we find it in practice extremely difficult to get written information from them.
I put it to Ministers and to the House. How often do we, in our business or professional lives, carry out our business by telephone? Surely it is very often indeed. Before the P.A.C. jumps to this kind of conclusion, should there not be some reflection on how human beings work in their day-to-day relationships? I want to give other examples. Question 3883 was:
Have you taken any disciplinary action in respect of the staff concerned for the breach of your own regulation?
Mr. Graham replied:
No, Sir, the matter has been brought to their attention but they have extreme difficulties in working with these bodies which are quite different from the normal run of bodies, local authorities and so on, with which we work. They are just a group of voluntary people with someone who is designated as the official correspondent who may be part-time, and I think even in some cases acting in a voluntary capacity.
In my view, that is a very reasonable answer. Do we, as the House of Commons, want voluntary bodies in this field? If we do, it seems that this kind of criticism may be a bit harsh and wide of the mark. There is this contrast, which seems to be important, between the realism of how Departments behave as human beings and the fastidiousness often demanded by the P.A.C., and here I am not criticising current members, because when I was on it, I was as bad as anyone.
I have two more examples. In Question 3884, the Chairman asked:
I appreciate perhaps as well as you do the problems of voluntary bodies with small staffs. My question, however, relates not to voluntary bodies but to your body of professional staff who you have told me acted contrary to your own regulations.
The reply was:
I appreciate that, but my officers are I think very much influenced by the fact that we are under extreme pressure to find places in these schools and they feel an obligation to do what they can to keep these schools going.
Granted that that is an honest reply, and I am sure that it is, the question is whether we want more civil servants, and we have to make up our minds on this issue. It we are to be as exacting as the questioning indicates that the right hon. Gentleman would like us to be, we have to have a bigger bureaucracy—and I do not like the term, but I use it—and not a smaller bureaucracy.
In Question 3885 he was asked:
Do they also feel an obligation to carry out their instructions from you?
The reply was:
I hope they do, Sir, but I think in this case they may have regarded the strict letter of the rules as less important than the spirit in trying to keep these bodies afloat.
That brings us back to the Fulton Commission. Do we want civil servants sometimes to stretch the rules, presumably acting in good faith—and no one is saying that the members of the Scottish Education Department are not acting in good faith? Do we want them to behave as many of us would in private firms, or in our professional lives? As I understand it, there is no indication of dishonesty or of fixing, but there is an indication of busy men trying to do their best in difficult circumstances, and it seems to me that the Public Accounts Committee has been unduly harsh in this respect.
I draw the hon. Gentleman's attention to two points. First, I do not think that he appreciated to begin with that these criticisms related to the staff of the Scottish Education Department and not to the voluntary bodies with whom they were dealing. Secondly, while there is a great deal to be said for the hon. Gentleman's view as to flexibility and ease in staffing, surely when the expenditure of public money is involved, if regulations are made, they should be honoured and obeyed.
There may well be a case for reviewing the regulations, but the criticism made of the accounting officer in question is that he made regulations, did not suggest their alteration, but appeared to have allowed them to be broken. I am sure that the hon. Gentleman will appreciate that when public money is involved. that is the worst of all worlds, and that is why the criticism was, I admit, very severe.
I am forced to agree with the right hon. Gentleman that the regulations themselves should have been reviewed. Perhaps I can put that view in the form of a question to my hon. Friend the Under-Secretary of State for Scotland, who has done me the courtesy of attending the debate, and ask him, in the light of what the P.A.C. has said, what changes have been made in his Department, particularly in the reviewing of the regulations.
I also have to thank my hon. Friend for being here because I should like to raise the question of the Hamilton College, a matter of which I gave the Department notice. I am a little surprised that the hon. Member for Hamilton (Mrs. Ewing) is not here, because this is in her constituency and it must be a matter of some importance to her. As I understand it from both the Report and the evidence, the main burden of criticism by the Public Accounts Committee is that the excessive possible accommodation was provided before it was needed. In the view of the Committee, this constituted a waste of public money.
It is normally the reverse complaint which is made when we complain when we see new schools or new training colleges going up and two or three years later find that there is no accommodation for those who would like to use them, and a vast expenditure is incurred by the contractor having to go back to the site and the public is put to extra expense. If there were fault here, I would have thought that it was fault in a good and not a bad direction, certainly not as bad as the chopping and changing which in the long term is the result of under-provision.
I ask, not impertinently, I hope, because I have too much respect for the members of the Public Accounts Committee for that, whether the Committee and the C.A.G. in this context took account, or had any notion, of the costs of a contractor on a big job like this going on site, coming off and then going back again, which seems to be what the Committee is asking the Scottish Education Department to cause contractors to do. I therefore ask the Chief Secretary whether he will be prepared, granted that there was some miscalculation, to say that the fault at Hamilton was very much slighter than the P.A.C. would have us believe.
The Public Accounts Committee seems to have a special nose for my constituency, because it turned its attention not only to the Forth Road Bridge, but also to Livingstone New Town. It was I who as a member of the Public Accounts Committee first drew attention, in somewhat unorthodox style, to the problems of Livingstone New Town and for that I have absolutely no regrets, because it was extremely important that the P.A.C. should examine the problems of new towns and the relationships of contractors, especially as new towns are not subject to local authorities and are therefore not subject to local opposition, nor subject, as are most towns, urban district councils and other local authorities, to criticism.
I am glad that the Government have accepted the recommendation that the Ministry of Housing and Local Government should study the Scottish practice in the contract provisions for liquidated damages to see whether they can be applied with advantage in England. I should like the Chief Secretary to say what was the exact result of the investigation of the extent to which the liquidated damages clauses in building contracts are implemented and to tell us what is the Government's attitude to whether there are valid grounds for not implementing liquidated damages clauses.
Much has been said about the Forestry Commission and it is fair to ask whether the Commission's non-commercial activities, the social benefits which have yet to be quantified, justify the heavy expenditure involved. I am not at all certain that expenditure of this kind can be quantified in any meaningful form of specific calculus. Here again, there were questions put by the right hon. Gentleman the Member for Reigate and me, and perhaps, when he winds up, the Chief Secretary will be able to say something about it.
On the question of the royalties on nuclear power stations, the Treasury minute says:
It is arguable that this left room for the Government to determine a rate of royalty significantly higher than what was actually fixed, while still leaving to the Generating
Boards a clear commercial advantage from adopting the A.G.R.; but this must be a matter of judgment. However, the Government agree that the Committee's recommendation should be borne in mind when further decisions are taken on royalties on nuclear power stations.
What is the Government's attitude to this?
I would have thought that this subject might have been better examined by the Select Committee on Science and Technology which, after all, is steeped in the problems of the nuclear power industry to a degree that the members of the Public Accounts Committee, however able, could not possibly be.
On the question of the "Ark Royal". the Committee says that
Your Committee, while not wishing to question the strategic arguments advanced in justification for continuing the refit, are nevertheless very concerned that a decision to spend some £30 million may result in no more than two years' further operational life for the carrier.
Perhaps the Chief Secretary could comment on the findings of the Public Accounts Committee on the Argylls—[HON. MEMBERS: "The what?"]—A Freudian slip I mean, the "Ark Royal" refit. All I can say is that this is what comes of valiantly following the Patronage Secretary's instructions to keep going for a decent time. Perhaps I can be given a hint from the Front Bench when my hon. Friend wants me to come to an end.
Meantime, the question I wish to raise of which I gave notice probably 10 minutes ago, and of which I wish to give notice, concerns American aircraft. The question can be put very crisply. Is it really a sensible policy to adapt spares to an aircraft built for different reasons in another country? Some of us for a long time have had very grave doubts whether we can fit other engines or avionics into airframes for which different equipment was designed and intended. I am not suggesting that the Phantom and the Rolls-Royce Spey engine present anything like the problem of the Starfighter. Nevertheless, in the minds of all of us who are interested in these technical matters, there must be some doubts about this in relation both to cost and safety.
Mercifuly, what I have to say finally is cut short by my agreeing, as other hon. Members have done, with much of what has been said by my hon. Friend the Member for Bebington. However, I should like to offer a reflection on the workings_ of the Public Accounts Committee. I take the work of the Committee extremely seriously, much more seriously than most other institutions in Britain. I think that it is a little of a reflection on the Committee that I should have been called so early in this debate, without keeping others out, and allowed to go on so long. It is a little of a reflection, also, on the House of Commons and, indeed, the malfunctioning of the House, because this is the day, surely, when, above all days, we can exercise our function of scrutiny and it really does reflect on Members of Parliament that they have become far too interested in being critical in general and not interested enough in being critical in particular.
I say a word of acknowledgment to the Chief Secretary who, like myself, was here at 4.30 this morning and at 4.30 yesterday morning, his time being more arduous than mine, but it strikes me that when civil servants go to enormous trouble to prepare evidence for the Committee, and when a great many other people go to enormous trouble, particularly witnesses, it is something of an insult to them by politicians that all this is not taken a great deal more seriously.
I really do feel, if I may put it this way, that it would have been much healthier if I had been kept waiting, by hon. Members desperately wishing to speak, till ten minutes to nine tonight, because that would have reflected hon. Members' interest in scrutiny. The unfortunate thing is that they are not interested. The good temper of the right hon. Gentleman the Member for Kingston-upon-Thames is well known, but I wonder what his feelings are—he will not reveal them to the House of Commons—that, after all the work 'he and other members of the Committee, including my hon. Friend the Member for Bebington, have done, there are so few of their colleagues here who are at all interested in all the work which has gone before.
I would have thought that this really reflects itself in public criticism of Parliament, because if we were seen to be a hit more concerned with this one of our functions—not the most important function but one of the important functions—of scrutiny, we would be taken a little more seriously by industry and a great many other important outside interests.
This brings we to one of my conclusions, that although there is the difficulty about side-lining—which I do not intend to go into—nevertheless, I would like to see the Public Accounts Committee, before most other Committees and before the House itself, televised. This may send a shudder down the spine of the right hon. Member for Kingston-upon-Thames, but I think that it would be good for democracy to see the right hon. Gentleman, and my hon. Friend the Member for Heywood and Royton and my hon. Friend the Member for Bebington, certainly my hon. Friend the Member for Fife. West cross-questioning civil servants.
Both parties would come out of it very well, I think, and it would be good for Parliament and, indeed, good for the civil servants. Nothing would put up their reputation higher than to see these extremely competent heads of Departments actually answering in a logical way critical questions which they are asked. To the television companies I would say that this would be excellent television, rather better than the drooling debates that might be televised from the Floor of the House of Commons.
One other thing, the whole effect which the Public Accounts Committee has on industrial decision-making in relation to Government Departments—decision-making as a whole in relation to Government Departments and their complex relations with industry. As the member of the Public Accounts Committee who first suggested that Sebastian de Ferranti, an industrialist, should be brought before the Public Accounts Committee, I am now, in retrospect, not very proud of that particular action, because whereas Ferranti's were definitely at fault, in that, it is alleged, they did not "come clean" about various transactions which they had with the Government, nevertheless there is a very real problem, and I can see it now that, perhaps, I am wiser than I was, when industry says, "If we are to have to face the kind of situation which faced Ferranti and Bristol Siddeley, can we be sure of ever making a high profit? And if we are not ever to make 'a killing' have you not got to compensate us for all the failures?" Therefore, the whole relationship of the Public Accounts Committee and of the Government with industry is something which would repay a good deal of study. I am sure that out of Fulton there will come a new atmosphere, a new ethos, in which the Civil Service, and particularly the technical Departments of the Civil Service, will feel much freer than hitherto to use their initiative.
The hon. Gentleman the Member for Guildford (Mr. David Howell) made an extremely interesting speech during the Fulton debate, in which he said:
I believe—I hope I am not being too depressing about the effort which has gone into the Fulton Report—that we will make little progress in administrative reform and in creating an efficient bureaucracy until the Treasury abandons its detailed control in favour of more modern methods."—[OFFICIAL REPORT, 21st November. 1968; Vol. 773, c. 1633.]
If the Treasury is to accept changes, and perhaps changes in favour of less detailed control, less concerned with Gladstonian candle ends, then the corollary is that we as Members of Parliament must give different terms of reference to the Public Accounts Committee.
Having spoken for far too long, for which I apologise, simply to cover our Parliamentary interests, which it was possible to do without preventing other hon. Members from speaking. I thank the House for its attention and hope that by next year some thought will have been given to the changes in the operation of this extremely important Committee.
I, too, should like to congratulate my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) on the excellent Report and on his speech introducing it to the House. I apologise, as others have done, to the Chief Secretary for not being able to be here to listen to his reply. I was interested and pleased to see the hon. Member for West Lothian (Mr. Dalyell), in his new role as Whip's delight, no doubt performing an important function for the House. I thank him, too, for his kind service to me for as far as possible emptying the Chamber, since what I have to say is unsuitable for a wide audience and will, I hope, be treated as a confidential chat to my right hon. Friend the Chairman of the Public Accounts Committee and to the Chief Secretary.
It is curious how the debate on this very extensive volume, worth every penny of the £3 16s. which my right hon. Friend said is its selling price, has focussed itself on the comparatively small section which relates to the Forestry Commission. It is on that topic that I wish to make a few halting observations. The Report has made fascinating reading. Paragraph 146 of the conclusions contains this remarkable statement regarding the accounts which are apparently being considered:
… and their value as a measure of the Commission's efficiency and commercial success is therefore limited.
That is one of the greatest under-statement of the second half of the 20th century. There is an almost equally remarkable sentence immediately following:
Your Committee … are of the opinion that the losses … indicate the need for consideration whether the Commission's non-commercial activities, the social benefits of which have yet to be quantified, justify the heavy expenditure involved.
On reading some of the exchanges which are recorded in the main body of the Report, one enters a world of enchantment, and it is sometimes difficult to decide which are the more delightful, the questions asked or the answers given.
My favourite question is one addressed by my hon. Friend the Member for Carlton (Mr. Holland) to a Forestry Commission witness:
… can you tell me what is the purpose of growing timber by the Forestry Commission?—We do attempt to grow it for profit but we have these constraints on us.
When he was asked to elaborate on that, the witness said that there were Ministerial directives. Further probing produced the answer that land use came into it. My hon. Friend was not quite clear about land use, as I am not myself. This was explained as being:
… the concept of practising multiple land use, improvement of agriculture, soil conservation, all these things.
After further probing, a new concept was introduced in the next reply, the problem of the saving of imports. This throws an entirely new light on the activities of the Forestry Commission. Earlier, the Report mentions the historical origins which have already been referred to, that is to say, the strategic reserves which after the war were thought should be established in this country.
I intervene with trepidation in the debate not having been a member of the Public Accounts Committee. I am not sure of the procedures, but reading between the lines of the volume, it appears to me that, although only one witness is named on page 322 as being under examination, he was accompanied by others, some from his own Department, and some from the Treasury, breathing I hope not too closely down his neck. The answer to Question 2909 is given by a Treasury representative. The first Treasury horse came up to the fence but shied and eventually refused it. It was left to the second Treasury horse to take the fence, which he did in this way, in words which have an enchantment which one did not imagine to exist outside the Forsyte Saga. He said:
The policy that we have agreed with the Commission is that one would normally expect the return of 5 per cent. …
But that apparently does not apply to Scotland. My hon. Friend the Member for Reigate (Sir J. Vaughan-Morgan), who was putting the question which provoked this answer, asked, not unreasonably:
A return of 5 per cent. on what?—Total capital cost
The next question was:
When do you expect to achieve that return?—This is a return at the end of the 60-year period of the planting.
That is an ambiguous answer on which I may wish to comment as I proceed.
The main factor which emerged in the opening exchanges was that the Forestry Commission is now apparently dominated by what are called sociological objectives. I find difficulty in debates in the House in understanding these long words. I go to the dictionary and find that "sociological" means:
of or connected with the science or study of the origin, history and constitution of human society.
As applied to trees this definition seems to postulate some rather highbrow trees among our Forestry Commission plantations. I say confidentially to my small audience that forestry is a special thing in our lives. There are two special diseases which are exclusive to forestry, one affecting the growers and one affect-
ing forestry accountants. A person must be a little queer to plant trees at all. I do it myself, so I am speaking from experience. When such a person sees a piece of land not being used, or overgrown with brambles and bracken, something inside him says, "Had we not better clear those and do something with the land?" Very often if the land is hilly or rocky the answer is to plant trees, so trees are planted.
Almost as strange is the disease which overcomes accountants when confronted with forestry. Their minds move upwards in the realms of profit and loss and they have to go into the ground evaluation of the financial result of the enterprise. Some members of the Committee who have spoken have become quite angry about this and have felt that the whole of the operation of the Forestry Commission has been quite unsuitable and not within the rules which self-respecting accountants would expect.
In my own limited experience, people seeing me engaged in planting trees have asked, "Will this make a profit?" It is quite easy to answer that. One answers it by saying, "If you, by your will, appoint someone on 1st January, 2030, to meet someone appointed by me in my will under the clock at Waterloo Station, assuming that it still exists, and you define to me 'profit', you say whether, apart from the sociological features involved, profit includes any estimate of the capital appreciation or otherwise of the land planted and any estimate of the profit which might have been made from the land by putting it to an alternative use, the answer can be given easily. There is no difficulty about it."
The Forestry Commission is rather more courageous. It works out these matters. It has to take refuge—and one cannot blame it for that—in certain formulae. As always, it gets into these technical terms. The two technical terms which seem to mesmerise the Commission are, first, plantations information and, second, plantations with expectation value. A remarkable line is drawn between the two. One speaks of plantations which have not yet been thinned and of plantations which are already in the thinning period.
Then one comes back to the remarkable statement in Question 2912 about
the 60-year period, and the following Question reads:
So really the costing should be done by the estates rather than in total, should it not?
The ambiguity of this is not making it clear whether the account is to be presented in general at the end of 60 years, which will be 1978, or at the end of the growing period of each separate parcel. All this postulates that, in any true calculations, these dates and facts must be known.
That is another very odd feature of forestry. It is very unwise to rely on such matter as records, files, facts and figures. It is much better to rely on oral tradition and local knowledge, and to use names which are easily recognisable. It is important to know the date of planting, and what we do in oar little property is to give each planting a distinctive name. For example, the area that we planted in 1957 is known as Macmillan Wood. In 1963, using a horrible pun and a gross mispronunciation. we replanted the Home Covert. Owing to the present financial stringencies, we have not been able to manage a Wilson Wood, but we are saving up for the great celebration, when in 1970 we shall replant an area which has long needed it and which, fortunately, is known as the Heath Plantation. That is the way to do it, because the names and dates can be easily remembered and firmly anchored in people's minds.
The moral of all this is that forestry and forestry accounting, although they have always been treated in terms of three dimensions, are really four-dimensional. Forestry cannot be usefully evaluated unless one considers the fourth element of lime. With great respect to my right hon. Friend the Chairman of the Public Accounts Committee and to the Treasury, we should not be considering the profitability of the forestry exercise but the profitability of the Public Accounts Committee exercise.
The only real rules that apply to timber growing are fairly simple ones which are rather remote from public accounting. One is that good land in terms of timber produces a better result than bad land. Another is that all trees, if they are not felled or blown down, ultimately die. A third one which is nearer the accounting question is that the way to make money out of forestry is to cut down trees and sell them. A fourth is that the way to lose money on forestry is to plant trees without having any to cut down and sell. Anyone who abides by those four rules cannot go far wrong.
The logic is that one must shed reason, policy or consideration of accounts and rely on what really matters, namely, instinct, tradition, emotion and dedication. Therefore, I suggest to my right hon. Friend that, when the Public Accounts Committee next considers this matter, it should be divided into two parts. Each half of the Committee should go to opposite ends of the Committee Corridor, one into Room 1 and the other into Room 18. One half should deal only with the side of the Forestry Commission which does the planting. It should work out costs, compare them with the area planted, and see whether it has been done economically and is a worthwhile operation. The other half of the Committee should consider the fellings, deciding whether the right prices have been obtained and whether the return from the area in question is adequate. It is important that never the twain should be allowed to meet and never should the two sides of the account be compared.
There is one other alternative, though I hesitate to suggest it while the present Government are in office. This enterprise seems inevitably to involve the taxpayer, for a limited period at any rate, in considerable loss. In my view, it should gently be sold off to private enterprise, where I think a willing buyer would be found, leaving to the Forestry Commission what surely are the proper spheres of governmental activity, namely control and advice.
I hope that my hon. Friend the Member for Ludlow (Mr. More) will forgive me if I do not follow him too closely into the aesthetic aspects of tree growing and planting, except to say that, having seen the giant redwoods in California, it is clear to me that in the millenium of planting there were neither accountants not politicians interfering at that time.
I, too, want to apologise to the Chief Secretary for the fact that I shall not be here when he replies to the debate. Indeed, I had not expected to participate in it and, therefore, I share profoundly the views expressed by the hon. Member for West Lothian (Mr. Dalyell) about the functions of hon. Members of the House in scrutinising public expenditure. On one of the most important occasions in the House, it is virtually empty. One could explore at great length some of the reasons why. One that I would suggest is that hon. Members are under such continuous, growing and relentless pressure to be everywhere except at Westminster, both when the House is sitting and when it is not, that perhaps some search may be made beneath the pressure for the reason why Parliament is failing to discharge its appropriate functions as rigorously and effectively as it should.
Those hon. Members who sweat their guts out on Select Committees do not get any recognition as such. After all, an hon. Member cannot go to his constituents and say, "I have served well as a member of the Public Accounts Committee", because the average constituent would merely reply, "What is that?". Surely that is an extra argument for public education by the televising of our Committees.
I share that view, and it is largely our fault that the point is not made. If extremely interesting cross-examinations of this kind were to appear on television, following the performances and records of those in the United States, some contribution would be made to general public understanding of what it is that a Member of Parliament is supposed to do.
I turn now to the specific issue of the Spey Phantom. As those who are not familiar with the aircraft industry might suspect, it is not a ghost on a Scottish river, nor even a skeleton in the Government's cupboard. It would be more aptly described as a skeleton in the Government's graveyard. It is the micro-economic case of public expenditure par excellence. We hear the macroeconomic debate almost ad nauseam. We all know the phrases and the arguments which are used. The ball is held effectively in the air and sometimes it is interesting and exciting, but not always is it altogether relevant.
We are always challenging each other to deal with specific cases of public expenditure. I suggest that here is a specific case which is quite alarming. We are told in this fascinating Report that the additional cost to the taxpayer of this single decision to put Spey engines in the Phantom aircraft was about £80 to £90 million. That is not a small sum. If the taxpayer could be relieved of that burden there would be some appreciable result in the economy. We are speaking in large numbers and magnitudes. To break it down and say that the cost of the aircraft was doubled by this decision—about an extra £1½ million for each aircraft—also suggests that this was a basic major decision. Therefore, the fact that the Public Accounts Committee has brought to light in great detail why the decision was made and why in some senses it went wrong deserves the close attention of the House.
Five principal reasons are given for this decision. These were carefully considered by the Public Accounts Committee. First, that it was only by putting the Spey engine in the aircraft that it could take off from British carriers. Secondly, that the higher powered American engine, the J.79, did not exist in the improved version at the time the decision was made which might have enabled the Government to think otherwise had they so chosen. Thirdly—and the Committee and those giving evidence to it are frank about it—that the main reason for the decision was to give industrial support to Rolls Royce. Fourthly—equally interesting though on a totally different front—that the special equipment needs of the R.A.F. and the Royal Navy would have had the result had we bought the American Phantom as it was off the peg, of a deterioration in operational efficiency. Fifthly, that with the Spey Phantom the aircraft would have improved range.
Let us look closely at some of those reasons. The first, and probably the most important, concerning carriers, and I should like to read the evidence given on this point. The question was whether the carrier was the principal issue, and the answer was:
The primary value and purpose of putting it into the Phantom was that the Phantom could not fly off a carrier unless it had this engine. Later on the J.79 was improved; also certain naval techniques were improved when the subject was reviewed and later on it was
judged to be possible to fly off a carrier with the American engine. At this point the whole question was re-examined and it was decided in spite of this that the Spey still gave us an operational advantage in terms of range, as I have described it, plus the industrial advantages and the Government decided to continue to go on with it.
This is an interesting point of view. But throughout one question was not asked. It may be a silly question, but I should like to ask it now in case the Government can answer it. Did the Government at any stage consider, instead of incurring the risk of spending £80 to £90 million—and this was an ascertainable risk even in 1964—lengthening aircraft carriers? It is possible to build a 1,000 ft. tanker—I am thinking primarily of the steel work—with everything that goes into it for £6 million. We all know that military equipment and all kinds of naval vessels seem to invite a different stratum of cost from ordinary commercial vessels. None the less, this would have been a straight-forward lengthening operation which the more sophisticated shipyards in the world are capable of doing. Assume that it costs £6 million. If we double it for luck and add another £6 million for fun, because we know it is a naval operation, we arrive at £18 million. Two carriers would cost £36 million, which is less than half of the cost actually incurred.
Another big question is: did we at any stage consider buying American carriers so that these aircraft could be used? Finally, at £80 to £90 million, did we consider building a new carrier in relation to this decision?
The hon. Member for East Lothian (Mr. Dalyell) has drawn attention to this point, and it needs reinforcing. This expenditure was incurred merely so that this aircraft could fly off carriers between 1969 and 1972—this is the main justification—after which time it will be phased out and become a land aircraft for the R.A.F. This is an additional £80 million for three years for 28 aircraft to enable them to fly off carriers. We know that £30 million was in any event spent on refitting the Ark Royal. This is an astonishing decision with an astonishing consequence and it deserves the attention of the House on those grounds alone—the raison d'être given.
These are important points. Would the hon. Gentleman care to state on what strategic grounds this decision was taken? If he feels that this is outside the scope of his speech, does he draw the conclusion that the Public Accounts Committee's investigation is too limited to be useful in modern conditions?
I take the hon. Gentleman's point. I do not think that it would be profitable to explore whether the Public Accounts Committee is the appropriate body to explore the strategic assumptions on which these decisions are made. However, I share the view that the strategic assumptions ought to be explored by somebody. Whether this Committee or another we can debate.
The next point concerns the J.79. Here again, I should like to quote from the Report at Question 4463:
I gather that the operational advantages were not significant. The Comptroller and Auditor General says that the Service Departments both stated that they would be quite happy with the J.79, so the operational advantage was not a significant point?
They would have been happy with it later, this is perfectly true. The decision to use the engine in the R.A.F. version was mainly taken on industrial grounds.
That is the next point to which I turn. Industrial grounds are very popular today. But what supports the view given in yet another paragraph of evidence to the Committee? I apologise for quoting so much from the Report, but it is essential to my case. A question was asked about the industrial grounds, to which the answer was:
The American engine is an old engine. It was considered at the time, I am sure entirely correctly, that the development of the Spey engine by Rolls Royce was an essential thing in order to keep Rolls Royce in the forefront of the technical development of aero engines, and I think the recent order for the R.B.211 engine, for example, is an indication of the importance of keeping Rolls Royce right in the forefront of technology.
It will he common ground on both sides that it is essential to spend a great deal of public money in one way or another if this is the basic decision we have taken. It may be the right decision to keep Rolls Royce in the forefront of modern aircraft engine technology. But did the Government Departments really think that, without support for the Spey,
Rolls Royce would, in the words of the Report, have failed
to keep in the forefront of the technical development of aero engines"?
Rolls Royce is one of the world's premier aircraft engine firms. We know that the world's premier aircraft engine firms claim, with justification, that they cannot exist without extensive Government support, particularly of a military kind. But here is a firm, pre-eminent in its sphere, with a turnover in excess of £100 million. Is it seriously contended that a firm of this kind will flounder if it does not receive this support of about £12 million?
Perhaps a more fundamental question arises. This is covered in the Committee's Report in the evidence on the R.B.211. Why do we not support it directly? Why, if we want to keep Rolls Royce in business, do we not say that we want to keep Rolls Royce out on the technological frontiers and, therefore, support development at that point rather than the development of an engine which apparently by common consent—and we are none of us experts—though technologically advanced, is by no means a supersonic engine.
Then we come to perhaps an even more disturbing feature of the Report, the fourth reason, the special equipment needs of the Royal Air Force and the Royal Navy. Here the fundamental point is made that there is a basic incompatibility between United States Air Force equipment and the equipment used by the Royal Air Force and other N.A.T.O. Powers, particularly in their main strategic aircraft. If this is so, why is it so? The evidence at a later stage of the Report is disturbing. It is that when these aircraft operate together strategically and tactically in Europe they have to be controlled by their respective tactical headquarters; they cannot communicate with each other. That is a most remarkable state of affairs between air forces which have been co-operating as allies for between 15 and 20 years.
If these aircraft—and this applies particularly to the British case—are made in the same factory, for the same purpose, to he operated by air forces which know themselves to be allies, and which in all foreseeable contingencies are likely to be allies, should not this be in the forefront of the air staff's attention wherever they can give attention to this, and should not the Government bring the heaviest pressure to bear on all concerned to make sure that the question of compatibility in defence needs comes to the fore in our thinking in the immediate future?
The only point which remains on this Phantom Spey question is that of range. and even that, at the end of the day, after all the evidence is given, remains of marginal advantage.
I have covered one point rather intensively, but it is appropriate that the House should consider this. This is a vast sum of money. It appears on the surface to be a vastly wrong decision, and I hope that the Chief Secretary will comment on it when he winds up the debate.
I apologise to the House for being absent for most of the debate so far. I have been abroad, and, unfortunately, I have spent the last two hours getting from Heathrow to the House.
There are one or two points to which I should like to draw attention, and I apologise again if I go over ground which has been covered by previous speakers.
The first point of interest in the Report arises on the budgetary aid given to Malawi and Gambia. This raises rather a curious, and perhaps unique, problem. in that we are involved in discussing the financial affairs of two independent States. This must be inevitable if, as we are entitled to do, we are to study the administration of aid to other countries, but I think that it raises peculiar problems, and I am not wholly certain that the Committee has taken into account all the problems that this involves.
It is difficult under any circumstances to look very closely at the financial administration in a developing country, where difficulties arise, not from any desire on anybody's part to use funds loosely or carelessly, but very often from a sheer lack of expertise on the part of the civil administration in a country which has been for so long under colonial rule that it has not had time, or the opportunity, to develop the skilled professional men necessary for its own civil administration. Arising from that, it is all the more important that those concerned at this end should study carefully the funds which are being dispersed, and make sure that errors are not committed because of a lack of sufficient supervision.
My view is that whatever the discrepancies which may have occurred in the disbursement of these funds, the arrangement whereby funds which may be saved on budgetary aid can be made available in the form of development loans is important and useful, and will in itself contribute eventually to relieving this country of assisting other countries by means of budgetary aid. It clearly is a much sounder policy for this country to provide funds for the development of the national resources of a developing country than simply to give what amounts to deficiency grants to make up shortfalls on revenue.
I hope that as budgetary aid is tapered off—which is hinted at in the Treasury Minute—this will not mean an effective reduction in the gross amount of aid which may be given to these countries, or indeed to any other countries which are benefiting from aid given by the British taxpayer. I hope, too, that this investigation will not lead to any misguided conclusions about the value of aid as such.
I want to touch briefly on a matter which I think has been thoroughly ventilated in the debate, and that is the question of the Phantom aircraft. I do not want to go into the strategic arguments referred to by the hon. Member for Portsmouth, Langstone (Mr. Ian Lloyd), but I am disturbed to find that the advantages of purchasing off the shelf from another country should, in this case, appear to have been wholly squandered by the demands of the Services for modifications of one kind and another.
The question of the use of the British Rolls-Royce engine is a more difficult and complex one because of the industrial considerations involved, but I am alarmed that the Committee has come to a conclusion such as that mentioned in paragraph 57:
Certain radio equipment was necessary for uniformity and compatibility with other Royal Air Force aircraft, and the navigational attack system, though not essential, was desirable on operational and dollar-saving grounds.
I tried to probe the question of compatability, because it seemed extraordinary that we had to put special electronic equipment into a plane being
used by a major ally, with whom, presumably, we would have to co-operate in military operations in the event of any conflict. It seemed to me that this was something which had not been thought out, or that somehow it was not possible to use these aircraft with the weapons we possessed.
The central point is made very forcefully in paragraph 59, where it says:
The purchases of Phantom aircraft … demonstrate that when off-the-shelf purchases are made, the benefit of reduced costs arising from long production lines can be totally lost if the standard version is substantially modified.
That is clearly relevant to future purchasing policy, because I understand that it is the policy of the Government—and it is a sound one—that in future the purchase of highly-sophisticated weapons such as military aircraft shall be done more and more on a basis of co-operative effort between ourselves and our allies in Western Europe.
If the Services are to be allowed to insist over and over again on their own special specifications, either for electronics or for major items such as engines, the possibility of any kind of economic benefit resulting from inter-country cooperation seems remote. I strongly suspect that the failure of the A.F.V.G. project arose essentially from differences of opinion, or excessive detailed separate requirements, by the different air forces of France and Britain rather than from any inherent weakness in the project itself.
If we are to depend on joint purchasing of military aircraft or any other kind of sophisticated weapons or joint procurement of weapons developed by allies, this insistence on their own special requirements by the Services must be kept strictly under control. It is somewhat absurd to argue that a Power as sophisticated in military techniques as the United States does not install in its aircraft electronic navigational systems which are up to the requirements of the R.A.F.
Paragraph 86 of the Report concerns the use of industrialised building methods and their cost. What concerns me is the number of different industrialised building systems in use by various local authorities. During the course of inquires I got the impression that some contractors were using the taxpayers to carry out experiments in various forms of industrialised building which may or may not be wise and useful.
In one case it appeared that components were being hauled from Scotland to England and, I believe, vice versa. This seemed an extraordinary way of achieving any kind of economy. What worries me is the conclusion which the Committee came to, in which I believe the Ministry concurred,
that there were probably too many industrialised systems in use to secure the advantages of large scale production, but that they were not in a position to dictate a reduction and were largely relying on market forces to achieve this.
I cannot see why the Ministry, through the system of subsidies, should not be able to inform local authorities that it will grant subsidies only for specified types of industrialised building systems. I do not see why subsidies should be paid by the taxpayer to any old system which a contractor may care to put on the market, and which some local authority may feel like trying out. As far as I know, at present almost anyone can persuade a local authority to have a go at an experimental system. Then, if it does not work, the taxpayer foots the bill.
Some of these systems do not work. We had evidence from Scotland of a house where joints were not waterproof, and when it was suggested that for a house to be waterproof was an elementary requirement the answer was, "Too bad. In this system it just did not happen to work out." That is a scandalous waste of the taxpayer's money. It is wrong to expect him to finance all kinds of experimental systems of industrialised building with no apparent limit on their diversity. If I recall the facts correctly, the number of different systems in existence exceeds 100, and apparently no limit is to be placed on any new ones which may come along.
There may be scope for experiments of this nature—although in terms of cost we do not seem to have made much headway—but to experiment wholly at the expense of the taxpayer seems to be going too far. I would have thought that the Ministry could exercise considerable control, through the system of subsidies, in getting a reduction of the multifarious systems and promoting only those which, over a period, have proved themselves to be reasonably effective, efficient and economical.
I also want to comment on what should have been the bulk purchasing arrangements of hospital authorities. Here there seems to have been a lamentable lack of progress. In one case where some progress towards bulk purchase has been achieved, namely, in the range of commercial paints, £100,000 was saved in the first year and yet, apparently, discussions on other matters—beds, nurses' uniforms, lockers, and so on—have been going on for year after year and year and still no bulk contracts have been placed and no standard designs are being approved.
I draw special attention to paragraph 93, which says:
It is particularly unsatisfactory that, five years after the report of the Committee of 1962–63, bulk contracts for textiles, which promised large savings through long production runs, have yet to be placed. Your Committee expects the Health Departments to take more vigorous action to expedite the adoption of standard designs which will not be over-elaborate or expensive to produce and recommend that exercises to secure improvements in design should not be allowed to delay the placing of bulk contracts for current requirements.
I would have thought that this was the most elementary common sense. It would be interesting to know where, along the line in the hospital authority system, the blockage of solid conservatism exists which is preventing its obvious recommendations from being put into effect with more vigour.
One aspect of the purchase of drugs, referred to in the next part of the Report, is disquieting, because it occurs in another field of public purchasing and has arisen in the case of the supply of equipment to the Post Office. I refer to the question of profits made by wholly-owned subsidiary companies of the main suppliers of proprietary preparations. In paragraph 96 reference is made to the fact that when certain figures were produced and investigated by the Ministry's accountants they discovered
that the costs included substantial sums for raw materials supplied by a wholly-owned subsidiary company.
The Minister very properly demanded that the accounts of the subsidiary company should also be investigated. Apparently the firm concerned resisted this proposal for some time, but eventually agreed, and the investigation was made.
I would have thought that it was fairly elementary that the costs of the supply of raw materials to a company which is providing equipment or goods to an important public purchaser were a serious element in the prices paid by the taxpayer for those goods or equipment. But it becomes peculiarly important when the subsidiary is entirely owned by the main supplier, since in this way there is an obvious means of making substantial profits without apparently, the Ministry having an absolute right to investigate the subsidiary at all.
This in itself is unsatisfactory, but it has caused me to refer to it in this debate because I have noticed that the same thing is arising in the case of the supply of telephone equipment and has had an influence on tender prices quoted by firms competing for important contracts for this equipment. This seems to need closer inquiry and better scrutiny.
My final point relates to the siting of the Post Office building at Durham. This is curious and interesting, because it is not dissimilar to the problems of the headquarters of the Metropolitan Police, which were discussed on last year's Report. In both cases, someone fairly high up in the hierarchy seems to have decided that it would be nice to have a particular site and has gone for that site, despite the fact that others were or could have been more economical, and has then produced all kinds of ex post facto reasoning to justify the choice of the central site rather than another which a more thorough investigation might have led them to buy at less cost to the taxpayer.
I wonder whether the degree of control exercised by whoever is responsible over this choice of sites for important Government buildings should not be looked at again. It is difficult to say how one can exercise this control, whether a Department or body not immediately concerned might give an impartial view of a site or choice of sites when expensive and important Government buildings are being put up at a cost to the taxpayer.
Last Session, the Committee scored some notable victories. In the matter of post-costing and agreements on profits of major contracts between Government and industry, a series of investigations which the Committee carried out, and its recom- mendations, have, after a long time, borne fruit in much more satisfactory arrangements for safeguarding the public purse in respect of very large contracts in difficult fields.
I hope that some of my points tonight and those of other hon. Members may also bear fruit and that we shall not have to wait three, four or five years and have to investigate major scandals before some of these things can be put right.
It is my privilege to congratulate my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) and the Committee on an admirable, not to say monumental, series of Reports and evidence. No hon. Member will be surprised to learn that my right hon. Friend missed not a single session of the Committee, nor that he pursued his investigations with his customary vigilance and zest, always tempered with tolerance and courtesy. I should have the agreement of the House, I think, if I said that my right hon. Friend is a distinguished servant of the House and a true House of Commons man.
It must be the mark of a good Chairman that it is possible to find such penetrating and critical Reports on Government expenditure from an all-party Committee, and on such a wide variety of subjects. The Public Accounts Committee is not supposed to concern itself with policy matters, yet it is impossible to read its Reports without noticing how very close is the relationship between administration and policy. If the Committee deliberately falls short of suggesting what policy should be, it nevertheless produces the evidence on so many occasions for how a change of policy should be called for.
It is a short but nevertheless very important step from discussing the need for a different policy in the Public Accounts Committee to discussing in other all-party Committees what these policies should be. Speaking personally, this is a step which I think should and could be made if proper arrangements were made for staffing such Committees, and it lies at the heart of Parliamentary reform.
But we are concerned with evidence and recommendations. They range from boots to Beagles, from the size of married quarter:, to nuclear power stations and from overseas aid to the National Seed Development Organisation. I hope that I shall be forgiven if I do not cover them all, but it is possible to distinguish three different categories among the various Reports. There is the administrative category, the accountancy category and the policy category. Of these, I would class the administrative category, concerning for example the Post Office building at Durham and Army boots, as the most straightforward, although by no means the most unimportant category, but the surplus stocks of boots were partly caused by the development of a new boot as well as by larger feet. I do not think that important considerations of accountancy practice and policy really arise on those matters, and it is to these two categories that I will now turn.
I will take first the Atomic Energy Authority's trading funds and the payment of royalties on nuclear power stations. The Authority claims that the trading fund is operating under financial arrangements resembling those of other industries, and is not subsidised. At the same time, it says that it would not be in accordance with commercial practice or with the practice followed in other countries to add to the capital value a sum specifically reflecting the cost of relevant research and development work——
The closed period is 7.30 to 8.30, but the practice of the House is not to accept a count at this time because it will actually take place four minutes later, and therefore in the closed period.
As I was saying, the Committee was right to question this view. What other industry can operate with such advantage? I suppose that it can be argued that the price at which the steel industry was nationalised did not take into account the research and development costs incurred by the steel companies, but every time a company develops a patent held by N.R.D.C., it certainly, and rightly, pays a royalty. The A.E.A. was given advantages and rightly so, which are not available to ordinary commercial organisations. It was given these advantages partly because we need to develop a new and ultimately cheaper form of electricity, and partly because other countries also give their nuclear industries similar advantages. But there can be no pretence that it operates in the same way as any other commercial undertaking.
The Authority has performed exceedingly well, and has invested surplus funds of £12·85 million. Dr. Hill in his evidence pointed out that the Authority has very heavy capital expenditure projected at Canenhurst, and that its cash resources will have to be used. That is quite true, but it seems to me to be a questionable practice that the largest part of the Authority's funds, some £6·4 million, should have been placed on deposit with local authorities for a period of two to three years. The Treasury should have first call on the money, for it was never the purpose of the A.E.A. to set up as an investment trust. No one will know better than the Chief Secretary what the present cost of borrowing is.
I turn now to the question of royalties on A.G.R. stations. It appears that the total cost of developing the A.G.R. system was some £110 million. There is no prospect that this sum will be recovered until the completion of a further substantial programme after 1975. What is at issue is how much of the advantage quoted of ·03d. in unit costs over the American system should be given to the Generating Board and how much to the authority. The Treasury was called in as umpire and decided that royalties of 014d. per unit, representing £26 million, should be paid over.
This seems a very dubious decision. It is clear that a political decision was made not to recover the expenditure on A.G.R. systems by royalties at this stage but to make sure that the C.E.G.B. contract was gained against the Americans. This is a perfectly proper political decision, but there is no reason to go further and allow the C.E.G.B. the advantage of about £25 million in favour of the electricity consumer rather than the taxpayer, who is already footing so substantial a sum. The point which the Committee makes about the true cost of nuclear power being thus disguised is certainly a fair one, although that is by no means the only fuel that has been subsidised by every kind of means. For example, we have been told this afternoon that the coal industry has had £415 million written off its debt.
I turn now to some examples of policy decisions which have already proved very expensive, and which appear likely to be just as expensive as time passes. I refer, first, to the refit of the Ark Royal at Devonport Dockyard. Some £30 million is being spent for two years' further life for the carrier. It is said that only £7 million would be saved if the Ark Royal were cancelled now, and that overheads account for a large part of the expense. Another reason for the extra expense was making the Ark Royal capable for Phantom aircraft.
But what is the cost of keeping the dockyards open? How far have they been reduced to conform with the present and projected size of the Royal Navy? How is it that the cost of constructing ships in Royal dockyards seem to be so much higher than it is in other yards—in fact, by £1 million for a frigate costing £4·5 million? The Government will have to consider carefully the whole questiton of naval dockyards after the damage they have done by running down the Royal Navy.
Anyone who has followed the history of aircraft purchases over the years, as the Public Accounts Committee has, cannot but be horrified by the quite extraordinary gap between the estimates and the outturn in the cost of these aircraft. For example, it appears that we could have bought almost twice the original number of Phantom aircraft if we had not altered that aircraft to include British equipment and engines, and it is doubtful whether there has been any overall saving in dollar costs at all. It may well be—I am sure that it is—that on strategic as well as on industrial and commercial grounds, in the case of the Spey engine this expenditure is more than justified, but that should have been made clear at the beginning. The Committee is right to castigate the decision made in 1965, which was based on totally unreliable estimates and before the costed technical programme for the engine was received.
If there is one matter about which all hon. Members can be certain it is that however astronomical the estimates for aircraft construction are they will be greatly exceeded when the bill is finally presented. It does not seem to be the kind of forecast which lends itself to careful and conservative estimates, but I am sure that the Government could make matters a good deal easier for themselves if they separated, or tried to separate, original research and development work—which is being carried out largely for strategic and industrial reasons, and where costing is so largely speculative—from aircraft which can be bought off the peg for our defence.
I turn very briefly to the drug prices charged by two firms which have been having protracted negotiations with the Ministry. What is the position now? Does the Minister intend to use his power to fix prices, or does he not?
I come now to what has generally been received as the most important part of the Committee's Report, and which urgently requires a firm statement of Government policy. I refer to the section dealing with false claims to personal reliefs from Income Tax. The facts are not in dispute. Of a sample of 1,000 immigrants from India and Pakistan, from 20 different tax districts, as many as 50 per cent. of claims for dependants abroad have been shown to be false. False certificates have been issued, and genuine certificates have been falsely attested. The Department assesses the loss at between £5 million and £7 million a year for four years up to 1967. We are now almost into 1969, and we have to face the fact that the revenue has lost between £30 million and £40 million in total as a result of these claims. An amnesty has been tried, but only 1,419 cases came forward out of 125,000 Indian and Pakistani immigrants working in this country.
This is a situation that clearly cannot be allowed to continue. What is to be done? The Committee itself was divided as to what its recommendation should be. Some of its members suggested that dependants' allowances should be retricted to dependants resident in this country but, as the hon. Gentleman the Member for West Lothian (Mr. Dalyell) properly pointed out, that would seem to be unfair to West Indian and other immigrants from the Commonwealth who have not made fraudulent claims.
What, then, do the Government propose? Has there been any improvement in the situation since the President of Pakistan warned Pakistani immigrants of the risks they were running? The Chief Secretary must give some indication of the Government's proposals. It may be that the Government will have to consider introducing legislation to ensure that allowances will be given to dependant; abroad only where the Revenue can be satisfied of their existence. Whatever the Government decide to do they must act soon, for delay can do nothing to improve what is an extremely delicate situation.
I conclude by expressing my admiration for the way in which the Chairman and the Committee have carried out their important and onerous task. The House has been well served.
The right hon. Gentleman the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), with his typical courtesy, opened his speech with courteous references to me and to the Treasury, for both of which references I am most grateful. He then went on, and I wish to associate myself with him, to pay his tribute to our most distinguished Comptroller and Auditor-General and to those who serve him in a very large and important Department.
What the right hon. Gentleman did not go on to say, and what he could not go on to say, was that this House, the Government and the nation are served by a body of most distinguished men who form the Public Accounts Committee, hon. and right hon. Gentlemen who have wide experience and are of great ability, and I would also say—and I hope that it will not be misunderstood—men of great earning opportunity, who could have chosen to have devoted their time to ordinary commercial and professional fields instead of devoting day after day and week after week to the honorary service of this House.
What the right hon. Gentleman did not go on to say was the debt which this House, the Government and the nation owes to them. I say it because I feel it very sincerely, having spent a long time in this field—not snooping but being available to look at all possible errors, human errors, errors of decision, errors of avoiding the daylight and being prepared to make a contribution on all these items and therefore to be known to be in the background in a helpful and constructive way and so keeping up a standard in a way which otherwise would not be possible, not only in regard to the items to which they pay attention but to all transactions.
That is the key. The function of an accountant or auditor is not to find out mistakes but to deter mistakes being made by the knowledge that he will come along and may find them. The function of the P.A.C. and the Comptroller and Auditor-General is that. No one can calculate the amount to which the nation is indebted to him because, fortunately, these are savings which never come up for calculation, so I am most grateful to the right hon. Gentleman.
He went on to say that his Committee is of course conducted on a non-party basis—that is the great value of it—and so is this debate. Because of that the matters which are covered are dealt with irrespective of which Administration or which element of investigation is concerned. If I am asked to give the dates, I will give them so far as I am aware of them, but I do not think that that comes into our consideration. The essential point is that the Report of the Committee helps in the administration of the nation's affairs and we should pay the fullest possible attention to it.
Before turning to detailed points I want to take up one point which the right hon. Gentleman made in a general way. He referred to the criticism which, no doubt, has been made about him: certainly it is made about me, I hope every day of the week, that I pay overmuch attention to "candle ends". I hope I shall never conduct myself so that that criticism cannot be made. I justify it in this simple way: I ask anyone who is about to criticise me for paying too much attention to candle ends to bear in mind what this means. The present level of public expenditure is of the order of £16,000 million. I do not know what size a candle end should be, but presumably it could not be less than 1 per cent. of the candle or it would be an unimaginably small proportion. Applied to £16,000 million it is £160 million, or, to put it in a more forceful way, it is equal to 6d. on the standard rate of Income Tax.
Anyone who says, "Will you please not pay so much attention to candle ends", is asking me to do what I would be happy in his individual case to do, to put up his tax by 6d. on the standard rate. That is the effect of paying even 1 per cent. less careful attention to the public expenditure of this country.
I shall inevitably have to detain the House for some little time because I have been asked a great number of questions about this wide and embracing Report. Perhaps I might now go on to the individual items and add something to the information which has been already made available. I ask the House to bear in mind that there is a great deal of information available. There is the Report itself and of course the Treasury Minute indicating the attitude of the Government on most of these items.
The first item which the right hon. Gentleman and many hon. Members have touched upon is the question of tax claims. He and others have pointed out the sensitive nature of this problem. I want to add one or two comments to put the matter in context. Figures have been based on an inquiry into fraudulent tax claims particularly by immigrants from two countries. Nobody, certainly not the right hon. Gentleman with his legal knowledge, would say that it proved more than that there is evidence of fraudulent tax claims in respect of dependant relatives of immigrants from those two countries.
It would be quite wrong to deduce from that that fraudulent tax claims are generally made by immigrants. Because we have no evidence one way or the other, it would be quite wrong to assume—I am sure no one does assume—that all white people are more conscious of their tax responsibilities than are all coloured people. It would be quite wrong to assume, because we have no evidence on the matter at all, that immi- grants from a variety of countries on the continent of Europe, for example, are more conscious of their tax responsibilities or less conscious of them than we are or than other immigrants in this country are. We must deal with the facts before us and the facts before us relate directly to the immigrants from two particular countries.
I wonder if my right hon. Friend has seen the answers to Questions 2783 and 2784. The question was put:
Has in fact any investigation been carried out of any immigrant population, notably those, say, from the West Indies?
The answer was, "Oh yes." Then the question was asked:
Has tax evasion been found to be significant?
and the answer was, "No". This, I think, goes a little further than my right hon. Friend said.
Indeed it goes a little further, although along the same lines. I do not want to particularise but merely to restrict to the knowledge we have and to comments justifiably made in relation to the knowledge we have. The fraudulent claims are substantial. They arise because of a total difference in the countries concerned to responsibilities for tax, a totally different way of levying tax in those countries and a totally different acceptance of responsibility compared with ours and from the lack of details of births, marriages and deaths in the countries in question.
That poses considerable administrative problems. I have been asked, what is the altitude of the Government? The right hon. Gentleman immediately saw that the only answer I could give to that question was to say that I could not answer if it were to be a matter of action being taken, because if so it could only be budgetary action if it were in the field of legislation. If it were in the field of administration, I could of course deal with the matter, but I think the Committee was satisfied, and certainly the Treasury and the Government are satisfied, that we cannot deal with this matter by administration alone. Therefore it is a matter for the Chancellor of the Exchequer to deal with or not to deal with when he introduces his next Budget. It is not possible for me to say more on that topic at this stage. I hope I have made clear that everyone recognises the alternatives of administration or legislation arid that dealing with the problem administratively would not be capable of leading to a satisfactory solution. One is therefore driven to legislation, and a Finance Minister is driven to say nothing.
Turning to the second matter which has drawn a great deal of attention, our old friend——
The hon. Gentleman has keen ears, and keen intellect, and is familiar to me, if I may say so. He heard me say exactly what I said, and he does not expect me to add to it. He heard me say that a Finance Minister is therefore compelled to say nothing. The answer which the hon. Member for Horshatn (Mr. Hordern) can repeat as much as he likes is "The Chief Secretary came to the Box and said, 'The answer is nothing'."
No. I did not say that all the resources of the Government had been exhausted. If one put every single Inland Revenue employee on to this, one could produce greater results than are produced at the moment, but it is not wise to do so, and it is not the intention of the Government to do so. What I hope I indicated is that we are satisfied, and the Committee is satisfied, that this problem will not be solved by administrative means alone. Therefore one has to turn to other means, if it is to be solved by legislation.
I was turning to our old friend, the army boot, about which, as indeed about every other matter, I am fully briefed. I think I am right in saying that Army boots were the only matter with which I did not go wholly as to the facts with the right hon. Member for Kingston-upon-Thames. When the new boot was adopted there were no more purchases of the old boots, except for specific and immediate use of the old boots. The bulk purchase of the old boot was in 1956, before the decision to use the new boot. Since then 18,000 pairs were subsequently purchased—in 1960—but they were purchased for the Guards and Territorials, who were in any event continuing to use them for particular reasons.
We are left with the situation that the stock had been built up some time ago and, owing to the change of boot and the reducing numbers of those who would use the boot, the stocks were not run down as fast as they might otherwise have been. I certainly accept the view of the Committee that attention was not given to running down of stocks as early as it might have been. That is now taking place, and while I accept the view of the Committee that it should have received attention earlier, it does not necessarily follow that there has been a loss, or any substantial loss, of public funds.
The stocks are now being run down at a not unsatisfactory price. When the Chief Secretary says "a not unsatisfactory price" he means a not unsatisfactory price. The simplest way of conveying this to the House is to say that the break-even price would be 5s. per pair. That is, so long as one can get 5s. a pair for the old boot, it is better to continue buying the new boot, because the new hoot is cheaper to buy and to use than the old boot, as well as being more comfortable and serviceable and so on. If one is getting more than 5s. per pair one is, at the end of the day, better off than one would have been in continuing to use the old boot. The first 140.000 pairs have been sold at an average price of 21s. 7d. That is turning out reasonably satisfactory.
The next thing that I was asked about was the sale of land at Woolwich to the G.L.C. The criticism made there was not that there was a loss of public funds, but that there was inadequate clarity in the arrangements, and that there was no firm agreement between the parties. The Committee specified the ways in which it considered that public funds were put at risk by the absence of a firm agreement in this case. I accept that there was not as firm an agreement as there should have been. It is a long story, broadly of co-operation between two large public bodies, the Ministry of Defence on the one hand, and the L.C.C., later the G.L.C., on the other.
I want to make it clear that, although I entirely accept the view that there should be clarity of arrangement and firm agreements, both as to the date at which the land should be handed over, the price to be paid and interest provisions and so on, those criteria should not preclude a Government from meeting local authorities and similar responsible bodies part of the way. One does not necessarily need to state any particular concession one has in mind, but one would want to co-operate in a way which is rather different from a sale between two private individuals of a parcel of land.
The next thing that I was asked to deal with by many hon. Members was the question of the purchase of United States aircraft and equipment. I do not suppose that we shall ever be free entirely of difficulty and anxiety when we are dealing with acquiring aircraft of the latest capacity and design. We are dealing with something which is, I think the phrase is, on the frontiers of knowledge. Certainly, as far as correct and accurate estimating goes, we are dealing with something about which, by its nature, one cannot be too accurate in one's estimates one cannot foresee precisely what will happen because, ex hypothesi, one is in new territory.
This was a case where we were in some difficulty. I owe it to the House to go into this in some detail, because it has obviously been causing a great deal of anxiety to several hon. Members. I refer now to the dates merely to place the matter in perspective. These naval Phantoms were ordered in the early part of 1964. At that time, the intention was to build a new carrier. There was a change of Government and a change of plan. The overall situation resulting from that change of plan, and the decision to phase out the carriers was referred to by my right hon. Friend the Secretary of State for Defence in the defence debate as long ago as March, 1966, when estimating the net saving from the phasing-out, he said:
So the net saving over the next 10 years is about £500 million … "[OFFICIAL REPORT, 7th March, 1966; Vol. 725, c 1793.]
I merely wanted to give that to show the background to this, assuming that hon. and right hon. Gentlemen accept that fact, as I do. I do not want to argue that.
It follows from that that these other matters have to be considered. In February, 1965, the decision was taken to purchase the R.A.F. version of the aircraft. The reason it had to be taken, and taken fairly swiftly, was that it was understood that arrangements had to be completed by the end of June, 1965, in order to catch the United States production line. That line would have phased out had we not made our decision by that date. There would otherwise have been delay, calculated to have been at least a year, which would have been quite unacceptable on military grounds.
For both versions therefore, the best estimates that could be made at the time had to be used and in the highly complex nature of the programme of the aircraft, these turned out to be too low. Certainly, they were too low. Certainly, it is right to add this. Whatever estimate one has in any circumstances for any kind of modern aircraft, guided weapon or the like using the latest technology, one can multiply by 2 or by 3, as one fancies, to come nearer to the actual ultimate cost. That seems to be the history of the matter. However, if one is responsibly considering at the time what an estimate should he, so long as one goes into the estimate with the greatest care, so long as the manufacturer makes allowances for contingencies, and so long as the Government add further allowances for contingencies—all of which was done—one should be able to rely reasonably on the outcome of that consideration.
The argument then always comes, "But it is bound to be more than that". One's reply is that fullest allowance for all contingencies has been made. If one did not do that, there would be no point in having estimates at all. But, as the machine moves more and more towards its final shape, more development is needed of one kind or another, and more cost is incurred.
Part of the essence of the argument was not that this was on the frontiers of knowledge, not that something of an unknown quantity was being purchased. This was an aircraft which in the United States version had been in production for five years. The costs should have been definitely known.
The application of that argument to this machine provides one of the reasons, which I explained a few moments ago, why it was necessary to make a decision quickly, as it were, because one was then buying a machine on the production line. I was going on to point out, however, that there then developed a need to modify the aircraft so theft British equipment could be incorporated.
The reasons for incorporating the British equipment were three. First, the equipment was operationally necessary. Second, the installation of British equipment would be of assistance to United Kingdom industry. Third, it would cost sterling and save dollars. For all those reasons, it was thought right to do what one knew would inevitably entail some adjustment to the airframe and some difficulty in the smooth flow of production. This inevitably happens when one wants a change of that kind in the production line. Estimates were made of this factor at the time. Unfortunately, those estimates were exceeded.
I do not say that we were unwise to do what we did. The reasons were valid reasons, and, had we known at the time what the costs would ultimately be, I do not say that we should have altered our plans. It was essential for operational reasons that we adopt the British equipment. It was a major argument that we should be spending sterling instead of dollars.
With the advantage of hindsight, it is, I think, impossible to blame the authorities in this matter, and I do not blame the Government or any of the participants. But may we have an assurance that both the Committee's conclusions and the evidence in this affair will be studied by those in my right hon. Friend's Department who are concerned with a possible Anglo-German variable geometry aircraft?
My hon. Friend can have the assurance that this is a lesson which has been learned. But it is not a new lesson. It really confirms what everyone in the field would know, that an attempt to add to or to vary a complicated item of production during the course of production is bound to lead to difficulty and considerable additional cost much greater than that of the unit items concerned. One has to take that into account, and in other matters one has to take into account also, where one is dealing with consortia—I think that this is what my hon. Friend has in mind—or Governments jointly responsible for production, the complexities which stem from that as opposed to straightforward single-firm production.
I hope that I have put that matter in context and explained the reasons why the decisions were taken.
Will the right hon. Gentleman kindly deal with the point made explicitly in our Report, that the decision to install the Spey engine was taken on the basis of estimates which, apart from all the allowances, were wildly out? What steps have been taken to prevent Ministers being put in that position in the future?
I shall gladly go over the ground again for the right hon. Gentleman. The estimates were carefully considered. The estimates were wildly out. Both statements are correct. The right hon. Gentleman then asks how one protects a Government or the taxpayer against this sort of thing in the future.
I find this extremely difficult. As I have said, if I were asked, as a very unbelieving, rather tough accountant type, I should simply say, "Multiply the best estimate by 3". Go into it with the greatest possible care, but, having done that, and having applied the best possible present knowledge, take into account the likelihood that three times will be as near to the answer as one can get. But that is based on hunch—nothing more than that. It is based on some experience, but based on hunch it finally is.
The other point of view is to say that one should take an estimate prepared by the best brains and with the greatest knowledge available, with every intention of covering the cost and providing for a reasonable profit, so that there is a bias towards a higher rather than a lower price in that sense. The manufacturer or designer says that he has made full provision, in view of everything that has gone on in the past, and by way of contingency for everything likely to happen he has added X per cent. Then, because he knows that he cannot foresee the future, he adds something beyond that, which we call Y per cent. Then the Government Department concerned says, "We have been through all this before. We shall take that figure of cost plus X plus Y per cent., and we shall add Z per cent.".
How can one say that that is wrong? I only say, speaking for myself and not putting responsibility on anyone else, that I think that it would be right, looking ahead five, six or seven years, to take that figure and multiply it by 3. But one cannot justify that except from previous experience. Why it should be so I do not know. All one can say is that foresight and hindsight differ by a factor of 3.
Perhaps the reason may not be quite so inexplicable after all. A manufacturer has an interest in putting forward a comparatively low estimate so as to secure the contract. The Rolls-Royce estimate for the Spey engine, which was in no sense a technological novelty, was £110,000. The Ministry added £20,000. That is my right hon. Friend's X plus Y plus Z factor. Yet the final cost was £154,000, an escalation of 40 per cent. over the best estimate of the firm which, presumably, was the specialist in that field. Does my right hon. Friend consider that there is a curious consistency in that we always multiply by 3 and never divide by 3?
I do not quite follow the last sentence.
As regards the earlier sentences, it is proper to approach these matters with care, caution and, if one likes, an element of suspicion. But I am sure that no one would deceive my hon. Friend, for example, if he had the fullest opportunity to examine the estimates which were put before him and the fullest opportunity to examine the people who were presenting them. He should not, therefore, assume that others having the same facilities are likely to be deceived. Moreover, he should not assume that Rolls-Royce has the slightest desire to deceive anyone. I have had many dealings with Rolls-Royce, and—I ought to say this—I find that company a perfectly straightforward one with which to deal. The answers one gets at the top level at Rolls-Royce are honestly given, and intended to give the whole truth.
Therefore, the matter is not quite so simple as saying' that there is a natural interest to get an order at any price. and that once a firm is in it can charge whatever it likes, that it can charge the moon. That is a simpliste view, if I may be forgiven for saying that to a most sophisticated man like my hon. Friend. There is no complete answer. It is true, as the right hon. Member for Kingston-upon-Thames said, that the estimate escalated beyond expectation. It is equally true that care was taken in studying the estimate, although I have made it clear that there was not all the time in the world, because delay then would inevitably have meant increasing prices, and it would have been an unacceptable delay on defence grounds.
I now turn to the question of married quarters. The right hon. Gentleman, or one of his hon. Friends, was careful to distinguish between those cases where the Treasury were happy and those where it was not without disclosing any secrets. I repeat how grateful the Government feel from time to time towards the Public Accounts Committee for its views. I am happy to say that on this occasion the practice is being changed. As the official reply indicates, the Government accept the principle that family size as well as the officer's rank should be taken into account in providing and allocating officers' married quarters. Building programmes are being modified and a review is taking place of the need, bearing in mind that there is a variety of needs to meet and a variety of existing quarters available. Certain married quarters which are in an early design stage have been suspended until the whole matter is satisfactorily cleared up. I think that the answer I can give to the right hon. Gentleman is that we are moving in what he and I and, I am sure, the whole House, would call the right direction.
The right hon. Gentleman's Committee seriously criticised the Department of Education in Scotland. The basis of the criticism was that the Department had decided to disregard the rules clearly laid down, what one might call Treasury control, and to make in advance of architects' certificates quarterly payments towards certain institutions which were having approved schools built for them. In that that was a departure from a clear rule intended to safeguard public funds, I am bound to accept the criticism. One of my hon. Friends suggested that the criticism was too severe, but I think that the severity is justified in that sense. But I must add, because I want to put the matter in context, that the Committee did not say—and I am making it clear—that the loss of public funds was, if anything, tiny. At the most, it was the loss of interest on funds which should have been invested and were not invested, or not invested as well as they might have been. Some was on deposit account instead of being invested and earning a higher rate of interest. It is difficult to make a calculation, but I should have thought that it was not more than £2,000 in total. As the capital sum involved was about £100,000, it would be that sort of figure.
That may be true, but what the right hon. Gentleman is concerned about, and what I am concerned about in supporting him and the Committee, is keeping the standards and discipline, without the observance of which trouble will arise. It is impossible for any Minister to accept responsibility for £16,000 million-worth of expenditure unless he knows that all the methods of checking are functioning, and functioning well, and unless he can rely on the right hon. Gentleman and hon. Members and on the Comptroller and Auditor-General and so on having their eyes very wide open. I say that without any suspicion towards anybody, because there is no justification for it. I say it with the knowledge that the kind of difficulties that came to light here compare immensely favourably with the whole of my experience in commercial life.
A commercial firm does not have the full glare of publicity on all its activities, and therefore, if one is not careful and makes comparisons, one begins to think that it is only in Government expenditure that such difficulties arise. On the contrary, they are human errors which arise throughout money and financial transactions. My experience from years on the commercial side is that in Government there is, as there should be and as one would expect and pays to achieve, in terms of the huge Department serving us in this respect, less difficulty than in commerce.
With respect to my hon. Friend the Member 'or West Lothian (Mr. Dalyell), who I think mentioned the point, I am grateful to the right hon. Gentleman and his Committee for the attitude they take on such matters. All the prepayments have now been fully used. The loss of public funds is negligible. But it is a wise lesson for us to learn.
Yes indeed. I am grateful to my hon. Friend for asking me that.
I should detain the House too long if I went through every item that was raised, so I will pick out the major ones, and if the House is not satisfied I shall give way to any hon. Member who wants me to deal with a further point. I propose to come to the problems of the Forestry Commission and the Forth Bridge.
There are two sides to the Forestry Commission problem: first, the question of accounting and, second, the question of wise alternative use of resources. I think that the accounts before the Committee were the first drawn on the new basis by the Forestry Commission. Beyond making a profit and carrying out its normal function, it has a number of social responsibilities, which are not separately accounted for and are not separately shown. If they could be separately measured and extracted from the rest of the accounts, which would not be an easy task, there would remain in the accounts the figures relevant to the normal commercial work of the Commission. The House would then be in a better position to judge whether that commercial activity was being carried on with full efficiency.
The new grants highlight the effect of the mixture of objectives underlying the Commission's policy, and the Government are considering, as the Committee suggested, whether the social benefits of the non-commercial activities of the Commission justify the additional expenditure which is incurred on their account, although I repeat that it is not possible to quantify it with complete precision. I hope that this will satisfy the House and the Committee that we have taken their views carefully into account.
It is true that the target rate for use of capital is a return of 5 per cent. normally and in development areas a return of 2 per cent., showing a 3 per cent. preference in favour of development areas. That is part of Government policy in assisting development areas. It is a major policy which we cannot debate now but I do not want to hide the distinction from the House. It is one we think it right to make.
I turn now to the difficult matter in which a number of my hon. Friends have been particularly interested. This is the question of the tolls on the Forth Bridge. First, we must get clear why the tolls are charged in this case. Some of my hon. Friends think that tolls should not be charged at all. A clear philosophy has been established. Tolls are charged where no crossing—I am talking of bridges and tunnels—previously existed, where the cost of the structure is very expensive and where the vast majority of travellers and goods vehicles find sufficient saving of time and money to make use of the new crossing preferable to an alternative route.
They are justifiable criteria. They have been applied throughout. I do not think that there is any substantial inconsistency. Nor do I think that there is any inconsistency in the calculation of the tolls, although I admit that, in the calculation of tolls and Government assistance, an element of consideration of the merits of each case has entered into the matter.
I was asked about the cost of collecting the tolls for this bridge. It is just under 6 per cent. and, with the new rate of tolls, will be 4¼ per cent. The cost of collecting the Selective Employment Tax is about one-third of 1 per cent. As the House is aware, but does not always make clear to the outside world, the S.E.T. is the cheapest tax to collect of any revenue tax. It is about one-quarter or one-fifth as expensive to collect as all the other taxes we regularly collect.
Even so, it is clear that the cost of collecting tolls is immeasurably more expensive. But that does not mean that it is not worth while collecting them, or that the collecting of sums of money of that order is too expensive. My hon. Friend the Member for West Lothian is looking anxious. I point out to him that, if one is collecting comparatively small sums of money—small as compared with S.E.T. and taxes generally—the cost is likely to be a higher percentage than in the collection of a large sum.
That is an interesting fact, but that is about all we can say about it.
I repeat, I am not to be deterred from collecting money because it would cost me 4¼ per cent. to do so. I hold a broad view on these matters and keep both hands open. No money has been wasted in the collection. The erection of the bridge was justified on the basis that there would be tolls to cover the cost. New rates are to come into force which will cover the cost—that is, they will service the loan in the usual way—and the general arrangements, including, in this case, a substantial Government contribution, are such as to make it fair and equitable as between this and other bridges. So long as users are prepared to pay the toll, and go that way rather than another, that is a sensible exercise of freedom on the part of travellers in deciding what it is worth-while for them to do.
There is no proposal in the P.A.C. Report criticising the writing off of large sums in connection with certain large groups, such as that which my hon. Friend has referred to, so that is not a consideration here.
My hon. Friend asks me why we should not write off the capital for the Forth Bridge instead of charging for its use. The bridge was built on the basis that the users would pay for it. The users are prepared to pay for it and, as long as that is the case, I cannot recommend to the House that revenue of this kind should be forgone when there are so many useful purposes to which revenue can be put. I would otherwise be faced with a loss of X millions of pounds needed for the social services and a host of other things, and, so long as the road users are happy to save time and avoid inconvenience by paying for it, I, too, am content.
I think that I have more than taken up the patience of the House in covering the various items. And I have said, the Treasury has given its views on a number of matters. The Committee is fully aware of them and it would not be right for me, therefore, to go into all of them in great detail.
I have little to add there to what is already in the answer given by the Treasury, but I will be happy to give a reply to the hon. Gentleman if I can find it. I am sorry. It escapes my attention at the moment. I hope that the hon. Gentleman will forgive me. I can talk to him about any other of about 29 items if he cares to ask me about them and I am sure that, the moment I sit down, the item about the Atomic Energy Authority will stand out in large print—an experience all of us undergo.
The earlier work and Report of the Committee in relation to excess profits and the question of post-costing, and so on, has been referred to. I want to finish on a constructive and hopeful note. We took full note of the views of the Committee in these respects. As the House knows, we, and I in particular, have been anxious to come to arrangements as between the Government as buyer and industry a s seller on a basis which would prevent, as far as humanly possible, that kind of situation from ever arising again. It seems to me that this was the sensible way to deal with the issue. It has taken time for agreements to be reached voluntarily but they have been reached voluntarily, and the situation is now a happy one—I hope that it will continue to be happy—and for that we are much indebted to the work of the Public Accounts Committee.