I was on my way up. No doubt, Mr. Deputy Speaker, your acute eye detected that.
This is the first such debate to which I have contributed. I wish to refer to the first report from the PAC in Session 1978–79 dealing with housing associations and the Housing Corporation. My interest is in the efficiency of the Housing Corporation and of the many associations which receive grants from it. I was particularly interested to note in the Committee's report that the 1977–78 accounts show a deficit for the year of £6 million, and an accumulated deficit of £7·7 million.
The Committee's conclusions are set out in paragraph 21, part of which is of particular interest. The final sentence of that paragraph states that the contribution made by the Housing Corporation
has resulted in the rapid growth of new housing associations run by voluntary committees with varying degrees of competence and financial expertise.
I wish to speak about the competence and financial expertise of housing associations. I make it clear that I make my remarks on the basis of information provided by a number of sources which I believe to be substantially correct.
My interest is in the allocation of funds to housing associations, which appear to have been made by the Housing Corporation without regard to the record or financial performance of the associations. For example, I am told that grants were made to the Utopian housing association, which is referred to in the Housing Corporation's recent report. That association had a negligible performance record when it was given funds by the corporation to build 334 houses in Farnborough, Kent, 700 units in Southend and 340 units on the Bayswater Road cemetery site.
If my information is correct, as I believe it to be, that seems a somewhat remarkable decision. One cannot help but wonder what information was available to the Housing Corporation which led it to conclude that the association had the necessary degree of competence and financial expertise for such large projects. Perhaps my hon. Friend the Financial Secretary will give some indication of the criteria that are adopted by the Housing Corporation when considering suitability for grant-aid. I should also like to know whether the Public Accounts Committee considered that aspect during its investigations.
Another example that has been drawn to my attention concerns the Community housing association. Apparently it was given a large allocation, out of proportion to its previous limited experience. The allocation included funds for a block of 120 flats in Candover Street, London, W.1. The association had not previously operated in that area. Tenants were not notified of the purchase, and no discussion took place. I understand that only one flat was vacant.
As hon. Members know, the Housing Corporation has a policy that no more than 50 per cent. of acquisitions should be tenanted. Obviously, that policy is based on the necessity to rehouse tenants in available rehabilitated units. Inevitably, the Community housing association could not make proper progress, as it had not had adequate consultations with the tenants beforehand and as the units were not available. For each day that the scheme is delayed, the taxpayer will be saddled with added expense, in addition to interest charges. The chairman of the Public Accounts Committee and his colleagues will naturally be concerned about such activities.
Some highly undesirable rumours are circulating, which I shall mention as discreetly as possible. It is said that grants are sometimes given to housing associations as a result of a close relationship with an official or other person within the Housing Corporation. I hope that that is not so. I hope also that the Public Accounts Committee will always satisfy itself that there are adequate safeguards and that public money is being spent properly.
The Auriol housing foundation operates very satisfactorily in my constituency. It has a long and satisfactory performance record. I am happy to say that as a result of its splendid work many of my constituents—who would not have been housed by the local authority, for one reason or another—have been housed quickly and decently. They now have good accommodation in which they live as happy families. The foundation has made a significant and important contribution to the housing needs of the London borough of Hillingdon and elsewhere.
The foundation operated at over 300 units a year in 1975–76. In 1976–77 the corporation reduced its allocation to 155 units a year. That figure was subsequently reduced to 108 units a year. Finally, it was reduced to 80 units. The Auriol housing foundation had planned to convert 300 or more units, but it found that it had been allocated funds for only 80 units. That is a sad contrast to the two previous examples. I began to question the way in which the Housing Corporation operated. I wrote to my hon. Friend the Minister for Housing and Construction, and he knows my views.
As Member of Parliament for Uxbridge, I am deeply concerned that the Housing Corporation may be holding up the Auriol housing foundation's excellent work. It may be depriving my constituents of good homes. The House cannot fail to be uneasy. My representations to the Minister on behalf of the Auriol housing foundation, and other questions put directly to the corporation, apparently remain unanswered. It seems that there has been a substantial deterioration in the relationship between the corporation and this association.
In pursuit of its aims, the corporation apparently made an inter-association comparison. It considered the many different indices of performance. I am told that the comparison was done properly. It was also written up well. However, I am dissatisfied, because nothing has happened as a result of that study. I believe that a committee should have been appointed to recommend future dealings with housing associations on the basis of the evidence. Although this action was agreed at the outset, no committee has been appointed. Not only has no action been taken as a result of the study, but the decisions that have been made fly in the face of the corporation's evidence.
Only three associations have been run effectively enough to fulfil their commitments and operate with a surplus. All the other associations have shown a deficit. However, greater funds have been allocated to one of the less efficient associations. That should be of concern not only to the House and those interested in housing but to the Public Accounts Committee.
As a result of reading the report of the Public Accounts Committee, I am concerned, first, that funds appear to have been allocated without proper regard to the track record or financial performance of individual associations. Secondly, funds appear to be inadequately monitored. I am not aware that the Housing Corporation keeps a record of the number of unconverted properties owned by each association. If such information is not available, it should be. Thirdly, I am worried because the corporation uses funds to enable an association to contract to purchase large property holdings and to turn the contracts at a higher figure to other associations. Fourthly, the Housing Corporation has apparently failed to act on its 1977 inter-association comparison. That comparison revealed that some associations lost hundreds of thousands of pounds annually, while others, carrying out a similar activity, made surpluses.
The study highlighted enormous differences in productivity. There is a certain degree of dissatisfaction among those in the housing association movement about the way in which the corporation operates. It is slow and perhaps administratively inefficient when required to deal rapidly with correspondence.
Although the level of scheme approvals has been reduced, I am advised that the number of staff at the Housing Corporation has almost doubled in the past two years. If that is correct, it should be a cause for concern. I understand that in June 1978 the Public Accounts Committee received an assurance that the Housing Corporation had adequate numbers of staff.
The Public Accounts Committee has done a great service by reporting on the many matters that it has investigated. However, I should be interested to know whether the points that I have mentioned have been considered in any detail.
I personally wish the Housing Corporation success. I want to see it operate efficiently, and I want to see the associations which work with it operating well, because that is essential if we are to make a substantial contribution towards solving London's housing problems. I thought it right to mention that there is considerable uneasiness among the housing associations about some of the problems to which I have referred. I hope that the PAC will bear those in mind when it looks at the work of the corporation on the next occasion.
It is always interesting and enlightening to listen to the contributions of the right hon. Member for Heywood and Royton (Mr. Barnett) in these debates. He was somewhat over-modest in denying himself the right to s somewhat over-modest in denying himself the right to make observations on the situation in Northern Ireland. Indeed, on any future occasion, we would welcome his observations on public expenditure in Northern Ireland.
It will be noted that these debates are in a sense out of phase, because the three documents which are relevant to Northern Ireland relate to 1977–78, and are derived from the Comptroller and Auditor General's report of that year. One accepts that we had the slightly important matter of the intervening general election. Therefore, one is not being over-critical of the PAC. Far from it. I should simply like to make two brief points at this stage. First, the ideal situation would be to look at the PAC report in the financial year following the year with which the Committee dealt. Secondly, it would also be helpful to Northern Ireland Members if the PAC's report was based upon the 1978–79 Comptroller and Auditor General's report, perhaps in time for the appropriation order debate in July.
However, I should like to concentrate on matters relating to the Northern Ireland Housing Executive. Of course, other matters arise in the report, but I want to limit myself to this aspect, which is of grave importance. Perhaps we can leave the other matters to another time.
On page 29 of the second report, there is an examination of the accounts of the Northern Ireland Housing Executive for 1976–77. There, Mr. Bloomfield and Mr. Brett—Mr. Brett is chairman of the Northern Ireland Housing Executive—accepted that serious criticisms were made two years previously. When they appeared before the PAC, they said that they took those cricitisms very seriously. One of those criticisms related to the appalling extent or rent arrears in respect of the Housing Executive. That concern was expressed in the answer to question 1699 on page 31 of the report. The question was:
That is good news, but at the same time, the actual rent arrears are going up by 20 per cent. They have gone up from £5·5 million to £6·5 million. Can you tell me, as you have already mentioned that the current year's figures for income and expenditure are known to you, how that figure has moved during the year?
Mr. Brett replied:
I can tell you that the rent arrears figure, expressed as an absolute, has continued to rise, but I am happy to be able to tell you that the rent arrears figure, expressed as a percentage of the sums recoverable, has been falling steadily.
In order to put that complaint about rent arrears into perspective, I should like to take the House through the relevant figures. In 1975–76, rent arrears amounted to £5½ million, as can be discovered from the report. In 1976–77, they reached £6½ million. In 1977–78, they amounted to £8½ million. In 1978–79, the figure was £9½ million, and in 1979–80, it reached a record of £10½ million. That is a deplorable record, and the House should be concerned to examine it carefully.
That increase to £10½ million has occurred in spite of the fact that there are rent and rate rebates, which to an extent have been publicised, and in spite of the fact that action is now being taken through what are locally called " benefit allocation branch orders" to reap in some of those arrears. Yet the present level of arrears is £10½ million. It is quite unacceptable for Mr. Brett to say that the percentage of recoverable money is falling.
That is to be expected, because all the time the Housing Executive is embracing more and more houses. Each year, it assumes responsibility for more and more homes, which it rehabilitates and rents out. It also builds more homes each year. Therefore, the percentage figure is bound to fall in terms of the overall recoverable sum. Yet these statistics speak for themselves. Total arrears have increased from £5½ million in 1975–76 to £10½ million now.
There are three concerns which my constitutents and many people in Northern Ireland entertain. First, in view of those figures, they wonder whether the loyal rent and ratepayers, if I can so term them, are in a sense paying for the debtors. Are they being penalised because they are prepared to abide by the law? I hope that we can be assured that that is not the case. If it is, there will be a greater incentive to those who are paying their lawful debts to discontinue doing so. I hope that we can be reassured on that point.
The second concern is whether the recovery process is being fully utilised. I accept that the Secretary of State for Northern Ireland said recently—we welcomed the statement greatly—that there were now the possibility and facility of deducting up to 95p for each area of debt owed in Northern Ireland from all kinds of longer-term benefits. I hope that there will also be the possibility of arranging for the supplementary benefits branch to pay, indirectly, current rent amounts in respect of those who are in arrears, because that is not the situation at present. While we welcome that, we still have to ask whether the recovery process is being fully utilised.
We must make it clear to the Housing Executive that even if good tenants are not being penalised in respect of the debts, and even if recovery takes place over a long period, at the end of the day the United Kingdom must meet the bill for the interest charges on this rent arrears amount of £10½ million. It is unfair that the taxpayers in the whole of the United Kingdom—not simply Northern Ireland—should be levied with this sort of interest charge.
Lest some people feel that I am indulging in my pet pursuit of knocking the Housing Executive, I shall give a comparison. In the Birmingham area, for instance, which has control of about 155,000 dwellings, rent arrears for the year 1977–78 amounted to £2¾ million, compared with £8½ million in Northern Ireland. In the year 1978–79, rent arrears in Birmingham amounted to £1½ million, compared with £9½ million in Northern Ireland. In 1979–80, rent arrears amounted to £1 million in Birmingham, compared with £10½ million in Northern Ireland. Surely there is a lesson to be learnt somewhere.
We urge seriously that the Northern Ireland Housing Executive should be taken to task for allowing this situation to develop and for allowing this sort of liability to devolve on the people of the whole of the United Kingdom.
This is not a wholesale indictment of tenants in the public sector in Northern Ireland. Happily, there are many thousands of public sector tenants who meet their commitments without delay, and without hesitation. We are dealing with a legacy of the rent and rates strike initi- ated by the Social and Democratic Labour Party in Northern Ireland. At the beginning of the decade, Mr Austin Currie said in the then Northern Ireland Parliament " The Revolution is on." All his friends joined him to state clearly to the people whom they purported to represent that no rents and rates should be paid. As is the case in most revolutions, the last date is much worse than the first. The SDLP, through its irresponsibility, has left a dreadful legacy of misery, uncertainty, and in some cases guilt—because there are some good tenants amongst the minority community. That party has been responsible for much of the debt.
In the Divis Street flats area—a complex of about 400 homes—the current debt is £338,000. I am sure that the reason for that debt is that many of the people concerned listened to the irresponsible words of members of the SDLP when they told them not to pay rent and rates. That is the way in which to perpetuate civil disorder. I repeat that this is not an indictment of the majority of tenants in Northern Ireland.
Bearing in mind that only a small section of the community owes money, we have to ask whether the recovery process is as successful and speedy as it might be. At present, the law is such that payments cannot be made direct from supplementary benefit to a housing authority. I ask the Minister of State for Northern Ireland—who has kindly joined us for the debate at short notice, for which we are grateful to him—to convey to the Secretary of State for Northern Ireland that it is the official Unionist Party's view that we need to be able to pay supplementary benefits for housing direct into a housing authority such as the Northern Ireland Housing Executive. That is essential, and the facility should be introduced in the near future.
I turn to another facet of the poor stewardship of the Northern Ireland Housing Executive. There is an acute problem of overstaffing—mainly in central administration. I shall illustrate that again by a comparison with the Birmingham housing authority. The Birmingham housing authority has responsibility for administering 155,000 dwellings, and it has non-manual staff of 1,622. The Northern Ireland Housing Executive has responsibility for 194,000 dwellings and has staff of 2,500. If a comparison were made on a pro-rata basis in respect of the number of homes for which each administration had responsibility, it would show that the Northern Ireland Housing Executive should have 2,000 staff, rather than 2,500. Most of the excess number of 500 can be traced to the central hierarchy. The Northern Ireland Housing Executive should be brought into line with the Birmingham housing authority in terms of staff numbers. That would save £2½ million a year.
Those 500 people could quickly be reemployed to look after the administration of homes that could be built with the £2½ million saved. However, I do not believe that the Government will immediately order the sacking of those 500 people, so I shall make a suggestion to the House about how we should use them. Northern Ireland has a rent arrears level of £10½ million. Why do we not use some of the excess staff to recover that amount? All that has been recovered so far is £300,000—a paltry sum in comparison to the total. If we used some of the 500 excess staff to recover the debt, it would justify their existence and enable the Northern Ireland Housing Executive to build more homes.
If other housing authorities throughout the United Kingdom realised the seriousness of the problem, there would be much disconcertment. Therefore, we should be careful not to allow the Housing Executive to permit this arrears debt of £10½ million to increase still further. It is incumbent upon this House to undertake, if possible, a sort of censure action against the Housing Executive, stating that it has broken the commitments that it gave at hearings two years ago. No commitment that was made then has been honoured, and that is deplorable. I suggest that an investigation be initiated immediately to ensure that the Housing Executive does not add to this deplorable level of rent arrears.
I am grateful to you, Mr. Speaker, for allowing me to intervene briefly to try to respond to some of the important points made by the hon. Member for Belfast, South (Mr. Bradford) about the arrears of rents owed to the Housing Executive in Northern Ireland.
This is a matter of grave concern to the Government, not only in so far as it relates to rent arrears, but because the entire area of public debt in Northern Ireland has reached unacceptable proportions. As the hon. Gentleman indicated, there is a political history to this matter. No doubt part of the large amounts now owing are due to the politically motivated strike, when people were urged not to pay their public debts. But that block of money has been owing for some considerable time. It has not been written off. Measures are taken constantly to seek to recover those moneys wherever possible.
The information that I have on the present figures is slightly at variance with the figures given by the hon. Gentleman. At 31 March this year, the gross arrears for rents amounted to £9·9 million, compared with £8·7 million at 31 March 1979. Those figures vary slightly from those mentioned by the hon. Gentleman, who referred to a current figure of about £10½ million. That is not the figure that I have.
I take the hon. Gentleman's point. I was referring to the gross arrears, with which we are principally concerned.
The hon. Gentleman talked about the growth of the rent arrears and criticised the suggestion that the percentage of arrears had not gone up, whereas the totality had. He must bear in mind that the collectable rental income has grown much faster in recent years than the arrears in comparative terms. For example, the average number of weeks' arrears has fallen from 6·8 in 1978 to 5·5 in 1980. That indicates that an effort—albeit perhaps in the hon. Gentleman's eyes too modest an effort—is being made to keep down the rate of arrears and to keep control of this difficult situation.
The hon. Gentleman mentioned the deployment of staff to try to tackle this problem. The executive has recently been reorganised, and a regional controller has been appointed and made directly responsible for making sure that the level of arrears is reduced. All district staff of the executive are being set targets for reduction of their arrears figures. The computerisation of rental records will assist the effort by releasing staff to make further visits to debtors to try to persuade them to enter into arrangements whereby they can reduce their debts. Whether it will be exactly 500 staff, to which the hon. Gentleman referred, I do not know, but certainly staff are being redeployed for this purpose.
As the hon. Gentleman knows, it is better, wherever possible, to make a personal visit to a debtor to seek to collect a debt than to send letters. Letters get put on one side, whereas a visit can be a matter of embarrassment, and frequently it produces the money. Constant visits and reminders have that effect. But the hon. Gentleman will appreciate that there are difficulties in some parts of Northern Ireland, even for people who seek to make visits for these purposes.
Indeed. I need not underline that problem, which is unique to Northern Ireland.
My right hon. Friend the Secretary of State has recently announced that the recipients of supplementary benefit who are persistently in default of payment of their rent will have their rent allowances paid direct to the executive. I shall certainly convey to my right hon. Friend the further suggestion made by the hon. Gentleman to see what can be done.
It may be of interest to the hon. Gentleman to know that the whole question of public debt—including rent arrears—was the subject of a review by Sir Derek Rayner. Sir Derek Rayner's recommendations are now before my right hon. Friend, who is considering them to see how they can best be introduced to deal with this difficult problem.
I hope that those remarks answer some of the matters raised by the hon. Gentleman. If I have not covered all of them. I shall speak to my right hon. Friend and to my hon. Friend the Under-Secretary who has direct responsibility for the Housing Executive, and if the hon. Gentleman feels that it would be of value we can arrange a meeting to discuss these matters further.
I shall not follow the Minister of State and the hon. Member for Belfast, South (Mr. Bradford) into the details of the situation in Northern Ireland. I should like to refer to the shrewd and statesmanlike remarks of my right hon. Friend the Member for Heywood and Royton (Mr. Barnett), who referred to the other and new departmental Select Committees.
I notice that some commentators are now writing off the Public Accounts Commmittee as no longer being Parliament's most prestigious and powerful Select Committee. Yesterday, the meetings of 11 Select Committees were notified on the Order Paper, most of them the new departmental Committees. Before Christmas the proceedings of the Public Accounts Committee were frequently broadcast, but since the setting up of the new departmental Committees there have not been any indications of interest in our proceedings. I understand that when the Treasury departmental Committee met less than a fortnight ago and had before it as a witness the Chancellor of the Exchequer. there was not even standing room.
The Public Accounts Committee does not send for Ministers as witnesses. It has to make do with the so-called mandarins. Those who watched the recent television series " Yes, Minister " may say " Yes, but perhaps the mandarins are the real masters" and that the PAC is interrogating those who really count, but I do not agree with that statement. I believe that it would be most unwise to write off the Public Accounts Committee. It is back by 700 professionals, and it is always well equipped for members of the Committee to be given the in-depth reports that they require.
Currently, there is considerable discussion about the role of the Comptroller and Auditor General. He has great integrity, and I should like his independence to be preserved. To that end, we should ensure the removal of certain of the Treasury's powers of direction. The Comptroller and Auditor General should have his own exchequer and audit department. He should take over the local government district audit. It is arguable that in local government expenditure some of the more flagrant and widespread wastes of money are occurring.
The audit service of central Government should have access to the books of our State industries. I refer especially to the British Steel Corporation. There was recently a crisis of confidence in the board and an unprecedented, lengthy and bitter strike. That was partly because, over a period, leaders of the steel workers, and later some of the middle management, were saying that the corporation's financial calculations were, to say the least, faulty. As tens of thousands of jobs were at stake, the subjection of the board to a public audit was an important request by the leaders of the steel workers. The charge was made in the recent dispute that value for money had not been obtained over the past decade. Investment in the industry had been about £3 billion.
It is true that in the sixth report there are examples of where the Committee has probed to ensure value for money. I have been able to see how important the Government's cash grants have been to attempts to regenerate Britain's industrial structure. I have in mind the examination of witnesses from the National Enterprise Board. I cite as an important example our deliberations over the two new Rolls-Royce engines that we debated, probed and examined. I believe that about £400 million of State money is currently programmed for the two engines. That is vital for the survival of the British aerospace industry. It was in the Public Accounts Committee that we were able to establish that we would be into the 1990s before that vast sum invested in the aerospace industry, especially in the engines division of Rolls-Royce, turned to profits. That was the view of the Department of Industry and the National Enterprise Board. We learnt in that same Session that it was vital speedily to build a new titanium smelter in the United Kingdom before the end of 1982, or else the mineral required in the new engines would have to be imported from abroad, thus putting us at a considerable disadvantage.
As a result of the probing questions of Committee members, we learnt that if the 1990s profits were to be realised we would have to hope—perhaps that is the operative word—that the pound would be reasonably strong in relation to the dollar. I think that $1·80 was mentioned. In that one Session, it was the Public Accounts Committee that was able to bring into prominence important facts and pieces of information such as the £400 million investment, the industrial base of Great Britain and the hopes of exports and prosperity.
I shall conclude by trying to assess briefly the work of the Committee. I get the impression that the mandarins of the Whitehall complex do not take lightly any appearance that they make before my right hon. Friend the Member for Hey-wood and Royton and the Committee. I judge by observation that it must be a considerable ordeal to be examined by my right hon. Friend and the Committee for more than two hours and to be called to account before Members of Parliament for actions and policy. It is clear that some of the witnesses occasionally play for time. I have seen some of them rendered literally speechless by some of the techniques employed and questions asked by my right hon. Friend and other members of the Committee.
I have formed some overall impressions. Accounting officers take the Committee with deadly seriousness. Audit staff have considerable professional expertise. The contribution of Members of Parliament as watchdogs makes for a successful operation, and there are the contributions of the various witnesses. Every one of them, whatever the nature of his remarks and contributions, oversees the massive expenditure of his Department—literally hundreds of millions of pounds of taxpayers' money.
Members of the Committee are faced with frequent and lengthy meetings. They receive many detailed reports and other papers. It is becoming harder to keep up to date with the papers that we receive. The work of the Committee takes up a great deal of a Member's time. Finally, my right hon. Friend said that his predecessor was a very good Chairman. There is no doubt that he was, but I think that my right hon. Friend is a good Chairman.
The hon. Member for Flint, East (Mr. Jones) referred to the work of the new Select Committees and contrasted them with the work of the Public Accounts Committee. The new Select Committees have a good deal of glamour attached to them and much interest, but for my part I think that the PAC will be around long after the new Select Committees have been left foundering in its wake.
Select Committees that do not have the staffing which is available to the PAC will find themselves altogether too easily upset by a flood of documents and contrasting opinions. The Select Committee that is examining the Government's economic policy has attached to it no fewer than three economists, all of whom have contrasting opinions.
My hon. Friend corrects me and tells me that there are five economists. No doubt they all have contrasting opinions. As my hon. Friend and my right hon. and learned Friend the Chancellor of the Exchequer think little of forecasts and assumptions anyway, it does not seem that that Committee will get very far in elucidating the truth or in enlightening the general public.
I do not wish to be diverted from the work of the PAC, which is what the debate is all about. The Committee starts with a considerable advantage, as it deals mostly with facts. It deals with what has already happened and facts which are agreed by all the Departments concerned. When the Departments come to us, they know that they have something to answer for. I should like to think that under the chairmanship of the right hon. Member for Heywood and Royton (Mr. Barnett) they have some penetrating questions to answer. Indeed, I know that that is so.
I shall not waste the time of the right hon. Gentleman by paying him a glowing tribute, although I know that it is the custom of the House to do so in these debates. I know him well enough merely to say that I knew that he would make a good chairman, and he has. He follows a long tradition of good chairmen. I shall have something more to say later about his speech and the work of the Comptroller and Auditor General.
One of the features that strike me about the work of the Committee over the years is the repetitiveness of some of the incidents that we are invited to examine year after year. Broadly speaking, the work of the Committee can be divided into two main sectors. One sector involves the accident-prone Departments which provide examples of waste or over-expenditure that occur from time to time. These are not necessarily repetitive in nature. The other sector, which is much more important, involves successive Governments making fundamental decisions, usually the same ones, in carrying forward large and expensive projects which the Committee finds itself examining year after year.
A good example used to be Concorde. It is now too late to examine Concorde any further. Happily, it is at least flying. For many years, when we were examining it, it was not even doing that. I regret to say that it has been swiftly replaced by several other candidates that are long-term losers.
The hon. Member for Flint, East mentioned Rolls-Royce. I can think of two examples. Rolls-Royce is certainly one, and British Leyland is the other. Until very recently, both of those were under the purview of the National Enterprise Board. Rolls-Royce was taken out of it for what appeared to me to be very good reasons, namely, the fact that the chairman of Rolls-Royce did not get on at all with the chairman of the NEB, and one had to go. One has gone. In my humble opinion, the right one has gone.
It has never seemed to me to be a good aspect of management policy to have, as it were, an intermediate manager in a company as large and complex as Rolls-Royce. It is important that the chairman and managing director of Rolls-Royce should have immediate access to the Department of Industry, which is its sponsoring Department.
The Department of Industry has very few people who have ever run an industry. The chief executive referred to by the hon. Gentleman was inefficient enough not to insure against a possible change in the exchange rate and so totally ruined whatever else he had done in at least one year's accounts. Does not the hon. Gentleman think that such a person needs a little advice, possibly from the Treasury, if not the Department of Industry?
The hon. Gentleman anticipated my remarks. I was not about to pay a glowing tribute to Rolls-Royce. That was the last thing that I proposed to do. I was coming to the meat of the matter. The hon. Gentleman is wrong in saying that the Department of Industry has few people who know about Rolls-Royce. It has more than a few. The NEB had only two people to look after Rolls-Royce. The Department of Industry, which has been much more closely involved, has greater expertise in the matter. However, whether or not the Department has expertise, Rolls-Royce landed a number of orders that have proved to be disastrously expensive for the country so far, and I do not think that there is any question that they will prove to be extremely expensive in years to come. One of the reasons for this is the fact that the contracts were placed—the hon. Member for Flint, East said at $1·80 to the pound—at $2 to the pound. Whatever the figure was, Rolls-Royce got it wrong. The contract is bound to continue to be very expensive.
The hon. Gentleman will know that the Export Credits Guarantee Department had a big and expensive hand to play in all this. It guaranteed not just the Rolls-Royce engines but those of Lockheed and Boeing. This is the first time, as far as I know, that the Export Credits Guarantee Department has guaranteed not just British products but American products, over which we have no control. We have something to say about that in our most recent report. I am sure that we shall return to the matter. At any rate, it was a departure that I did not like and that I hope and trust will not recur.
Nor is that all. In considering Rolls-Royce, we discovered that far from being one of the most efficient companies in the country in terms of productivity, there appeared to be twice as many people employed in Rolls-Royce as there were in General Electric and Pratt and Whitney for the same operation. Therefore, there is a good deal of improvement yet to come.
I do not believe that the National Enterprise Board had anything to contribute in that way. The decision was made originally by the Department of Industry and should always have been monitored by it. I do not think that the NEB had anything to contribute.
The other company to which I wish to refer is British Leyland. I do not wish to talk about the troubles of the motor industry or the particular problems in which British Leyland has found itself. If the case for Rolls-Royce being managed and run by the Department of Industry more directly is strong, the same applies to British Leyland. I do not think that the intervention or interposition of the NEB does anything to help the position of British Leyland. It would be very much better, given my right hon. Friend's policy towards the NEB, to hive off the British Leyland responsibility more directly to the Department of Industry.
The National Enterprise Board is now happily changing direction rapidly. I cannot help but say that I have a passing regret for the brave old days when Lord Ryder was chairman and launched such products and projects as Thwaites and Reed, and presided over the continuing losses of Alfred Herbert, Cambridge Instruments and British Tanners Products. My right hon. Friend's policy will mean fewer losses for us to inquire about and to enjoy watching the prognostications of those involved, simply because, with any luck, those concerns will be wound up quite soon.
The NEB received a great deal of money from the taxpayer. I know that the hon. Gentleman is keen on some of the activities of the NEB. It is true that it has a marginal regional role still left to it, in the North-West, at any rate. However, £78 million has been invested not in British Leyland or Rolls-Royce but in activities of its own. The record of the NEB has gone from bad to worse in this respect.
The original target set for the NEB was that it should make between 15 per cent. and 20 per cent. on its assets in 1981. So far from reaching that target, it achieved 11 per cent. by the middle of last year. But the position is a good deal worse than that. The NEB was given a considerable amount of equity capital directly by the Government. This means that the taxpayer is having to pay for the difference between what the Government have to pay to borrow money from the market, which nowadays is about 18 per cent., and the money that they advanced to the NEB at no rate of interest at all. From the taxpayer's point of view, the return has not been 11 per cent. or anything like it. There has scarcely been a profit.
It is worth saying this if only to strengthen the ambition of my right hon. Friend the Secretary of State for Industry to run down the NEB. I view its activities as those of liquidator and receiver. I hope that it will get on with that.
I do not think that the chairman of the NEB, in his role as receiver, should be renting a flat in Grosvenor House at £36,000 a year. He should be found more modest accommodation.
I leave the subject of the NEB and turn to the question of the Polish shipbuilding order. To my great regret, last year the Committee said that it accepted the inevitability of seeking that order. We published that in July 1979. At that time, the loss in respect of the order was thought to be about £28 million. We discovered only recently that the loss was really much greater than that. It was £40 million. In addition, British Shipbuilders borrowed $65 million with which to buy the ships that it was to hand over to the joint Anglo-Polish company.
When we asked the civil servant who was giving evidence to us at the time what the Poles had advanced towards this company, we were told that they had advanced the sum of £50,000, for which they had the right to buy the ships that the taxpayer was providing for the Polish marine to sail in, from which only half of the profits, if any, would come to the taxpayer.
I ask the House to consider what a crazy proposal this is. I know that it is easy to argue this in retrospect. I cannot think how I ever got myself to put my name to the original report, but it is there. Seen in retrospect, of course, it is a disastrous position. Not even on the most sanctimonious and regional grounds could such an order ever have been justified. If it was right that a ship-owning company should be advanced money by the taxpayer in this way, it surely should have been a British ship-owning company and not a foreign one providing competition for our own companies. A more ludicrous position it would be difficult to imagine. I hope that that lesson has been well and truly learnt.
I have taken the examples of the National Enterprise Board, Rolls-Royce, British Leyland and, now, the Polish shipbuilding deal, all of which happen to be examples of profligacy by the Department of Industry. I want to say something about that. It is very noticeable how the Department of Industry has grown in recent years. When I first came to this place, there was no Department of Industry. Very soon after I came, the first Ministry of Technology was formed. If the performance of the Department of Industry is to be judged by results, I regret to say that the aim established for it—that is, to provide industrial regeneration—has resulted in higher unemployment and lower production. Yet all this has been met with increasing numbers of civil servants. There are more than 9,000 now in the Department of Industry, and many more in the Welsh and Scottish Development Agencies, but their results have not yet been shown to be at all good, so far as one can observe.
In West Germany, there is no Department of Industry. The House really has to consider what is the point of some of the aspects of the Department. Of course, it has a major function to perform in relation to companies such as Rolls-Royce and British Leyland, but in terms of industrial regeneration it is becoming increasingly clear that other much more direct regional incentives, notably a differential tax regime, would be much more effective than the subjective judgment that the Department displays in putting forward its grants.
The Department itself and the whole question of industrial grants—a very complicated question—are a relic of what one might call Keynesian intervention, which was popular with both parties for many years after the war. I am glad to say that my right hon. Friends have departed from this policy, and I think that they need to look very seriously at the whole question of industrial intervention and whether or not the regional regeneration that all of us want to see could not better be achieved by a much simpler and more direct tax incentive system.
I come finally to the role of the Comptroller and Auditor General. The right hon. Member for Heywood and Royton—I regret to say that I missed his earlier remarks—referred, I understand, to the new direction in which the Comptroller and Auditor General appears to be moving—that is to say, in the direction of examining policy alternatives. This is a major departure, and I think that we ought to consider it very carefully before endorsing it fully.
I do not say that it is right or wrong; I merely think that we ought to consider it fully, because it seems to me that it is most important—I know that the right hon. Gentleman agrees with this—that the Comptroller and Auditor General, with the Exchequer and Audit Department, should continue with its main function, which is to audit every Department of State and make sure that its operations are carried out properly and efficiently, and are properly accounted for.
I have in the past thought that the Comptroller should have a role closer to that of the post in the United States, which is a much wider role in terms of examining the functions of different departments and how they can best order their affairs. On the whole, I am inclined to think that it is right that the Comptroller should have responsibility for looking into policy matters, but the whole matter needs to be carefully thought about and debated.
I say that in passing, because it seems to me that the Comptroller has another role plainly open to him. It is one that involves a managerial revolution in Government expenditure and, in particular, in local government expenditure and expenditure in the Health Service.
Enough time has passed for me at any rate to be able to say, with some of my right hon. and hon. Friends, that the reorganisation of the Health Service and of the local authorities in 1973 and 1974 was a disaster. I think that those most closely involved in those reforms now admit that. It was disastrous because it was thought at the time that a managerial revolution in the sense of making those bodies separately accountable would increase their efficiency. I do not think that there is any evidence to show that. What has been shown is a huge increase in the number of people employed by the local authorities and the Health Service, both of which increases far exceed the increase in the number of civil servants.
In 1949 local authorities employed 1·6 million people. Last year they employed 2·9 million. That is three times more than the whole of the Civil Service itself. Of course, much of it is accounted for by the growth in the number of teachers and lecturers. That number increased from 456,000 in 1965 to 693,000 last year. But what was much more striking was the enormous increase in the number of those employed in the education service who neither lectured nor taught. In 1965, there were about 500,000 people who neither lectured nor taught. Last year, there were 717,000. It might well be asked what all these people are doing, but there is no one whom we can ask why so many people are employed in the education service.
I regret to say that the same is true of the Health Service. In the Health Service in 1961, 575,000 people were employed. In 1978, which is the latest year for which we have figures, there were 1·175 million. Of course, the Health Service comes under the jurisdiction of my right hon. Friend the Secretary of State for Health and Social Security, but for practical purposes it has been very difficult to stop the recruitment of extra people by the area health authorities, even after the reorganisation.
If the hon. Member for Nottingham, West (Mr. English) doubts that statement, let me quote an example. I asked my right hon. Friend to let me have examples of the amount of outside consultants' advice that the Department had asked for over the years. I have one example of office work measurement on which an outside consultant was called in, and under " description of job" it says that the job was aborted owing to staff side opposition. So the question could not even be looked at.
The reason why I was shaking my head was that the Secretary of State for the Environment and the Secretary of State for Social Services both have sections of auditors under their immediate command, as civil servants, to deal with the responsibilities that the hon. Gentleman is talking about. They really are the only two departmental Secretaries of State who have no excuse. They have people of whom to ask the questions that the hon. Gentleman poses. The Secretaries of State have auditors of their own quite different from the Comptroller and Auditor General. If they are not asking the questions and publishing the answers, that is their fault.
The hon. Gentleman really mistakes the position. There was a major reorganisation of both services in 1973 and 1974 and, of course, technically speaking the Secretaries of State are responsible for those Departments. But, as the hon. Gentleman knows, the point of that reorganisation was to separate those authorities—both the local authorities and the health authorities—in a management sense. I am quite sure that it was never intended that they should go in for an orgy of recruitment, as they in fact did. The fact of the matter is that our education service and our Health Service are grossly overmanned, both for the jobs that they do and in terms of any international comparison that can be made.
The country cannot afford to have so many people employed in the public service. It is enormously difficult to control public expenditure, in any case. The Government are doing their best to reduce the number employed in the Civil Service, but that number does not begin to compare with the number employed in the Health Service and the education service, which greatly exceeds the number employed in the Civil Service and over which there is little effective control.
There is an important additional role for the Comptroller and Auditor General to pursue. It is to examine the operations of the Health Service and the education service to establish what all these people are doing. I over-simplify the matter, I know, but we are grossly overmanned by any standards. This is a major matter into which the Comptroller and Auditor General should be able to inquire, and he should have the power to do so. I would much prefer him to get on with that aspect than to examine other aspects of Government policy over which there can be continuous and considerable political disagreement.
I hope that the hon. Member for Nottingham, West (Mr. English) will understand if I call next the hon. Member for Folkestone and Hythe (Mr. Costain), who has been present throughout the debate. He docs not usually speak for very long.
I promise, Mr. Speaker, that my average time of six minutes will barely be exceeded on this occasion. Earlier this afternoon, an hon. Member spied strangers. When you look round the Chamber now, Mr. Speaker, you might say that you spy a Member of Parliament or two.
I have attended every Public Accounts Committee debate for 21 years, ever since I came to the House. It always astounds me that these debates should be so poorly attended. Today, on the Government Front Bench there is the biggest attendance that I have ever seen in such a debate, and I am grateful to the Government for that.
This debate has a special significance for me. The Committee has a new Chairman, who has batted in very well. He gave me the impression today that the Committee had something to do with policy. I have always understood that the Public Accounts Committee was an auditing Committee, which looked into what had happened. I hope that it wilt remain so.
I am sorry if I misled the hon. Gentleman. The point that I sought to make was that the Committee's proceedings were bound to impinge on policies when the Committee looked at the effective use of money. I gave as an example the greenhouses-on-the-moon syndrome. When looking at the effectiveness of greenhouses, should we consider whether they should be built on the moon, or somewhere else? I gave the example of the Polish shipbuilding order, and one or two other matters.
I thank the right hon. Gentleman for clarifying the position. What he said confirms what I understood him to say. Once the Committee gets on to policy, it cannot avoid party politics.
On 10 December, I was lucky enough to draw a place in the ballot for Private Members' motions. I made a speech on that occasion. I had a stinking cold, and the press said of my speech that I sounded like a worn-out concrete mixer; I certainly felt like one. I said that it was most important that the new Committee should have terms of reference and the right to call whom it wished. The hon. Member for Nottingham, West (Mr. English) intervened. A characteristic of all debates on the Public Accounts Committee is that the hon. Member for Nottingham, West always intervenes in every speech. He has such great knowledge of the subjects. I do not remember any member of the Liberal Party taking part in the debates, although they pop in from time to time. I rather expected the Leader of the Liberal Party to turn up when he saw my name on the television annunciators.
I have said on many occasions that the Public Accounts Committee is a mirror that enables Departments to look at themselves and judge their own performances. It is the only Committee that does not interview Ministers. It interviews civil servants and accounting officers because it deals with accounts. It should take evidence from people who have a direct relationship with the Departments. The Committee normally relies on the statements made by the accounting officers. Accounting officers have enormous responsibilities, and it is impossible for them always to be up to date. Certain accusations are made against people and firms who deal with the Departments, and we should have the right to interview them. We have the right to call for persons and papers, but we should also interview the people who are directly concerned. That would stop the passing of the buck.
The Public Accounts Committee has now admitted the public. I and one other member of the Committee voted against going public. I think that I was wrong. I thought that, if we went public, people would play to the galleries and even members of the Committee would act as if they were on the television screen. I am glad to say that that has not happened.
There has been another innovation in recent years. We visited Chatham dockyard. I am delighted to see that the First Lord of the Admiralty is here today. We had a very good reception, and learnt a lot. If we made more visits, we could become more kindly disposed to the people whom we go to criticise. That is probably why they entertain us so well. We also visited a teaching hospital. That taught us a lot, too, and I hope that it taught the teaching hospital a lot.
Over the years, the Public Accounts Committee has drawn attention to certain failures—certain matters that cost enormous sums of money. I wonder whether the Departments have learnt from our example. Time and again, when we are on an economy drive, we cut off Supply and cut off expenditure, yet time and again, as elections get near, politicians decide to start projects. I refer particularly to building projects, which, naturally, I know something about.
We have found with a number of construction jobs that the work has been started before the plans have been properly prepared. We can quote job after job—£14 million in Liverpool, £15 million somewhere else, £40 million for a power station—where the money is wasted because it has not been realised that to spend half a million pounds in preparing plans for a £14 million contract will save an enormous amount of money. When the job is properly prepared, not only is money saved but labour relations are improved. Nothing upsets men on a building site more, when, for the good of the contract, they have worked very hard to erect a wall, to be told three weeks later that they must pull it down because it should not have been there in the first place. It is our fault, as politicians, for starting work before the plans are prepared, and it is the Government's fault for not realising that a little money spent in the early stages will save an enormous amount of money later.
My hon. Friend the Member for Horsham and Crawley (Mr. Hordern) has gone into detail about some of the points that we have disclosed, and I do not wish to waste the time of the House by repeating them. Everybody in the Committee has read the report, and Ministers are aware of its contents. What we look forward to is the Financial Secretary's telling us, at the end of this debate, that he has studied these figures, that mistakes have been made, and that he will be a very good boy and put them right. In the last debate he spoke from the Opposition side of the House. I shall be fascinated to know what he says from the Government side.
He promised that during the first Session of this Parliament he would reorganise the whole system of Committees, and I am very grateful to him for doing so. Now he has the opportunity of ensuring that everything is properly organised so that the Committees themselves can do the work and not duplicate the work of the Public Accounts Committee.
It is always a pleasure to follow the hon. Member for Folkestone and Hythe (Mr. Costain), because he can almost be described as " Mr. Public Accounts". He has, by his assiduity, put other members of the Committee to shame. He must admit that I have not interrupted him on this occasion. That is partly because I gathered from your remarks in relation to him, Mr. Speaker, that you might be kind enough to call me to speak in this debate. In previous debates, I have sometimes not been called.
As my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) said, we cannot in this debate discuss 14 reports. We must be selective. Two to which I should like to refer briefly are the fourth report of 1979–80 on provision for Civil Service pay and the second report of the same Session on matters relating to Northern Ireland. That on Civil Service pay illustrates the much better relations that now prevail between the Public Accounts Committee and the successor to the Expenditure Committee, the Treasury and Civil Service Committee, than has been the case upon occasions in the past. I do not mean the immediate past. I am not casting reflections upon the right hon. Member for Taunton (Mr. du Cann).
There was a time when, to put it bluntly, the Clerks of the two Committees did not even speak to each other and one was capable of writing a report which did not refer to three reports written by the other. That is no longer the case, and, as the Chairman during the last Parliament of the General Sub-Committee of the Expenditure Committee, I pay tribute to all the Officers of the House who are concerned in this. They are now co-operating with each other. The two Committees provide each other with evidence, and of course this is the sensible way to proceed. The results are shown in the fact that, although we may have different aspects of matters to examine, one being the past, the audit, and one being future expenditure, nevertheless we are working in tandem. I think that my right hon. Friend the Member for Heywood and Royton and the right hon. Member for Taunton should both take part of the credit for this.
Turning to Northern Ireland, I have done a modest amount of research into the whole question of the audit, and indeed the Public Accounts Committee has been kind enough to request me to give some evidence to it on the Green Paper. I am still a little puzzled about Northern Ireland. There is a separate Civil Service, called the Northern Ireland Civil Service, which is roughly 4 per cent. of the total of the two Civil Services of the United Kingdom and Northern Ireland. I presume that in the days of Stormont there was a separate individual called the Comptroller and Auditor General for Northern Ireland. I am fishing for information here, and I hope that when the Financial Secretary returns he will give us it.
I presume that this Northern Ireland Comptroller and Auditor General reported to Stormont. I regard that as a bad principle. I must be careful in what I say, because in this Parliament I normally chair the Northern Ireland Standing Committees, and the question whether functions should be uniform throughout the United Kingdom, or should be autonomous in Northern Ireland, is, of course, a sensitive political issue into which I do not wish to enter.
If I might remove it from the context of Northern Ireland, one of the things that I thought ridiculous about the devolution Bills for Scotland and Wales was the fact that they devolved the audit. I say this as one who was basically in favour of devolution. A reference was made earlier to the Comptroller General of the United States and the General Accounting Office which he controls. In a federal state, where the constitution specifically protects the legal sovereignty of each one of the 50 States, the auditor is allowed to chase federal money wherever it goes. That means that he can chase it if it is given as a grant to one of the States, if it is given as a grant to a local authority subordinate to one of the States or if it is given to a private company or person. If he has reason to believe that there is some audit reason, he can follow the money.
It is not possible to devolve the audit of the taxpayer's money. It is possible to do so if it is some other taxpayer's money. If it is a question of rates raised by a local authority, the authority might have the power to audit it itself, but if it is out of income tax, or value added tax, or whatever it may be, that is national taxpayer's money, and surely the national taxpayer's agent, the Comptroller and Auditor General, has a right to audit how that money is spent.
With the greatest respect to the hon. Member for Horsham and Crawley (Mr. Hordern), who spoke about auditors investigating policy, it is rather a side issue. My right hon. Friend the Member for Heywood and Royton raised it, but this question of policy is something of a side issue. Incidentally, I hope that he realises that the moon would be an excellent place on which to put a greenhouse, since it is a place without an atmosphere to interfere with the rays of the sun. I agree that it might be a little costly in capital terms, but in terms of running costs it would be extremely efficient because there would be no atmosphere to cause erosion.
One cannot " second guess ". At least, one can, but it is an enormous waste of resources to do so. What one can do is to decide whether a person who has made a decision has carried it out efficiently—whether, for example, as the hon. Member for Folkestone and Hythe said, a person has made detailed plans for building a hospital before the building work has been started. That is a sensible thing to audit and investigate, and it is a bit more than just auditing whether someone has pinched the cash, or committed fraud, or something of that nature.
However, I am intrigued by the scope of the audit. Apparently, the PAC receives reports from the Comptroller and Auditor General of Northern Ireland. I am all in favour of widening the scope of the audit in that sense—not in the sense of introducing policy into it, but in the sense that public money can be followed everywhere.
In this context, one is bound to be concerned with two reports of the Committee in the last Parliament. The second special report on the work of the Committee of Public Accounts and the status and functions of the Comptroller and Auditor General partly relates to, and in this case mentions, reports of the former Expenditure Committee. That Committee and, subsequently, the Procedure Committee were both extremely critical of the present position of the auditor. I stress that I do not mean Sir Douglas Henley himself or any member of his staff. I am talking of the organisation, and I hope that it will be recognised that I am not referring to people personally in any way.
We must all be concerned about what Dr. Normanton said in the standard work on the subject. These were not my words or those of my hon. Friend the hon. Member for Norwich, South (Mr. Garrett). Dr. Normanton who is now, I believe, an auditor with NATO, described our system of public audit—and he is the world's expert on it—as the worst in the Western world. Surely we must be concerned about that and about why he said it in a book which is now a textbook used by students. He may not be right, but, since he has said it, we should investigate his reasons.
The Expenditure and Procedure Committees found, on investigating this, that our auditor was one of the least independent in the world. Let me explain. It is commonly said that the Comptroller and Auditor General is independent because he can be removed from office, like a judge, only by the Crown upon an Address by both Houses of Parliament. That, of course, secures him against dismissal.
However, the person appointed has traditionally been a former high Treasury civil servant—in this century, at least. He has usually been a second permanent secretary in the Treasury, or someone of that character. The poacher is turned into a gamekeeper. I mean no criticism when I say that perhaps one of the reasons for that is to exclude any other possible poacher. He is not a professional accountant or anything of the kind. He is not someone with audit experience but a civil servant who has risen in the Service in the usual way. More than being a case of poacher turned gamekeeper, it is a case of the gamekeeper being made into a registered poacher by the authority of the squire in order, as I have said, to exclude any other possible poacher. The system is obviously not independent.
The second aspect of the non-independence of the auditor is in section 3 of the Exchequer and Audit Departments Act 1921. That says that, in the event of any dispute between the auditor and the Department, the decision of the Treasury shall be final. I can think of some dubious company chairmen who would be extremely pleased if they thought that, in the event of any dispute between their accountant and their auditor or any of their executives and the auditor, their decision should be final. It seems an odd provision to put in an Act of Parliament.
A third aspect is that the Comptroller and Auditor General is not allowed to control his own staff. Whether they fall within the highly technical description of civil servant, which is an unofficial definition coined in 1931 and not the one in the Act of Parliament that governs Civil Service pensions, I should hate to try to find out. However, it is certain that their pay, grading and numbers have been controlled for more than a century by the Civil Service Department. Again, the very people who are being audited say who is to be their auditor in terms of pay. This is highly important, because I would have thought that any one of the senior partners of the big six accountancy firms in this country receive more money than does our Comptroller and Audit General. I shall not stress that point further.
My right hon Friend the Member for Heywood and Royton said that I was wrong to assume that because someone was a graduate he would be a better auditor. The Civil Service makes that assumption about civil servants. France is supposedly a highly elitist country, but, if one can get into the Ecole Nationale d'Administration, one can become a top civil servant without even a baccalaureat. The only institute of higher education in France that admits anyone who it believes will be a capable and competent civil servant is the Ecole Nationale d'Administration. It is the Civil Service in this country that says that the Civil Service Commission shall recruit into the First Division Association only graduates who are either first-class honours graduates or II. 1 honour graduates. However, it said something quite different in relation to the Exchequer and Audit Department. It said, until 1975, that the Department could not recruit graduates and professional people.
I pay full tribute to the present Comptroller and Auditor General. He is now recruiting graduates, and they are being trained and qualified as accountants in one particular institute—not in all six. That is excellent, but for more than a century they were prohibited from this by the very executive that the Department was supposed to be auditing. The Department was prohibited from exercising a free choice in respect of personnel. No choice was allowed and the matter was determined by the executive that was being audited.
The last of the reports to which I want to refer is the Third Report of Session 1978–79 concerning the parliamentary control of public expenditure, and it is there that we see part of the results of this process. The Comptroller and Audit General, who is described in the earliest of the Acts—the first was in the 1860s—is described as acting on behalf of the House. He is not allowed a lawyer. Yet one of his functions is not just as an auditor of past events but as a comptroller, an English word that descends from the Latin contra rotulator, meaning the person who keeps the counter roll, the person who approves expenditure because he has the legal check upon it. He authorises the expenditure in the sense of authorising payment out of the Exchequer Account at the Bank of England to Departments of State on the ground that they have the authority of Parliament and of the Treasury by warrant signed by two Treasury Ministers and all the other legal processes that have to be followed.
What mention is there of that in the Green Paper? It says that there are certain other aspects of the Exchequer and Audit Department Acts that may have to be looked at. On this whole question of the pre-audit of the public expenditure of the United Kingdom, that is all it says. I begin to wonder whether the person who wrote the Green Paper has ever read those Acts. It mentions in great detail past event auditing, but the pre-event auditing of the Comptroller and Auditor General is not mentioned. That is very puzzling. Even more puzzling is that that is exactly where the matter has fallen down. I am sure that because of the sub judice rule you would rule me out of order, Mr. Deputy Speaker, if I referred to the aspects of the Crown Agents case, which are currently under investigation by a tribunal. However, there is one matter that has been remedied by an Act of Parliament in relation to the Crown Agents to which IS can refer, because it is not the same issue. We had to pass a brief Act of Parliament indemnifying every Comptroller and Auditor General from the unification of the office until the present day from not carrying out effectively his duties as Comptroller General. They had authorised expenditure of moneys from the Exchequer Account to the Crown Agents illegally under a statute passed, admittedly, before the Comptroller and Auditor General's two offices were united in one person.
I shall say one final thing to prove where control over the audit lies. The hon. Member for Horsham and Crawley mentioned local authorities and the Health Service. Both those Departments of State have civil servants who audit those bodies for them. In the case of local government, district auditors audit their accounts. They are civil servants directly responsible to the Secretary of State. I do not believe that they should be. The audit of local authorities should be independent.
The hon. Gentleman said that certain things had not been done because of staff pressure in Ministries. That may be right, but there will always be staff pressure in Ministries. A Cabinet Minister who is in charge of a Department for, on average, two or three years will not necessarily resist that pressure. I have nothing against the Secretary of State. It is a secondary issue in terms of politics. However, a Minister will not put punch into the audit if there is staff pressure in his Department and he wants to make his name before, say, a Conservative or Labour Party conference.
No Minister should be in charge of the audit. Ministers should be in charge of current events. The body that should be in charge of the audit, as the Procedure and Expenditure Committees have said, is the House of Commons Commission, which is the most impartial body that we have. It consists of Mr. Speaker, only one Minister, one Front Bench Opposition Member and three Back Benchers, drawn from three parties. In this political world, that is as near to impartiality as one will get. They should be the employers of the Auditor General, the district auditors in the Department of the Environment, and so on. I shall go into further detail with my right hon. Friend's Committee.
We must first make sure that the control of the audit is responsible ultimately to hon. Members of all parties, and not only those who happen to be in government. To do that, we need agents in their hundreds, who are professionally qualified and able people. We could call them the Exchequer and Audit Department, but I should prefer even to change the name. The Exchequer has always been associated with the Executive since it was founded in the eleventh century. Let us have auditors on behalf of the people, run ultimately by the House of Commons. Let them be truly independent of the Executive that is spending the people's money. They may then be able to resist staff pressures inside the Executive. Civil servants are part of the Executive, as well as Ministers. They may even be able to take a slightly more long-term attitude than Ministers, who may feel that they will not be in their Departments next year or that their party will not be in office in five years' time.
May I add one further point to prove where control over the Exchequer and Audit Department lies? Who audits the Comptroller and Auditor General? It is the Permanent Secretary to the Treasury in his capacity as auditor of the Civil List, which is almost certainly a breach of the law. The Exchequer and Audit Department Acts lay down that all Appropriation Accounts, without exception, shall be signed by the Comptroller and Auditor General. They were signed by him, even in his own case, until changes took place, partly as a result of the 1921 Act. He then stopped doing that.
The first change was that he felt, naturally enough, that he needed an assistant. He recruited the auditor of the Civil List, which was fair enough. It was not a breach of law. In 1921, the post of Deputy Auditor General, who had the job of auditing the Civil List, disappeared. The permanent secretary to the Treasury became the auditor of the Civil List. That is in bare outline.
At that time, the Comptroller and Auditor General ceased to sign the accounts. There was no change in the law, but from then on the sole auditor of the Auditor General was the permanent secretary to the Treasury. I do not believe that that is right. The average firm of accountants in this country which audited, say, ICI would not accept that its own auditor ought to be the principal accountant of the firm that it was auditing. That is absolute nonsense. A firm of accountants would not allow the pay and grading of its staff to be determined by the people it was auditing. However, that is the nature of the audit at present.
Something must be done. I am sure that my right hon. Friend will be doing something about it in the inquiry that his Committee is undertaking. The right hon. Member for Taunton, in the Treasury and Civil Service Committee, which he chairs and on which I serve, is also likely to suggest something. We need an independant professional system of audit. We cannot have total confidence in a system of audit controlled by the Executive that is supposed to be the subject of the audit.
I am pleased to follow the hon. Member for Nottingham, West (Mr. English). He has his admirers in this House and, like us all, his detractors. I am one of his admirers. We are all indebted to the hon. Gentleman for his consistent and competent work on behalf of the House as a whole. The hon. Gentleman's speech was important and well-informed. I hope that my hon. Friend the Financial Secretary will be good enough in due course to comment on his suggestions. I find myself in agreement with many of them.
As former Chairman of the Public Accounts Committee, I had the honour on five occasions to move motions similar to that which was so agreeably moved by the right hon. Member for Heywood and Royton (Mr. Barnett). All hon. Members and many people outside would agree that that important Committee has served the House well in the past. I hope that it will continue to do so under the chairmanship of the right hon. Gentleman. I wish him and the Committee well in their future deliberations.
I was grateful to the right hon. Gentleman for the kindly personal comments that he made about me, and I was grateful also to the House for the way that they were received. I enjoyed my time as Chairman of the Committee. I hope that it was a constructive time. During that period, we published no fewer than 250 reports.
I hope that the innovations to which my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) referred, which we introduced carefully and slowly, will become permanent features of the scene. I took the view that it was right and appropriate to endeavour to associate the public more with the work of the Public Accounts Committee. It was the determination of that representative body of the House of Commons to endeavour to obtain value for the taxpayer—and promote better administration in terms of method especially. As my hon. Friend said, we therefore embarked on visits outside the House to see the work of Government Departments and its effects. We opened our proceedings to the public. I was pleased to hear my hon. Friend say that he thought that on the whole those experiments had been a success.
If the Committee is successful, it is successful because of the devoted service of its members and those who assist them. I join the hon. Member for Nottingham, West in paying tribute to a very remarkable member of the Clerk's Department who has worked hard on that Committee for some time, also to the Comptrollers and Auditors General for the United Kingdom and Northern Ireland and to my fellow Committee members—who are present in the chamber—my hon. Friend the Member for Folkestone and Hythe who is a devoted and conscientious member, and my hon. Friend the Member for Horsham and Crawley (Mr. Hordern). Perhaps I may also refer particularly to four people who were members of the Committee in my time but who are no longer Members of the House. We very quickly forget those who have given service here and have left. I mention particularly Mr. Hugh Jenkins, Mr. John Ovenden, Mr. John Watkinson and the late Mr. Maurice Orbach.
I was only concerned with the Committee's work in the 1978–79 Session which was curtailed by the dissolution of Parliament in April last year. The Committee of that period issued eight reports covering 13 main subjects. It took evidence on a further 13 subjects, and the Committee under the right hon. Member for Heywood and Royton was good enough to publish those.
I wish to refer to one of the particularly important points that the right hon. Member for Heywood and Royton raised. As in former years, the Committee continued to carry out its work in an entirely non-party spirit. Whatever differences of opinion hon. Members may have on the Floor of the House—and there certainly are differences which show very clearly all the time—in the Committee we were united in our aim of contributing to the better management of the country's resources. That was the practical ideal that united us. Therefore, we had no difficulty in agreeing the terms of all of our reports without any formal division in the Committee. Further, we made factual reports to the House of Commons which was then free to take whatever partisan view it wished. I agree very much with my hon. Friend the Member for Folkestone and Hythe that it is important to preserve, wherever possible, that bipartisan approach.
I turn now to some examples of the work of the PAC. We covered a whole range of subjects, just as the right hon. Gentleman is doing today. How wise he was to talk about the continuity of the PAC's work. We inquired into excess Votes, the underspending of cash limits, the Contingency Fund, in which the hon. Member for Nottingham, West has a great interest, the meteorological services, for which I have great admiration, the cost of Harrier aircraft, contract incentives and four other matters which I would like to mention in detail.
The first, which was referred to by my hon. Friend the Member for Uxbridge (Mr. Shersby)—and I apologise to him for the fact that I was unable to hear his speech—concerns the Housing Cor- poration. The Committee was shocked to find a number of serious items for criticism in this area—the overpayment of grants, the inadequacy of initial vetting and subsequent monitoring of housing associations, weakness over accounts and so on. The Housing Corporation is now disbursing more than £400 million of public money each year. It was amazing to discover that these slacknesses had gone on undetected for such a long time. I am glad that legislation is now being brought in by the Minister for Housing and Construction and his colleagues. I am glad that the Comptroller and Auditor General now has access to the books and records of the Housing Corporation, and I hope that that, too, will help to improve control.
Second, I turn to defence matters. Our inquiries ranged over several diverse aspects of the Ministry of Defence's vast responsibilities. One of these was the operation of arrangements for the placing and pricing of non-competitive contracts. Where one has monopoly suppliers and monopoly buyers, it is important to keep what is done under close surveillance all the time. If the spur of competition is absent, one cannot be sure that the prices being quoted and those at which orders are executed are the right prices. This is a necessary and continuing subject for the PAC to examine.
Third, another defence subject inquired into is the declining productivity in the naval ship building industry, which continues to receive substantial subsidies from public funds. We are talking about large sums of money, often hundreds of millions of pounds. My hon. Friend the Member for Folkestone and Hythe and the right hon. Member for Llanelli (Mr. Davies) will remember that in the past we have looked at the work done in Naval dockyards. A continuing impression that I have about defence matters is worrying. Defence is enormously expensive. It is very important to ensure that an increasing proportion of our gross domestic product is spent on defence. I support the Government's efforts in this regard. Yet, on the other hand, all the time that I spent in the PAC indicated to me that defence spending Departments are also extravagent Departments. I am quite convinced that the scope for savings in the defence Department is immense.
The fourth matter that I wish to mention is the inquiry that we made into the operation of the exchange equalisation account. Obviously this is a matter which requires examination with discretion and privacy. I take the view that the Government by and large are obsessive about secrecy. They do too much in private. Here we have the Public Accounts Committee looking at a matter which is commercially sensitive. It was proper for the PAC to study how the exchange equalisation account had been operating over a period, and I am happy that we were able to make one or two minor constructive suggestions which I hope will be of use in the future operation of that account.
These are the bread and butter issues. They were all in the form of an inquest, but I hope that they were, in their way, a stimulus and a spur to financial effectiveness and efficiency.
I wish to turn now to the more general matters that were mentioned by the hon. Member for Nottingham, West. Our second special report to which he referred was particularly significant because it considered certain recommendations made by the Procedure Committee and the Expenditure Committee—of both of which the hon. Member was a distinguished member—affecting the work of the PAC and the role and functions of the Comptroller and Auditor General and his staff in the Exchequer and Audit Department. As the PAC was the Committee directly affected by these recommendations, we thought it right to record our views on some of the issues raised before decisions were taken by the House or the Government.
We particularly welcomed the Procedure Committee recommendation that the PAC should be excluded from the restructuring of Select Committees and left to continue its indispensable, specialised role. However, we were less happy about the recommendation that the new Departmental Select Committees should examine and comment on all the PAC reports before they were debated in the House, and that the PAC should be invited to take part in the examination of Departmental witnesses. Those two recommendations surprised me greatly. I took the view that such procedures would doubtless lead to unacceptable delays in the PAC's proceedings, and that they certainly could jeopardise the completely non-partisan nature of the Committee's work. Our view was that the differing objectives of the departmental Committees should be pursued separately. As Chairman, now, of the Treasury and Civil Service Select Committee and as Chairman of the Liaison Committee I confirm that view.
The Procedure Committee's recommendations on the role and functions of the Comptroller and Auditor General and the Exchequer and Audit Department were overtaken by the Government study to which the hon. Gentleman referred and which has now taken the form of this Green Paper. I was pleased—and I dare say that my hon. Friend the Member for Folkestone and Hythe and the right hon. Member for Llanelli will confirm it—that it was perhaps because of some of the proposals made by the PAC that that study was launched. We now have it, and it is a matter that needs to be discussed at an early date. I am glad to know that the right hon. Gentleman's Committee is doing exactly that.
I spoke earlier of the outside visits made by the old PAC. As my hon. Friend will remember, we not only took evidence from the Comptroller and Auditor General about his function. We also visited the headquarters of the Exchequer and Audit Department and met and talked with all the senior staff. I was astonished to learn that ours was the first visit to the Department by a PAC since the Department was established in 1867. It seemed to me extraordinary, when the insight that we derived from its work was so useful to us, that no one had thought of paying a visit to the Department before then, but there it is.
What I wish to say clearly to the House on this subject can be said under two headings. My first point is that, over the years, the work of the PAC and the Exchequer and Audit Department has developed through mutual support and with, I may say, much help from the Treasury into a powerful combination for monitoring and improving Government administration. It may well be that there is room for further development and improvement, but I believe that it is most important that, whatever changes may eventually result from the present review, those changes should not in any way jeopardise the substantial benefits derived from the existing arrangements.
In particular, I stress the risks to the independence of the Comptroller and Auditor General, and the audit-based nature of his inquiries, if he were subject to more direct parliamentary control and was required to undertake investigations at the request of the House or of one of its Committees. That was the view taken by the old PAC.
I began by paying a tribute to, and associating myself with, the speech of the hon. Member for Nottingham, West. I shall not rehearse his arguments, but I agree with him that perhaps it is wrong that the Exchequer and Audit Department should be to such a degree subject to the general control of the Civil Service. I think that that Department and the Comptroller and Auditor General should be more independent of the Treasury than they are today.
I do not believe that the appointment of the Comptroller and Auditor General should always be made from the Civil Service, and I do not believe that the pay of the staff of the Exchequer and Audit Department and of the Comptroller and Auditor General should be on all fours with that of the Civil Service. I do believe, however, that the Comptroller and Auditor General should have a wider remit and, to use a phrase which is not original, that he should have a wider duty to follow public money wherever it is spent.
I can now make some common cause with the right hon. Member for Heywood and Royton, particularly in relation to his analogy about greenhouses on the moon. I do not believe that the responsibility of the Comptroller and Auditor General should be financial only. I believe it is right that he should move, increasingly, into the orbit of managerial efficiency.
The right hon. Gentleman was correct to point out that risks are involved in this context. We were able in the last PAC, as my hon. Friend will remember, to get into this area a good deal, particularly in looking at some of the larger Government projects by deliberately choosing those which were probably—in party political terms—non-controversial. I see no reason why that work should not continue and be extended. However, one must recognise that there are certain risks.
Perhaps the best testimonial to the Comptroller and Auditor General and the Exchequer and Audit Department is demonstrated by the increasing volume of the work of the Public Accounts Committee. When I was first elected to the House 24 years ago, the reports of the PAC consisted of 36 pages and 136 paragraphs. In the last full year when I was Chairman—1977–78—the reports consisted of 152 pages and 491 paragraphs. That was a four-fold increase.
The right hon. Gentleman gave us a snapshot of the volume of the work with which he is currently dealing. There is no question but that if there were not a Public Accounts Committee, a Comptroller and Auditor General and an Exchequer and Audit Department, it would be necessary to invent them. When I say that I wish them well, it is not out of parliamentary politeness. Their work is essential in the national interest.
In its third report of 1978–79, the PAC also reviewed various aspects of parliamentary control of public expenditure arising from previous recommendations of the Committee and from the fourteenth report of the Expenditure Committee with which, again, the hon. Member for Nottingham, West is connected. The most important of these—and one which the PAC strongly supported in paragraph 4 of the report—was the assimilation of cash limits and Votes which had been largely completed in the financial year 1979–80 and for which the right hon. Gentleman and his colleague the hon. Member for Llanelli deserve considerable commendation.
This assimilation seeks to achieve the objective that the cash provision which Parliament is asked to authorise in the original departmental Estimate will now be expected, except in exceptional cases, to cover the whole expenditure for the year. That means the House will no longer be faced with voluminous Supplementary Estimates for pay and price increases which it cannot effectively scrutinise and control. In this way, I hope that there will be a new and significant opportunity to improve Parliament's control of public expenditure, provided only that the House can devise an effective means of scrutinising those Supplementary Estimates presented by the Government.
The Treasury and Civil Service Select Committee, of which the hon. Member for Nottingham, West is a member, has reported on this matter. He and I are associated with the report made to this House. We have just received the Treasury's reply, and perhaps I may say to my hon. Friend the Minister of State and the Financial Secretary to the Treasury that we shall be studying what the Treasury says.
Howsoever the matter is eventually decided does not, perhaps, matter too much, provided that the House has an effective means of scrutinising those Supplementary Estimates presented by the Government. Upon that, I think it would be right for right hon. and hon. Gentlemen on both sides of the House to insist.
Increasingly, as time goes on, we provide better, more effective methods of parliamentary control over the Executive. There is no better way of achieving that than by controlling the way in which taxpayers' money is spent. We are trustees for the taxpayers. They trust us, particularly on the Back Benches, to ensure that by and large they get value for money. I hope that the new Select Committees will have an important part to play in that process and increasingly associate Parliament with the policy-making process.
Increasingly, I come to the conclusion that it is necessary for Parliament, by whatever method it may devise, to review organisations and systems just as much as transactions. All the reports are on cash, not activities. The PAC, crucial though its work is, is in a sense a forerunner only of other systems of parliamentary scrutiny and control that perhaps we have yet to devise.
I should like to see us evolve methods and systems towards a form of departmental reporting which identifies clearly to the House, and through the House to the nation, policy objectives, what the measurable progress is towards obtaining policy objectives, an assessment of the resources devoted to achieving planned levels, even if they are intermediate, and, last but by no means least, some measure of achievement. We have done no work of any kind to establish performance indicators. There is an urgent need to do that. What I am trying to say, in a sentence, is that it is crucial to look at more than just the figures.
The Public Accounts Committee will be needed for ever. There is perhaps even more virtue in adopting the systems approach to auditing. If there is an area for examination and work in the future, it is that. Our controls over expenditure, as the right hon. Member for Heywood and Royton wisely said, remain inadequate. They need strengthening urgently.
The present Lord Chancellor was right when he complained that our democratic system provided an elected dictatorship. It is essential that we on the Back Benches—the people's representatives—should be more closely associated with the business of policy-making, comparing results with forecasts and outturn with proposals, and examining policy alternatives. To devise a new system of auditing is the first essential. Through that method, my burning ambition remains—it is in no way mitigated now that I have left the Public Accounts Committee—to ensure that it really is Parliament that rules.
I congratulate my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) and pay tribute to him for presenting his first report as Chairman of the Public Accounts Committee. I have no doubt that he brings, and will bring, to his task the diligence, skill and good humour that he displayed when he was Chief Secretary to the Treasury. I also pay tribute to the previous Chairman, the right hon. Member for Taunton (Mr. du Cann). I was privileged to serve under him for a few years. He displayed skill as Chairman of the PAC, and I learnt a great deal from him. I appreciate the experience.
This is the first time that we have debated PAC reports since the new departmental Committees were established. The new Committees, at least initially, cast a certain shadow over the PAC, because they seem more glamorous. They examine the broad sweep and do not have to deal with specific factors or actions. Perhaps that is their attraction.
As the right hon. Member for Taunton said, there will always be a PAC and a Comptroller and Auditor General. The work of the Committee is unique. It examines transactions and tries to chase and trace money paid out by the Government. This afternoon, we heard an extraordinary statement by the Secretary of State for Industry, who said that the Government were arranging to pay moneys to a foreign partnership. The PAC is the best body to investigate such transactions. I do not know whether it will wish to do that, but it is for such situations that the PAC exists. I am sure that it will continue to do its job diligently.
I have no doubt that the Financial Secretary will deal with all the issues in detail. The fourth report from the 1979–80 Session deals with Civil Service pay. A few weeks ago, we discovered through questioning in the new Treasury and Civil Service Committee that Civil Service pay might go up by 25 per cent this year. That was an important fact for the Committee to elicit. I hope that the Financial Secretary will tell us whether the Treasury accepts the recommendations in paragraph 15 of the fourth report, which deals with the way in which the main Civil Service Estimates are to be brought to the House.
A report in a Sunday newspaper said that in the next Session the Government intended to legislate on the structure of the PAC and on the Comptroller and Auditor General. I appreciate that the Government might not wish to go into much detail, but I hope that the Financial Secretary will say something about it, because the PAC is examining the matter and there is a Green Paper.
Much of the debate has involved the role of the PAC. If legislation is passed eventually, I hope that it will provide for an extension in the PAC's role, so that it can cover matters that have been mentioned in the debate. I hope that the Government will not be too timid in their proposals. I hope that they will not pay too much attention to Treasury suspicions. The Treasury is naturally suspicious of other organisations that appear to poach on its territory.
My hon. Friend the Member for Nottingham, West (Mr. English) made an interesting speech, but he did not use the correct analogy. He said that Comptrollers and Auditors General tended to be former Treasury second permanent secretaries and that they were gamekeepers turned poachers. I think that they are gamekeepers in both cases. They are doing a different job.
The Treasury should not be suspicious. The Public Accounts Committee and the Comptroller and Auditor General can do work for which the Treasury is not equipped. That is no criticism of the Treasury. It does not and cannot pursue such payments and transactions. Once the Treasury has agreed levels of expenditure with Departments, it is ill-equipped to carry out such a role. I had expected it to welcome the strengthening of the roles of the Public Accounts Committee and of the Comptroller and Auditor General. Indeed, I would have thought that that might help the Treasury.
Reference has been made to the Acts governing the work of the Comptroller and Auditor General and the Public Accounts Committee. Perhaps those Acts should be reconsidered. Perhaps the institution should be more independent. This is a difficult area. I believe that the Acts should be reconsidered. This may appear to be a reactionary note from a reactionary lawyer, but we should not talk too much of the Executive and the legislature. There is a tendency to look at the British constitution as though it contained a separation of powers. At the end of the day, the Executive sits in this House. If the two are divorced, it may create edifices that do not serve us well. However, we must consider the independence of these bodies in relation to the Government.
I should like to see the role of the Public Accounts Committee extended to cover local authorities. Perhaps the Comptroller and Auditor General's office could be merged with that of the district auditor. I do not know the answer.
There has been a vast increase in the amount of money spent by local authorities. A case can therefore be made for amalgamation or extension of the Comptroller and Auditor General's office. I should also like to see its role extended to cover " value for money " or " efficiency " audits. The right hon. Member for Taunton mentioned the Ministry of Defence. I make no criticism, but I do not think that the Comptroller's office and the Public Accounts Committee are equipped to pursue waste in the Ministry of Defence.
I remember those Committees and the difficulty of understanding and discovering what was happening when technical matters were involved. Considerable waste probably occurs, particularly in the Ministry of Defence. However, neither the Treasury nor the Public Accounts Committee is equipped to go into intricate areas of waste. I therefore hope that the role of the Committee will be extended into areas of " efficiency " and " value for money ".
The Committee has, and will continue to have, a unique role. I hope that we shall witness a development of that role. Criticisms have been made. Dr. Norman ton's book has been mentioned. I am not qualified to say whether the criticisms that have been made are valid However, criticism is understandable, because little change has been made during the past 100 years. The amount of money spent by the Government has grown enormously. I hope for a change, but it should not detract from the role of the Public Accounts Committee as the guardian and watchdog of public expenditure.
I hope that the Government will tell us something of their thoughts. If they bring forward legislation, we shall consider it with an open mind. We hope that any such legislation will be of a fairly radical nature.
I shall begin my remarks in a special way. I wish to pay tribute not merely to the present Chairman of the Public Accounts Committee—as is customary—but, on the rare occasion of a debate on reports of the Public Accounts Committee, I pay tribute also to his predecessor, my right hon. Friend the Member for Taunton (Mr. du Cann). I pay tribute to them for the achievements of their Committees. One is in his maiden year and the other is in his valedictory year. They both made excellent speeches today.
I do not wish to be invidious, but it is right to pay special tribute to my right hon. Friend the Member for Taunton. He has steered the Public Accounts Committee for many years with great skill and to great effect. I am sure that his successor, the right hon. Member for Heywood and Royton (Mr. Barnett), will make an equally illustrious Chairman. He will have noted that his predecessor gave one or two tips in his speech. There are few matters about which all parties agree. However, it is widely agreed that the work of the Public Accounts Committee is an effective vehicle for enforcing the accountability of Ministers.
Since the last debate, in which I had the honour to take part as an Opposition Member, the House has opted for a major enhancement of the accounability to Parliament of Ministers and Departments. We now have a new departmental Committee system. My right hon. Friend the Member for Taunton is playing an important part in that development. Various hon. Members have touched on this subject. There seems to be general agreement that the new Committees do not diminish the relevance and importance of the Public Accounts Committee. In some quarters, it was felt that the new Committees might be something of a nine-day wonder. My hon. Friend the Member for Horsham and Crawley (Mr. Hordern) said that the Public Accounts Committee would still be forging ahead while the new Select Committees wallowed in the mire.
I do not believe that the departmental Committees will be a nine-day wonder. They are much more important than that. However, they have yet to find clear terms of reference and a clear role. The Public Accounts Committee has established its role over the decades. In addition to their being new, the work of the Select Committees is less clearly defined.
During the last Parliament, the recommendations of the Select Committee on Procedure gave rise to these new Committees. As my right hon. Friend the Member for Taunton said, the Committee on Procedure concluded that the Public Accounts Committee had an indispensable, specialised role quite distinct from the general scrutiny of administration. The Government agree with that judgment. I also pay tribute, along with the right hon. Member for Heywood and Royton, to the Comptroller and Auditor General and his staff.
I should like to confine my remarks—to a greater extent than usual—to answering the points that have been raised during the debate. I do not wish to make general observations on the role of the Comptroller and Auditor General and the Exchequer and Audit Department. The Government have published a Green Paper. We have set out our views and the areas in. which we have an open mind or have reached a provisional view. It is a discussion document. We look forward to hearing the views of the House and of the Public Accounts Committee.
I welcome the presence of the Financial Secretary, as he was a member of the former Expenditure Committee. However, I hope that he will answer a point that I raised while he was momentarily out of the Chamber. Perhaps he can explain why the Green Paper does not mention the pre-audit functions of the Comptroller and Auditor General.
I shall come to that point, if the House is patient. Having made a few preliminary remarks, I should like to consider in order the points raised by various hon. Members. The last speaker that I could forget is the hon. Member for Nottingham, West (Mr. English). Who could forget him, particularly in the context of a debate on the reports of the Public Accounts Committee? I was fortunate in that my hon. and learned Friend the Minister of State took a note of what the hon. Gentleman said while I was momentarily out of the Chamber.
There is one point in the Green Paper which I should like to underline. It is the Government's view that the effect of the working relationship between the Comptroller and Auditor General and the PAC should be preserved. That very special working relationship has a great deal to do with the unique character of the PAC's work and its unique effectiveness. The Committee's reports are based on work by the Comptroller and Auditor General, which in turn is based on facts which have been researched by the staff of the Exchequer and Audit Department in the various Government Departments. The audit-based character of the Committee's reports explains why no Government of any kind can afford to ignore a recommendation of the PAC. Certainly, this Government do not. I hope that answers one of the questions put to me by my hon. Friend the Member for Folkestone and Hythe (Mr. Costain), who admonished me not to ignore anything which the PAC was to recommend or to state. I assure him on behalf of the Government that I shall not and that we do not.
The right hon. Member for Heywood and Royton raised a number of points. He referred among other things to the inter-relationship between cash limits and public sector pay. That was also touched on by my right hon. Friend the Member for Taunton. Indeed, the right hon. Member for Heywood and Royton referred to the remarks that I made on this subject during a debate some years ago on the PAC's reports. I think he suggested—certainly, the PAC suggested in its report on this matter—that provision for Civil Service pay increases should have been made in the Votes of the individual Departments and not in a single Vote. But, as I think he knows—and it is important to understand this—there were two reasons why we did not follow that procedure for 1980–81. First, the Civil Service pay award differs between grades. Therefore, the cost varies from Department to Department, depending on the mix of grades. Again, many of the departmental Votes, relatively speaking, contain very little but pay, as a result of which they lack the flexibility to meet variations of this kind. The idea of the central Vote was partly to provide for that necessary flexibility.
Secondly, work on the single Vote could be delayed until a much later date than work on the many departmental Votes. That enabled the Government to consider the pay research review before providing for Civil Service pay. That was in line with our manifesto commitment, which was that we would reconcile the system of pay research in the Civil Service with the system of cash limits to which we are committed. In my judgment, those arrangements in no way detract from parliamentary control, which I think was the main point made by the right hon. Gentleman.
A revised Estimate will be presented before the House votes on the Estimates. It will allocate provision to the individual departmental Votes. Making provision in departmental Votes from the outset would have resulted only in Supplementary Estimates reallocating provision among the various Departments. These Supplementary Estimates, which would have been the real outcome, would have occurred no earlier than the revised Estimates on which the House will now have the opportunity to vote. Therefore, the House would have been no better off and there would have been no greater parliamentary control.
I should like to emphasise—and this relates to another point which the right hon. Gentleman made—that the central Vote was set before the pay settlement. It was the framework for the negotiation. That is precisely in line with the comments I made in our debate in January 1978, to which the right hon. Gentleman referred.
I do not wish to be difficult about this, but that is not precisely what the Minister said in January 1978. He quoted the Expenditure Committee as saying:
effective cash limits should be fixed before pay negotiations are entered into".—[Official Report, 9 January 1978; Vol. 941, c. 1345.]
He stressed the word " before ".
I recognise the difficulties in the current year. Is he saying that, for the future, he will abide by what he said then and also that he accepts what we said in paragraph 15 of our report, that whatever else he did, we would be strongly opposed to reverting to the previous arrangements whereby provision for pay in the main Estimates reflected only pay settlements already made or whose lines had already been settled with sufficient precision?
We are thinking of the best way of treating future years in the light of our experience this year and in the light of the remarks made by the PAC and the report to which the right hon. Gentleman has just referred. But the main point I was making, which preserves the essence of what I said in 1978, was that the overall limit was set before the pay settlement. That provided the framework within which the pay settlement took place.
There is obviously a difficulty in reconciling the system of pay research with the cash limit system. I think that we have achieved a method of doing that which makes sense. We shall have to see how we get on in the light of experience.
I take it from that—obviously, many people would be ex- tremely interested in this matter—that pay research will continue and that the new system will be devised in line with that.
Certainly, pay research is in operation at the present time.
My right hon. Friend the Member for Taunton—although he spoke at the end of the debate, it is relevant to bring him in at this point—also referred to Civil Service pay, as did the right hon. Member for Llanelli (Mr. Davies), who praised the Treasury and Civil Service Committee for unearthing the fact that in this coming year Civil Service pay is expected to be 25 per cent. above what it was last year. Of course, those are not new figures. They are published figures. But all credit to the Committee for having noted that they existed. However, it would be a great pity—and I counsel the House to take heed of this—if it were thought that that meant that Civil Service pay settlements this year have been of the order of 25 per cent. That is very much not the case.
The right hon. Member for Llanelli looks surprised. I do not want to read the letter which my right hon. and learned Friend the Chancellor sent to my right hon. Friend the Member for Taunton, which clearly set out the position. That letter is available for all who wish to see it. Roughly speaking, the 14 per cent. cash limit has been adhered to for the total pay increase this year. But the total pay bill is very much more than last year as a result of the staging of pay settlements which was introduced by the previous Administration, which meant that there was a delay in the coming into effect of the previous year's pay increase.
Am I right in thinking that the 25 per cent. is made up of 14 per cent., representing the cash limits for this year, plus 11 per cent. for last year? What will be the position in regard to next year? Can my hon. Friend say that no part of any phased settlement will run into next year as well?
A very small part of a phased settlement will run into next year, but the amount next year will be much smaller, because the 14 per cent. has been met largely by the fining down of the amount of the pay bill by a reduction in Civil Service numbers. There is some element of staging, but it is very small.
That is precisely the position—a position that I find most unsatisfactory. But it is not a position for which we are responsible. The figures were published, and the letter from the Chancellor to my right hon. Friend the Member for Taunton explained precisely how it came about.
The right hon. Member for Heywood and Royton made some specific points with which I shall deal before turning to the more general matters. He spoke about the Department of Energy and the offshore interest relief scheme—which no longer exists. He gave a fair account of what was wrong, and he put it in perspective. I have only one quarrel with what he said. When he was challenged by my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) about why this matter had been put totally out of perspective in the press, he said that he was not responsible for what the press reported. However, he chaired the press conference that led to those reports. He must regret that he allowed this matter to be raised prematurely, before the Public Accounts Committee had reported. That is totally contrary to all custom, but it is the right hon. Gentleman's first year as Chairman of the Public Accounts Committee, and I am sure he will not do that again.
I am sure the hon. Gentleman will wish to be fair, in his customary manner—if I may put it so inaccurately. He will know that, if the press had been present while the evidence was being taken—it was not—everything that was said at a later stage would have appeared in the press two months later, whoever had been in the Chair. The information given to the press on that occasion was given after I had closed the meeting, so I did not say that as chairman of a press conference. I am not responsible for remarks of members of my Committee. The hon. Gentleman must understand the facts of the case.
I think that enough has been said about that. I was dealing with what happened, rather than with hypotheticals.
The right hon. Member for Heywood and Royton asked specifically about the improvement of the internal audit, which is an important matter. The Department of Energy has noted the suggestion of the Public Accounts Committee. An early review of the resources needed by the Department for internal audit has been launched, and is still in progress. The Civil Service Department, the Exchequer and Audit Department, the Treasury and the Government accountancy service have all been consulted, and any conclusions of general interest to those departments will be widely disseminated. We take this matter extremely seriously.
The right hon. Member for Heywood and Royton asked about early legislation during the next Session—a point that was picked up by the right hon. Member for Llanelli. I have not read the report, but I can give both right hon. Gentlemen the assurance that there is no question of the Government introducing new legislation to amend the Exchequer and Audit Acts in advance of receiving and considering the report of the Public Accounts Committee. I say that without hesitation or qualification.
The right hon. Member for Heywood and Royton discussed in delicate terms—but nevertheless he was weighing his words, and he attached great importance to them—the new development of the Public Accounts Committee which he wished to see under his chairmanship. He said that the dividing line between administration and policy was somewhat tenuous, and that attempts to examine one in isolation from the other were likely to be sterile. That is very much the approach that the Government have adopted in the Green Paper. I began to have doubts—I sensed that hon. Members from all parties had doubts—when he made a virtue of the Public Accounts Committee delving into and assessing the merits of different policy objectives. Generalisations in this sphere are dangerous.
I spoke about how to achieve a policy objective. A policy objective cannot be achieved without questioning a Government's right to have a policy objective, but it may be able to be achieved in different ways. If one looks at it in cost-effective terms, I think that the Green Paper recognises that point.
The Green Paper recognises precisely that the right hon. Gentleman gave as an example the case of shipbuilding, where he said that on the one hand there was apparent waste of money, and that on the other hand there were constituency interests to be taken into account. This takes us not beyond the ambit of Parliament, but beyond the proper ambit of the Public Accounts Committee, and it could weaken the position of the Public Accounts Committee in our system. The great value of the audit-based Public Accounts Committee is its non-partisan character, which it has always had, and still has. The audit-based nature of both the work of the Comptroller and Auditor-General and the Public Accounts Committee is something that we should never lose.
My hon. Friend the Member for Ux-bridge (Mr. Shersby) made a number of remarks about the Housing Corporation. In general, his words were not so much addressed to me as to the Public Accounts Committee, urging it to look into the matter. It has access to the books of the Housing Corporation, and I am sure that the Chairman of the Public Accounts Committee and others who were present today will have taken note of what my hon. Friend said.
With regard to the inter-association study, I am advised that this has not turned out to be of such great value as my hon. Friend had imagined. The criteria used by the Housing Corporation in advancing money to the housing associations include all the proper criteria which he mentioned. If there are any matters which disturb him, I suggest that he writes to my hon. Friend the Minister for Housing and Construction and asks him to look into the matter. The Department of the Environment has a responsibility in this respect, of which he will be very conscious.
My hon. Friend the Member for Horsham and Crawley referred to the longtime losers—as he called them—Rolls-Royce and British Leyland. He commended the decision of the Government to transfer Rolls-Royce from the National Enterprise Board to the Department of Industry, and I am grateful to him for that. He suggested that British Leyland should be similiarly transferred. I am sure that my right hon. Friend the Secre- tary of State for Industry will consider the matter.
At this point, it is right to pay tribute to what Sir Michael Edwardes has done for British Leyland within the existing framework, which my hon. Friend feels is unsatisfactory.
The other specific point to which my hon. Friend referred was the Polish shipbuilding order. I agree entirely with him and with my right hon. Friend the Prime Minister that that was a classic case of a waste of public money and a bad bargain for this country.
My hon. Friend also dealt with the role of the Comptroller and Auditor General. We have put forward our views in the Green Paper. But my hon. Friend was concerned specifically with the vast increase in the numbers employed by health authorities and local authorites, and he suggested that the Comptroller and Auditor General ought to be allowed to look at this area.
The Comptroller and Auditor General is responsible for the audit of the National Health Service. In recent years, the Public Accounts Committee has examined and reported on the numbers of administrative staff in the NHS. It is a matter for the Public Accounts Committee whether it considers that it is time for a further inquiry into that question.
The Comptroller and Auditor General has no standing with local authorities. Our constitutional position is such that a system of district audit has grown up separately from the work of the Exchequer and Audit Department. One of the issues in the Green Paper is whether the Comptroller and Auditor General and the Exchequer and Audit Department should be involved or whether it might be better to seek other ways of improving the local government audit on its own merits.
On the question of the Comptroller and Auditor General's right to oversee various accounts, my hon. Friend is right about the powers concerning local authorities. But one aspect of the local authorities which concerns the Government deeply is the provision of education services. That is a national service and forms the largest part of local authority expenditure. Docs my hon. Friend feel that here is a case for the Comptroller and Auditor General to have particular powers and rights of examination, considering that these are national, not local authority, powers of expenditure?
I take my hon. Friend's point. No one who has seen how local government numbers have increased over the years could in any way be complacent about the position. I am certainly not complacent. However, my hon. Friend will know, from some of the discussions which have taken place outside the House in the context of the Local Government, Planning and Land (No. 2) Bill which is going through the House at the moment, how delicate and highly charged is the relationship between local and central government. This matter requires a great deal of thought, but there are paragraphs on this subject in the Green Paper. I look forward to hearing what the Public Accounts Committee, of which my hon. Friend is such a distinguished member, recommends in this regard and to hearing its reasons.
If I am taking time in answering the debate, it is because I wish to respond to the occasion and to the special plea by the right hon. Member for Llanelli that I should reply to every point made in the debate.
My hon. Friend the Member for Folkestone and Hythe, from his special experience as, I think, the longest serving member of the Public Accounts Committee present, made some wise observations on the way that the PAC should operate. He expressed some of the concern that I have about the dangers of a change in the nature of the Public Accounts Committee. He also had some stern words for the Government. He asked whether Departments had learned the lessons of the costly failures unearthed by the Public Accounts Committee. I hope that they have. I am in no doubt that the situation would be much worse if it were not for the efforts and successes of the Public Accounts Committee.
I come now to my colleague on the old General Sub-Committee of the Expenditure Committee, the hon. Member for Nottingham, West. He made a number of points. He was concerned about the power of the Treasury over the Comptroller and Auditor General.
The Green Paper admits that certain provisions of the Exchequer and Audit Acts, which reflect an outmoded concept of the role of the Treasury, could be removed or recast in any fresh legislation. We shall be happy to see that. However, we argue that, as operated at present, the relevant Treasury powers have had no material impact on the independence of the Comptroller and Auditor General. Incidentally, the Consultative Committee of Accountancy Bodies, an outside impartial witness, when it appeared before the Treasury and Civil Service Committee on 5 March, testified that the Treasury had not used these powers and that the Comptroller and Auditor General had had total independence. I think that is correct.
The Green Paper also indicates that the Government are ready to consider dispensing with CSD control of the staffing and grading of the Exchequer and Audit Department's staff in favour of control by the House of Commons Commission. I hope that that goes some way towards meeting the points made by the hon. Gentleman on that matter.
The hon. Gentleman also asked, and intervened a little while ago to remind me that he had asked, about the comptroller function. This has come to be a trivial function in the way that our systems work. I know that it appeals to his tidy legal mind, but the fact that it is a comptroller function means that it is a sort of pre-audit by which the Comptroller and Auditor General examines control over the vires from the Consolidated Fund to the National Loans Fund. It is important, but chiefly in a formal sense. It is largely automatic. That is why it was not mentioned in the Green Paper.
I am grateful for that startling piece of information. Every textbook on constitutional law points out that the sole safeguard of the House of Commons in its control of the Executive is the Comptroller and Auditor General's certification that money may properly be paid out of the Exchequer account of the Bank of England to Departments of State under the authority of Parliament. This is now described as trivial.
The point that I was making earlier, when the hon. Gentleman was momentarily out of the Chamber, was that the Comptroller and Auditor General, who has no lawyers to help him to determine whether the expenditure is legal, had to have an Act of Parliament passed to rectify the errors of every Comptroller and Auditor General in allowing money to be paid to the Crown Agents illegally.
Reality sometimes transcends the descriptions in the textbooks. I am concerned, as the whole House must be, about the dangers of public expenditure getting out of control. There are many reasons why public expenditure can get out of control. However, the one reason why it can get out of control is not the defect in the technical comptroller aspect of the Comptroller and Auditor General's work.
If the hon. Gentleman has some suggestions to make, we shall be more than happy to receive them. The fact that there is no mention of this issue in the Green Paper does not mean that we shall reject the suggestions that he has to make. I am sure that the Public Accounts Committee, too, would be more than happy to accept his suggestions on this front and weave them into its report on the Green Paper.
The hon. Gentleman referred to the position of the Northern Ireland Comptroller and Auditor General. The basic reason why he remains separate is a technical one. I am sure that this will appeal to the hon. Gentleman's tidy legal mind. The reason is that the Stormont Parliament has been not abolished but suspended.
I have already referred to part of the speech of my right hon. Friend the Member for Taunton. He, too, said that he would like to see the Comptroller and Auditor General more independent of the Treasury. I have already referred to that issue in my answer to the remarks made by the hon. Member for Nottingham, West.
The Minister has not answered the other part of my question about the Comptroller and Auditor General for Northern Ireland. I am aware that he is a separate person and that Stormont has been suspended and not abolished. However, how did he come to be reporting to a Committee of this House?
There was no other Committee to whom he could report. I thought that was fairly clear. I am glad to say that hon. Members who repre- sent Northern Ireland constituencies seem well content with the arrangement. My hon. Friend the Minister of State, Northern Ireland Office intervened specifically to deal with Northern Ireland matters.
My right hon. Friend the Member for Taunton spoke about the importance of the merger of the cash limits with the Estimates. This may mean that Supplementary Estimates will take on a new meaning. It is a thoroughly good development, and it is now up to the House to find some means of taking advantage of the opportunity to exercise surveillance over public expenditure in a way that it has not found possible hitherto.
I have great sympathy with the argument that parliamentary surveillance is inadequate. However, that is a matter not for me but for those who are responsible for the procedures of the House. As the hon. Member for Heywood and Royton implied when he advanced his suggestion of a Grand Committee system, it is a matter that concerns the procedures of the House and one that should be discussed in those channels that are responsible for arranging our procedures.
My right hon. Friend the Member for Taunton gave us something of a curtain raiser for what I assume he wants his Committee, the Treasury Committee, to do in future. He said that the Public Accounts Committee was in some sense an hors d'oeuvre to a somewhat wider investigation into Government policy and expenditure. I wish him every success in the development and evolution of his wider inquiry.
The right hon. Member for Llanelli spoke from the Opposition Front Bench. I have already dealt with the issues of Civil Service pay this year, and legislation on the Green Paper. The right hon. Member said that the Treasury should not be suspicious of the Comptroller and Auditor General and the Public Accounts Committee. We are not suspicious of them. I am sure that the right hon. Gentleman must know, as a former Treasury Minister, that we regard the Comptroller and Auditor General and the Public Accounts Committee especially as among the few allies that the Treasury has in the House. We cherish that relationship.
The right hon. Gentleman said that he would like to see the Comptroller and Auditor General's remit extended to local government. I have already dealt with that issue. He also said—I did not quite understand this—that he would like it extended to cover efficiency and value for money. That is precisely what the Comptroller and Auditor General and the Public Accounts Committee examine now.
|Division No. 279]||AYES||[8.35 p.m.|
|Barnett, Rt Hon Joel (Heywood)||Hordern, Peter||Ross, Stephen (Isle of Wight)|
|Bonsor, Sir Nicholas||Hunt, David (Wirral)||Shaw, Michael (Scarborough)|
|Boscawen, Hon Robert||Jenkin, Rt Hon Patrick||Shersby, Michael|
|Bottomley, Peter (Woolwich West)||Joseph, Rt Hon Sir Keith||Squire, Robin|
|Carlisle, Kenneth (Lincoln)||Kilfedder, James A.||Stevens, Martin|
|Chalker, Mrs. Lynda||Lawson, Nigel||Stewart, Rt Hon Donald (W Isles)|
|Chapman, Sydney||Lester, Jim (Beeston)||Stradling Thomas, J.|
|Cope, John||MacKay, John (Argyll)||Townsend, Cyril D. (Bexleyheath)|
|Costain, A. P.||Major, John||Waddington, David|
|Davies, Rt Hon Denzil (Llanelli)||Maude, Rt Hon Angus||Walker, Bill (Perth & E Perthshire)|
|Dean, Paul (North Somerset)||Moore, John||Wells, Bowen (Hert'rd & Stev'nage)|
|du Cann, Rt Hon Edward||Myles, David||Wheeler, John|
|Finsberg, Geoffrey||Newton, Tony||Whitney, Raymond|
|Fletcher, Alexander (Edinburgh N)||Page, Rt Hon Sir R. Graham||Wilkinson, John|
|Gow, Ian||Powell, Rt Hon J. Enoch (S Down)||Wolfson, Mark|
|Griffiths, Peter (Portsmouth N)||Prior, Rt Hon James|
|Grimond, Rt Hon J.||Pym, Rt Hon Francis||TELLERS FOR THE AYES:|
|Gummer, John Selwyn||Rees, Peter (Dover and Deal)||Mr. Spencer Le Marchant and|
|Hamilton, W. W. (Central Fife)||Rhodes James, Robert||Mr. John MacGregor.|
|Atkinson, Norman (H'gey, Tott'ham)||Richardson, Jo||TELLERS FOR THE NOES:|
|Ellis, Raymond (NE Derbyshire)||Soley, Clive||Mr. Jim Marshall and|
|Haynes, Frank||Stallard, A. W.||Mr. Andrew F. Bennett.|
|Orme, Rt Hon Stanley|
That this House takes note of the First, Second, Third, Fourth, Fifth and Sixth Reports, and the First and Second Special Reports from the Committee of Public Accounts in the last Session of Parliament, and of the First, Second. Third and Fourth Reports from the Committtee of Public Accounts in this Session of Parliament, and of the Treasury Minutes, and the Northern Ireland Department of Finance Memorandum on those Reports [Cmnds. 7631, 7788, 7787, 7824 and 7882], and of the Fifth, Sixth, Seventh and Tenth Reports from the Committee of Public Accounts in this Session of Parliament.