Motion made, and Question proposed,
That this House takes note of the 10th to 24th and 26th to 35th Reports from the Committee on Public Accounts of Session 1983–84. of the 1st to 25th Reports of Session 1984–85 and of the Treasury Minutes and Northern Ireland Department of Finance Memoranda on those Reports (Cmnd. 9226. 9325. 9368, 9373, 9452, 9464, 9530, 9546, 9587, 9638 and 9639), with particular reference to the following Reports: —
We are today introducing a new form of debate, so that seven of the reports with which we shall be dealing w ill be highlighted because we feel that they should show the particular interest of the Public Accounts Committee or that there are lessons be learnt, or that they express some of the concern that can best be shown by dealing with these reports.
The last debate on PAC reports took place on 20 March last year, when 46 reports were debated. We had a debate on the De Lorean report on 1 May, and in this interim debate. rather late in the Session, we are discussing 51 reports and 11 Command Papers in reply. When discussing the matters contained in the reports, we do not exclude any of these 51 reports. They can form the subject of an intervention by any hon. Member. We took this step because earlier this year there was a debate on premature retirement from the National Health Service, which formed the subject of one of our reports. A large number of hon. Members were interested in the report and we thought it right to highlight the points which ought to be debated. I am grateful to the Leader of the House for initiating this new form of debate.
It is my pleasant duty to thank my fellow members of the Committee, an impressive number who work far more assiduously than was the case when I first became a member of the Public Accounts Committee about 20 years ago. The House owes a great deal to the hard work done by hon. Members who debate, discuss and examine all these matters over a long time and deal with a formidable amount of paper.
All of our reports are unanimous. This forms the strength of the PAC reports. After questioning witnesses and discussing the draft reports, party differences are subsumed in the interests of achieving better administration and ensuring that value for money is obtained. When it is not obtained, we do not hesitate to say so. The PAC is one of the most demanding of the parliamentary Committees. Its future programme of work, which we shall shortly be discussing, will not make the Committee's task any easier in the months ahead.
My next pleasant duty is to thank the Comptroller and Auditor General and his staff in the National Audit Office—Sir Gordon Downey and those who work with him—for the work that they do and for their reports. The new Green Paper reports go into these matters in much greater detail than was previously the case. The reports are agreed with the Departments. That is their strength. Therefore, a basis of fact is established. The questions put by Committee members are based upon that basis of fact.
I thank also the Clerk of the Committee, John Rose, and his assistants; Mr. Calvert, the Comptroller and Auditor-General for Northern Ireland, who did noble work in the De Lorean matter; the Treasury officer of accounts, Mr. Judd; and the witnesses who appeared before the Committee.
Each year the Government spend about £130 billion. The PAC looks at about two-thirds of that amount. Our main task is to ensure that the money is spent upon the purposes intended by Parliament and that it goes to the right destinations. Control is effected by reports from the National Audit Office which form the basis of our investigations. I have already referred to the fact that these have been expanded and that the National Audit Office investigations are presented to the Committee and to Parliament as a whole in a much more dramatic way.
The PAC is called the watchdog of Parliament. It is not a label that I like very much, but it is a passable description of the work that we do. Occasionally the Committee bites a little, but its essential function is to warn and, more recently, to encourage. It tries to encourage those Departments that are doing certain things right, rather than each time to produce a negative response. The Committee examines how public money is spent and takes evidence from the Departments of State, based on the reports of the Comptroller and Auditor General, who has immediate and direct access to the accounts. The right hon. Member for Chelmsford (Mr. St. John-Stevas) in 1983 introduced an Act under which legislative authority is provided for value for money examinations.
How does the Committee evaluate the effectiveness of Departments? First, we require a clear objective, with estimated financial expectation, to be set out in detail. Next, we ask for monitoring to be incorporated into the scheme, as originally devised, so that if matters do not turn out as planned the earliest possible warning can be given. As a result, we should be able to compare performance with objectives and therefore be able to evaluate the success or otherwise of the scheme.
All of this seems to be fairly obvious, but there have been startling instances when none of this has been implemented for schemes costing many millions of pounds. In the case of premature retirement from the National Health Service, no clear objective was laid down about the number of administrators who would be retiring and there was no means of monitoring the number of those retiring. We were unable, therefore, to establish how many administrators had retired prematurely. This was a glaring example of something that had gone wrong.
My next point concerns the value for money examinations that we undertake more frequently than was previously the case. The value for money requirement calls for much greater judgment than ordinary certification work, which involves checking that money has been used for the purposes for which Parliament intended it to be used. The reputation of the Committee is more difficult to maintain in this respect. Consequently, we rely upon the judgment of the members of the PAC.
This is a very interesting aspect of the Committee's work. However interesting this aspect may be, and however many new avenues are opened up to it, the essential work of checking fraud has to continue. This must always remain the most important part of the Committee's work. It is even more important now because of what is regarded as lower morale, here and there, in the Civil Service. All too frequently civil servants are regarded as those who are unable to succeed in the more important private sector. The reduction in the size of the Civil Service also means there is much less possibility of advancement. Given the state of industry, in particular the construction industry, there is the twin danger of dissatisfied, underpaid civil servants dealing with desperate private contractors.
We must ensure that the standards of probity in our public life, of which we are rightly proud, are retained. Nevertheless, we have to recognise that civil servants face a greater challenge than any with which they have been confronted during the past 100 years. Therefore, it is all the more important to remain vigilant and to treat with adequate severity any failings that come to light.
A criticism that is frequently levelled at the work of the PAC is that it makes civil servants extra careful and that it destroys initiative. It is said that civil servants are cautious, and they are compared unfavourably with managers in the private sector. The comparison is often unfair. Private industry has a simple device for measuring success—profitability. Industry is very good at selling whatever product it wishes to offer for sale. Most of its activities are subordinate to its marketing function. It benefits from a certain degree of aggressive behaviour. This appeals to very many people, who tire of the more objective attitude adopted by civil servants. By comparison, civil servants appear to be laid back.
Those with experience of private industry know about the inefficiencies in its administration. To be fair, efficient administration is not its first priority. Its first priority is to obtain orders and to increase its market presence. However, when dealing with private industry Ministers spend much of their time with the more thrusting characters and come to admire them. They come less frequently into contact with the more inefficient parts of private industry. Often, administration in the Civil Service is compared unfavourably with business practice, but we are never comparing like with like. We should be aware of that.
The National Audit Office has now been established for two years. Its task is to obtain economy, efficiency and effectiveness. The relationship between that office and the Public Accounts Committee is not only close, but they mutually trust one another. We work closely together. What we have to do is to compare achievement with outturn, monitoring at the outset any piece of work that is put before us.
Two questions need to be answered about the watchdog functions of the Public Accounts Committee. Should not a good watchdog bite the occasional burglar, or, in similar terms, should not heads roll from time to time? The next question, which is not unrelated, is how far should civil servants take responsibility for the decisions of their Ministers? We know full well that Ministers have the supreme excuse that they can say that they took over a piece of work that had been initiated by another—"I took over a hopeless project. If only I had been there at the beginning it would have been splendid and I could have organised it properly." If a Minister initiated a project, he might say, "If only I had been able to continue it, it would have been splendid." That illustrates the problem of bringing Ministers to book before the Committee.
One of the most hopeless cases to defend was defended in such terms when my right hon. Friend the Member for Barnsley, Central (Mr. Mason) tried to assert that everything done about De Lorean was done correctly and well—a view with which the Committee unanimously disagreed.
In regard to the relationship between civil servants and Ministers, civil servants may write a note of dissent absolving themselves from decisions by their Ministers, but that is a matter of last resort. The relationship between civil servant and Minister would move from incompatibility to something approaching hostility if that were done. Therefore, few notes of dissent are written, or perhaps I should say that few such notes are actually delivered. Heads cannot be expected to roll, but lessons can still be learnt.
There are cases where the fault lies at the door of one or more individuals. In such cases, should not action of a more direct kind be taken than put the known black mark against the career of the person involved? If action were taken, would the service be improved thereby, or would the action just satisfy the desire for blood? Those are questions upon which the Public Accounts Committee ponders and which the whole House might consider.
I am grateful to the right hon. Gentleman, to whose distinguished chairmanship of the Public Accounts Committee I pay tribute. In regard to the relationship between the Civil Service and Ministers and possibly a defensive attitude, will the right hon. Gentleman confirm that criticism by the Public Accounts Committee can lead to great improvement? A classic example is the Wardale report on corruption in the Property Services Agency. A hostile report from the PAC undoubtedly produced a considerable improvement, as the PAC itself said in its latest report.
The hon. Gentleman is undoubtedly right. The hon. Gentleman, who is a most assiduous and distinguished member of the Committee, had much to do with that.
Our task is not just to search for scapegoats, but to improve administration and to make sure that when Parliament votes money for certain projects that money is spent in the most economic, efficient and effective way and that the House gets value for money. We act on behalf of the House to ensure that its wishes and needs are protected. It is a tribute to the Committee as a whole that we have an understanding of how these things work in practice. Instead of pursuing legalistic methods of examination, we carry out our work with an understanding that is the hallmark of the Committee.
The 13th report, 1983–84, on vehicle excise duty showed that there was a large amount of evasion that was difficult to measure. In 1977–78 the Department of Transport made an examination which showed that 7 to 9 per cent. of motor cars and 10 to 13 per cent. of goods vehicles and motor cycles evaded tax. The loss of revenue was computed at £135 million to £174 million out of a total of £1,800 million collected in tax in 1982–83. I understand that the estimate has been reduced, and we should like to examine the matter to see whether that is so.
The Department of Transport gave up trying to get anything like full compliance with the law as it existed. It decided in 1980 to settle on the basis of 60 per cent. of cases brought in London and 80 per cent. elsewhere. In 1983, 1,185,000 offences were reported and only 253,000 people were prosecuted or penalised. That was an improvement on 1982. The average fine in 1983 was £33·60, compared with a maximum fine of £425 which the courts could impose. The Department sees no prospect of getting anything like full recovery of the missing revenue.
Alternatives to the method of tax collection are continuous liability or an increase in the duty on petrol. Another option would be to impose the fine on the possessor of the vehicle rather than on its user. Out of a total of 20 million vehicles on our roads, 2 million are without licences. The figure of more than 1 million offence reports suggests that die total number of offences is larger.
We welcome the Department's change of mind in its decision to undertake a further survey on evasion. It cannot be right that the penalties make evasion so profitable when we set a fine of £33·60 against the current licence fee of £100 and remember that that applies only when the offence is known and only when the offender is successfully prosecuted. The odds are too great and the mathematical advantages of non-compliance are far too attractive.
My right hon. Friend will be pleased to hear that a survey has been carried out. The Government's statistical office published the results last December. Those results are encouraging. They show that there has been a substantial reduction in evasion, with the best estimate being that it is only 4 per cent. of the total, and lost revenue of roughly £90 million per annum. Surely that must reduce the force of the suggestion in the report that alternative means of raising the revenue should be considered.
I am glad to hear of some improvement, but the matter comes before the Public Accounts Committee so often that I hope the optimism engendered by those comments will be justified. Meanwhile, we note the low number of people prosecuted even when reports are made. I look forward to a contribution to the debate by my hon. Friend, if he is able to make one. We shall listen to him with great interest because of his constituency involvement with the Swansea vehicle licensing centre.
The 17th report of the 1983–84 Session deals with the sale of Government shareholdings in publicly owned companies. It deals with the sale of 51 per cent. of Britoil in November 1982, and 49 per cent. of Associated British Ports Holdings in February 1983. In 1981–82 the previous Committee was concerned about the prices at which British Aerospace and British Petroleum had been sold. The Committee called for a review of the arrangements which had allowed large profits to be made at the taxpayers' expense. We note that in both cases the sales method used was to dispose of 50 per cent. in one operation, and we asked that proper consideration should be given to a phased release of shares.
We were concerned that in settling the terms of the offer the Departments relied heavily on the advice of merchant bankers who were also involved in the underwriting. Such dual involvement provided an incentive to set a price which would ensure that the flotation was fully taken up. The Committee considered that the Departments should not rely too heavily on merchant bankers who have an underwriting interest in the sale. Since then there has been further privatisation and substantial profits have been made by those involved. Those matters are likely to come before the Committee in due course.
Policy does not concern the Public Accounts Committee. At all times we are anxious to see that if there is a sale of Government property, national property, whatever it may be, full value is obtained for the taxpayer, on whose behalf we act.
Regional industrial incentives are the subject of the 21st report of 1983–84. At present, there are three categories of assisted areas special development, development and intermediate areas. Those cover about 28 per cent. of the working population. The regional development grant gives, under true capital expenditure programmes, levels of 22 per cent. payment in special development areas, 15 per cent. in the development areas and nothing at all in the intermediate areas. The RSA is a discretionary payment that can apply to all areas.
In 1981 the previous Committee thought it was time that proper objectives were set for regional assistance, and progress towards them was measured. The major task is to get the highest possible number of jobs in the regions. Of course, due regard must be paid to the amount of money spent. and to do that it is essential to have comprehensive information, and we call for that in paragraph 24 of our report. We know about the Department of Trade and Industry's proposals for initial surveys of the use of incentives and the qualitative indications of cost, but we doubt whether those go far enough. We have not yet been told whether more or fewer jobs will be created under the revised policy, or what the cost will be. What particularly concerned the Committee was that a full review of the effectiveness of revised incentives would be available only five years hence. We need to have a fuller understanding of the effectiveness of the new proposals long before that.
Regional policy has become even more important in recent years, and better forms of monitoring must be made available to the House. Regional policy depends on its success being measured and we need an assurance about that. I was pleased to see in the Treasury minute, which I received on Monday, that new surveys are being proposed which, on the face of it, appear to go some way towards meeting the demand of the Public Accounts Committee for some information against which it can judge the effectiveness or otherwise of the Government's action in this important matter.
The 33rd report of the 1983–84 Session deals with the economy of stores support. The Ministry of Defence has stores held centrally with a value of £5 billion. The Committee considered that the figures suggested a general level of overstocking. We have made that point again and again over the years, and it has always been denied. This time we had the unique advantage of benefiting, if that is the right word, from a major disaster. In 1983 there was a major fire at the central ordnance depot in Donnington, which destroyed stocks with a book value of £169 million. The Ministry decided to replace only £54 million-worth of the stocks that were lost. Why did it not replace the whole of that £169 million-worth? That was the most interesting question of all.
The Ministry of Defence felt that some of those stocks were not important. The Ministry's answer to why it did not buy all these stocks again seemed to us to be wholly inadequate. We asked for the basis of the assessment of what was required and, as we state in our report. the Ministry seemed to view those excess stocks with some equanimity. The Committee was concerned that more than two thirds of the Donnington stocks did not need to be replaced. What is the basis of need for the central depot stocks that exist in other parts of the country?
Invisibles are stocks that are held not centrally but in various sheds and hangars in different parts of the country. Only the RAF knows what it holds locally. It holds £900 million-worth. The Royal Navy thinks that it holds about £270 million-worth, and the Army has not a clue. That cannot be right when we are dealing with £5 billion-plus of what we call invisibles, because we do not know how many there are. It cannot be right that there is such lax control. That laxity of control was denied again and again, as we were able to show in the case of the Donnington fire.
There are two important aspects of this overstocking. First, there are the interest and storage charges on surplus, and with £5 billion-plus worth of stocks interest charges alone amount to much more than £500 million a year. The second point is that excess stocks mean greater deterioration and more rapid obsolescence. It is the easiest thing in the world to over-order just to ensure that there is always enough. In certain stores that policy may just be acceptable, but it is certainly not acceptable in the generality of supplies.
We note with interest that there will be a review of stock holding and that it will not be inhibited from examining the need for separate supply organisations for each of the three services. There may be a chance of merging some of those activities. I understand that the review is nearly complete, and we may return to this matter at the end of the year.
The 6th report of 1984–85 deals with the housing benefit scheme. There used to be two different schemes which provided assistance with rent on the one hand and rates on the other, and those schemes caused problems for local authorities and the DHSS. Under the consultative document that was issued initially, the predominant spur to reform was that the scheme would be easier for claimants to understand, easier to operate and would have a third advantage of reducing the work of the public sector manpower. However, claimants found the scheme difficult to understand, it has been difficult to operate and a significant number of claimants have had to apply to more than one office to get their full entitlement. In addition, the scheme has not produced public service manpower savings. That fact emerged ever more clearly as time went on.
The explanatory note to the Bill that introduced housing benefit said that it was expected that local authorities would require 1,500 or 1,600 more staff, but that there would be fewer civil servants. In practice, although there was a net reduction of 1,900 Civil Service staff — a reduction of 2,400 plus an extra 500 because of increased take up—the number of local authority staff increased by 3,500. The requirement for extra staff has been double what was expected.
Far from an overall reduction of 800 in the number of Civil Service and local authority staff, there has been a net increase of 1,600. Those were the figures at the time of our investigation. They may have changed a little, but my information is that the position has not improved much, if at all.
We were worried because the new scheme was introduced in great haste and so many problems arose that the Secretary of State found it necessary to set up an independent review in the very first year. Local authorities had not been effectively warned of the complexity and volatility of the cases that the DHSS was handing over to them, and proper investigations were not made into the ability of local authorities to cope with the increased work load. It is axiomatic that the operational implications and costs of new schemes should be considered in detail before their introduction, but that clearly was not done in this case. Nothing like this must ever happen again. Many people ought to be ashamed of introducing such a scheme with so little preparation.
The Committee's ninth report deals with the monitoring and control of nationalised industries. The Committee regrets that the National Audit Act did not extend the powers of the Comptroller and Auditor General to nationalised industries. Unfortunately, the industries did not understand the way in which the PAC works. They thought that we would be busy querying all their commercial decisions. In fact, the Committee wants to know whether the decisions are commercial decisions and are not the results of arm twisting by the Government. In that way, the PAC would be the natural ally of the industries.
Of course, not all the decisions of nationalised industries will be commercial decisions. We would see which were commercial decisions and try to promote the advancement of commercial understanding as their main preoccupation. If some decisions were not commercial and the Government wished industries to adopt a course that cost money, the cash for such purposes would have to be found separately. That could be done by payments such as those made to British Rail for commuter services.
The Public Accounts Committee is exactly the right body to understand the division between business requirements and political realities. Not many organisations are able to combine those two difficult functions, but the PAC can do so.
The nationalised industries should have welcomed the involvement of the PAC, as should the Government, because we could have separated some of the decisions that the Government have to make when they resort to the not very happy solution of twisting the arms of nationalised industries rather than understanding that, if nationalised industries are to be successful, commercial realities should be a priority. The omission of such matters from the National Audit Act was a lost opportunity and I believe that eventually we shall have to return to this subject.
I wish to make special mention of the normal controls of nationalised industries, which are extensive and involve control of the corporate plan, monitoring of returns, setting financial targets, performance indicators, appraisals of investment, and the setting of external financing limits and prices.
We are regularly concerned about the function and operation of those controls and how efficient, effective and worthwhile such procedures are in nationalised industries' pursuit of their objectives. We are seeing that the role of EFLs is conflicting with other objectives. The Department of Trade and Industry told us that unless the EFLs were firm limits they had little purpose. But if they are firm limits, what happens to all the other controls? The DTI seemed to support the Treasury view that EFLs take priority.
The Department of Energy had some reservations about the primacy of EFLs, and it was apparent to us that there was a divergence of view that needs to be resolved. A serious issue is at stake. If the EFLs are the dominant controls, where does that leave medium-term planning? Not only are nationalised industries shackled by undercover political involvement, but even when they have a sensible plan for development, which might be readily financed in the private sector, because it is profitable, right and sensible, if the EFL is tightened, the plans of those industries will have to be recast from year to year and perhaps even more frequently. That cannot make sense in the operations of our nationalised industries.
The 17th report of the PAC for 1984–85 dealt with the general dental service. Dentists in the service are paid on a piecework basis for the various forms of treatment. Fees are set to cover average practice expenses and to provide an average net income agreed by the Government. The gross annual income varies widely. In 1983 the average was £42,000, but the income of individual dentists ranged from almost zero to, in one case, £225,669.
Millions of claims are submitted each year to the Dental Estimates Board without independent verification. The amount of paperwork is so voluminous that the board cannot deal with it in anything like a proper way. Because of that, it has been suggested that there is a substantial blank cheque element for dentists in the present arrangements.
We asked the DHSS what steps it took to investigate the high earnings of some dentists. The Department told us that expensive treatments required prior approval, but it had no information on whether unnecessary dental treatment was widespread and accepted that it was ultimately dependent on the integrity of the profession.
The Department and the profession are worried that a small minority might bring dentistry into disrepute, and they have persuaded Ministers to set up a committee of inquiry to examine the extent of unnecessary treatment within the general dentist service. The Department has also advanced to 1985 the date for the installation of a computer that will be able to check the records of dentists. Because of the wide differences in earnings, that is a sensible move, and it is another example of how the PAC operates. We do not merely produce reports and ensure that they are acted upon, as they usually are. Often, Departments anticipate our work when they know that we are interested in a certain subject and they try to find a solution or anticipate our conclusions before we produce the report. This is also valuable and indicates the useful way in which we are able to work with Departments.
There are just two other reports besides those mentioned on the Order Paper which I need to cover briefly because they raise general principles, besides being important in themselves.
The first is the 13th report of 1984–85 on the Forestry Commission. There is one important question here which really must be brought to the attention of the House. When sales of land are made by the Forestry Commission, there is no disclosure, following the sale, of the price realised. In ordinary circumstances, such concealment might be found difficult to justify. In the light of the sale of Hamilton college of education for what amounted to little more than a song, there is something seriously amiss with a policy which allows the sale of public assets without the public knowing anything about the price realised.
We were quite unconvinced by the Forestry Commission, which felt that secrecy was the best way to get the best price. It might be acceptable in the private sector, but when we are dealing with public assets, even if there were to be some diminution in the price, which I cannot accept without further information, there is a need for public disclosure, because this is the only way in which we can be assured that everything is as it ought to be in this very troubled world. We intend to return to this matter.
The other is the 24th report of 1984–85, on the dockyards. In April this year the Government published a document on the future of the royal dockyards. Three options were suggested: a trading fund, commercial management—the Government's preferred option—and privatisation. Mr. Levene, then the personal adviser to the Secretary of State for Defence, and now the chief of defence procurement, proposed that firms should tender for the exclusive use of facilities, and the rest of the Navy's programme would be open to competition. There are more details of the scheme, but our criticism centres on the assessment of the savings put to us.
The evidence that we took was among the weakest that we have received during this Parliament. The calculations given provided us with no valid basis on which to judge whether any increase in efficiency would result from the Government's preferred option. We noted that the net saving might be as little as 3 per cent. of operating costs over a 10-year period. Meanwhile, there are certain interim measures that are being implemented and savings of 2 per cent. are expected here. So the situation is that, over and above the interim measures, a figure of 1 per cent. minimum net savings is expected.
It is on the tenuous basis of savings of 1 per cent. that this is the preferred option. When challenged, the Ministry of Defence stated that the prospect of a major change ahead was a discipline for the Ministry of Defence to be encouraged to achieve the savings. Would that such disciplines proved effective everywhere. We asked that the information on expected savings be much more reliably based than that which has been given to us.
We work continuously. Members of the Public Accounts Committee retain their enthusiasm and their desire to improve the efficiency, the effectiveness and the economy of the public administration and remain determined to get value for money. Most important, the Committee continues to undertake its duties to the House.
I must straight away congratulate the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) on the way in which he has presented our case this afternoon, covering a tremendous amount of ground very lucidly and bringing out the important points that were so often the centre of our discussions. We all join my hon. Friend the Member for Rutland and Melton (Mr. Latham) in paying tribute to him for the way in which he has conducted our proceedings.
There is no doubt that year by year—and I have been on and off the Public Accounts Committee for some time —the character of the Committee has changed, not out of recognition but considerably. There is no doubt—and it is partly due to the chairmanship in recent years—that the members of the Committee have had much more say and been encouraged to make far greater contributions to our proceedings. I believe that to be right.
Undoubtedly, a new era came into being after the new legislation and the new status of the Comptroller and Auditor General. We are now receiving much fuller reports and, of course, the scope of our work is widening greatly. We should also give credit to the Comptroller and Auditor General and his staff for the work that they are developing because we are still in the early stages of what that department will become. This is not just creating departments for the sake of it; it is for a very real and necessary purpose—to try to ensure that not only is money properly spent, in the old-fashioned sense of the word, but that value for money is achieved.
Going hand in hand with the increased expertise of the Comptroller and Auditor General, and, dare I say, the continued enthusiasm of the Public Accounts Committee looking into the reports presented to it, is the improved expertise of the staff in the Departments. This, too, is important. We dealt with it the last time that we had a full debate on the Public Accounts Committee, so I will not go into it again now, but I hope that we continue to see this improvement in the expertise of the staff dealing with accountancy matters.
I agree with my hon. Friend the Member for Rutland and Melton and rather disagree with the right hon. Member for Ashton-under-Lyne because I believe that our work, far from disheartening civil servants, encourages them. Above all, it encourages better management, because one of the failings within the Departments is that the leaders take too much interest in policy and too little in expert management. The more we encourage good management, the greater service we are doing for the whole of Government activity.
I picked up this vast bundle of papers that we had to look at. Our Chairman was not too disheartened. This afternoon he had clearly recovered from the shock of going over that volume of paper once more. Year by year the volume of paper plonked on our desks, to be read before the next meeting, seems to get bigger and bigger. We do our best, and I hope that the Chairman will not chide us too much if occasionally we have failed to read all the documents before the start of the meeting. Nevertheless, that better documentation and the better reports that we receive from the Comptroller and Auditor General help us in our work and lead to better reports from the Committee.
I do not wish to go into great detail on these reports, but there are two in particular on which I should like to touch. The 33rd report for the Session 1983–84 deals with the economy of store support at the Ministry of Defence. We had an interesting interrogation, and the report is typical of our work. The subject is routine, but it changes in character and is complex. The store problem in the Ministry of Defence is unlike any other store problem. Not many industrial concerns will experience the same problems, which are caused by the changing needs of our forces, the tying together of the different services and the linking of our forces with NATO forces. All such considerations remain constantly under review.
The report rightly makes some criticisms. Our report and the report by Mr. Levene make it clear that much expertise is involved in store keeping by the services. Like all human endeavour, this endeavour is not always perfect. It was right for us to voice our objections and criticisms.
I welcome Mr. Levene's appointment. Originally he was the Secretary of State's personal assistant. An important matter is involved. In a discussion on 13 March we heard that the basis for certain actions had been contained in a letter from the permanent under-secretary of state. We asked why that letter had not been made available to us. The permanent under-secretary, in a letter which was presented to us on the day that we sought to investigate the matter, told us that
Mr. Levene presented his report on stockholdings and re-provisioning procedures to the Secretary of State for Defence on 26 June 1984.
That means that a report existed. He went on to say:
We regard Mr. Levene's Report as helpful and constructive and are reviewing policies and procedures in accordance with its recommendations.
There was a report, and it was being acted upon.
The question was whether such reports should remain confidential to the Secretary of State. The discussion in Committee was lively, and it confirmed what I believe to be the right decision. It confirmed that, although it was reasonable that any advice given while the Secretary of State was making up his mind should be confidential, when a decision was finally made and the reasons for that decision are stated to be a certain report, that report should be available. Sir Gordon Downey set out the position clearly when he said:
As Sir Clive has pointed out I have thought it right and reasonable that the National Audit Office should have access to these papers at some stage because otherwise I do not see that I am in a position to give this Committee any assurance about the conclusions reached and the basis on which decisions have been taken. It is a convention which has been accepted by the Committee that information provided internally by officials—although I do not think Mr. Levene was an official at the Ministry at the time but by analogy the same may apply—to Ministers would not necessarily be provided as such to the Committee. But access to those papers by me at least provides the Committee with some assurance if I can look at them on the Committee's behalf.
The Chairman agreed with that on our behalf. I should like the Minister to confirm that that general principle is accepted by the Government.
The 21st report for the Session 1984–85 deals with the Export Credits Guarantee Department. Can the Minister confirm that borrowings from the Consolidated Fund are likely to peak at about £1,000 million before starting to fall? That expectation is voiced in the report and in the evidence. Does the Minister have a clearer picture now?
There was a difference of opinion between the Treasury and the ECGD about the way in which the ECGD draws up its accounts and how they are dealt with by the Treasury. Any amount which needs to be borrowed by the ECGD has to be shown in the accounts. We wanted to know how this would be shown by the Treasury. The answer is that the impact would eventually show up in the public sector borrowing requirement.
The evidence seemed to show that there was not entire agreement about the sums involved. I put questions to Mr. Gill and to Mr. Judd of the Treasury and received an answer in part from Mrs. Case, who said:
ECGD have to make provisions because they draw up their accounts on a commercial basis. Of course the Treasury has to take account of the sort of figures Mr. Gill has been describing, in terms of drawing up the Budget forecast because those cashflow figures have an impact on PSBR.
I said that that was what I understood. When I asked whether she would accept Mr. Gill's figures, she said:
We are still discussing them with him. The sort of figures he is describing are the figures which are currently being assessed and being taken account of in the Treasury.
Presumably discussion has now taken place and finality has been reached. Do the ECGD and the Treasury agree on the figures necessary for calculating the PSBR? If there is a difference of opinion, whose opinion will prevail—that of the Treasury or that of the ECGD?
Do the objectives of the ECGD still remain the same? I understand that the Government are determined to ensure that British exporters have at least the quality of assistance that is available to their foreign competitors in seeking foreign orders. I fully support that. I have always opposed free trade, but I am strongly in favour of free and fair trade. When I say "fair trade", I mean trade that is fair to the British trader, because I know jolly well that every other country will do all that it can to look after its own citizens. Is it now part of Government policy to use ECGD, where necessary, to place the British exporter on level terms with his foreign competitors? If so, what are the arrangements, if any, for disclosing that fact in the accounts of the ECGD?
In conclusion, although the work that we do in the PAC is often not very glamorous—it involves going over old subjects time and again to see what has happened, what is happening and what is going to happen—unless that work continues to be done to the best of our ability, I believe that shortcomings will go undiscovered and the Government and the taxpayer will be the losers.
The Public Accounts Committee is the senior Committee of the House. As the hon. Member for Scarborough (Sir. M. Shaw) said, its work is often unglamorous, unsexy and unsung. It is perhaps rather sad that, despite all the good work done by that Committee, as evidenced in the large number of reports before us today, there are not more hon. Members, particularly those who are not members of the Committee, participating in its work today.
I sincerely congratulate the Chairman and members of the Committee, who produced these most worthwhile reports. I was also pleased to note that there is a new breath of democracy in the proceedings of the Committee. I congratulate not only the members of the Committee, but the Chairman who, both generally and in his presentation today, has added enormous credit to this non-partisan Committee which works very hard indeed on behalf of the British taxpayer.
I was tempted to stray into consideration of a number of the Committee's reports—in particular, that on the management of the overseas estate, the 15th report, and the second report of 1984–85 on diplomatic manpower. It is true that the crude percentage reduction in the budget of the Foreign and Commonwealth Office has, in a number of cases, had very adverse effects on the quality of our overseas representation. Similar considerations apply to the British Council and other overseas matters. I will. however, avoid that temptation and spend a short time on a matter which, as my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) kindly pointed out, has a certain constituency interest for me—the report on the evasion and enforcement of vehicle excise duty, which was ordered to be printed in March last year. The Treasury minute in reply was printed in August last year. Clearly, quite a lot of water has flowed since that time and there is a need for some updating on this subject.
My right hon. Friend the Member for Ashton-under-Lyne referred to the level of fines. I am pleased that the report drew attention to the ludicrously inadequate fines imposed by the courts on vehicle excise duty payment defaulters. The average fine at the time of the compilation of the report was a mere £36. That cannot act as a deterrent when set against the annual duty of £100 for private vehicles. The honest motorist would endorse a substantial increase in fines for the tax dodger whom he or she is effectively subsidising.
Paragraph 4 of the Treasury's response to that report stated:
The Committee's concern at the low average level of fines imposed on evaders is being drawn to the attention of the Magistrates' Association, and in Scotland to the District Courts Association, the Sheriffs' Association and the Association of Sheriffs Principal.
It would be interesting to know whether those bodies have indeed issued guidance to magistrates and others as a result of that concern being drawn to their attention.
The hon. Member for Swansea, East (Mr. Anderson) has a strong constituency interest in this matter. I am sure that he will not mind my helping him by saying that in 1984 the average court fine had risen to £44, but he will know that that is less than 10 per cent. of the total penalties that could be prescribed by statute, which would be five times the annual rate of duty. That may be of help to the hon. Gentleman in his argument.
That figure is above the rate of inflation and, therefore, a marginal improvement. I am grateful for the Minister's intervention, as I was somewhat puzzled by a letter from the director of the Department of Transport driver and vehicle licensing centre who wrote to the Financial Times on 15 October:
The average penalty at £63 was 25 per cent. higher than the cost of a six monthly licence.
That is at least some comfort.
The report mentions local campaigns. The Department has so far run 50 intensive local campaigns with the help of the police. Four campaigns are under way or have been held this month in London, south Wales, Manchester and Cumbria. The campaigns are to be welcomed, provided that any additional work generated can be met by an increase in staff.
At the time of the report, February 1984, no Scottish police forces had been prepared to co-operate in one of these local blitz campaigns. As evasion in Scotland is said to be 25 per cent. higher than in the rest of the country, it would be interesting to know whether the Scottish police forces are now prepared to give a higher priority to countering the evasion of vehicle excise duty. Has there been any change in their attitude?
The results of a survey prepared by the Government statistical service were published by the Department of Transport in its statistics bulletin in December last year. The key finding of that survey was that the cost to the country of evasion was £90 million per annum, or 4 per cent. of the total, which clearly is a substantial increase. Compared with the 7 to 9 per cent. in 1979–80, the loss of £90 million in revenue is substantial and more should be done to collect it.
Paragraph 8 of the report mentions a procedural problem in Scotland—that two witnesses are required as corroboration of evasion in these reports. It was suggested that it should be recommended to Ministers that that procedural need should be changed. It would be interesting to learn whether the Ministers have considered this recommendation and whether there is to be any amendment in the Scottish law relating to corroboration.
The abolition of vehicle excise duty has been tempting for successive Governments, and it has been discussed for the past 15 years. The Committee recommends a switch from vehicle excise duty to a tax on petrol if evasion remains a major problem. A survey published in December last year shows that the problem has now been substantially contained, if not resolved. The possibility of switching to a tax on petrol was considered by Mr. William Rodgers when he was Secretary of State for Transport in 1977–78 and by the present Secretary of State for Social Services when he was Minister of Transport in 1979.
At that time, the option of abolition was rejected on the basis that too large a share of the burden of motoring taxation would be carried by the high-mileage rural motorist and essential business users. In 1979 it was estimated that such a tax would add in excess of £100 million per annum to business costs. An increase of at least 38p per gallon on petrol would be necessary to compensate for the loss of revenue from vehicle excise duty and the spiral of inflation would be refuelled at a stroke.
From a constituency point of view, I take comfort from the fact that no Government are likely to be so bold as to impose an additional 38p on a gallon of petrol. There is a wide range of opposition — the Automobile Association, the Royal Automobile Club and the Motor Agents Association—to such a suggestion.
I was interested in what the permanent secretary at the Department of Transport said about necessary staff changes if work on evasion were to be increased. I note that the report urges the Department to ensure that no reports of offences are abandoned purely through lack of staff. In paragraph 12 of the Comptroller and Auditor General's report, it was suggested that the Department of Transport had insufficient staff to handle all the reported cases of suspected evasion. During the examination of witnesses on 4 February last year, the Chairman asked the permanent secretary at the Department what increase in staff would be required to deal with that problem. In reply, Sir Peter Lazarus said:
If we were to try to deal with every report and carry it on for as long as we could, we would probably need of the order of an additional 1,000 staff, as compared with the 900 odd that I have on enforcement at the moment. Almost certainly that would not produce the best net revenue position. We think it far more likely that we would get the maximum net revenue improvement if we had something like an additional 400 or perhaps 500 staff, but we would want to take them on at perhaps 150 a year or something like that.
There is no serious suggestion that the number of staff on enforcement duty should be doubled, but the professional view of the permanent secretary is that a further 500 staff could be recruited cost effectively. I was surprised that there was no response from the Treasury to that point. There has been no sign whether the Treasury accepts that
it would he cost effective to recruit the staff required to carry out enforcement work. It would be helpful if the Minister would comment on that.
I remind the Minister that next year, as a result of new computers coming on stream at Swansea, more than 500 staff will no longer be needed. Since 1982, productivity has increased by over 15 per cent., so this matter should be looked at carefully in relation to the staffing implications.
It has been suggested that draconian measures would increase enforcement and that wheel clamps should be considered. That would almost certainly run foul of public opinion — although there may be a case for the introduction of clamps as an enforcement measure on an experimental basis in areas of high evasion.
I commend the Committee on the quality of its work and report and look forward to the Minister's response.
First, I wish to say what a pleasure it was to be under the chairmanship of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). He gave, as one would expect, a thorough and comprehensive account of our sittings—as a managing director does in the report of the companies under his command. The rest of us are fortunate in not having to follow him in every detail—we can pick out the nuggets that appeal to us.
I wish to discuss regional policy. It is a topic that has come before us many times in the past 12 years. We have questioned the Department of Trade and Industry since it was founded on the efficacy of its regional policy, the results of which have not been as satisfactory as we or the Department had hoped they would be. We have reported many times on this subject and no less than £20,000 million has been spent during the past 20 years on regional aid. We now have to ask what we have to show for this expenditure.
In 1965, unemployment in the north was 2·5 per cent. It is now over 18 per cent. In the north-west it was 1·6 per cent., but it is now 15·8 per cent. In Wales unemployment was 2·3 per cent., but it is now over 16 per cent., and in Scotland it was 3 per cent. and it is now 15 per cent. It is true that unemployment has occurred in all the developed economies, and that it affects manufacturing industry most severely, but I think it is correct to say that unemployment has affected Britain more than other countries. Regional incentives and regional development grants do not seem able to stem this adverse tide. We must ask whether the present system of regional incentives, which we have had for many years, is as good as it should be.
The right hon. Member for Ashton-under-Lyne spoke of the way in which the work of our Committee had developed over the years. He said that the Comptroller and Auditor General was now more concerned with value for money. This is a developing trend, and I am sure that the Comptroller will produce many more worthwhile reports on value for money for us to consider.
When we have, as I think we have in this case, a longstanding role by a Department to produce incentives for the regions which palpably have not produced results, we as a Committee have the responsibility to go further. Nobody will question the right of the Comptroller to consider value for money, although when it was originally suggested I think it was viewed with suspicion by the Treasury Bench. After a time, and under successive Governments—because party politics is not involved in this issue—it becomes necessary to look at a broad form of policy and to ask whether the institutions that serve that policy are as good as they should be.
In our review of regional policy we found that the very large capital grants that had been made over the years employed relatively few people. For example, the chemical industry received some £1,400 million, yet employed a minimal number of people. Firms such as Dunlop are attracted to Liverpool, but as soon as the recession bites, large national and international firms in places such as Liverpool close their factories and take their regional grants with them. Therefore, it is right to make the grant dependent upon jobs rather than on the size of capital investment. I understand that this is the nature of the change being brought about by my right hon. Friends on the Treasury Bench. Even so, we have been spending some £700 million a year on capital intensive projects, which is double the rate in West Germany. That in itself is an indication of the need for a review.
It is disappointing, as our report shows, that academic research has not been able to identify a particular success in regional policy, although overall that research is unanimous in saying that such a policy is of some use. It is not surprising that academic research has not been able to point to particular successes. If there has ever been a growth industry, it is academic research into regional aid. That research has not been directed at alternative means of regional support, but at existing means in order to determine how effective it is.
It is true that the PAC, in its deliberations, is supposed to question not Government policy but its administration, and what I have to say now is strictly in terms of administration and not of policy. Furthermore, it applies to all Governments, of whatever nature, over a long period of time. We cannot be inhibited in this debate from stating our views. My view is that regional incentives, as they have been practised in this country, are wasteful, out-of-date and ineffective. The reason is not that they are poorly administrated, but there are too many Government agencies competing with each other to pursue the same objective, and not enough effort is made to see whether these objectives could be reached by other means.
I do not know how many different forms of Government' assistance there are for places such as Merseyside, but Liverpool has a large number of empty factories which were built by different Government agencies acting, apparently, in ignorance of one another. We are too ready to accept the need for the existence of so many different institutions without questioning their relevance in changed conditions, and we have failed to observe the lessons that other countries teach us.
Comparisons with regional grants in other countries have been made by the Department and by academic research, but, as far as I know, there has been no study of the institutions that direct that regional aid. Why is it that the United States and Germany—two most successful economies—manage without a Department of Trade and Industry? In this country we have an enormous Department, which has grown substantially over the years. I asked Department of Trade officials that question on one occasion and felt like the man in the Batman cartoon. I shall not ask that again. I ask it here because the officials are not before us. What use is that Department if it is not providing more jobs?
The lesson of regional policy is that a comprehensive approach is necessary: not just regional grants for industry, but improvements to the urban aid programme, tax cuts, lower national insurance contributions in the regions to cheapen the cost of work and regional rate relief. Why is a package of these measures not considered for the regions, instead of sticking to the tried and failed mechanism of regional grants? If we want to understand why some parts of the country are more successful than others, we must study the composition of the successful areas in this and other countries.
Why is so much of the Civil Service and the Ministry of Defence based in London and the home counties? Why do we pay a London weighting allowance for civil servants, but not a Liverpool weighting allowance? That is where the money should go. It is hard to define what constitutes a successful regional policy. Experience in Belgium, France and the United States suggests that tax concessions for operations in the regions are likely to have a greater benefit than cash handouts. I cannot understand why the Treasury is so singularly lacking in imagination as not to experiment with regional differences in national insurance contributions, corporation tax or tax exempt municipal bonds, as they do in the United States.
The Foreign Office has the reputation of being the most conservative institution in Whitehall, but in my view the Treasury wins hands down. What other institution would be so lavish in accepting waste and misdirection of taxpayers' money in terms of getting results, and yet be so niggardly with its pounds? It is true that we have seen substantial growth in business expansion schemes, but the Treasury fails to recognise that to achieve success in the regions we must reduce the cost of work.
From what I have seen of Liverpool and other cities in the north, I am persuaded that there is no single solution to rising unemployment in the regions. I believe that regional development grants and urban development grants should be handled by the same Minister and that that Minister should be the Secretary of State for the Environment. Each city or region has its own characteristics which demand an individual approach. It is more sensible to improve the environment and reduce the cost of work in those areas than to give money to companies. We must review the institutions and machinery that are responsible for distributing aid in all its forms, not the efficiency of regional aid. Perhaps that is something that my right hon. and noble Friend Lord Young could best carry out as a neutral but primarily interested party.
The purport of our report is that regional aid has been, and remains, unsatisfactory and that it is time for a change.
The hon. Member for Horsham (Sir P. Hordern) made some interesting comments about regional aid. Initially, I thought his conclusion would be that regional aid was not a necessary or important part of the way in which our economy is run. I was pleased to hear that that was not his conclusion. I can tell the hon. Gentleman that in my bitter experience, in my constituency the removal of even the current system of assistance is viewed harshly. More importantly, the businesses in my constituency, especially those which were attracted to the area by regional grants, view its removal extremely harshly. My constituency is unique in the south-west in being cut out of regional grants. The Government considered that Solihull and Stratford needed assistance because their unemployment problems are greater than those in the far south-west, although that is manifestly not so.
I do not criticise the Government for all their efforts to reduce national insurance contributions and corporation tax, and all their microeconomic measures, but they pale into abject insignificance beside the exchange rate, which has been maintained to the detriment of the manufacturing sector during the past five or six years. A reduction of 1 per cent. in national insurance is insignificant if overseas competitors are 15 or 20 per cent. better off because of the exchange rates. If there is a real desire to put some buoyancy back into the remoter regions of Britain, the entire philosophy and economic base of exchange rates must be examined. This matter is not strictly within the confines of the reports, although there are so many reports that this debate is as close to a Consolidated Fund debate as any we could have in the House. Any matter could be raised if we so desired.
Although I am not a member of the Committee, I believe that a great deal of valuable work has been done. More publicity could be justified for the work done on the Committee, which does not receive the recognition that it deserves. The work done by the Committee Chairman has already been praised by several hon. Members. Although I was not on the Committee, it sounded from the speech of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) that that praise was deserved, so I shall add my thanks.
Oddly, although specific matters have been raised, the wrong people are here to listen. We have discussed defence, housing benefit, regional aid and any number of subjects that tickle our fancy or catch our eye, but the man responsible for the detail of the administration which has been the subject of complaint is not on the Government Front Bench. The Treasury has a broad sweep of responsibility, but nearly all the difficulties discussed are primarily somebody else's responsibility.
I have glanced through the documents, although I cannot confess that I have read every line. I was determined to do so, until somebody got them for me. However, a number of points caught my eye. I was especially struck by the Donnington store evidence. There are one or two magnificent lines which are worth incorporating into after-dinner speeches, but there are also more serious aspects. The details are well known. There was a fire, and a great deal of stock was ruined. It had a book value, but the Government chose to replace about a third of it. I found the Government's response unsatisfactory:
While agreeing that lessons can be learnt from the Donnington fire, the MOD does not accept that the decision not to replace most of the stocks lost in the fire at COD Donnington is evidence of excessive holdings. Because the replacement cost of certain stores is very much in excess of the disposable value, it may be cost-effective to retain existing holdings but may not be cost-effective, or even possible, to replace them.
The response must be read several times to get the gist of it, but it does not deal with the question. The real question is whether the stocks should have been bought in the first place. If one has four overcoats and they are stolen, only one is likely to be replaced if one gets money from the insurance company. But the company might ask
why four overcoats were bought in the first place. The question to be asked about the Donnington fire must be why the stocks were bought in the first place.
I admit that the following is hearsay, but there are some defence establishments in my part of the country. I meet and talk to their representatives, and occasionally we discuss things that we should not discuss. The general view among people in responsible posts is that there is a degree of slackness and overstocking. There was a magnificent reference in one report. A witness questioned on the amount of stuff stolen replied with some pride that stealing was not a problem. By chance, I discussed this with a constituent, who said that there was nothing in there worth pinching. He said that most of the stock was so old and out of date that it was better to go out and buy new. That is perhaps an exaggeration, but there is a general feeling that all is not well in that area. The Donnington fire is good evidence of that. I hope that the Committee will not give up on that matter and that it will return to it to consider the outcome, because real hard money is involved. To cover the loan costs about £500 or £600 million a year. It is not difficult to think of a better use for that money.
One report discussed the housing benefit scheme. The right hon. Member for Ashton-under-Lyne was not too kind about the reality of what happened with the housing benefit scheme. In many parts of the country—mine was not the worst—what occurred was not far short of obscene chaos. There was no preparation. People were without benefit for weeks. We are not talking about people who could go to the bank, merrily borrow a few hundred pounds and curse the Government of the day because they had not received their cheque. Those people were living on a week-to-week basis. The preparation for the administration of the housing benefit scheme was a disaster.
The Citizens' Advice Bureau has given me several examples, collected within the past months, of manifold problems that still exist. It states:
Several clients have told us forms they submitted have been lost.
The capacity of Government Departments to lose forms never ceases to amaze me—not that I always believe that my constituents have sent them. The CAB also said that there had been,
failure to process claims for HB within the 14 days…due to extreme delays in processing of claims for HB by the HB Section of the Finance Departments.
The CAB also alleges a
vast backlog of work and administration on claims for housing benefit".
We all know that this is true. It is not so bad in my constituency, although I have pursued five housing benefit cases for constituents of London boroughs who happen to be students in London. The delay is beyond total comprehension. The irony is that we were told that the system would be more efficient and reduce the number of Government employees, but, as has been pointed out, there are almost 2,000 extra employees. Nevertheless, that is not my main point. That is history, and I hope that one can learn something from the mistakes that undoubtedly have been made.
My main consideration is to warn the Government, not from malice but from reading the position—sometimes one sees Government policies better from the Opposition Benches rather than the Government Benches — that such is their enthusiasm to reform social security benefits under what is generally known as the Fowler review before the general election, which is only two and a half years away—I may even agree with some of the reforms, but we shall have to wait and see—that it could lead to a second dose of chaos on a large scale. I ask the Treasury, as only Treasury Ministers are present, to demand of other Departments that the administrative details of the scheme that is finally produced are carefully thought out and crosschecked. Otherwise, great hardship will be created—ironically, unintentionally. I may argue with the Government over benefits, and claim that their policy is causing hardship, but the hardship of which I am now speaking is not intentional. It is born out of chaos, and in many cases that is worse than any intended consequence. When I deal with constituency cases and the Departments co-operate well, I am aware that for every 10 constituents who come, 110 do not, and I wonder who sorts out their problems.
My third and final point was in some ways covered by the hon. Member for Swansea, East (Mr. Anderson). I have not quite the same interest to declare as he has, and I cannot honestly say that I would defend the road fund licence on the basis of the Swansea licensing centre. However, at times allies are found in peculiar quarters, and I, too, ask the House to defend the road fund licence. I remember the arguments in 1979 with the then Minister of Transport, whom I have, by chance, got to know better since then, and I was never convinced that evasion was as high as the Department claimed. I do not wish to pretend that evasion does not occur. Obviously, it does. But the claim that about 11 per cent. of cars on the roads are without road fund licences has never withstood even the most cursory examination in a car park or wherever the idea to check a few cars flashes through one's mind. I have never believed that evasion is as high as that. I asked the then Minister where the statistics came from. Evidence that the statistics came from anything other than a not very accurate throw at a darts board was never adequately produced. Nevertheless, I do not wish to underestimate evasion, because £100 for a road fund licence is a large sum.
The matter is of great sensitivity in my constituency. I live 300 miles from the House. Little public transport exists in rural areas, such as my constituency, and, no matter what the Transport Bill does, there will never be a great deal of public transport in remote areas. It may exist between towns, but not in the countryside. The suggestion of a 38p increase on petrol to cover the money at present raised by the road fund licence must be carefully considered. Such a change would undoubtedly transfer taxation from people who must drive only a few miles to people who must travel many miles. Clearly, some of my constituents would benefit from that change as much as people in other areas, but generally speaking such a policy would transfer road fund taxation from London and the wealthy south-east to Cornwall, Wales, Scotland, the north-east and east Anglia. I hope that the Government will not take that course.
Unfortunately, the Committee did not have the power to investigate the virtue or otherwise of the Government's policy, which has increased the tax take on a gallon of petrol from 44 per cent. to 55 per cent. during the past six years. Nor did the Committee have the power to ask why the road fund licence has doubled in cost. Clearly, we can argue whether those levels of taxation are justified, but when we make such calculations we endlessly ignore the petroleum revenue tax which, as I occasionally point out, raises a further useful sum. If my constituents did not use the roads, there would be no petroleum revenue tax.
It would be useful if the Minister could today say that the idea of abolishing the road fund licence and transferring the tax to petrol, which would require an increase of between 30p and 38p per gallon, is out of court.
I am aware of that, but it is one of those ideas that keeps popping up. I should like to give the Minister the opportunity of pushing it back into its particular pocket. On the face of it, the idea has great appeal. There is no point in denying that. However, it would be bad for remoter areas.
Finally, I wonder whether the way in which we review the reports on the Floor of the House could be changed so that more opportunities to debate them existed, but with a shorter period per subject. It is lunatic to think that a sensible intense debate will take place about such a volume of reports. The debate would be a shambles if every hon. Member raised every subject, and the poor Minister, who is not responsible for much of it, could not conceivably engage in the sort of in-depth rows which one may wish to have about these matters. Could not the House consider changing its procedures in favour of a series of short debates on specific reports as they arise with the Minister responsible present? If we had the responsible Ministers here today, the entire Cabinet and all the junior Ministers—about 120—would be present. Indeed, it would not be a bad idea to have 120 hon. Members present to discuss the report: but 120 Ministers would be beyond the pale.
I ask those responsible to consider the way in which we discuss and analyse this useful work. The present procedure is not the most sensible or rational way, and a review on the Floor of the House is inevitable if the work is to be taken seriously and is to be seen to be effective.
I am pleased to follow the hon. Member for Truro (Mr. Penhaligon), and immediately pick up his final point, which has great validity. It is ridiculous that the House is invited to consider some 40 reports of the Public Accounts Committee with a gentle hint in the motion that hon. Members should restrict themselves to about seven of them.
As a member of the PAC, I am well aware that because of the valiant efforts of our respected Chairman, to whom I add my tribute, we get time to debate these matters on the Floor of the House. However, it is usually towards the end of a week and often approaching a recess or some other occasion when the attention of hon. Members may not be devoted to the affairs as closely as it may otherwise be.
I have been keeping careful note of the attendance this afternoon. For most of the time about 15 hon. Members have been present, of whom four are not members of the Committee. Where are the other 635 Members of Parliament who, on every occasion possible both inside and outside the House, pay such attention to obtaining value for money, and who press the Government hard on that? It is sad that so few of them have chosen to attend this afternoon. It was nice to listen to the hon. Member for Truro, with his usual attractive delivery and sense of fun, and to the hon. Member for Swansea, East (Mr. Anderson), who added to the comments made by members of the Committee.
I wish to speak on three of the reports, the first being the 13th report of the 1983–84 Session on the evasion and enforcement of vehicle excise duty. That matter needs to be drawn to the attention of both the House and our constituents. Vehicle excise duty — or VED as it is called in Committee — is paid on all mechanically propelled vehicles kept on public roads, but not on those kept off public roads. The two categories cause a problem.
The Comptroller and Auditor General drew the Committee's attention to the large amount of revenue estimated to be lost through evasion of VED. He spoke about the difficulties of enforcing the current system and about alternative arrangemens that have been considered, but rejected, on several occasions by both the previous and present Administrations. That includes the rejection of an increase in petroleum revenue tax that would obtain the revenue while abolishing the licence.
We all know that such extensive evasion cannot be measured precisely because the driver vehicle licensing centre does not monitor periods when vehicles are kept off the roads and so are not liable to duty. However, the Department of Transport survey indicates an evasion level of 7 per cent. to 9 per cent. for cars and 10 per cent. to 13 per cent. for goods vehicles and motor cycles. In 1982–83, that level of evasion would have resulted in a substantial loss of revenue of about £100 million compared with net proceeds from the tax of about £1,800 million.
To enforce VED, the Department of Transport relies on reports of apparent offences from police officers and traffic wardens. The tracing of offenders is hindered because two thirds of the reports contain no names and addresses. Up to 7·5 per cent. of the central vehicle records is out of date through the delay or failure of motorists to notify changes. That is a substantial figure. We are told that enforcement is to deter evasion rather than to ensure full compliance. The Department's work in 1983 resulted in the recovery of £14·6 million.
When examining witnesses from the Department. the Committee was told that, although the maximum fine for the evasion of duty on cars is £425. the average fine imposed by the courts is only £33·60. The witnesses also observed that the proportion of offenders electing to pay the Department a mitigated penalty fell from 60 per cent. in 1976 to 38 per cent. in 1983.
I asked one witness from the Department, Mr. Lazarus, whether he thought that if the maximum fine were increased substantially that would have a desirable effect. He replied:
I do not myself see any valid relationship between the £425 which is available now and the figure which I quoted to the Committee of the average fine last year which is as low as £33·6.
I then asked him whether, if there were a minimum penalty that the courts could impose, that would be higher than the average penalty imposed in 1983. He agreed that, if Parliament legislated to provide for a minimum penalty that would obviously help a great deal. I think that the appropriate Government officers should consider that.
The loss of revenue of between £70 million and £100 million, with net proceeds of tax being £1,800 million, is a very serious matter. It is ridiculous that the courts should impose an average penalty of only £33·60. With the risk of detection not being very great, it is little wonder that some people—about 882,000 in 1983—conclude that it is a good deal cheaper to pay the fine if caught than to pay the £100 duty now being demanded. The position is becoming ridiculous. I hope that my right hon. Friend the Secretary of State for Transport will discuss the matter with my right hon. and noble Friend the Lord Chancellor with a view to reminding magistrates of the need for fines to act as a real deterrent and to use the penalties available.
Our constitutents are being ripped off by those tax evaders who use their cars on public roads but do not want to pay their duty. I dare say that about £100 million a year would be a very welcome addition to, for example, the social security budget or the overseas aid vote—about which we have heard so much from our constituents during this week when they lobbied us about fighting poverty. Rather than putting 30p or more a gallon on the cost of fuel, we should consider penalties to enforce the existing system.
Another way to improve the detection of evasion would be to change the current system of vehicle registration which makes it difficult to trace offenders because the records are out of date. Why do we not move to the system adopted by Canada and a number of other countries, where an individual has the same registration number throughout his motoring lifetime? The licence plate must carry either the current excise licence stickers, or be replaced annually with another bearing the year of issue. That would get away from cars having to bear a new prefix in August, with the consequent enormous bulge in the delivery of new cars during that month and all the problems that flow from that. The whole question of how we license vehicles should be considered as a matter of urgency by the Department.
I come now to the 33rd report on the economy of stores support, to which the Chairman of the Committee and other hon. Members have referred. The Committee looked at evidence on a report by the Comptroller and Auditor General, dealing mainly with stores supplied through central depots. Those stores provide materials to the armed forces as part of a world-wide operation involving enormous assets and heavy operating and capital costs.
We have already heard this afternoon that the stores retain stocks with an approximate replacement book value of more than £5 billion spread over 2·5 million inventory items, and each year issue stores valued at £1,700 million. Overall, stock levels represent three years' normal peacetime issue. The Committee was told that the ranges of individual stores show stock levels of up to seven years peacetime issue, and even higher levels for some parts of some ranges.
Although the Ministry of Defence did not believe that total stockholding was too high, it accepted that in areas within the total figure there were, for a variety of reasons, excessive stocks. The Committee was informed, however, that the general level of overstocking was likely to be much higher than the Ministry had in the past thought.
Reference has been made to the Donnington fire and the substantial amount of material destroyed there. It has been said that, of the £169 million worth of stocks destroyed, £37 million worth was obsolete, that £21 million worth was due to be withdrawn and that £26 million worth represented "falling demand", in that the original calculations were wrong, so that there had been a further category of over-provision in respect of original purchases.
While the House appreciates that obsolescence occurs, there should, surely, within the Ministry of Defence be an efficient computerised system to ensure that large stocks of obsolete or semi-obsolete equipment are not held. I am not satisfied that such an efficient computerised system exists. Indeed, in answer to a question that I put to Sir Clive Whitmore, the permanent secretary to the Department, I was told:
Your concern is absolutely right and it is one which the Department as a whole shares.
He went on to tell the Committee:
Supply Managers are now considering the introduction of a standard system for setting surplus stock warning levels.
Sir Clive also referred to a study group looking into the causes of surpluses. That work should now have been completed. I hope that when the Minister replies to the debate he will say what has been the outcome of those two courses of action.
We are told by the Treasury in the 33rd report that the Ministry of Defence agrees that, with such a large range of stores, there are bound to be excessive stocks in some areas but that it does not agree that the level of stocks is generally too high. Why should we be given what appears to be such a complacent reply from the Treasury?
In receiving evidence, the Committee was told that an example of obsolescent stores was the Larkspur range of thermionic radio valves, a range which had been replaced by a system called Clansman. Another category, valued at £21 million, was of stores close to withdrawal from the service but which had not quite reached the withdrawal point. A further category, known by the Ministry of Defence as "falling demand," amounted to a further £26 million. Yet another category, worth £13 million, as of stores where the Ministry of Defence had over-provisioned in its initial purchases.
There were also a couple of miscellaneous categories—sort of throw away lines—one described as £7 million worth of "all-time buys," being buys of stores at the outset of their life. There was also £8 million worth of stores held against possible sales to overseas countries. About that item we are told simply, "We have lost those".
The Treasury's replies on this issue have not been adequate. Nor do they reflect the concern that the Committee expressed. These are vital matters for the taxpayer because we are dealing not with hundreds of millions of pounds but with £5 billion worth of stores. Obsolesent valves, radio sets and other equipment of various types worth £20 million here and £20 million there should not be cluttering up the stores of our armed services.
If we had a proper system of control using all the modern equipment at our disposal, such a situation would not exist. The Committee was deeply concerned about that, and I hope that the Minister will agree that the Treasury's reply has been less than adequate.
We make it clear in paragraph 6 of our report that the Ministry of Defence has agreed to consider the wider lessons that might be learnt about stores inventory as a whole. What lessons has the Ministry learnt and what assurance has the taxpayer that surplus and obsolete stores will not be held at great public expense?
What reduction in the percentage of overall stocks has the Ministry been able to achieve and how much will be saved? What arrangements is the Ministry making for identifying the full acquisitioning and holding costs of stocks and to ensure that such information is taken into account on a regular basis by those responsible for ordering stocks, for reviewing them, for maintaining stock levels, for arranging disposals and for otherwise managing stores?
What arrangements are to be made for keeping Parliament regularly informed on these issues? There is reference to that in the report from the Treasury, but I am not encouraged greatly by it because it does not say how Parliament will be informed and how we shall have the opportunity to examine the information provided.
What is to happen to stores that become surplus to requirements in the Falklands? Will they be dumped at sea or are they being sold to the islanders, who could make good use of them? I know from two visits that I paid to the Falklands that an old Land Rover in the hands of an islander can rapidly be rebuilt and provide a serviceable vehicle for many years to come. A great deal of aviation fuel is stored in the Falklands. That, after a time, becomes surplus to requirements. Is it being dumped at sea? Could it be used more effectively by the islanders?
The 20th report for the Session 1984–85 deals with arrangements for delivering social security benefits. The 30 separate benefits involved the payment of nearly £31 billion in 1984. The delivery of those benefits resulted in the employment of over 80,000 staff, plus 27,000 people in the Department of Employment. The cost of delivering the benefits to those entitled to them was £1·328 million, an enormous sum. The Committee has been considering ways by which the cost of delivering benefits could be reduced, with consequent benefit to the recipients.
There are four methods by which benefits are delivered. The most common is the post office order book. That accounts for 88 per cent. of deliveries. There are Giro cheques, payable orders and the recently introduced automated credit transfer, which accounts for only 0·5 per cent. of payments. That involves payment direct by the DHSS into a bank or other account—for instance, a building society account—by the automated transfer of funds using computer-produced magnetic tape.
When the Rayner scrutiny examined this matter, the team came to the conclusion that a substantial sum could be saved, and the figure of £50 million was mentioned. The scrutiny team recommended the introduction of direct crediting, a reduction in the frequency of benefit payments and a simplification in administration.
The team noted that the United Kingdom and Irish Republic were alone among the 13 countries considered in paying a high proportion of benefits weekly by order books. We are, therefore, in a unique situation; as a country, we seem to be locked into what has almost become a way of life—the paying of benefits by order books at post offices. The Select Committee on Social Services looked at the matter and substantially endorsed the recommendations, one of which was that benefits be paid less frequently. However, the Government took the view that it was not right to make people change to less frequent payments as many people find them inconvenient.
Behind the questions about whether we should make payments by order in post offices, frequency and so on there is the point that 75 per cent. of the income of the average rural post office comes from social security payment work. There would come a point when the DHSS could not continue to take away work from those post offices without paying them more for the remaining functions.
We should not retain the expensive and rather old-fashioned method of paying pensions through an order book merely to maintain the rural post office system. I see hon. Members nodding in agreement. We all want to maintain rural post offices as they are an important part of the fabric of our society. It may be public policy to maintain post offices, but they should be subsidised by some other method, rather than that we should continue with this old-fashioned way of paying benefits.
The Select Committee on Social Services recommended that, as an inducement, pensioners accepting ACT should be paid two weeks in advance and two weeks in arrears rather than four weeks in arrears. This method was rejected by the Government on the ground that it would cost £50 million and that they had hoped that changes could be achieved without incurring extra cost.
In Committee, we took note of the fact that no assessment had been made of the additional savings that would accrue, although it had been estimated that ACT payments would cost £2 a year each, as against £10 for paying pensions over the post office counter by means of an order book. I understand that the latest estimate is that ACT will cost £6 a year and order books £16. That is a substantial annual cost, and the DHSS should give fresh consideration to the ways and means of offering direct financial inducements—for example, a cash payment of £10 to encourage beneficiaries to change to more effective methods of payment.
I believe that I am right in saying that only 27 per cent. of pensioners do not have a bank account. That is a different picture from that of a few years ago when it was commonly said that half the British population was unbanked. The number of those without a bank account is shrinking more and more, and as it does so, so the opportunity will come to switch more and more people to ACT and to move over to less frequent payments.
I asked my right hon. Friend the Secretary of State for Social Services a parliamentary question earlier this year about the possible cash savings to his Department
that would be achieved in a full year on the assumption that pensions were paid by automated credit transfer to those pensioners who on the latest information available to him have a bank account.—[0fficial Report, 16 July 1985; Vol. 83, c. 137.]
The answer was, £70 million a year. In answer to another of my parliamentary questions, I discovered that that was equivalent to increasing the Christmas bonus by just over 70 per cent. If everybody were paid by ACT, the Department would have the option either of increasing the Christmas bonus—something for which hon. Members call from time to time — or of using it as a direct financial inducement for people to switch to ACT. That should be discussed, considered and acted upon.
The Department should do something about giving great publicity to the relative costs of different methods of payment to encourage the adoption of the cheapest method of payment. None of us has seen a Government commercial on television pointing out the real costs. I feel sure that if there were some action by the Department and an attempt to persuade people, in the public interest, to switch to reduce costs, there would be a bigger take up.
This is one of the important reports of the PAC and, although it is not on the short list for discussion in the motion, I felt that, nevertheless, it was worth mentioning. I hope that somewhere in the depths of the Treasury some friendly soul will take account of my points. I hope that my hon. Friend the Financial Secretary to the Treasury will be leading the Treasury in some useful reforms. Big money is involved, and it is well worth my hon. Friend taking a little time to study reforms, as they will bring benefit not only to the taxpayer but to the pensioner as well.
It is a privilege for me, as a member of the Public Accounts Committee, to take part in this debate. The information contained in the reports is of immense value to hon. Members and to the general public if they are concerned about value for money as it is spent by various Departments. That is why the Committee meets and considers the numerous papers and voluminous reports that are received—work that must continue. I shall always be pleased to take part in the work of the Committee.
The hon. Member for Uxbridge (Mr. Shersby) spoke about the low attendance in the Chamber for the debate on the reports. I agree that a better attendance would be of value to hon. Members so that they could take part in the debate and listen to it.
However, it is not just hon. Members who are absent this afternoon. The Press Gallery is empty as well. Therefore, information that could be passed on to a wider public will not be unless the points are picked up through the Official Report. I do not point a finger only at the absent hon. Members. If the press is interested in the work of the House, it should be taking note of the reports from the PAC.
My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) referred in general terms to all the seven reports listed in the motion. We all take great interest in them and there is need for some urgent action to be taken to remedy the defects. The problem was highlighted in the meetings of the PAC when we questioned witnesses.
One of the most important problems is economy of store support in the Ministry of Defence. It is rather amusing to hear and read some of the replies given to questions. I hope that some deep interest and concern will be taken by the Department of Defence and in particular by the Secretary of State because there is an urgent need for a review of what is happening to stores collected by the Department.
I wish to refer to two of the Public Accounts Committee reports, the first being the report on regional industrial incentives. The PAC observations have been noted by the Treasury and the Department of Trade and Industry. I hope that they will be acted upon and that the Government will consider the matter in the light of their forthcoming decision on the 1984 White Paper relating to regional industrial incentives.
The PAC report welcomes the establishment of a single main aim for regional industrial policy: the reduction of regional imbalance in employment opportunities. This aim can be used to assess the effectiveness of that policy. There is high unemployment in my region. It contains many empty factories and pits are being closed. I hope that the Department will note the concern expressed by the PAC about the regional imbalance in employment opportunities. The distribution of incentives is unfair and unjust. Unemployment in some regions is between 15 and 20 per cent., yet they receive no aid. On the other hand, regions which do not suffer from high unemployment receive substantial aid.
Reference has been made to the provision of different types of aid. We must consider whether the various schemes that have been established are providing job opportunities. The enterprise zones are causing difficulties. Certain concessions are enjoyed by factories in enterprise zones. However, factories which may be only just outside an enterprise zone enjoy no such concessions. This is unjust and it needs to be investigated.
The Government ought to consider helping local government to create job opportunities. Instead of reducing resources, I hope that the Government will provide local government with additional resources to help them to create jobs.
The five year period which, it is suggested, should elapse before there is a full review of the effectiveness of providing job opportunities is, in the opinion of the Committee, far too long. It considers that there should be a full review of the effectiveness of regional industrial incentives before the end of five years. Academic studies of regional industrial policies have revealed various impacts upon different industries. The report refers to those studies. They reveal that the creation of jobs in motor engineering, instrumental engineering and electrical engineering has produced some results. However, the Government should also consider those areas where industry has been run down. The textile and clothing industries have suffered. Thousands of jobs have also been lost in the mining and heavy engineering industries. There is an imbalance in the amount of assistance that is provided to these areas. I hope that the Government will take note of the Committee's report and will consider providing further assistance to them.
One also has to consider the loss of jobs in the support industries. When a pit, clothing factory or textile mill closes, jobs are lost in the support industries. The number of jobs lost in a factory can be doubled because of the loss of jobs in the support industries.
The report also refers to the aid that is given to the chemical industry and states that, instead of creating jobs, it has had the opposite effect. In the period referred to in the report, more than 20,000 jobs were lost after the introduction of the incentive scheme. This matter needs to be investigated. Incentives are provided to create jobs, yet we find that they are being used to reduce the number of jobs. I call upon the Department of Trade and Industry to accept the PAC's recommendations and to use the job opportunity figures as a means of assessing the effectiveness of incentives. The only way to assess whether value for money is being obtained is to compare incentives with the number of jobs created.
The Department of Health and Social Security housing benefit scheme is now in operation. The previous schemes caused concern because they were difficult to understand. People had to visit various offices to satisfy themselves that they were getting what they were entitled to. The supplementary benefit section of the DHSS made provision for rent and rate rebates for people in receipt of supplementary benefit payments. Running alongside the supplementary benefit scheme was the local authority rebate scheme which also provided rent and rates rebates for council house tenants.
It was in the financial interests of many tenants to opt out of one scheme and to take advantage only of the other. Many of them lost benefit because they were receiving the wrong type of payment. The schemes were difficult to understand and in many cases were unfair. The new scheme, which caters for all people entitled to rent and rate rebates, is to be welcomed.
In the 1970s the DHSS considered alternative schemes to overcome the unfairness and difficulties. The housing benefit scheme came into operation in April 1983. The original intention of the Department was to help claimants who had difficulty in identifying which of the previous schemes was better for them. By 1983 the emphasis had changed and the DHSS wanted to reduce the number of civil servants on its payroll.
The members of the Public Accounts Committee were concerned about the hasty introduction of a scheme whose obvious purpose was to implement cuts in public expenditure by reducing the number of civil servants on the payroll of the DHSS. The hasty introduction of the scheme created problems for claimants and for local government employees. It should be noted that only a year after the introduction of the scheme the Secretary of State for Social Services found it necessary to set up a review body.
As a member of a local authority at the time the scheme was introduced, I am well aware of the difficulties that arose because of the way in which the DHSS shoved files, names and addresses at local authorities. There was a publicity campaign about the scheme but local authorities were not familiar with the details. Because of problems in identifying relevant areas there was chaos. Substantial arrears had to be paid in many cases. Local authorities had made provision to deal with the administration of the scheme by computer. The DHSS did not have computer facilities in its supplementary benefit section to cope with housing benefits. That created problems for the local authorities. I hope that the problems will be overcome before the publication of the report that the Secretary of State called for.
The report of the Comptroller and Auditor General said:
In February 1984 the Government announced an independent review of the structure and scope of the Scheme with the aim of simplifying it, ensuring that help is concentrated on those most in need and improving its administration…DHSS…had also taken steps to assist Authorities by simplifying the administrative task in a number of areas and are considering others in consultation with Local Authority Associations.
I commend that. I hope that there will be an improvement in the scheme which will help claimants in receipt of housing benefit. The sixth report of the PAC said:
DHSS issued guidelines to help Authorities identify eligible claimants over pensionable age. DHSS consider the guidelines have been very successful and that in about 70 per cent. of cases referred to DHSS by Authorities benefit was payable.
We are talking about a 70 per cent. success rate which was acceptable to the DHSS. The report continues:
However, one of the weaknesses of the Scheme has been that DHSS do not know how many cases Authorities fail to identify. DHSS have not managed to devise guidelines for non-pensioners because there is such a variety of circumstances that no rough rule-of-thumb would identify them.
I emphasise that point.
DHSS told us"—
that is the Public Accounts Committee—
that only about 200,000 people are receiving the Supplement out of an estimate of nearer half a million who might have been entitled to it.
That is a serious point. Some claimants are losing because the Department has not done its homework. Because of the haste with which the scheme was introduced, only 200,000 claimants out of 500,000 were receiving benefits. I hope that that injustice will be put right. The Committee has said that it would support an attempt to simplify the scheme and make it more equitable. I hope that the scheme will be reviewed to make sure that the present unfairness and injustices are erased.
In addition to the review body set up by the Secretary of State for Social Services, a social security review is taking place and, as hon. Members are aware, a Green Paper was published in June. That review will also consider housing benefits and the payment of housing benefits. The Green Paper also refers to simplifying the scheme and making it more equitable and to the scheme being made fairer for claimants and easier for the people who administer it.
The Minister said that housing benefit goes too far up the income scale. The Secretary of State also says that in the Green Paper. We are told that, if the proposals in the Green Paper are accepted—the proposals which have been submitted for consultation—between £500 million and £750 million will be taken from housing benefit payments. In other words, in addition to the report from the Public Accounts Committee, and in addition to the Secretary of State's review on the present system, we are told that housing benefits will be reviewed by the social services and that there could be a benefit reduction of over £500 million.
I hope that the proposals in the Green Paper to reduce housing benefit to claimants is not a means of putting right what the DHSS did wrong at the beginning. I hope that money will not be taken out of the housing benefit scheme to reduce the work load and ultimately the number of people administering the scheme. I hope that the House will not let that happen.
The work of the Public Accounts Committee will continue, and I should like to offer my congratulations to the Chairman on his work on behalf of the Committee. I hope that the new way of presenting the reports to the House will continue and that in future we shall have better support from the Press Gallery so that we can at least be sure that the work done and the contributions made by hon. Members will be made known to a wider audience.
I should like to take up one or two of the points made by the hon. Member for Normanton (Mr. O'Brien). The report with which I propose to deal is the one on regional industrial incentives, and it is perhaps appropriate to begin with the recommendations of the Committee. Of course, we must bear in mind that this report was published on 11 June 1984, and a great deal has happened since then.
Many of the failures of the past have been rectified by the new scheme which the Government introduced subsequent to the publication of the report. There is a recognition of the fact that £20 billion of public money spent over the 20 years prior to 1982 created new jobs in the regions at a cost of £32,000 per job. That cannot be regarded as in any way efficient or cost-effective, and that fact was recognised by the Government in changing the basis for the payment of regional grant from a capital base to a base of job creation. Since then we have seen the development of two schemes, one on the basis of £3,000 per job, basically for small and labour-intensive businesses, and the other on the basis of £10,000 per job for larger businesses, in which the investment which qualifies for grant is much higher.
I see from the recommendations of the report that the Government have introduced grant-aid into the service sector. It has been said many times in the House that the service sector holds the greatest promise for the greatest creation of jobs. In future the Committee could look at the effectiveness of regional industrial incentives and at the expansion of the areas for service sector grant to see how that grant could most effectively be spent. At the moment, the areas available for service sector growth are limited and could be expanded a great deal.
A third criticism which has been met since this report was published is on the use of the European regional development fund. Before the Co-operative Development Agency and Industrial Development Act was enacted in the last Session, regional development grant was not linked to the European regional development fund. However, because the basis of grant is now job creation the two have been linked in a much more logical and efficient way, and that meets some of the comments made in the report.
Along with many hon. Members who represent assisted areas, I welcome the conclusions in this report which, loosely spelt out, are that, effectively, a regional development policy is necessary. In those areas where industry is declining but the community infrastructure is still in existence, it is obviously much more sensible, in cost-effective terms, to create new industries in those areas rather than develop new communities, with the all-attendant infrastructure that must go with them. Perhaps in future the Committee could look at regional development rather than consider only new towns. Such a policy could be targeted at the recovery of urban areas, and particularly those old industrial revolution cities in the north of England which now suffer badly from inner city decay.
Something else that the Committee could consider is the transport of grants, if I may use that loose phrase. Many of the new towns attracted industry because of the grants that were available. One of the great fears of hon. Members who represent new towns is that after a time, having taken advantage of those grants, companies move to greener pastures where other grants are available. Careful scrutiny of money spent like that can avoid abuses. A job may be created in a new town or in an enterprise zone, and it can then be recreated or moved to another assisted area where it will attract new grant. That perhaps is a matter which the Committee could consider carefully.
There is a plethora of agencies assisting regional development. We have partnership schemes, urban development corporations, new towns corporations, the Commission for the New. Towns, the Highlands and Islands Development Board, the Welsh Development Agency, assisted areas, enterprise zones, county council enterprise schemes, various enterprises agencies and a vast infrastructure of assistance.
Perhaps we should consider how to streamline the system or to reform it by targeting the available resources most efficiently on the areas of greatest need. It has been suggested that we should examine which regions need help most and consider whether they should have regional development agencies. That would be welcomed in the north-west, where many of us would like to have such an agency dealing specifically with the assisted areas in the region. That would be cost efficient and would gather together many of the assistance schemes that I have mentioned.
Such a development would also avoid a company that wishes to expand having to travel from one assisted area to another seeking the best offer of rent and rate relief, capital grants and so on before deciding where to settle. At present, we see one assisted area bidding against another, even within the same region. Perhaps a streamlining of the system could avoid that. Many of us in the north-west are driven mad when we see on television a Welsh choir singing against the backdrop of a film of Snowdonia and the Welsh hills. We know that our development corportions, new towns and partnership schemes have nothing like that sort of advertising budget to attract people to look seriously at what we have on offer. We must try to iron out such problems, and perhaps the creation of regional development agencies is the only answer.
Mention has been made of the American system of tax incentives for regional development. Perhaps we should consider that carefully, but I emphasise that many of the companies that I have visited and those that have sought my assistance were short of capital and did not have the profits on which to claim tax allowances. They were looking to expand and to buy new machinery to create jobs. Tax incentives would not be a great help to them.
The Public Accounts Committee could also examine the administration of regional development schemes. The manuals are extremely complex and often drive away some applicants. If applicants are not to be put off by the manuals, they need the help of efficient officers in the enterprise agencies and the small firms bureau at the Department of Trade and Industry to find their way through them.
Those who administer the schemes, particularly in the north-west, are inundated with applications. I hope that my hon. Friend the Financial Secretary to the Treasury will note that in Liverpool it takes four or five months to get a decision on a regional development grant. That is a long time for a small business that has grown out of the enterprise allowance scheme, is looking to take on people and has customers waiting for orders. Six months from the date of application to the payment of grant is a long time in the development of a small business. Perhaps we should consider seriously the more efficient use of manpower in the processing of applications, particularly in Liverpool.
Time is of the essence in the development of small businesses, and I am sure that both sides of the House agree that if we are to get large-scale economic recovery the small business sector is the one from which it will come.
The Government have created a mega-department, the Department of Employment, drawing together all the Job-creating agencies. Perhaps it would be sensible to consider taking into the Department the regional development agencies and the payment of regional development grants. They are part of a job-creating policy which aims to solve the major problem that we face, and perhaps they should be taken away from the DTI. Lord Young might welcome the opportunity to draw those responsibilities into his net.
The PAC report says:
Five years is a long time to wait to start a full review of effectiveness of the revised incentives; research studies should be put in hand earlier than this".
If there is one profound conclusion of the report, that must be it. Five years is far too long to wait, and it is clear from the criticisms voiced in this debate that an early examination of the effectiveness and administration of grants is needed. I commend that view to the House.
I should like to take up what the hon. Member for Lancashire, West (Mr. Hind) said about regional policy, but I shall resist the temptation. I only hope that no one will follow his advice to transfer the payment of grant from the Department of Trade and Industry and the Scottish Office to the Department of Employment. We have enough difficulties already.
I shall concentrate on the 24th report of the PAC in 1984–85, which deals with the dockyards, and couple it with the fourth report of the Select Committee on Defence in this Session. We are talking about efficiency, and I make the mild suggestion that we should reconsider how we deal with these reports.
We have seen in the House a contrast between today and yesterday. The House was operating as a debating chamber yesterday, with the cut and thrust of highly charged political debate, with a large number of hon. Members present. It was enjoyable and, on occasions, enlightening, and the media lapped it up.
Today, we are dealing with a plethora of reports and there is an absence of cut and thrust. For example, the 24th report of the PAC, which is Government dominated—rightly so, given the way that we do things—was a unanimous report. Like the report of the Select Committee on Defence, it looked searchingly at the control and operations of the dockyards, a subject on which we have also had a plethora of reports in the past 10 to 15 years. All have suggested changes. All have questioned the efficiency of the Government. But for the first time we have a Government very clearly preferring an option—a commercial option—which came to us almost out of the blue and emanated from a rather sparse study undertaken by Mr. Peter Levene who, at the time of the study, was a specialist adviser to the Secretary of State.
One of the things that we expect, if we labour in Select Committees, is to be listened to by the Departments concerned. We do not expect them to fall over backwards to agree with the strictures of either the Public Accounts Committee or the Select Committee on Defence, but we expect to be listened to.
The Public Accounts Committee had a Government majority as, of course, did the Select Committee on Defence. The latter has some very well known Left-wingers on it. The Chairman is a former Minister, the hon. Member for Ashford (Mr. Speed) is a former Minister, and there are several other former Ministers, including some who have been concerned with defence. That Committee overwhelmingly questioned the Government's preferred option.
But what happened? Almost before those Committees had submitted reports to the House—to be fair, a little time elapsed—the Secretary of State for Defence came along on 24 July and said, "No matter, we are going on. I am going on with the preferred option."
A management team is currently devoting valuable time ushering certain contractors through the dockyards. Some of us have the names of those firms. Perhaps the Financial Secretary to the Treasury will tell the House the names of the firms that are going through the dockyards at Rosyth and Devonport at the present time. The Government have commissioned a voluminous report by Touche Ross, showing what assets can be hawked round.
All this is against the background of the reports of the Public Accounts Committee and the Select Committee on Defence. It means that Members have, in a way, laboured in vain. I hope that I am wrong. I am an eternal optimist. Even at this juncture I hope that the Financial Secretary, who is really, if I may say so, a pragmatic type of gentleman, will ask himself, as he certainly ought, whether we will get value for money, whether it really is efficient and whether it will work. Will the Government's preferred option of commercialisation work?
Perhaps I can explain briefly what this preferred option desires to do. The idea is to keep the capital assets of these dockyards in the public domain so that they will still have the stricture of a vote. The Ministry of Defence and the Treasury will still have their hands on that vote. The concept then is to create two companies, one for Devonport and one for Rosyth, which will be labour-only companies. We will put the labour of the dockyards into two companies for which outside contractors will bid. They will bid for the companies and they will bid for the Navy contracts, or a substantial proportion of the refit and maintenance work allocated through the Navy Board.
The Public Accounts Committee has examined this matter. I pay tribute, as others have done, to the work of the PAC. I was a member in a previous incarnation, and I am in a way sorry that I did not enjoy the chairmanship of my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), but I served under earlier Chairmen who are not now in the House. One was Joel Barnett, now Lord Barnett, who is in another place. They were excellent Chairmen, who gave valuable service to the PAC. We have asked in both these Committees whether it will work.
In the evidence given to the Select Committee on Defence, my right hon. Friend the Member for Dudley, East (Dr. Gilbert), a former Defence Minister, at question 411, asked:
Would you describe this Government's preferred option as a high risk option?
Dr. Harte, of the Ministry of Defence, replied:
Those are the words I used and I would stand by them. What I was implying was, if you ranked the proposals which are now put in by the Government in order of risk, then I think it is true that the commercial management option is at the top of that list. On the other hand, if you ranked them in order of potential financial benefits, the commercial management option is already at the top.
So it is a high risk giving notionally high rewards.
What are these high rewards? What does the Public Accounts Committee say about the nature of these rewards? I quote from its report, paragraph 10:
We note that the net savings may be as little as 3 per cent. of the total Dockyard annual operation costs over a 10 year period, after allowing for the costs of implementing commercial management and the contractors' return on capital employed, although MOD stressed this was a worst case and expect that they will be higher and will increase after 10 years. Over and above those from the Interim Management Measures…the savings may be as little as 1 per cent.
There is an additional submission showing certain figures that are being submitted in answer and that is cited on page 6. There is a supplementary note by the witnesses which
gives some additional information. Nevertheless, savings are really minuscule and not backed up by any figures whatsoever.
What are we putting at risk? We are putting at risk the ability to put to sea a viable naval force in any and all circumstances that might prevail. That is a large consideration.
I know that the Public Accounts Committee does not normally undertake visitations. I do not think that the practice has altered since I was a member. Its members take the view that their responsibility is to hear witnesses, take evidence and come to their conclusions. The Select Committee on Defence does not have that circumspection. We have visited certain dockyards. Yesterday some of my colleagues and I visited Portsmouth. Here the Government have taken a different view of operations. They closed Chatham and ran down Portsmouth, but even there one can see the complexity of refitting vessels. Some of the Ministers ought to visit the dockyards. I do not suggest that they do so in the next week, because they may get a pretty rough handling if they go to Devonport or Rosyth. But if they go even to Portsmouth — and I say it with no disrespect to Portsmouth—they will see the complexity of the procedure.
We were on a County class destroyer yesterday — a rather old ship. There is no way that that type of ship could be put out to a commercial yard. It may be that the Chief of Fleet Support and Rear Admiral George or the Chief Executive, Royal Dockyards, will contradict me, because I have been rather a long time away from this as a Clydeside fitter. But let us see the sort of test that the Government have made. They have asked for a compex examination. That is what they call it. They have put out for private tender an Oberon class submarine, Euryalus, and they will then be able to make some comparisons. However, these comparisons will not be available until after 1987. The full evidence will not be available either to the House or to the Department until that time.
What has happened to the Otter? When we questioned Rear Admiral George in the Select Committee on Defence we heard the tale of the Otter's propeller. The work could not be done in a commercial yard. Rosyth is having to deal with HMS Red Pole. The estimate for that work at Rosyth was 20 weeks, so it was decided to put the work out to Richards, a commercial yard, where the work could be done in 16 weeks. The deficiencies after the commercial yard had had a go were so mind-boggling that it was decided to try to send the ship to Rosyth.
I do not excuse my trade union colleagues, but, not unnaturally, the boys and girls in the yard resented that. The Government have ideas of how to proceed with the dockyards, but they are completely untested. No other country adopts their style and practice. The United States certainly does not. The Government are putting at risk the viability of our naval force.
Perhaps the Navy and the dockyards have had too cosy a relationship over the years. Perhaps the dockyard men have been trying to do a Rolls-Royce job to ensure that, to the best of their ability, when a ship goes to sea it never breaks down. That. is erring on the right side and recognising that men's lives are at stake. That cannot be measured in terms of profit and return on capital. I know that we must press for efficiency, but that must be balanced against putting men's lives at risk and against back-up.
The Government do not even intend to examine carefully the lessons of Portsmouth. Perhaps the Select Committee on Defence is at fault because it did not examine the matter until a few days ago. The Select Committee as a whole has not yet taken a view. The Government are not awaiting the results from the Otter and Euryalus. The real culprit is the Secretary of State for Defence, although the Treasury is also involved because its aim is to reduce the number of civil servants. The main aim is to take people out of Civil Service employment and to put them in the private domain. The Government are not concerned with making the Navy more efficient.
I am a member of the Select Committee on Defence, but I have seen the work done by the PAC. I believe that the House and the nation should resent what is happening. The Government are paying no attention to the strictures of the senior Committee of the House—the PAC—or of the Select Committee on Defence on which they have a majority. The Committees do not take a political view. They are saying to the Government. "You have not proved your case, so, until you do, halt." We have had no response from the Government.
I suspect that the Gracious Speech will contain a commitment to introduce a Bill for the commercial management of the dockyards. Such commitments do the House and politics great harm. Government Members will troop dutifully through the Lobby in favour of that. Unfortuntely, many of my right hon. and hon. Friends and other hon. Members will not have read the reports and they will take a decision in accordance with the balance of political votes.
Two Commitees have said that the Government have not proved their case. I apologise to my right hon. Friend the Member for Ashton-under-Lyne for not being present to hear the whole of his speech, but he said that some of the worst evidence that he had heard was about the dockyards. In the Select Committee on Defence only one of the many witneses was a non-MoD man. I cannot say that his evidence was good. It was a rather appalling support of the Government's case.
The Financial Secretary is responsible for the effectiveness of Government spending. He should examine what is happening and look at the end product. Is he willing to have all this on his conscience because of disruption in the yards, with no tangible benefits or savings?
Perhaps the Government are planning to privatise the Navy. I would not put that past them. Unless they plan to do that, they must remember that the customer is in the public sector and the assets will remain in the public domain. The Secretary of State's doctrinaire view puts at risk the effectiveness of the Navy as a fighting force. Anyone with any sense of patriotism or public responsibility should resist that.
I wish to discuss the Foreign and Commonwealth Office and its effect on exports, and the perennial topic of the National Health Service which I have now studied in the Public Accounts Committee for seven years.
I pay a personal tribute to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), the Chairman of the Committee. The PAC is one of the happiest of our Committees, and the right hon. Gentleman certainly keeps us working hard. I do not complain about that. Of all the work that I have done in politics, the work on that Committee is by far the most worthwhile.
It is disappointing that we have to debate 51 reports this evening. We are treating the work of our most senior Committee without proper deference. We do our best to analyse the evidence. We try to suggest practical solutions. Much of the cutting edge of our work is wasted because our reports are debated so long after they are made. However, we shall try to put in a few cutting edges this evening.
It is high time that the Comptroller and Auditor General, through the National Audit Office, modernised the presentation of his work in terms of green reports. These are now put out in a succinct and very readable form and the coverage given to them by the media has grown extensively.
I am as much a traditionalist as anybody, but the format in which we produce our reports is as boring as one could possibly find, and we have to be assiduous in working out exactly which report we are dealing with. The format is identical for all the reports. They are pretty unreadable, and I would say to the Chairman and his colleagues that I hope that that will be an urgent item for discussion at our meeting on Monday next and that we shall consider how the general accounting officer in the United States operates. He produces reports that are readable with recommendations that are on the cover. If we followed his example, more than the six or eight Members attracted to the debate tonight might be attracted in future.
The second report, the 15th report and the 21st report 1984–85 relate to helping the nation's exporters. Our reports are so often critical of what is happening in Departments of State that it is quite nice to pick up a report which is thin and in which the evidence is clear. The second report states in recommendation No. 15(1) on page vii:
We consider that the C and AG's findings provide welcome assurance that the staffing of the Diplomatic Service has been, and is, scrutinised regularly and carefully.
We do not say that lightly, and we long for the day when we can say the same about the National Health Service or indeed about any other Department of State. It is to the credit of the Foreign and Commonwealth Office that it has accepted the strictures that the Committee made of it some years ago and that it got its act together. I pay tribute to the work that it has done.
The 15th report deals with the management of the overseas estate. Considerable progress has been made with it and we believe that further progress will come. I draw the Minister's attention to paragraph 14(v) of the 15th report's recommendations, which states:
We regret the significantly reduced resources available to FCO for rationalisation and 'spend to save' proposals with a high rate of return. We think it unfortunate that opportunities for savings are being frustrated by an initial shortage of funds.
It is clear from that that the FCO has a much better grip on things than it has had for a long time. I think that the Treasury might relax its control a little in this area. As one who specialises in matters concerning south-east Asia, I am conscious that, had we had more men on the ground and progressed further the concept of a territorial commercial man, we should not have got into such a mess with the Thai bus contract, with every chance of losing it.
The 21st report on the ECGD deals with our exporters and is a most important and timely report. As hon. Members will know, the Minister of State has received recommendations for a review of ECGD. He did not accept all the recommendations that were put to him about the nature of the board, but he said that there were now full-time members on the board and that the result will be a swifter and more responsive service to exporters and, as he put it, more stimulating work for the staff.
It is a perennial worry for anyone at the Treasury to discover that the ECGD is making a substantial loss. My hon. Friend the Minister needs no reminding of that, but I hope that when the Treasury considers the report and the evidence of Mr. Gill and others it will recognise that it is perfectly right, proper and practical that commercial insurance risks should be run at a profit and certainly on nothing worse than a no-profit-no-loss basis but that there are times, a substantial number in today's world, when there is, as it were, political risk. In this context, I draw my hon. Friend's attention to paragraph 46(viii) of the summary of main conclusions, which reads:
Guarantee facilities within ECGD's Trading Accounts which incur substantial losses, but which are necessary in the national interest, should be accounted for as public expenditure.
The details in paragraph 25 show that in that category of trade the loss was £68·2 million. In the other category, shown in paragraph 29, the loss was £87·7 million. We know that ATP, aid and trade provision, is still being reviewed three months after the initial announcement of its role. I put it to the Government that the £150 million spent on trading risks of a political nature is vital to the nation's exporters, and the House will do a great disservice to the nation if the availability of that cover is removed.
Having praised the Foreign and Commonwealth Office, I come to my bête noir, the National Health Service. Here I must declare a number of interests in that I advise two pharmaceutical companies and am married to a full-time general practitioner. In this context, I wish to dip into a number of reports—Nos. 12, 16, 28 and 29 of 1983–84 and Nos. 17, 22 and 23 of 1984–85. I shall say no more than this for the pharmaceutical industry. Tackling the approximately 10 per cent. of NHS costs accounted for by the national drugs bill is fine and dandy, but it is no use ignoring the other 90 per cent., throwing one's hands up in despair and saying that because we do not know how to get at those costs we cannot do anything about them.
In relation to the pharmaceutical price regulation scheme, I draw attention to just two issues. First, the parallel imports situation is covered in the 29th report of 1983–84. Paragraph 31(vii) of the recommendations states:
The suggestion that the NHS has not been overcharged in respect of parallel imports of drugs in no way justifies chemists making large unintended profits at the taxpayer's expense, and DHSS should deal urgently with the problem on this basis.
That was printed on 9 July 1984, but to the best of my knowledge action taken on it has been almost nil. I did some telephoning on this yesterday and to my certain knowledge there are still parallel imports at 30 per cent. below the list price cost, the difference being pocketed by the large chemists doing the importing.
The 23rd report of 1984–85 makes a further important point about the PPRS stressing the importance of the Department receiving the main review body report for Government contracts before carrying out its negotiations with the industry. The DHSS previously did its own negotiation but, because of the other main body of Government review contracts, we have the farcical situation that a non-pharmaceutical industry can get a better rate of return than someone under the PPRS.
The 28th report is about the procurement of NHS savings. The not insignificant sum of £60 million is available. However, we sadly report—these are pretty damning words—in 32(i) of the recommendations:
The slow progress in securing available economies in the cost of NHS supplies represents a significant missed opportunity. It is lamentable that after nearly 30 years of effort by the NHS we are virtually starting from the beginning.
That sentence fills us with horror and it ought to fill every senior official in the DHSS, Ministers and shadow Ministers with absolute horror. It is not good enough to allow that situation to continue, and I hope that the Treasury will put pressure on the Department to sort this out.
It gives me some pride to state that only the Oxford region has virtually eliminated small stores. It is not often that, coming from Northampton, I praise the Oxford regional health authority but it has got something right. The DHSS informed the Committee that the target for centrally co-ordinated supplies was 80 per cent. to be achieved in 1984–85. I would love to know whether we got anywhere near 80 per cent. The £60 million is available without a great loss of sweat in the supplies area. If Sainsbury, Tesco or any other company were involved, it would soon be digging into that £60 million.
The 22nd report concerns energy conservation. First, I quote a few words of praise:
We recognise the achievement made by the health service over the last ten years in securing energy savings totalling £379 million".
The Committee then goes on to say:
But we have grave doubts as to whether the potential for further savings of £1,335 million in the next fifteen years will be realised".
"Grave doubts" is an understatement because the Department set up a scheme in 1977 with a great fanfare but which totally collapsed by 1981. We say it faltered. It is extraordinary that when we look, ask, question and probe we find that there is not one piece of guidance given by that Department to its regions for the whole of the period from 1979 to 1984. We forget too easily that 1979 was the middle of an oil crisis, yet the DHSS, despite that crisis, ignored the question of energy saving. In paragraph 7 we state that, in the view of the DHSS, it had delegated that responsibility to the districts and regions, but it is not adequate to delegate in such circumstances, given the Department's record.
I should like to know how near we came to achieving savings of £100 million, which was the Department's own target for 1984–85. My guess is that we had a miserable performance—I doubt whether we got halfway to it—so that leaves at least another £50 million to £100 million.
The report on the general dental services—the 17th—does not show any massive savings. It is right to place on record the Committee's view that, since 1979, dental health in Great Britain has continued to improve and should improve further. The vast majority of our dentists do a first class job for the nation in preventive dentistry. The Department, however, should respond to our recommendation that regulation 22 procedures—a spot check—should be done on those dentists who appear to be either over-providing or over-charging. A little activation of that would go a long way to solving the problems.
The 12th report makes very sorry reading. It is distressing that any Department of State can estimate cost savings from reorganisation of £8·6 million which turn out to be £54 million. That is an incredible difference, and the Committee is not even sure whether £54 million was an accurate figure. We were told that there were 4,000 posts to be saved. We do not know whether they were saved. All we know is that there were 3,000 premature retirements at fairly princely sums of money. Paragraph 29 of the report says:
We must express our misgivings about the re-employment in the NHS of officers who have had the benefit of premature retirement terms. We welcome the review being undertaken by the Department and, whilst we can appreciate that re-employment could be an assistance to management, we consider that it should be very strictly controlled by the DHSS themselves.
That warning paragraph is just as relevant today, and I hope that it is brought to the attention of the authorities.
The 16th report for 1983–84 concerns manpower control. I am sure that my hon. Friend the Member for Crawley (Mr. Soames) will have drawn attention to it. Recommendation 52(i) says:
Progress by the health departments and health authorities in bringing NHS manpower under control has been quite inadequate".
That is an understatement. We were aiming for savings of £30 million from the reorganisation, but we are not sure whether we have achieved more than £10 million so far. We know that we have building defects to the tune of at least £30 million and that in terms of claims against contractors and professionals we have garnered the princely sum of £400,000 as at the date of our report, which was not so long ago.
I have tried to highlight the fact that there are several areas in the NHS, which is under a lot of pressure, where substantial savings can be made. I have to attend a meeting of my district health authority next Friday. It wants to close three wards, but when I look through its plans I find that they show every sign of the evidence that I have found in the PAC's reports — inadequate planning and inadequate tackling of what is no more than simple professional good management. The Treasury wants to save money. It is high time that it worked through some of our NHS reports because tens of millions of pounds are lying wasted. That is to the detriment of the whole nation.I hope that, if nothing else, I have stimulated my hon. Friend into reading those reports on the NHS.
I shall confine myself to the 13th report of the PAC concerning the evasion and enforcement of vehicle excise duty. The Committee underlined the fact that circumstances up to 1982–83 were far from satisfactory. The report notes that between £135 million and £174 million of revenue is lost by people not carrying out their duty to license their road. vehicles. It identifies the fact that, out of some 28 million vehicles that are in use or have been built in this country, 20 million are licensed, but 8 million are unaccounted for. The report states that most of the unaccounted for vehicles are laid up, awaiting sale or are not licensed but are being used regularly. This emphasises the unacceptability of the present situation.
The police make an effort to apprehend licence dodgers, but we have seen recently how difficult it is for the police to do that job adequately. We learnt a bitter lesson in Handsworth, where I believe the riot was started by a spot check on a vehicle that was not displaying a tax disc. Conversations that I have had with police officers suggest that they are hesitant about dealing with tax dodging within the inner city areas, for fear of starting something much more substantial in the form of civil disobedience. If the police are not prepared to do that, there are grounds for having a commissioned debt collecting agency, as there is a large amount of money for a private enterprise agency to collect on behalf of Her Majesty's Government.
There was no shortage of ideas about how to combat the present situation, and there are two or three basic alternatives. One idea was to pass the tax on to the user in petrol prices, to make sure that everybody who used a car paid the equivalent of the vehicle excise duty. That would mean an increase of 31p per gallon on the price of petrol. The Government ruled that out because it would disadvantage many people in rural areas who do much higher mileage in daily commuting to schools, shops and so on.
Another alternative was to tax every vehicle, irrespective of whether it was used or laid up. That would be a much more simplified form of vehicle excise duty, but it was dismissed because it would be unfair on those who collect cars as a hobby, run museums or rarely use vehicles on the public highway. Surely a combination of alternatives can be arrived at to come up with an acceptable policy.
I am disappointed in the report because no active suggestion is made to help the Secretary of State for Transport develop an alternative strategy. Non-payment of the vehicle excise duty is not a declining problem, but is gradually increasing, and it is becoming increasingly difficult to enforce licensing in our inner city areas. It seems to me that we could evolve a system that would feature all the suggestions that have been made. It makes sense to have some form of road pricing by passing some of the vehicle excise duty cost on to a gallon of petrol. A petrol increase of 15p per gallon is small compared with how much petrol has gone up in the past two years—approximately 40p to 50p. That would be paid by everybody who uses a motor vehicle.
It is equally possible to have a standing charge for a car, much as we have a standing charge for electricity, gas and telephone. A standing charge for a vehicle would not be unreasonable.
There could be a standing charge of not more than £2 a month— about £20 a year— for the opportunity of having a vehicle to use on the highway. Were one to apply for a full vehicle excise licence, that would be at a cost of about £40 or £50 a year, bearing in mind the extra cost of petrol and the standing charge that would be paid.
Of course not, just as British Leyland would not pay many other taxes when it produces a vehicle. This charge would be levied on the car only when it was handed over to the first keeper, and whether the car was laid up or put into a museum that person would still pay the standing charge.
For a museum or a collector, it would be possible to exempt any car built before 1960. Oddly enough, if some of the cost of everyday usage were passed on through a surcharge on the price of petrol, in many areas that could make all the difference between no public transport and viable public transport. As motoring costs would clearly increase in some cases, there would be an encouragement for the user to switch to some extent to public transport.
The report also draws attention to the identification of the relationship between the user of a vehicle and the keeper. All too often when people are apprehended for driving a vehicle without a vehicle excise licence it is discovered, after numerous investigations and inquiries, that the keeper claims that he knew nothing about the use of the vehicle on that particular day—that it had been taken without his permission, laid up, or its use had not been authorised. We must make a clear distinction between the user and the keeper.
A user is a person who can commit an offence for parking, speeding and so on. He would be liable for any fine or penalty. However, the keeper must be responsible for the roadworthiness of the vehicle and the presentation of a vehicle excise duty licence. Whoever the user may be, if a vehicle does not have such a licence, the keeper must be liable. If that point were made clear, it would cut out a lot of the time-wasting involved in establishing who is responsible for paying the vehicle excise duty. If there were a standing charge and a surcharge on the price of petrol, everyone would be contributing to vehicle excise duty, even though some of the dodgers might not pay the full amount of duty involved.
As the report also says, the fines that are levied are quite derisory. The average fine is about £33, yet the maximum is about £425. Very few people ever pay the maximum fine. As an example to others, we should ensure that it does not pay to fail to license one's car. There ought to be a recommendation that if a car is not licensed and the person is caught, that person should have to pay a great deal more than the cost of licensing the vehicle in the first place.
In the absence of punitive measures, people will continue to take the risk. As the report indicates, in many parts of the country it is common sense to take a chance and to drive a vehicle without a current vehicle excise disc on the windscreen. Our attention ought to be devoted to introducing a system to ensure that all road users pay their fair share of the cost of running a car and of providing the infrastructure that is necessary.
A notable feature of this debate has been the number of hon. Members who have taken part who are not members of the Public Accounts Committee. I have sat through several PAC debates and read the Official Report of others. But what struck me this evening was that, although there has been the traditional self-criticism of poor attendance in the Chamber, many non-members of the Public Accounts Committee have taken part in the debate. I shall refer to some of their speeches in my contribution.
My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) paid tribute to the work of his colleagues and noted that the Public Accounts Committee is one of the most demanding Committees of the House. On behalf of the Opposition, I thank all the Committee members, including those who have not been able to contribute to the debate tonight but who contributed, in many cases with great distinction, to the deliberations of the Committee.
I join other right hon. and hon. Members who have congratulated and complimented my right hon. Friend the Member for Ashton-under-Lyne. There is a certain ritual about thanks, but I have noticed tonight the warmth of the congratulations from Conservative Members. The hon. Members for Horsham (Sir P. Hordern), for Uxbridge (Mr. Shersby), for Scarborough (Sir M. Shaw), for Northampton, South (Mr. Morris) and for Rutland and Melton (Mr. Latham), who are all members of the PAC, have commented on the distinctive role of Chairman performed by my right hon. Friend the Member for Ashton-under-Lyne. I would add to our appreciation of his work as Chairman that those of us who have served on the PAC for a few months recognise that, although an ordinary member of the Committee does a great deal of work, the amount of work undertaken by the Chairman is much greater.
We wish to express our appreciation of my right hon. Friend's lucid presentation of the reports this evening. It was clear from his contribution that he has given thought not only to the work done by the Committee but to the Committee's responsibilities, the way in which his duties should be discharged in future and the evolution of the work of one of the oldest and most historic Committees of the House. We shall study with care his remarks about the delicate relationship between Ministers and civil servants and how that is affected by the PAC.
I join hon. Members in expressing appreciation for the work of the Comptroller and Auditor General. I associate myself especially with the remarks of the hon. Member for Northampton, South. Similar sentiments have been expressed before on both sides of the House. Sometimes the Comptroller and Auditor General and his staff must think that hon. Members pay only lip service to the importance of their work and the work of the PAC.
I also agree with the comments of the hon. Member for Northampton, South about the delay in debating the reports. The previous debate on the PAC reports took place more than 18 months ago in March 1984. There was a special debate more recently on the report on premature retirement in the National Health Service. I encourage such special debates. However, during our previous debate, hon. Members criticised the delay in debating the reports. On that occasion the delay was nearly two years, although it had been increased by the intervening general election. On this occasion we have had a gap of more than 18 months and we are debating the reports at the fag end of a Session.
Many hon. Members regret that we do not debate PAC reports more frequently so that they are still fresh and some contribution can be made to the decisions which must be taken by Ministers. In the previous debate, the Financial Secretary, who is to reply to this debate, promised to bring this point to the attention of the Leader of the House. I am sure that he did as he promised, but there has been no result. Hon. Members on both sides of the House wish to press the Financial Secretary again this evening, because the impression given is that the Government do not care enough about the PAC reports. I mean that they do not care enough to have them debated more frequently and more promptly after the reports are published, and to have subsequent debates. The Government's manifesto at the general election stated:
We are determined that our public services should provide the best possible value both for people they seek to help and for the taxpayer who pays the bill.
One way to get value for money would be to debate the reports of the Public Accounts Committee, as we have seen tonight.
There has been a new development. In opening the debate, the Chairman of the PAC identified seven reports which he regarded as especially significant. Those reports were also identified, for the benefit of the House, on the Order Paper. However, I am sure that my right hon. Friend would agree that almost every report merits its own debate and that we need more debates on individual subjects, as happened with the report on premature retirement in the NHS. That was another point advocated 18 months ago.
I also support the point made by the hon. Member for Truro (Mr. Penhaligon) — I had intended to make it myself—that there is a need for other Ministers to reply to such debates. I yield to no one—at least to no one in the Opposition— in my regard for the abilities of the Financial Secretary, but it is asking too much of him to reply to the debate with the expertise, knowledge and experience of Ministers from Departments whose activities are the subject of PAC reports. It would benefit the House, the Government and the governing of the country if departmental Ministers could take part in such debates, as happened during the debate on premature retirement in the NHS and as happened, unusually, during proceedings on the Finance Bill.
This year, the Finance Bill Standing Committee debated vehicle excise duty, and the Government brought to that Committee the Under-Secretary' of State for Transport. I make no comment about the views that were expressed or the policy that was enunciated by the Minister. The point is that we had the opportunity to debate with the Minister the taxation aspects of his Department's activities. That was right and proper, and it led to me and my hon. Friends thinking seriously about that aspect of that tax. On behalf of the Opposition, I press the Financial Secretary to consider seriously my request for more such departmental debates on the Floor of the House.
When he replies, I hope that the Financial Secretary will tell us what has happened with regard to the points put to him 18 months ago. After all, he has had plenty of time to think about them. I especially wish to ask him about a point made by the hon. Member for Scarborough, who drew attention to the need for much greater emphasis to be placed on the work of internal audit departments. It is not enough to leave such matters to the PAC. Hon. Members on both sides of the House believe that all Governments should pay more attention to the work of internal audit departments. Much more could be done internally. Indeed, one role of the Comptroller and Auditor General should be to ask why the internal audit departments have not reported on some of the matters which are the subject of PAC reports.
My right hon. Friend the Member for Ashton-under-Lyne noted that the PAC is concerned not with Government policy but with the implications and the financial aspects of their decisions. He referred especially to vehicle excise duty. Our debate on the Finance Act 1985 showed that the Government have given little, if any, thought to the relationship between different classes of vehicles in regard to vehicle excise duty. However, the report sets out the measures that should be taken to combat the evasion of vehicle excise duty. During our debates in Standing Committee—I make no apology for referring to them, because we had an extensive debate on the subject —the Minister of State estimated that the revenue from vehicle excise duty is about £2·5 billion a year. The Under-Secretary of State for Transport told us that, based on a study conducted a year ago, the Government consider that the rate of evasion is 4 per cent.
My hon. Friend the Member for Swansea, East (Mr. Anderson) declared his interest. The driver and vehicle licensing centre is in his constituency. The hon. Member for Truro declared a slightly different interest. He said that his constituents have an interest in the present structure of taxation because, if the tax on petrol was increased to replace vehicle excise duty, there would be a redistribution of tax from urban to rural areas. That is a valid point. I accept the logic of what he said—that people living in rural areas tend to drive longer distances than people who live in urban areas.
There would be another aspect of redistribution. I am not arguing for that policy; I am drawing attention to another aspect of redistribution which would arise if the tax on petrol increased and the vehicle excise duty were reduced— a redistribution between different classes in our society. There would be a redistribution of tax from smaller to bigger cars. Many people think that that would be desirable. It would also redistribute tax from people who cover small mileages to those who cover high mileages, not because of the areas where they live, but because of their lifestyle.
I note with interest that the Liberal party is opposed to an increase in the tax on petrol. I shall record that for the future because, as the Financial Secretary will remember, when the Opposition pressed him on that point during our debates on the Finance Bill in Committee of the House, not one Liberal Member voted against the increase.
My hon. Friend the Member for Swansea, East referred to last December's report about evasion. I think he made a slip of the tongue because he said that the report showed that there had been a reduction in evasion, and that the problem was contained or even resolved. That is to misread the report. The estimates have been reduced, not the amount of evasion. The surveys carried out in June 1984 show that the previous estimates may have been wrong. I say "may have been wrong", because the figure may still be an underestimate. The estimate was based on the number of vehicles observed in three days in the summer of 1984. However, the report notes that some vehicle owners evade duty for at least part of the year. The estimates, therefore, must take account of that. The report also notes that at least twice the number of unlicensed vehicles may be in use than were estimated on the basis of the survey. The scale of the evasion, therefore, may be much nearer the 10 per cent. mentioned by my right hon. Friend the Member for Ashton-under-Lyne than the 4 per cent. which is tentatively suggested in the December report.
If the figure is only 4 per cent., the loss to the Inland Revenue is about £100 million a year. The figure will be slightly higher than that because in the interim the Government have increased the rate of vehicle excise duty. That does not take into account the effect of an increase in the vehicle excise duty on the amount of evasion. I am not suggesting that we should study the subject ad infinitum, but if there is a relationship between the level of tax and the amount of evasion, the evasion will have increased because of the increase in tax in excess of the rate of inflation. We can, therefore, expect the amount to be significant. I was glad that my right hon. Friend the Member for Ashton-under-Lyne hinted that the PAC would go further into the subject. If evasion is about 10 per cent., lost revenue is about £250 million.
The point is not simply to quantify the amount of lost revenue, but to ask what is to be done about it. The hon. Members for Birmingham, Northfield (Mr. King) and for Uxbridge and my hon. Friend the Member for Swansea, East argued that greater efforts should be made to counter evasion. I was particularly struck by the point made by the hon. Member for Uxbridge that we should consider what other countries do to ensure less evasion. I am sure that other hon. Members from the west midlands will support his point, that a change in the system of vehicle registration and licensing may reduce evasion and have a beneficial effect on British motor manufacturers.
I wish to ask the Financial Secretary some questions about the reports. Why does the Department of Transport not deal with all offence reports? It must be borne in mind that the statistics deal only with known offences and vehicles which have already been spotted as being on the road without vehicle excise duty having been paid. Why has the Department set itself a target of only 60 per cent. of reported offences in London and 80 per cent. elsewhere? Why is it satisfied with those proportions? Why is there a difference between London and elsewhere? Why should 40 per cent. of offenders in London escape action and only 20 per cent. elsewhere? Will the Financial Secretary and the Department of Transport consider employing more people, as recommended by my hon. Friend the Member for Swansea, East, to deal with evasion? The report shows that it would be productive and the revenue to be derived from it would greatly exceed the cost of employing 400 or 500 more people. Therefore, the Financial Secretary should consider the idea.
The hon. Member for Northfield also referred to police reluctance to deal with evasion. He referred specifically to Handsworth and the inner cities, but the problem is not restricted to those areas. I am sure that hon. Members will have seen, as I have, vehicles for which the vehicle excise duty has not been paid. I have never forgotten walking around a car park outside a sports centre in leafy Berkshire and being amazed at the number of cars there that morning for which vehicle excise duty had not been paid for long periods. It was not just that the owner had forgotten to license the car for a month; it was for long periods. The problem is not, therefore, restricted to the inner cities.
Will the Financial Secretary tell the House what has happened in the 18 months since the report was published? He told us that the average penalty had increased to £44, but the present maximum penalty is £500, not £425, because it is five times the rate of vehicle excise duty. The Government's increase in vehicle excise duty has increased the maximum penalty. If the average penalty is only £44, it is low. Does the Financial Secretary find £44 an acceptable figure? Does he want it increased? If so, what are the Government doing to persuade magistrates to view the offence with greater severity? As my hon. Friend the Member for Swansea, East asked, what reply has been received from the Magistrates' Association? It is more than a year since the Government wrote to it, and the public and the House are entitled to know what is happening and what magistrates intend to do about it.
The report on the sale of Government shareholdings in publicly owned companies deals with the procedure for selling the holdings, which is a matter of intense political debate. I note from the report that in the sale of Associated British Ports Holdings the public lost £5 million because the value of the shares immediately rose by 23 per cent. The price has now quadrupled. What will happen when all the assets are sold off? That question concerns not the PAC, but the Treasury Select Committee, and it causes my hon. Friends and me some anxiety. I am sure that we shall return to that question in our debates during the year.
Although several hon. Members have constituency interests in vehicle excise duty, the hon. Member for Horsham could not be accused of speaking from a constituency point of view when he referred to regional industrial incentives. He argued that we needed a package of measures, not simply grants. I agree with his general point, especially his idea of a more discriminatory policy, possibly tailored according to region and city. However, I would probably disagree with him about what those measures should be. I also disagree with him about his interpretation of the unemployment figures for the different regions. He read out percentages, and argued that there was little to show for regional industrial incentives over the years. That argument can be met by referring to the work of the PAC. When discussing the effect of regional industrial incentives, one can ask what the figures would have been without those incentives.
The argument is similar to the argument in favour of a Public Accounts Committee. Several hon. Members have said that there is little corruption and fraud in public administration. Our record is better than that of many other countries, but that does not mean that we should not have a PAC whose prime responsibility is to ensure that money is properly spent and not misappropriated. The Committee's role ensures a high standard of public administration. We would not abolish the PAC simply because there was little evidence of fraud and corruption in public life. The Committee has a deterrent effect. Similar arguments apply to regional industrial incentives. Without them, we would probably have lost more jobs in the regions.
I was interested to hear the hon. Member for Lancashire, West (Mr. Hind) say that each new job was estimated to cost £32,000. He said that that was a large amount, and I agree. However, that was only one estimate. He will have noted in the report that the estimates for the number of jobs created varied a great deal. Over a 21-year period, from 1960 to 1981, estimates varied from 350,000 to 630,000 additional jobs. That is a great variation, and there are many estimates. I suspect that the academics who have been studying regional industrial incentives, rather like the economists, never agree.
It is unfortunate that there is only one estimate for the cost per job. If all the academics had produced estimates, we would, no doubt, have had a wide variation. I am not impressed with the figures because no one knows the true effect of the incentives. As the hon. Member for Lancashire, West said, jobs can be double counted—for example, through transfers of jobs. A new job may be created and counted, but then move because of a grant in another area and be counted again.
The Government's new scheme has the clear objective that the incentives are to reduce regional disparities in unemployment. There is a weakness in that target. It would be easy to reduce regional disparities by having 100 per cent. unemployment in every region. They would all be equal then because there would be a levelling down. I suspect that that would be regarded as a success in some quarters. My hon. Friend the Member for Normanton (Mr. O'Brien) was on the right lines when he spoke with great feeling, based on his constituency experience, of the need for greater efforts to reduce the imbalance in job opportunities. I link that with the comment of the Comptroller and Auditor General about the absence of targets for the Government's regional policy.
There is some discussion in the report about whether the job figures should be gross or net. The real target should be total employment in the regions, and job opportunities should include existing jobs. The targets should take account of jobs saved and indirect jobs created by incentives. The figures should be shown not by an estimate using a standard multiplier effect, but by recording, planning and targeting total employment in a region or city.
The report on stores control in the Ministry of Defence was highlighted by the hon. Members for Scarborough, for Truro and for Uxbridge. I have an interest to declare. Indeed, I always seem to have an interest to declare in our debates on the PAC reports. Perhaps it is because there are so many of them with which to deal at one sitting. I spent some years working in the supply area of the engineering industry. Not only was I responsible for obtaining supplies, but I became a supplier to the Ministry of Defence. Therefore, I have rather more sympathy than other hon. Members with the people handling that responsibility in the Ministry of Defence. I am not as impressed as some hon. Members by the fact that the Ministry of Defence did not regard it as necessary to replace everything that had been burnt at Donnington. I suspect that, in some cases, it could not replace everything. That was the purpose of the all-time buy in the first place—if it did not put those items into store, it could not obtain them again.
The original decision to buy may not have been wrong; perhaps subsequent events led to overstocking. We can be too trenchant in our criticisms with the benefit of hindsight. However, I accept that substantial savings could be made in that aspect of the activities of the Ministry of Defence. I agree with the comment made by my hon. Friend the Member for Coventry, North-East (Mr. Nellist) on 30 April, who, when examining one of the witnesses, referred to the complacency of the permanent undersecretary. The replies recorded in the minutes show a degree of complacency about the efficiency of stores control.
I was disturbed to learn from the hon. Member for Scarborough that Mr. Levene's report was so confidential that it was not shown to the PAC. I am sure that hon. Members on both sides of the House are concerned about that. I did not gain the impression from the report that that had happened. The information may be buried somewhere in the back-up papers.
As my right hon. Friend the Member for Ashton-under-Lyne said, reviews are under way. There are two reviews and the Treasury has agreed that the results will be notified to Parliament. I hope that we will have not only the results but the whole report, so that we can judge the efficiency or otherwise of stores control.
My hon. Friend the Member for Normanton spoke at length about the reports on the housing benefit scheme and social security. He expressed the Opposition's view perfectly. Constituency cases show that the introduction of the housing benefit scheme was chaotic. However, it is easy to forget that there were problems previously and that people lost benefit because they were not clearly advised whether to apply for a rebate or for supplementary benefit. Nevertheless, the introduction of the new scheme caused very many problems. Indeed, it could be argued that it caused more problems than it solved.
It is clear from the report that the scheme did not lead to fewer staff being employed, yet I thought that that was the cardinal objective of the Government. They are actually employing more staff to handle these benefits than hitherto. Therefore, on that narrow measure, the scheme has been a failure.
My right hon. Friend the Member for Ashton-under-Lyne summed it up when he said that, having thoroughly investigated the matter as Chairman of the Committee, he concluded that the housing benefit scheme was not properly prepared and not properly introduced. We shall return to that subject during the next year when we debate the social security review.
We will also pick up the points made by the hon. Member for Uxbridge about the report on the arrangements for delivery of social security benefits. The hon. Gentleman drew attention to the cost of paying pensions and other benefits by order books cashed weekly at post offices. He drew attention to the higher cost of that system compared with the cost of payment into a bank account. If someone wishes to have a pension or other benefit paid into a bank account, he should be able to do so.
My hon. Friends and I would oppose any compulsion or financial penalty being imposed on people who want to receive their benefits weekly in the traditional manner across the post office counter. If the Government were to pursue the suggestion of the hon. Member for Uxbridge of a £10 incentive or bonus payment to people who agree to switch to monthly payments through a bank account, we should face the problem of people wishing to change back because of their circumstances changing.
Indeed, that difficulty has already occurred with the monthly payment of child benefit. Hon. Members on both sides will have had that difficulty drawn to their attention by constituents. The overwhelming point is that people should have the right to choose how they are paid benefit, and on that I hope we can achieve cross-party agreement.
I, too, would oppose any penalty being imposed on people who did not wish to make the change, and I agree that people should have the freedom to choose. I was simply suggesting that further publicity should be given to the advantages of switching by those people who felt able, in the national interest, to make the switch.
I agreed with the hon. Gentleman when he said that he wished there were more advertisements on television about that than about some other things that are advertised. I, too, wish to encourage people to change, because to do so is in the interest of the taxpayer and, therefore, of us all, because, as the hon. Gentleman said, resources are released for use in other ways. However, I wish to make it clear that my hon. Friends and I would oppose the imposition of any penalty on people—who, in practice, would be the poorer people in society—who could not afford to switch to monthly payments.
The report on the monitoring and control of the nationalised industries is one of the more important documents to come from the Public Accounts Committee this year. I will not express detailed views about that tonight because I suspect that we shall debate it at length after the Queen's Speech. After all, there has been much-trailed legislation about arrangements for the nationalised industries, and we look forward to those debates.
I reiterate what I said at the outset about the need for more frequent debates with various Ministers taking part. The hon. Member for Northampton, South referred to several reports concerning various aspects of the National Health Service. The detailed points that he made deserve a reply from the Minister for Health. I share the hon. Gentleman's concern about the efficiency of supplies in the NHS — a matter which has been the subject of previous PAC reports. I recall the Committee discussing it five years ago, and it is regretted by hon. Members in all parts of the House that there should still be that apparent waste of resources. As I said, the subject should be discussed with the Minister for Health present rather than our simply having the Financial Secretary dealing with it.
The hon. Member for Northampton, South also referred to the report on dental services in the NHS. Indeed, he was the only hon. Member to refer to that document. That report from the PAC showed that there might be some abuse of the present system of payments by a minority —a small minority, no doubt—of dentists by way of dishonest claims for treatment that has not been given or justified claims for treatment that need not have been given. As the report points out, we need to change the emphasis of the dental service from treatment to prevention. Two other important points should be made in the same context—the effect of the increased charges on the number of people seeking treatment, and the need to improve the dental health of people with low incomes.
The PAC has pointed to the great disparity in dental health between the people of Scotland and the rest of Britain. That is not a new point. It was made in the Black report a few years ago. There is a tremendous disparity between the health of people in social classes one to three and classes four and five. We should debate those issues in a broader context with the Minister for Health present.
My right hon. Friend the Member for Ashton-under-Lyne and my hon. Friend the Member for Dunfermline, West (Mr. Douglas) referred to another report which was not listed for special attention in this debate, the report on the control of dockyard operations and manpower—or, as my hon. Friend the Member for Dunfermline, West put it, the commercialisation of operations in the dockyards.
The PAC criticised the calculation of the savings. My hon. Friend the Member for Dunfermline, West went further because he was able to bring to the House his experience on the Select Committee on Defence. My hon. Friend's speech was particularly interesting because he could put both reports together. We need a combination approach. We need reports from departmental committees on aspects of policy decisions together with reports from the PAC on the financial aspects.
Both reports in this case looked at the same Government decision but from different angles. We need to debate that in a special way. I am not suggesting that the Financial Secretary should not take part in such debates. If I were, I should be excluding myself from them. I am delighted to have him take part in them, but he should have alongside him, also taking part, the Minister with departmental responsibility, in the same way as this year we debated vehicle excise duty as part of our consideration of the Finance Bill. I hope that in future years, not only in debating the Finance Bill but in discussing PAC reports, the same attitude will be taken. After all, hon. Members on both sides are united in agreeing that we need more frequent debates on these reports.
I start by unreservedly paying tribute to the valuable work done by this senior Committee, the Public Accounts Committee, and by that I mean all past, practising and potential members of it. I join those hon. Members who have paid special compliments to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). There is no doubt among all of us who have to digest and participate not only in this debate but in all the work of the Committee about the outstanding work that he does for and on behalf of the House, which means the Government and the country as well, as Chairman of the Committee.
I also add to the compliments to the National Audit Office, which provides much expert and well-informed advice. Its work is close to the interests of the Treasury and —as the right hon. Member for Ashton-under-Lyne, as a former Financial Secretary, will know—it provides value for money. It is especially valuable in that the Committee's work is independent, objective and external to the the normal Treasury-spending Department relationship. That is an important point.
I also welcome the new form for this debate, which enables the Committee to concentrate our minds on a realistic section of its reports. In particular, I note the two points made by the hon. Member for Birmingham, Hodge Hill (Mr. Davis) — if he does not stop being complimentary about me, he will create even more difficulties for me—about the delay between debates. For those of us who have to digest 51 reports it is not easy to have the debates in quick succession, but I shall draw this matter to the attention of my right hon. Friend the Leader of the House and the other relevant people who decide on our debates. I shall also draw their attention to the point made by the hon. Members for Truro (Mr. Penhaligon) and for Hodge Hill about Ministers. I know that changing anything in our constitutional system creates a huge debate, but I cannot pretend not to be personally interested, because of the particular difficulties of trying to respond on a wide range of subjects.
Unfortunately, despite the new system that we are introducing today, I was not relieved of the need to remind myself of what is in all the reports to which I have presented replies. I share the concern of my hon. Friend the Member for Scarborough (Sir M. Shaw) about the paper mountain that the PAC faces under the diligent leadership of its Chairman. However, I accept that responsibility, in the interests of preserving hon. Members' undoubted right to raise matters on any report on the agenda. I shall do my best to respond to most of the points that have been made.
For the most part, we are dealing not with recriminations about the past, but with trying to do things better in the future. It is hardly to be expected that any organisation, with the auditor's invaluable hindsight—like the hon. Member for Hodge Hill I speak as an exauditor—will have performed perfectly in every respect, although the Comptroller and Auditor General's latest report on the Her Majesty's Stationery Office trading fund comes about as close as it is possible to that. It will usually be possible to point to mistakes and to learn from experience. The PAC's comments and conclusions contribute to that and even where, rarely, the Government do not entirely agree with the conclusions, I assure the House that PAC reports are always read, marked, learnt and inwardly digested by Departments for the future conduct of their business, and are certainly appreciated enormously by the Treasury.
If I am not able to respond to any of the detailed points that have been made, I shall make sure that the relevant Department responds specifically to hon. Members.
The debate on the 13th report on vehicle excise duty seems to have taken much of the attention of the House. My hon. Friends the Members for Birmingham, Northfield (Mr. King) and for Uxbridge (Mr. Shersby), the right hon. Member for Ashton-under-Lyne and the hon. Members for Truro, for Hodge Hill and for Swansea, East (Mr. Anderson)—who has a particular constituency interest—legitimately spent a considerable time on this extremely difficult subject. I shall make one or two brief observations and then respond specifically to the staffing point that was raised not only by the hon. Member for Swansea, East but by the hon. Member for Hodge Hill in his winding-up speech.
Possible alternative forms of taxation have been examined, but none has been found to be preferable to the form that we have, even with its acknowledged disadvantage. I put that clearly on record. As an example, one would have to add 38p a gallon to the price of petrol if we changed to that method instead of keeping the vehicle excise duty. Efforts to improve enforcement have therefore been made, and considerable success has been achieved. A useful reform of Scottish law, recommended by the Public Accounts Committee, is included in the Law Reform (Miscellaneous Provisions) (Scotland) Bill, which is expected to receive Royal Assent later this month. This will have an impact in this area, and hon. Members ill be happy to welcome it.
The key point, however, is that no Government survey of the possible replacement of vehicle excise duty is taking place. To that extent, anxieties cannot be allayed.
My right hon. Friend the Chancellor of the Exchequer must constantly review and consider every form of tax. I said quite specifically everything that I could possibly say about this matter, and I hope that it was helpful. However, the Scottish aspect is important. The Government have drawn the Committee's views about the level of fines to the attention of the Magistrates Association and, in Scotland, to the attention of the District Courts Assocation, the Sheriffs Assocation and the Association of Sheriff Principals and they hope that adequate notice will be taken of those views. The potential penalty is more than adequate. The problem is the average level of the fines applies by the courts. There is a degree of legitimate separation of powers within the United Kingdom.
The hon. Member for Swansea, East referred to staffing. In evidence to the PAC, in February 1984, a permanent secretary at the Department of Transport said that an extra 400 to 500 staff might produce the maximum net revenue from enforcement. Improved enforcement performance has caused this figure to be revised downwards to 300 at present, 908 Department of Transport staff are allocated to vehicle excise duty enforcement work, while 25 extra staff are to be deployed to deal with the extra cases in Scotland because of the expected change in Scottish law. Thus, reliance is being placed largely upon improvements in efficiency within the existing staff numbers to reduce evasion, because of the need to order priorities within the Department and because of the constraints upon public service running costs.
Surely a case could be made that because of the downward revision 300 extra staff would be the most cost-effective way of bringing in these receipts. The Minister must look seriously at this point and not reject it out of hand.
This matter is being seriously considered. It relates to the Government's overall attitude towards running costs, targets and public expenditure constraints on staff. However, I shall draw the hon. Gentleman's point about cost-effectiveness to the attention of my right hon. Friend the Secretary of State for Transport.
The next report, covered by the right hon. Member for Ashton-under-Lyne, and touched upon by my hon. Friend the Member for Northfield, is the 17th report of the Public Accounts Committee, relating to the sale of Government shareholdings. I shall limit my remarks to the report and not refer to privatisation. The Treasury minute was quite clear on this subject. All I would add is that it is impossible to make a set of rules for the sale of shares. In each case the situation is different. The PAC acknowledges that it is easy to form a view on a case with the benefit of hindsight. All that is available in the decisions about price, method of sale and underwriting are human judgment and experience. The Treasury keeps in close touch with the City on all aspects of the sale of shares so that the best possible outcome of each sale can be attained. As promised, the concerns of the Committee are borne constantly in mind in making difficult decisions. No Department is interested in underpricing the sale of its shares.
The right hon. Member for Ashton-under-Lyne, his hon. Friends the Members for Normanton (Mr. O'Brien) and for Hodge Hill, and my hon. Friends the Members for Lancashire, West (Mr. Hind) and for Horsham (Sir P. Hordern) referred at length to the 21st report of the PAC, on regional industrial incentives. My hon. Friend the Member for Horsham has made a particular study of this topic, and I shall consider with care his important contribution to our debate.
I wish to deal with the points raised in the debate and in the report. The Government's policy change was the product of an exhaustive review. The difficulty of measuring the results of what is being done is enormous. This was touched on by the hon. Member for Hodge Hill. Much as we should like to be able to devise a simple yardstick, no one has managed to do so. It is easy enough to measure net increases and decreases in employment in assisted areas. What is also required is a measure of what would have happened without the incentives. That must inevitably involve speculation. The research that is being undertaken is aimed at getting better information. I confirm to my hon. Friend the Member for Horsham that the object of the change in policy was to target the incentives more closely on job creation, thus making the operation less expensive and critically more cost-effective.
Many hon. Members spoke on the 33rd report, on economy of stores support in the Ministry of Defence. My hon. Friend the Member for Scarborough, the hon. Member for Truro, the right hon. Member for Ashton-under-Lyne, my hon. Friend the Member for Uxbridge, the hon. Member for Normanton and the hon. Member for Hodge Hill all addressed themselves to that issue. Because of the experience of the hon. Member for Hodge Hill, I was pleased at his remarks about the complications specifically in relation to Donnington.
The PAC reports on stores and stockholding practices in the MOD have been carefully considered, as has been the earlier independent report on stockholding by Mr. Levene. A comprehensive programme of work is in hand in the MOD, covering economies in stores and stockholding arrangements. Many suggestions in the PAC report were already being examined or implemented—for instance, the improvement of financial control by means of executive responsibility budgets and the use of computerised techniques to allow increased visibility of stocks. Where the suggestions made were not already under review, studies have been undertaken to recommend improvements where necessary. Some studies are complete. Others will report within the next 12 months. I have read all the reports, including the evidence, with care. I have also listened with great care to the debate. I hope my hon. Friend the Member for Uxbridge will not think that the Treasury, like any other Department, can afford to be complacent. I shall take note of the obvious concern that has been expressed by the Committee.
I am pleased to hear the Financial Secretary say something about visibility. He has taken note of the point that, whereas the RAF knows what stores it has in local bases, the Army has no knowledge at all, with the Royal Navy coming in between. Will what the Financial Secretary has said mean that there will be an assessment of the stores held by the Army at its local depots?
Perhaps I may elaborate on that. It is a little more complex. As he chaired the Committee, the right hon. Gentleman will know that progress has been made in obtaining greater visibility of stocks. The Navy department now has 96 per cent. visibility of stocks at its main depots. This will increase to 98 per cent. by the end of the year. A decision has been taken to link Gibraltar to the computerised inventory supply procedure during 1986–87. Proposals are under consideration for including Royal Fleet Auxiliary stocks.
There is no plan in the short term to make visible the stocks held on HM ships and at Fleet shore establishments for operational tasks, as they would not be available for reallocation. Their values are estimated at £250 million to £300 million and £25 million to £50 million respectively. However, they will be included in the Royal Navy's onboard ADP system in ships—OASIS. It is envisaged that links between OASIS and CRISP will make the holdings visible to stock managers.
The Army department's stock visibility is being progressed as new ADP systems are introduced and existing systems are enhanced. It is planned to have visibility of BAOR theatre stocks by 1987, with visibility down to divisional level by 1990. Obviously I shall consider the point made by the right hon. Gentleman. I thought that the additional points would be helpful to the Ministry of Defence if the right hon. Gentleman wishes to pursue the matter further.
The sixth report on the housing benefit scheme was referred to by the right hon. Member for Ashton-under-Lyne, the hon. Member for Normanton, the hon. Member for Truro and the hon. Member for Hodge Hill. I must refer here to the Treasury' minute, which said that the conclusions of the Department's review would have to be considered as part of the wider social security review. The DHSS responses to individual criticisms pointed out the practical and legal difficulties of meeting all the Committees's concerns.
All of us have considerable constituency experience of the problems that have been addressed tonight. The report of the review team which was chaired by Jeremy Rowe has been published, as has the Green Paper "Reform of Social Security". The proposals on housing benefit, as the hon. Member for Hodge Hill fairly said, aim at simplification, but that is not easy because the benefit goes to about one in three households. The appeals system should be given a longer trial.
Less dependence on direct financial support from the Government, specifically for housing benefit costs, thus increasing local accountability and improved monitoring, continue to be favoured in the Green Paper as the keys to greater efficiency. New guidance on handling overpayments has been given to local authorities, but improvement in cross checking must await the outcome of the Green Paper proposals. The Green Paper is clearly involved here, and I shall draw to the attention of the Secretary of State for Social Services the points raised in the debate.
The ninth report deals with the monitoring and control of nationalised industries, and many hon. Members are interested in that. I am delighted to say that the Government welcome the PAC endorsement of the overall monitoring and control structure which derived originally from the 1978 White Paper, and which has been developed since.
There was a similar endorsement recently in the 18th report in relation to the water industry. I also welcome the PAC's recognition that there has been an improvement in the application of these arrangements. Monitoring arrangements have been strengthened considerably in recent years and the Treasury has an interest in the PAC's concern to promote those matters.
I do not usually take issue with the right hon. Member for Ashton-under-Lyne, but I have to take issue with him slightly on those of his arguments which, I am sure, as the hon. Member for Hodge Hill said, we shall be addressing at another stage. I assume that there is a possibility of a debate, but it is not up to me. The right hon. Member for Ashton-under-Lyne said that divergence existed between
EFL and other targets. I shall quote specifically from the Treasury minute, which was carefully drawn on this. Paragraph 11 of the Treasury minute says:
The Treasury and the three departments do not believe that a divergence of view exists over the position of the EFL in the control framework. As a general presumption. investment allocations, EFLs and financial targets should all be compatible and the question of precedence of one over the other does not arise. At the time of setting it would be expected that EFLs would be consistent with the financial targets. Although short-term trading fluctuations might affect an industry's EFL performance in a particular year, over the medium-term period covered by a financial target such fluctuations should generally even out. This is consistent with the central position in the control framework ascribed to financial targets in the 1978 White Paper. EFLs and financial targets are, therefore, to be regarded as two elements of the control system, applying to different time periods and, to some extent, measuring different financial flows. It follows that the purpose of medium-term planning is unaffected.
The right hon. Member for Ashton-under-Lyne quite legitimately adverted to an important point on the role of the Comptroller and Auditor General in relation to nationalised industries and the desire to follow public money wherever it goes. Let me reiterate the Government's position. It was made quite clear in the context of the proceedings on what is now the National Audit Act, and it has not changed. The Committee's motives are quite understandable, but there is another dimension — the effect that there might be on management.
The Government believe that with such exposure to parliamentary criticism of the conduct, as distinct from the results, of the nationalised industries, it would be impossible to expect the industries to conduct themselves on strictly commercial lines. The Government's preferred alternative to C and AG/PAC investigation is the regular programme of MMC investigations, with which the industries co-operate. I am sure we shall discuss this issue again.
Before the Minister leaves that point, I must point out that there have been some changes in the attitude of the nationalised industries. I have had discussions with them, and the hon. Gentleman may have had discussions with some of the nationalised industries. They feel that some of their fears were over-emphasised. A greater understanding of the 'work of the National Audit Office and the Public Accounts Committee is bringing about a number of changes. The Minister has seen changes even in the Treasury. A number of his colleagues are looking at this in a slightly different way, and perhaps the Minister is a little pessimistic. I am sorry to hear that.
I said with great care that I was sure we would come back to this issue, and the point the right hon. Gentleman has just made confirms my view of that. I shall look carefully at the point that he has made.
The right hon. Member for Ashton-under-Lyne. the hon. Member for Hodge Hill and my hon. Friend the Member for Northampton, South (Mr. Morris) mentioned the 17th report of the current Session on the general dental service and noted the welcome fact that dental health in Britain has continued to improve and should improve further. I understand that new information, to be published shortly, will confirm that fact.
The report's eight findings and recommendations were directed mainly at existing policies and the rectification of some relatively small, but not unimportant, problems. It will be clear from the Treasury minute that the health Departments have already begun to tackle the problems vigorously. More staff are to be appointed to the dental reference service and work has already begun on calculating the annual costs of unsatisfactory treatment and on remedying the problems relating to the remuneration system of dental practitioners. The hon. Member for Hodge Hill mentioned unnecessary treatment, and urgent consideration will be given to the recommendations of the committee of inquiry as soon as its report is received.
The hon. Member for Swansea, East and my hon. Friend the Member for Northampton, South mentioned the second report of the 1984–85 Session on the control of diplomatic service manpower, and my hon. Friend touched on the 15th report of this Session on management of the overseas estate. I thank him for his compliment about the ways in which the Foreign and Commonwealth Office has diligently followed up the work of the PAC. I shall have to consider what he said about the area where the Treasury could relax a little.
My hon. Friend the Member for Northampton, South, in his usual diligent way, asked many questions about the Health Service. He dipped into many reports dealing with the pharmaceutical price regulation scheme, parallel imports, review contracts and the procurement pattern, which is dealt with in the 28th report of the 1983–84 Session. I shall certainly look again at those matters from the Treasury point of view and press the DHSS.
My hon. Friend and the right hon. Member for Ashton-under-Lyne reminded us again of our debate on the 12th report, on premature retirement, which was discussed under the new Estimates procedure. My hon. Friend also reminded us again of the 16th report, on manpower control, though I have to point out that my hon. Friend the Member for Horsham (Sir P. Hordern) did not, for once, raise that matter. I shall give careful consideration to all the points made by my hon. Friend the Member for Northampton, South.
My hon. Friend the Member for Scarborough and my hon. Friend the Member for Northampton, South asked us to consider aspects of the 21st report of the current Session, on ECGD. I can bring the House up to date on the figures. Trading results for 1984–85 were better, with a loss of £9.2 million, compared with a £148 million loss in 1983–84, but the cash position was worse, as earlier losses required more cash provision. Borrowings from the Consolidated Fund on 31 March this year were £392·5 million, compared with £42·3 million a year earlier. On 31 July this year borrowings had reached £520 million and were still rising, but it is expected that the underlying trading performance will go on improving. I note particularly the points made by my hon. Friend the Member for Northampton, South.
In answer to my hon. Friend the Member for Scarborough, I should say that it is clear that the operation of the ECGD is financed by cash from the Consolidated Fund. Its commercial amounts are completely compatible with the Consolidated Fund amounts. My hon. Friend asked whether the objectives remained the same, and the answer is yes. I refer him to the Treasury minute. It is not necessary for us to match competitors exactly, but I know that my hon. Friend will be reassured about the objectives.
My hon. Friend the Member for Scarborough also mentioned what is known as the Levene report. All I can say is that there is no reason to suppose that any similar reports in future will not be released. I know that my hon. Friend and the hon. Member for Hodge Hill will be pleased to hear that.
The hon. Member for Dunfermline, West (Mr. Douglas) and the right hon. Member for Ashton-under-Lyne mentioned the 24th report of the 1984–85 Session and I understand the interconnection of the report with that of the Select Committee on Defence. I hope it is understandable that, as we had 51 PAC reports to consider. I have not yet looked at the report of the Select Committee on Defence.
On this very complex matter the Treasury minute seeks to point out that the costings must inevitably be speculative at this stage, but are the best possible. Re-examination of them has confirmed the expectation of worthwhile savings. They will be updated in due course when tenders are received. In the minute, reference was made to the Secretary of State's announcement on 23 July of the decision to go for the commercial management option. The interim measures are thought to be realistic in terms of what can be expected in the run-up to a major structural change.
The MOD regards the dockyards efficiency scheme as having been worthwhile. Its future is now bound up with the interim measures pending contractorisation. Comparisons with commercial refits would not be wasted, as the results would be available to incoming commercial managers. The Comptroller and Auditor General would have the necessary access to the records to fulfil his duties. I shall, however, in the light of the particularly detailed defence questions asked by the hon. Member for Dunfermline, West, make sure that I ask the Ministry of Defence to respond to these points.
The last report which was touched on in some detail, and to which a response was requested, was referred to by the right hon. Member for Ashton-under-Lyne in relation to the Forestry Commission. The right hon. Member drew the attention of the House, quite properly, to a rather important aspect of the second report, looking at this particular topic. It is important for me to make sure that the House is aware that the Treasury minute noted the Committee's conclusions and recommendations and was
pleased to note the provision of information [on land sales] in confidence on request will enable the Committee to satisfy itself on Parliament's behalf'.
The Treasury minute confirms that the
Commission will do its utmost to secure the assent of any purchasers of forestry land to the public disclosure of information about the transaction.
I confirm that the commission's 1984–85 and subsequent annual reports will include information and analyses of sales of land on a regional basis. I am aware that this is not as far as the right hon. Gentleman would wish to go, but I wanted to make sure that the Treasury's comments on that were on the record.
Mr. Robert Sheldon I am grateful to the Financial Secretary to the Treasury for what he has said, but the crucial thing about the disclosure of the price realised after the sale is not that the Public Accounts Committee is made aware of it, because we do not have the knowledge or the understanding of the particular land that is being sold. If there is a general disclosure, however, this is the greatest safeguard against fraud that one can have. As Hamilton college of education was sold for a song, we are concerned about these matters. This is the only real safeguard that exists. That is why we consider it to be so important.
I am aware and supportive of the nature of the right hon. Member's concern, as I obviously responded to the PAC report with a note on the Hamilton college issue. I just wanted to make sure that the House was aware, within the minute, of the other balanced point that the Treasury sought to make.
I do not want to belabour the House with further comments. I shall just repeat what I said at the beginning. No one who has not served on the PAC—and most of us here have done so—has any understanding of the enormity of the work that is done by those who serve the House. They serve both the House and the country admirably.
I can end with no better tribute than that which essentially I uttered on 20 March 1984. I noted tonight that my hon. Friend the Member for Uxbridge and the hon. Members for Swansea, East and for Normanton were all concerned about what they regarded as the poor attendance of non-participants in our debate in the House. At the time of the last debate I quoted from Hansard in 1976 words which I thought were very important:
The success of the Committee's work cannot and should not be measured by the attendance of hon. Members in this House when the reports are debated, but by the way in which it changes the future of those who appear before it, and changes the way Government operations are conducted."—[Official Report, 20 March 1984; Vol. 56, c. 982.]
Those are the words of the then Financial Secretary to the Treasury, now the Chairman of the Public Accounts Committee. I can see no better way of ending our debate than with his words, wise then, and still wise today.
That this House takes note of the 10th to 24th and 26th to 35th Reports from the Committee of Public Accounts of Session 1983–84, of the 1st to 25th Reports of Session 1984–85 and of the Treasury Minutes and Northern Ireland Department of Finance Memoranda on those Reports (Cmnd. 9226, 9325, 9368, 9373, 9452, 9464, 9530, 9546, 9587, 9638, and 9639), with particular reference to the following Reports:—