Public Accounts Committee

Part of the debate – in the House of Commons at 6:12 pm on 17th October 1991.

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Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield 6:12 pm, 17th October 1991

Fortunately we did not copy all the American legislation. I support the changes that have led to the appointment of an independent Comptroller and Auditor General, and it is true that that follows the American model, but in other respects we still retain many of the characteristics of the Gladstonian system and I am glad that we do. Although the National Audit Act 1983 placed a new emphasis on the importance of value for money, which I support, it is important not to lose sight of the fact that the bottom line is the financial and regulatory audits. That is where one starts from. Many of the value for money inquiries emanate from the annual statutory audits of Government accounts.

The Chairman of the PAC referred to the unfortunate fact that many of the appropriation accounts have been qualified recently for a variety of reasons. Much of today's debate has referred to appropriation accounts as much as to the green value-for-money reports. The two are complementary and perhaps debating which of the two is more important is not terribly fruitful. However, I believe that financial and regulatory audits are extremely important.

I agree with my right hon. Friend the Member for Hertfordshire, North (Sir I. Stewart) about the report of the Select Committee on Procedure. It is important to retain the integrity of the system and I have been greatly reassured to learn that it was effectively conceded by the Chairman of that Select Committee that the PAC would have a veto over certain matters.

I also agree with the Chairman of the PAC that it is important that the Government should state the clear objectives of any new expenditure programme. The public expenditure White Papers have been improved in that sense and contain clearer statements of the objectives behind Government spending programmes. It is also important that, at the start of the exercise, the Department concerned should consider how it will assess at the end of the programme, or at some suitable point, just how economic, efficient and effective that programme has been. However urgent the project or political problem, consideration must be given at the beginning. We all know that Ministers are often tempted to throw money at a problem if it is urgent, but it is important that consideration be given to how, at a later stage, it can be determined whether that money was spent effectively.

Reference has already been made to the number of Government accounts that have been qualified and I should like to add to the list that has been given. The most recent is the insolvency services account, which also resulted in a major qualification because of computer breakdowns similar to the problem at the Foreign and Commonwealth Office. I hope that the Committee will be able to look into that problem later to find out exactly what went wrong. Those are all important matters. The latest account to be qualified was published on Monday by the Ministry of Defence and relates to a sum in excess of £100,000 spent on "celebrations", which I understand to mean parties. That, too, will have to be investigated.

The investigation carried out into the retail prices index was important because the RPI may have a significance that is not fully justified. However, it has great significance in the private sector in wage negotiations but also in the public sector, where many benefits such as social security are indexed every year by the increase in the retail prices index. A difference of 1 per cent. or even a tenth of 1 per cent. can result in huge increases in public expenditure, or the opposite. It is therefore important that we should get it right.

Two aspects concerned me. The first related to the costs of owner-occupation. When house prices were rising quickly from about 1985 to 1988–89, but interest rates were low, the fact that the cost of housing was rising rapidly was not properly reflected in the index. Since then, there has been a fall in house prices but a rapid increase in interest rates until recently, which has resulted in a substantial addition to the index. It is accepted that that needs to be examined. The Treasury minutes reported that the CSO would consider whether there was a possibility of improving the treatment of owner-occupiers' housing costs in the RPI. Will my hon. Friend the Minister say what progress the Central Statistical Office has made and whether it has any proposals to improve the housing element of the retail prices index?

The second point that concerned me was how the community charge, and particularly transitional relief, was treated in the retail prices index. The principle that is used in determining what should be included in the RPI and what should be left out is whether an item is means tested and whether it is income related. I fully accept that community charge benefits, for example, should not be taken into account in the retail prices index. I am concerned about so-called transitional relief, which was available to certain owner-occupiers, regardless of their income. It was determined by the rateable value of the property and the relationship between the previous rates bill and the new community charge bill. That was not taken into account in the RPI, even though it was not an income-related benefit. I was glad to learn that that matter had been referred to the Retail Prices Index Advisory Committee, which had never previously considered it, but I was less happy to learn that that committee had accepted the way in which the community charge was treated in the index. I still think that it managed to get that wrong.

The Public Accounts Committee considers Inland Revenue matters regularly, and there are two matters on which we should like to see progress. The first is schedule D, which the Committee has considered many times in the past few years. The good news is that the Inland Revenue has now published a consultative document on schedule D and, if the proposals are implemented, schedule D taxpayers will be taxed on a current year rather than a prior year basis. That will be a major step forward in tax simplification and will, in due course, be welcomed by Committee members.

The second matter that concerns me relates to extra-statutory concessions and has also been considered by the Committee on many occasions. In the last report on that matter, which was the second report of this session, we learned that three extra-statutory concessions which were suitable for legislation were more than 50 years old and that one concession classified as temporary was also 50 years old. We were disappointed to learn that only one extra-statutory concession had been included in the Finance Bill in 1990.

Although I appreciate that the Treasury minutes were probably drafted by the Inland Revenue, they said: The Committee's concern at the growth in the number of extra-statutory concessions has been noted. The content of Finance Bills is of course a matter for Ministers". We are all well aware of that fact and we know that there are different pressures on Ministers. Some hon. Members, including me, have complained about the length and complexity of tax legislation. It is not satisfactory that so many extra-statutory concessions are left out of taxation legislation and I hope that we shall make more progress on that in future.

My right hon. Friend the Member for Hertfordshire, North and the Chairman of the PAC have already referred to the most extreme example of how the Government manage their property—the appalling story of the British Library. Two other examples have been presented to the Committee in the course of the year. The first was the new headquarters building for the Department of Energy. The second was accommodation for Customs and Excise London investigation division. Those examples have a number of common features. In the period that we were studying–1987–88—there was an appalling staffing problem in the Property Services Agency. As a result, one member of staff was responsible both for the Department of Energy head office and for the Customs and Excise building. Once we had taken evidence, PSA Services sent us a note about the poor man who was in charge. It was no reflection on the individual concerned, who could not possibly do the work allocated to him. The project manager on that scheme was Mr. Tony Stark. The note said: At the time of the Worship Street project, Mr. Stark was a Grade 7 officer. The pay scale for Grade 7 in October 1988 was £18,442 to £23,487 per annum". Mr. Stark was responsible for literally hundreds of millions of pounds' worth of taxpayers' money, and it is no criticism of him if he could not keep all the balls in the air at once. The PSA was seriously understaffed.

Following the changes made to the structure of the PSA since then, that problem should be resolved. However, my hon. Friend the Minister should give a clear undertaking that there is now adequate staffing to cope with those property matters. If it is appropriate for the Ministry of Defence to hire experts in defence procurement, it is equally appropriate for Government Departments, which are now responsible for their property, to hire experts in property. It is clear from the reports that some civil servants had rings run round them by private sector developers, so perhaps more expertise would be a good idea.

The question of project responsibility arose in the context of the British Library, but it applied equally to the two projects that I have just mentioned. There was much buck-passing between the PSA and Customs and Excise, and between the PSA and the Department of Energy, regarding who was responsible for certain decisions. The situation is now better because individual Departments will have responsibility. They will be able to use PSA services if they wish or to go to the private sector. Nevertheless, there is a continuing concern that there should be adequate expertise, especially in small Government Departments which do not have frequent property transactions. The Department of Energy—unlike the Ministry of Defence, for example—would be one. It is important that such Departments should have adequate property expertise within the Department. I hope that my hon. Friend the Financial Secretary to the Treasury will be able to give us some reassurance on that matter.