House of Commons Hansard Debates for 30 Nov 1989

Column 885

and admitting officers and a regular revision of waiting lists. They support many recommendations which were opposed initially. I am grateful for their assistance.

We are always concerned about defence expenditure because it involves extremely large sums. I shall begin with the forty-eighth report on the royal ordnance factories. The turnover in 1986 was £550 million. We may differ on privatisations and the value of those operations, but the members of the Committee do not differ--I hope that there is not too much difference among hon. Members in the Chamber--on the need to get value for money for taxpayers. The royal ordnance factories were sold off to British Aerospace for £190 million. That sum was effectively set off by various expenses amounting to about £50 million. We expressed concern that the Ministry did not explore possible redevelopment at Waltham Abbey or Enfield, and did not obtain a valuation based on redevelopment. The Committee noted that the taxpayer will not benefit from any redevelopment that is carried out by British Aerospace.

Valuation concerns us greatly. It can be taken for granted that it is important in any privatisation operation to obtain value for money. There must, however, be proper valuation. It is said that some privatisations can proceed on the basis that we look for the best price that we can get and accept that as the only price and the only way that the undertakings can be sold off. Another approach is to secure a proper and realistic valuation that is based upon all possible different uses of the undertaking that the Government wish to sell. That is the proper approach. I do not think that any individual would sell anything valuable without obtaining a proper valuation. That applies to a house or an object of great rarity, whatever it may be. Once a proper valuation has been secured, it is possible to compare that with what it is possible to obtain on a sale. If the sale price falls very much below the realistic valuation, it is open to the vendor to delay the sale.

I am worried that there have been few delays of sales while an examination is made of the way in which a sale will go ahead. The Committee has come down again and again in favour of tranches of sales. So often we sell a company or industry in one go, but gilts are sold in bits. They are sold over a period after a study of the market. Sales take place when it is assessed that the market is right, and it is a sophisticated exercise, but that has not been done in the privatisation of public undertakings. If an undertaking is sold in tranches and those who are concerned get it wrong in one instance, only a limited sum is involved. If that is done, it is possible to get a better price or a different price when a reassessment has taken place of the value of that which is being sold.

The Government acknowledged that those who were in control of the royal ordnance factories had been exploring the redevelopment of the Waltham Abbey and Enfield sites. They knew also that they had reached no definite conclusions. There was no proper alternative-use valuation because it was considered that that would produce a lesser figure than the existing use valuation. We have not completed our investigations into the royal ordnance factories, but the factories have been sold. We have had the benefit of an investigative session with the

Column 886

consultants, who told us something about the methods of valuation that were available. It was a most valuable session, and it will form part of our subsequent report.

The forty-seventh report deals with major defence projects for the Session 1987-88. Each year we examine the major projects to ascertain whether we are getting value for money and to compare the actual expenditure with that which was anticipated. We studied a useful production of information entitled "Learning from Experience". We found that, within an equipment budget of £8.5 billion to £9 billion, £3 billion to £4 billion of expenditure was not foreseen when the projects were started. About half of the costs were incurred when the project entered full development, when we would have expected the sums involved to be more clearly understood and confirmed. This dismayed us greatly.

We look forward to considerable improvements in the Ministry of Defence. Sir Peter Levene has impressed the Committee in two respects in particular. The first involves competition. Sir Peter has stated again and again that he is trying to get more competition and that he has obtained it in several areas of production. There are, however, areas where it is not possible to obtain competition when dealing with large-scale projects, although it is possible to get it for some of the subcontracts. Sir Peter has asked for all subcontracts to be available for competition. We hope that in due course this will improve matters considerably. We look forward to evaluating the progress in due course.

A smaller but important matter is that we are paying rather more for some of the articles that are held in stores than we probably should. The Committee had much in mind the experience of the United States. Mr. Bowsher, who is the opposite number of the Comptroller and Auditor General in the United States, will be visiting us next week to give us the benefit of his advice, especially on defence projects and expenditure upon them.

It was found in the United States that they were paying about $1, 300 for what appeared to be an ordinary ashtray that could be bought anywhere. The horrifying thought that occurred to me and many of my colleagues was, "How can we be sure that the same sort of thing is not happening here?"

Sir Peter said that the price of each article that is held in store should be made known so that when someone goes to the store and asks for an ashtray, or whatever, there will be an explosion when he finds that it will cost $1,300. That seems to be a simple and effective approach. The difficulty that Sir Peter experienced was in convincing those who supply articles to the Government that it would be in the interests of the Government, and possibly in their own interests, to adopt that approach. The suppliers said that they would not like others to know their prices.

It is easy to become a cynic. The Committee is not cynical--and I hope that it never will be--but it is somewhat sceptical about some of the claims. It is right to enter the discussions with that in mind. I understand that a number of companies have now accepted that idea, and we look forward to the results in due course.

The thirty-first report in the Session 1988-89 deals with the reliability and maintainability of defence equipment. Paragraph 3 states:

"The Department have for many years been concerned about the reliability and maintainability of equipment purchased from Defence contractors. The Royal Air Force have estimated that unreliability currently costs it £500

Column 887

million, or 20 per cent. of its annual operating budget. Based on this, the Services have estimated that unrealiability adds over £1 billion a year to support costs."

I understand that the Department believes that half of that amount is available for saving. That is important because half of the RAF fast jet fleet is not available at any particular time because of maintainability and reliability problems. We must ensure that safeguards are built in when the equipment is ordered. There must be an agreement so that the problems are dealt with then. We were surprised to hear that only 30 specialists are dealing with that matter in a Department with a procurement budget of £9 billion. If reliability cannot be assured at a critical time, there could be serious consequences. We are concerned about the rundown of the planned reliability and maintainability activities by contractors, and we want that to be improved.

In the Government's response, the Department agreed that the annual costs of unreliability at more than £1 billion were too high. It accepted that a sustained programme was needed to produce savings. It undertook to take positive and effective action to implement the recommendations of its management consultants who had investigated the problem. We look forward to an improvement. I am sorry that my hon. Friend the Member for Bolsover is not with us. One of the great advantages is that the Committee does not take anything for granted. It will return again and again to these and other problems, and the Department knows that. It is aware of our interest and that we shall continue to look for improvements and changes.

Dr. Norman A. Godman (Greenock and Port Glasgow) : When the Committee returns to an examination of the royal ordnance factories, will it examine the circumstances surrounding ROF Bishopton, in Renfrewshire?

Mr. Sheldon : We are examining the whole sale again, with the advantage of the further report from the Comptroller and Auditor General.

The twentieth report of the Session 1988-89 deals with urban development corporations. A number of problems made the Committee feel rather uneasy. On the subject of controls over the disposals of land for development, paragraph 19 states :

"The Corporation had generally sold land for commercial development by private negotiation rather than by inviting tenders from prospective developers. In 15 of the 16 cases examined, the NAO found that valuers' certificates had been obtained after sale negotiations had been completed, and were therefore less useful and provided less assurance on bids than independent pre-tender valuations." The House will note that the language used in the report was restrained, which is typical of the Public Accounts Committee. We do not like to shout too loudly because there are always some horrors lurking that might demand a louder voice.

The London Docklands development corporation told the Committee that it had revised its valuation procedures and that in future the valuation of its properties for annual accounting purposes would be supplemented by valuation of individual sites before negotiations began and again at their conclusion. One example cited was that of a leaseholder who had sold his lease for about 10 times the amount that he had paid to the corporation two years previously. Although the transaction entailed a greatly increased scale of development, the LDDC was unable to secure any additional premium.

Column 888

We need to be very careful when dealing with public money because it is much more sacrosanct than private money. Inefficiencies are sometimes associated with that--not too many, I hope-- but it is important to remember that when people pay their taxes they must feel that they are paying them to incorruptible, sensible people who will be accountable for that money. People can take a flier in private industry, but we cannot do that when we are safeguarding other people's money. It is important that we conduct our affairs accordingly.

Paragraph 28 states :

"We are concerned that the Department and the Corporation did not pursue the question of profit participation more forcefully with the original consortium ; and we believe they should have taken much more positive steps to review the position as part of the negotiations in mid-1987."

Paragraph 29 states :

"we recommend that the Department should require all Urban Development Corporations to take a tough stance in land negotiations, and in particular to seek an equitable return to the taxpayer in any future schemes where developers have the prospects of exceptionally high profits."

It is one of the safeguards that, if there are to be some unforeseen advantages, the taxpayer should have the confidence that part of them will come back to him. It is an essential part of the process.

I wish now to deal with another report, in which our language becomes a little more extreme. It is the first report in the Session 1988-89 on the management of the collections of the English national museums and galleries. We are dealing with the nation's historical, cultural and artistic heritage. In the last century we were fortunate to have great wealth, much greater than any other country, with resources available throughout the world to acquire enormously important and valuable collections of works of art and of cultural interest. They were collected at a time when there were a number of wealthy collectors. As we shall never again achieve the sort of world dominance that we achieved in the last century, we must carry out the wishes of those who gave those collections to our national museums and art galleries. The problem is that we are selling them. I wish to make a personal observation which has nothing to do with the Committee. I apologise for intruding into the debate personal observations. Italy does not allow the export of much of its works of art-- and, heaven knows, it has by far the largest proportion of works of art. It does not allow export, but unfortunately we do. It is our duty and responsibility sensibly to look after and cherish our works of art.

Paragraph 4 says :

"The British Museum and the Victoria and Albert Museum, in common with other national museums, face major concerns in the management of their collections. Over significant areas of the collections the position is deteriorating steadily, and in others it is at best being contained or only very slowly improved."

We looked at three institutions, but there are many others where we do not know what is happening, although we have our suspicions. It behoves anyone who has any responsibility in this area to take note of what we say about the three collections that we examined and the importance that we attach to them.

In paragraph 18 on the British museum and the Victoria and Albert museum we said :

Column 889

"The National Audit Office examination identified many examples of objects stored in cramped, chaotic and overcrowded conditions, including a lack of temperature or humidity controls or air filtration systems."

Paragraph 20 goes on to say :

"The backlog of conservation work was a particularly disturbing part of the C&AG's Report. There were serious conservation problems in a number of areas and in some respects the position was worsening all the time."

It goes on to point out that

"for example, 128 years had elapsed before a comprehensive survey of the National Art Library was carried out in 1985 which revealed serious and extensive problems with damage and deterioration, with major and minor repairs needed to thousands of valuable books and manuscripts. The Victoria and Albert Museum accepted frankly that this was a national disaster' and agreed that it"--

these are damning words, some of the most serious in our report-- " represented lasting and irreparable damage to some of the national heritage.' "

In paragraph 21 on paper conservation at the Victoria and Albert museum we say :

"On present staffing levels backlog conservation in this area alone was estimated at 200 years."

That is unacceptable. We are talking about priceless objects. We shall never have the opportunity to have such objects again. I hear of water pouring through the roof, irreparably damaging part of our national heritage, and of someone knocking over an expensive vase. These things belong to all of us, and it is shameful that we allow them to deteriorate. I was pleased to see that the Minister for the Arts received a substantial increase in funding, but I will be surprised if it is enough.

It must be understood that the PAC is not a spending body. We are urging spending for the purpose of conservation and the conservation or maintenance of what we own as a sensible way to proceed. Anyone who does not look to the roof of his house because he is trying to save money would be rightly condemned, not least by the PAC. If we do not look after our heritage, it will deteriorate. That is a foolish way to proceed and we draw attention to that whenever we see it. The maintenance of roads is another area where, by failing to carry out repairs, we shall incur more expenditure in the end. The Committee expressed concern about the backlog in 1985-86, and we understood then that the Department's intention was to clear the backlog of maintaining motorways and trunk roads as quickly as possible. The Committee looked at the position again in 1989 and was concerned to find that progress had not continued. In 1988 we found that substantial funds, earmarked for maintenance, had been diverted to sustain new construction. The Committee estimated that the decision to transfer money from maintenance to new construction would lead to extra costs over the next three to four years and we doubted whether the benefits of new construction would outweigh the disadvantages of lost maintenance, but the Government did not agree. It is much more attractive to open a new road or motorway than it is to start coning off and spending money on repairing the surface of a road. The sad thing is that the original decisions were so awful. Everyone knows that the state of our motorways is a scandal. They have far too short a life, and when they were built we did not even know which was the best method of construction. There were gaps in our knowledge and the main objective seemed

Column 890

to be to cut a new ribbon. However, the Department of Transport says that the elimination of backlogs remains a key objective. Of course it must remain so. But to what extent is the deterioration continuing, and how soon will it be before we have relatively cone-free roads able to take the traffic? That is the argument that we put forward to which we shall return on a number of other occasions.

Allied to that was the fifteenth report on road planning in the 1988-89 Session. That dealt with the way in which roads were being planned. The Department of Transport estimated the benefit to cost ratio as 1.9 : 1. Traffic flows are central to the appraisal, and the PAC examined those. We felt that back checking had been insufficient. Whenever estimates are made, they should be checked with the end result. That is the real source of knowledge. That is the way in which we can find out what went wrong so that we can learn for the future. We said that back checking is a vital ingredient of planning and control.

The National Audit Office looked at 41 schemes and found that 22 per cent. were within 20 per cent. of traffic forecasts. I will come in a moment to the way in which those figures were calculated. The rest, nearly half, varied from minus 50 per cent.--50 per cent. less traffic on the road than had been expected--to 105 per cent., and that was called reassuring.

In paragraph 14, the Committee did not accept

"that the Department's traffic flow forecasting is as reliable as it could and should be. We find their explanations of the variations that have occurred to be unconvincing ; and we are concerned at the Department's reluctance to accept that there is a serious problem, which we feel verges on complacency."

We felt that to be a serious matter and regretted the method to calculate the figures. They were calculated on the increased level rather than the reduced one, so that the figures appeared to be almost double what they were. The figures were presented in far too favourable a light, and the Committee wanted to examine that further in due course.

Only one or two sessions a year of the PAC deal with Northern Ireland, but we cover a number of important matters each year. Let me take one to give the flavour of some of the criticisms that we have to make on the way in which public money is being applied. I refer to the twelfth report of the 1988-89 Session.

Up to 1980 the Northern Ireland Housing Executive had private insurance. It found that that was a relatively sensible way to proceed. Then it became a little worried at the size of the premiums, and it made changes. In the eight years from 1972-73 to 1979-80 it paid £1.69 million in insurance premiums. It then decided to terminate its insurance cover, and from April 1980 the executive carried its own risk for public liability claims. The claims increased from £1.6 million to £13.5 million over the next eight years, and there are claims for a further £19.8 million outstanding. The Committee suspected that there were a number of fraudulent claims. The Department stated that

"although a number of fraudulent claims had been identified, it was impossible to quantify the size of the problem."

The Department also stated that it would contest more than one claim from a household, and that the computer enabled such occurrences to be identified. The Committee commented :

"We take a most serious view of fraud and we urge the Department and the Executive to do more to quantify the extent of this malpractice and to take all necessary steps to eradicate it." In one instance, we found that claims for injury resulting from inadequate road repairs had been made by every

Column 891

householder on the estate in question. Clearly that suggests the possibility of fraud, and similar examples should be closely examined. We look forward to that being done. The Committee also recommended

"a system of inspection which enables defects to be identified and repaired"

so that the possibility of claims can be reduced. Certain legal requirements make it more difficult to pursue such claims in England and Wales, and we asked that that aspect be examined with a view to conforming with the practices observed in England and Wales. The next report to which I refer concerns the quality of service given to the public by Department of Social Security local offices, which is a problem of which members of the Committee have personal knowledge. We know that the 500 local offices deal with about 23 million callers each year. The Committee was told that callers wait for a much shorter time than it found to be the case. I put to Mr. France, the then permanent secretary to the Department, this matter :

"We have your assessment that waiting times"--

that is, the time that elapses before a caller is seen by a counter clerk--

"averaged 24 minutes for supplementary benefit claimants and 7 minutes for contributory benefit claimants. We know from the Gallup survey"--

which the National Audit Office commissioned--

"that their average waiting time is 70 minutes."

Naturally, the Committee was rather more impressed by the Gallup figures than by those of the Department.

We were provided with a fascinating insight into what happens in social security offices. Right hon. and hon. Members will have visited such offices on many occasions and seen the queues there for themselves. So when the members of the Committee were told that the average waiting time is only seven minutes, they knew that the Department's figure could not be right. We know what goes on in this world, and we were subsequently able to give advice on desirable improvements to the system.

Mr. D. N. Campbell-Savours (Workington) : Does my right hon. Friend accept that there is a disturbing consistency in the inaccuracy of the Department's statistics? I shall be alluding to that aspect in my contribution, if I am fortunate enough to catch your eye, Madam Deputy Speaker.

Mr. Sheldon : I am grateful for my hon. Friend's intervention. Not only were the Department's statistics wrong, but problems arose in understanding the needs of claimants. There was wide variation between the requests made and the responses. A number of callers at DSS offices require only a little advice, but we found that some offices were very chary about divulging information on the benefits that are available, even though people have a right to ask Government Departments where they stand and how much they are entitled to receive.

Many offices provide a poor service. Piercy recommended four important improvements to help bring about an enhanced performance in offices whose standards fell below those required. It was found that claimants were not being provided with enough help and advice and that offices should play a more positive advisory role. When a person is in real trouble, that is the time when he needs the best possible advice. It is clearly wrong that people should be turned away with a curt dismissal.

Column 892

The Committee suggested that surveys such as that which it had commissioned should be undertaken by all Departments having contact with the public to evaluate the effectiveness of their service. The Public Accounts Committee followed up the original Treasury minute with the third report of 1988-89. As a result of those two reports bearing on the same area of examination, the Department of Social Security implemented most of the recommendations. It accepts that desirable standards of service and delivery should be defined and monitored, is paying particular attention to offices performing below tolerable standards, and is promoting a more positive and consumer-friendly image. Customer opinion surveys will also be used to validate claimants' reactions to the service.

Dr. Godman : Did the then permanent secretary to the Department explain why results of test cases by social security commissioners are not conveyed to claimants who may be directly affected by them?

Mr. Sheldon : No, we did not examine that aspect--but my hon. Friend makes an important point. The result of test cases is the kind of information that is not being made available to claimants. Government Departments must realise that the people who come to them should be treated as customers. I tell any new agent that, whenever a person comes through the door of my constituency surgery, I am on that person's side--no matter what he says. That is an extreme example of a Member of Parliament having a rather different reaction from someone working in a social security office. Nevertheless, I want that approach to be adopted more widely. I want help to be given and surveys undertaken so that the right help is available to people at a time when they are often in great distress. I appreciate that it will take time for that to happen.

Many people compare the public service with the private sector, but that is not a fair comparison. In the private sector, anyone who comes through the door is treated as a customer from whom profit can be made, so he or she is usually very welcome. But anyone coming through the door of an office wanting help from a public service is viewed as someone who is bringing extra problems. Nevertheless, the approach should be brought more in line one with the other, despite the obvious problems that arise.

That is the final report to which I allude, but I am sure that right hon. and hon. Members will deal with a number of others. I hope that I have illustrated the work of the Committee, which continues at the expense of its members' time and effort but to the advantage of both the House and the country.

6.48 pm

Sir Michael Shaw (Scarborough) : My first duty--not for the first time, I am glad to say, but I regard it as by no means a routine privilege- -is to thank the Chairman of the Public Accounts Committee, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). He does a tremendous job, bringing a team together, cutting out partisanship and keeping us all to the point, and he does it in a way that allows us all to make a fair contribution. The right hon. Gentleman so organises affairs that the Committee's members take a real interest in their work, and that--as I shall demonstrate later in my speech--has not always been the case in Public Accounts Committees.

Column 893

Not long ago we benefited from the attention of the hon. Member for Bolsover (Mr. Skinner). I must confess that that was the first occasion on which I have known the hon. Gentleman to adopt an entirely "establishment" attitude to Select Committees. Be that as it may, however, I found myself wondering what would happen to Parliament if we merely sat here in the Chamber, with no committees of any kind working outside it. In my view, the power of the Government and the Front Bench would become intolerable--cynics might say, "even more intolerable", but I would not go as far as that.

Dr. Godman : May I point out that not all Opposition Members agree with their hon. Friend the Member for Bolsover (Mr. Skinner)? As a Scots Member of Parliament, I deeply deplore the continuing failure to appoint a Select Committee to monitor and oversee the Scottish Office in the way that the PAC performs its important role.

Sir Michael Shaw : The hon. Gentleman has made a fair point, but I will not pursue it now.

I agree wholeheartedly with what the right hon. Member for Ashton-under- Lyne said about the Comptroller and Auditor General. His office has taken on great new responsibilities, and is, I think, performing its task very well, making important progress in relation to value for money and benefiting hon. Members generally and PAC members in particular.

Let me take up the right hon. Gentleman's comment about museums. The Committee discovered that a serious problem had arisen : incredibly valuable antiques and works of art, collected from all over the world, had been stored very inadequately here, there and everywhere. Moreover, no one seemed to know much about what was in stock, or--if that was known--where it was stored. That is a sad indictment.

I feel that two factors were responsible for much of the problem. The people who had to draw up demands for money each year, and explain why they wanted it, may have been punch-drunk ; I certainly do not think that they spelt out a proper, hard-hitting, detailed demand every year. In a sense, I blame the Treasury : the habit had grown up--or perhaps had been there from the beginning--of simply allocating a bulk sum to the Department, and then leaving the Department to sort it out on the basis of a bit here and a bit there.

Our inquiry revealed a special need for conservation, stock-taking and general presentation of the tremendous fund of museum articles. Surely the needs of famous institutions such as the Victoria and Albert museum should be considered separately by the Treasury. I gained the impression from the Treasury representative, however, that it stuck pretty firmly to its original attitude : "We have heard these special case' arguments before ; we will simply allocate a sum to the Department, and it can get on with sorting everything out". In such circumstances, the case for special need must be spelt out clearly--as I do not think that it has been in the past-- and the Treasury must then respond.

So much for the particular ; now let me deal with more general aspects. We have a mass of reports and Treasury replies to discuss. I feel that we must accept that the purpose of this debate should change, for how can we

Column 894

examine so many reports in any worthwhile detail in such a short discussion? Furthermore--and this is the real question--do we need to? In general, I think not.

There have been changes at Westminster. The Select Committees have come into being, and, since the National Audit Act 1983, the status of the Comptroller and Auditor General and the National Audit Office have also changed and developed. The procedure of the PAC has changed, too. When I first joined the Committee--I hope that the House will forgive me for going back such a long time--we all sat around all afternoon and were lucky if we got a question in, as the Chairman seemed to do all the questioning. The reports were tiny, and very insignificant ; they were not a patch on those of today.

Our hearings are now public, and both press and radio have access to them. Next will come the intrusion--if that is the right word--of television, which will allow the public to see something of our work. All that means that the effects of our deliberations are felt much earlier than they used to be.

Let us examine the history of a typical report. First, the Comptroller and Auditor General produces his report, along with a press statement. If the contents are newsworthy, they will receive considerable coverage--we need only observe the coverage currently given to the Rover report. Then the PAC meets--not secretly, as it used to, but publicly--and examines the witnesses. If that proves newsworthy there is more press coverage, as the press and the BBC attend if they wish. Then we produce our report. Again, there will probably be a press statement, and the Chairman may consider it appropriate to hold a press conference.

That is the time at which the effect of what we have been doing is felt. It is not felt a year later, when we meet here--and let us be blunt : only PAC members turn up on these occasions, apart from one honourable exception, who is a volunteer, and the Front Benchers, who are pressed men.

The old purpose of the debate is no longer relevant. Its objective was to create discussion. We are not creating discussion today, but I hope that we have shifted and influenced people's opinions because the press and other media have been watching us ; therefore, we can have maximum effect. Of course we receive a reply from the Treasury, and if that is not satisfactory we can call back the witnesses and have another go, with the same press coverage. None the less, it is right that we should meet periodically here in the Chamber to discuss the way in which the Public Accounts Committee is working, the effect that it is having, and the various changes that it may seek. We should also consider how our work affects other Select Committees. We are very careful to act only within our remit, as a form of audit but looking for value for money, without becoming involved in policies. If it is felt that wider discussion in the House is needed on any report, it can be achieved either by moving a motion or by using a supply day. The old title of the debate has gone and we must now look ahead and debate the Public Accounts Committee reports in a different way.

We might consider the conditions under which we work in Committee Room 16. As our proceedings attract greater public interest as television will be coming in from time to time, that room is quite inadequate for our purposes. I suggest, as I have suggested many times before, that the adequacy or otherwise of Select Committee rooms should be considered by the appropriate Committee of the House.

Column 895

I turn to another general topic arising out of two of the reports--the public sector borrowing requirement. I shall refer first to the report on the Commonwealth Development Corporation and then to the report on British Nuclear Fuels.

I believe that the definition of the public sector borrowing requirement needs to be reviewed as it is sometimes a definition of convenience. That does not necessarily mean that it is a bad thing, but it is certainly suspect. People may be using the terms of the PSBR to put something in balk that should not really be in balk. I draw two examples of that from two of the Committee's reports. Pages 4 and 5 of the evidence in the twenty-ninth report on the Commonwealth Development Corporation refer to a subsidiary company in the Cayman Islands. Its purpose is to borrow and lend money abroad. I asked :

"Will any borrowings that are made under this system be backed by the Treasury?"

and I received the reply that effectively they would. I was told : "They will effectively be under Government guarantee. That will of course ensure that they are obtained at the keenest interest rate. These borrowings have to be approved by us."

--that is the Government. So I asked ;

"Are they included in the PSBR or anything of that nature?" I was told :

"They are not included in the PSBR."

I said :

"Perhaps we might turn straightaway to Mr. Beastall"

--of the Treasury--

"and ask him why it should not come under the PSBR."

He said :

"The reason for the classification, as has already been implied, is in the case of money which is borrowed abroad for lending abroad. That transaction, unless the debt becomes bad--and I accept that is a different situation but in the normal situation--would have no impact on the United Kingdom economy",

to which I replied :

"That is very interesting."

On pages 4 and 5 of the thirty-third report on monitoring and control of British Nuclear Fuels my hon. Friend the Member for Eastbourne (Mr. Gow), who I am sorry cannot be with us this afternoon, asked :

"Since all the shares save one are owned by a Government Department, since the whole of the borrowing of the Company is guaranteed by the Government, why is it that it is treated as if it were not a nationalised industry so far as the treatment of being a public sector company is concerned?"

I shall skip the long answer and read out the short answer : "There is a difference between guaranteeing the indebtedness and providing all the finance from Government departments."

Apparently, the difference is between guaranteeing indebtedness and providing the money.

Frankly, that shows that if the Government want a Government or local government institution to be outside the PSBR, they can arrange that, but if they do not want such an institution to be outside the PSBR they block it by saying, "I am sorry, but that is within the public sector borrowing requirement and therefore it cannot be done." That is basically wrong. Although it may be convenient, it may be helpful to allow Government bodies or local government bodies to be placed outside the PSBR. Where finance could be arranged by Government or local government bodies, making it clear that capital money is required on commercial grounds rather than on PSBR

Next Section

Home Page