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Mr. Richard Livsey (Brecon and Radnor) : Does the Minister agree that the United States Air Force has said that it is worried about the security implications of privatising the PSA? What will he do about security at military installations and at Cabinet Ministers' houses when the service is privatised?
Mr. Patten : We are discussing with the Ministry of Defence and United States forces how we can continue to provide as much excellent work for the Ministry of Defence overseas and for United States forces in this country as the PSA provides at present. A great deal of Ministry of Defence work on matters involving considerable security is already carried out by private sector operators. For example, 70 per cent. of the design work for the MOD is carried out under that sort of security umbrella by the private sector. No great principle is being breached here.
Column 341Mr. Dalyell : We have figures here given by the unions and I should like the Minister to tell us whether they are accurate. In 1988, the PSA design costs were shown to be 25 to 30 per cent. cheaper than those of private designers. On the related question of estate surveying, the issue raised by my hon. Friend the Member for Workington (Mr. Campbell-Savours), the private valuation of the new DHSS headquarters at Richmond terrace, Whitehall cost 266 per cent. more than a PSA valuation would have cost. Is that correct?
Mr. Patten : Given the way that accountancy operations are conducted at present when a potential private sector firm is in the public sector, it is extremely difficult to work out the sort of figures that the hon. Gentleman has mentioned. If his figures are correct, this firm will do spectacularly well in the private sector as the result of a trade sale or a management or employee buy-out.
Mr. Campbell-Savours : The Minister misunderstands the point that is being made. As we understand it, valuations are often carried out on the basis of a percentage. Let us look at the district works office, Teddington. The Minister may laugh, but this is a serious matter. The outside contractor charged £193,722 for his work. The PSA valuation for exactly the same work was £92,112--a saving of £100,000 to the taxpayer. That was the difference between the private sector and the public sector for exactly the same work. The Secretary of State cannot brush that aside and say that in future prices can be cut. That difference arose because of the basis of valuation and it is for the Secretary of State to assure the House that that will not happen in future.
Mr. Patten : I am sure that the Under-Secretary of State for the Environment, my hon. Friend the Member for Southampton, Itchen (Mr. Chope), will be succinct and will do just as well later in dealing with Teddington as he did in the recent Adjournment debate. As a Minister responsible for a Department, I think that the disciplines of being responsible for one's own budget on matters such as the maintenance of property are extremely good for the taxpayer and ensure that we get the best value for money. That is an important part of the development of the financial management initiative. I look forward to congratulating the management, the employees or those responsible for the trade sale when the PSA operates extremely successfully in the private sector, as it will in due course. In 1986, the PSA management launched a fundamental review of its responsibilities and organisation, and its relationship with departmental clients. Shortly afterwards, the Select Committee on the Environment under the direction of my hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi) carried out a study of the PSA, resulting in 1987 in an important and constructive report. Those reviews paved the way for the Government's decision that, from 1 April 1990, all Departments would be fully untied from the PSA and that the PSA's service activities would be managed commercially. Steps are now in hand to separate the PSA's commercial activities from its governmental responsibilities, so that, from April 1990, the residual governmental activities, such as the maintenance of the Palace of Westminster and the management of the Government car service, will be transferred as a separate unit to the Department of the Environment with its own accounting
Column 342officer at deputy secretary level. Within these activities, one has already been established as an executive agency under the Government's "next steps" initiative--the highly successful Queen Elizabeth II conference centre. Two others, the main resident function of managing the Government's common user estate, and the small but significant activity of negotiating contracts for fuel supplies to parts of Government and the public sector, were shown in the recent White Paper "Next Steps" as candidates for agency status. Since the major portion of the PSA is to be a competitive commercial organisation, many hon. Members will need no further convincing that we should aim for privatisation at the earliest opportunity.
For any who are less committed to the principle of privatisation, even after the words of the hon. Member for Copeland on television last week, perhaps I should explain why I believe that early privatisation will be in the best interests of the PSA and its staff. It is a very large organisation--the country's largest building consultancy--which has had the benefit of a guaranteed work load. Suddenly, it is about to face competition. Even if it competes effectively, as I have no doubt it will, it must inevitably lose some of its market share to its competitors. Unless it can compete in new markets, it will inevitably be an organisation in decline. That is not a recipe for a successful operation. Faced with that prospect, the better staff would start to leave, and the quality of service would fall away. The decline would become a downward spiral and customers would suffer. That is not in anyone's interest--not the customers', and therefore not the taxpayers'; not in the PSA's or that of its staff.
It is essential, therefore, that as a quid pro quo for untying the PSA's protected markets, it must be allowed freedom to widen its market base. For the long term, and on a large scale, that is not an attractive prospect for a department within Government. Government is not the place for a fully diversified consultancy. Any organisation that, in the last resort, is underwritten by the taxpayer cannot be allowed the same unrestricted access as a private company to capital ; nor can it be allowed to face the full risks of the marketplace, nor to reap the full rewards.
However, it is right and proper that, for a limited period, and with appropriate safeguards, the PSA should be allowed to compete in the general marketplace to offset its shrinking Government market. That will give the business the opportunity to demonstrate the quality of the service that it can offer so that it can secure a foothold in serving private sector clients to prepare itself for full privatisation.
Mr. Michael Stern (Bristol, North-West) : I am sorry to interrupt my right hon. Friend, who has been interrupted many times already. As he will appreciate, many Conservative Members are always a little concerned when the private sector is opened to competition from what is essentially a state-run and state-supported service industry. Does he agree that an appropriate safeguard might be that, during the short time that the PSA is competing with the private sector from within Government, there should be an automatic reference of its tender price to, for example, the National Audit Office? Would that not be a suitable safeguard against the private sector being forced to compete against a subsidised organisation?
Column 343Mr. Patten : I can assure my hon. Friend that, during the short time until 1992, we shall want to be absolutely certain that the arrangements in place are sufficient to give my hon. Friend and others the absolutely necessary confidence in the operation. I shall consider my hon. Friend's point, but I can assure him that we have that sort of problem very much in mind.
The timing of the sale of the PSA depends on the business being properly structured for sale, and on having the necessary commercial accounting system in place. The appropriate systems are being installed, but that is a major task. Although the earlier the privatisation date the better, the earliest practicable date seems likely to be the second part of 1992. That is a tight timetable given the scale of the changes that are needed, but it is realistic. It also allows sufficient time for the customer departments to prepare themselves for the time when they will obtain all their works services from the commercial market.
That early target date for privatisation will be good for the PSA and for the Departments in concentrating minds on what has to be done. However, for the PSA's management I am inclined to think that the freedoms that come with being in the private sector cannot come quickly enough. The PSA will be a business whose success depend's on its ability to attract, to motivate and to reward good quality staff. Its freedom to compete for those staff in the marketplace will be very important.
Although there is now undoubtedly more flexibility than there used to be to adjust Civil Service pay rates to particular market circumstances and to recognise good performance, that does not go far enough if the PSA is to be able to respond as quickly and as effectively to sudden changes of work load as its competitors can. Privatisation should make that possible. In the meantime, the PSA's management will need to make as full use as possible of the flexibility that does exist in the Civil Service environment and to press for further flexibility when it can justify it.
I hope that the management and staff of the agency will take the time and the opportunity to consider whether they wish to bid for the business themselves. Although the Government will need to be sure, when the sale is made, that a fair competitive price has been obtained, I think that it would be good for the PSA, and good for the commitment and motivation of its staff if there were a strong management-employee buy-out team as well as trade bidders in the competition at the finish. A management-employee buy-out team would have to compete with other bidders, but if it proved successful I should be delighted.
I come now to the other business covered by the Bill--the Crown Suppliers.
The Crown Suppliers is part of the PSA for management purposes, but it operates as an independent business with its own trading fund, supplying furniture and furnishing and related equipment, and operating vehicle hire and document delivery businesses for the public sector.
The Crown Suppliers has been a highly successful organisation. In the 1988 annual accounts, total sales were reported at more than £230 million. Over the years it has developed new ranges of office furniture, most recently one
Column 344called Laser, which is now bringing in sales of more than £5 million a year. It has supplied equipment to many prestige projects, like the Queen Elizabeth II conference centre.
Over the past two years, the business has changed substantially. Those parts of the Crown Suppliers which were not suitable to be undertaken on a normal commercial basis, or could not be privatised for security reasons, or where value for money could exceptionally be better achieved by retention in the public sector, have been extracted from the business and they are excluded from the sale. Total sales by the businesses that are to be privatised were an estimated £168 million in 1988. That was all business won on its commercial merits. As I have already said, Government Departments are untied, and may purchase where they can find the best value for money.
The business has been increasingly organised on commercial lines. A totally new on-line computer system has been installed this year. In the wake of the decision to privatise, the Crown Suppliers has begun to market its services in the private sector. Since the start of the year, about £600,000 of sales have been made to the private sector. The transport business has won a contract for the maintenance of 150 vehicles belonging to a telecommunication company. These are small beginnings, but there is real promise for growth.
Because the Crown Suppliers already has commercial systems in place, an early sale is possible. Samuel Montagu, the merchant bank advising the Government on the privatisation, has already written to all organisations and management buy-out teams that have expressed any interest in buying the Crown Suppliers and also to all the major firms involved in contract furnishing, vehicle hire and document delivery.
Mr. Campbell-Savours rose --
Mr. Campbell-Savours : Is it true that the Crown Suppliers has been in breach of European directive No. 77/62 by failing to tender for certain contracts over a value of £92,000 and by extending those contracts? Is it true that the Government's Law Officers have advised the Government that they are in breach of that directive? As I have now raised this matter in the House, which will alert the European Commission, what action will the Government volunteer to take?
Mr. Patten : My hon. Friend the Under-Secretary will be delighted to answer that question comprehensively when he replies to the debate, and I am sure that he will do so to the hon. Gentleman's complete satisfaction.
We are now considering applications for the purchase of the Crown Suppliers and will shortly be issuing invitations to bid. I am pleased that a number of teams of the Crown Suppliers' staff have expressed an interest in acquiring various parts of their business. I strongly welcome that. It demonstrates the confidence of the staff in the future of the business and in its ability to prosper in the private sector. The Government have offered financial assistance with consultants' fees to assist staff in preparing their bids. It will naturally be essential to obtain a fair return for the taxpayer from the sale of the Crown Suppliers, but price will not be the sole criterion. We shall be concerned
Column 345to ensure that its staff are fairly treated, and we shall be particularly interested in bidders' proposals for profit sharing and equity participation. Throughout the sale competition, we shall also be favouring bidders who demonstrate a knowledge of the business and a commitment to its future development. That will help to safeguard the future of the staff ; it will also help to ensure that the Crown Suppliers can continue to be a source of competitive supplies to Government.
Before turning to the specific provisons of the Bill, I should say something about the implications of privatisation for the staff of the two organisations. I know from having met the PSA trade unions that there is some uncertainty and concern. I can well understand that, but I assure the staff that their fears are unnecessary : the aim of the privatisations will be to create viable, vigorous competitive organisations in the private sector, with better prospects than they would have if they remained in their present position within the public sector. [Interruption.] As the hon. Member for Workington (Mr. Campbell-Savours) will know from his study of these matters, many previous privatisation Bills have said the same. I am sure that he would not wish to be misled by the explanatory and financial memorandum, and will be interested in what I have to say on the subject.
To put the matter simply, the Government intend that the terms and conditions of service of employees shall not suffer as a result of the transfer of employment. Let me explain precisely what I mean. When the businesses are created, the staff who transfer to them will have their conditions of service protected. Most of their conditions will be preserved identically in the new organisation. The Transfer of Undertakings (Protection of Employment) Regulations 1981--the so-called TUPE regulations --which will apply, will ensure that. They do not cover pensions, for the very good reason that there are so many different ways of handling potential pension provision ; however, we shall invite purchasers to offer arrangements for pensions for future service, which--taking all features together--will be comparable with the Civil Service scheme, and we shall take steps to ensure that purchasers' schemes are properly assessed on whether they achieve that aim. Because the old and new schemes are unlikely to be identical, we shall ensure that staff are compensated for any differences. We shall, of course, consult the trade unions about both privatisations.
If staff are to feel confident about privatisation, they must be clear that they will enter the private sector with pay, conditions of service, redundancy entitlements and pensions all safeguarded. Once staff are in the private sector, they will of course be free to renegotiate with their employer for improved conditions, and, if their performance justifies it, they can share in the growing strength of the company instead of being tied to the public pay framework. Their longer-term prospects will depend on their success in maintaining and improving the business.
Finally, let me come to the point made by the hon. Member for Workington, and deal with the specific provisions in the present Bill. It is a short Bill, and I will be mercifully brief. The first and most important point is that the Bill does not seek authority for the sales themselves ; it includes technical enabling provisions to facilitate them. The intended method of sale will be to transfer property, rights, and liabilities to companies owned by the Secretary of State, and then to sell the
Column 346Government shareholding in those companies. The sale of shares, as I said earlier, would be by means of a management- employee buy-out or a trade sale ; flotation is not envisaged.
The Bill deals with the problem of technical redundancy. Without this provision, the staff of the PSA and the Crown Suppliers--whose employment will be transferred automatically to the new employer--would become entitled to redundancy compensation as well as keeping their jobs. That would be patently absurd, and the Bill removes the anomaly in clause 2. There are naturally precedents for this provision in earlier privatisations. In case any hon. Members were misled by the explanatory and financial memorandum, let me reassure them that, of course, the Bill does nothing to remove the entitlements of staff to compensation if they lose their employment through redundancy.
Mr. Dalyell : The Bill refers to the Transfer of Undertakings (Protection of Employment) Regulations 1981. I feel that the Secretary of State should tell us in his opening remarks what undertakings he is prepared to give in regard to any person or persons subsequently made redundant under the new private body. What we need are concrete undertakings.
The Bill seeks to give me explicit authority to establish companies that are wholly owned by the Crown. It will also provide a framework under which schemes may be drawn up to allow for the vesting of property, rights and liabilities in those companies in preparation for sale. The shares of the companies will then be sold to the purchaser for the businesses under a contract.
In the case of the Crown Suppliers it is intended that the shares will be sold immediately on vesting, but in the case of the PSA it may be desirable for the company to trade for a short period while staying within Government ownership. The Bill allows for that in setting out the necessary financial arrangements in clause 3. It provides for the sales of the businesses to take place at different times, for reasons that I touched on earlier.
I have explained the reasons why we are bringing forward the privatisations today, and the way in which they fit into the general policy of improving the efficiency of the public service. I am sure that they will be good for the Government as customer, good for the business prospects of the PSA and the Crown Suppliers, and therefore good for their staff. They are based on a sound principle, which has been implemented with considerable success across large swathes of what was once the public sector. Only the most hidebound and narrow-minded ideology could object to the principles asserted once more in this Bill and to the attempt to put them again into successful practice.
I commend the Bill with enthusiasm to the House, and I am delighted to see on the Benches behind me some of my hon. Friends who have made it possible for us to present its proposals to the House this afternoon.
Column 3475.16 pm
Mr. Clive Soley (Hammersmith) : The Secretary of State began by saying that privatisation was now internationally acclaimed. What he forgot to tell us was that that was because so many companies, both British and overseas, had had their hands in the pockets of the British taxpayer. It is worth reminding the right hon. Gentleman of his own Prime Minister's warning that there is no such thing as Government money ; there is only public money--money belonging to the people. Whether that money is the £38 million handed out for the Rover deal or some other handout, it is our money, and it is the duty of the House to ensure that such offers are not made inappropriately. We shall look very carefully at what the Secretary of State has said, to make certain that that does not happen under this Bill. The Secretary of State has made a thoughtful and careful speech, but--interestingly--one containing an element of schizophrenia. There was a little of the last Conservative Prime Minister--the right hon. Member for Old Bexley and Sidcup (Mr. Heath)--in the Secretary of State's desperate attempt to sell to the employees of the two organisations the belief that all this is in their best interests and that he has their welfare at heart, as well as being concerned for the taxpayer.
There is also something rather insecure about the right hon. Gentleman's desperate attempt to prove himself by pretending that the privatisation even begins to be necessary. Perhaps "insecure" is the wrong word to use the day after the Prime Minister's re-election as leader of the Conservative party ; "wobbly" might be better. One is reminded of those vases that people stand on the mantlepiece and dust very carefully in case they fall off--as this one surely will in due course.
The truth is that it is neither necessary nor desirable to transfer these organisations to the private sector. That is the central issue on which the Government have failed to convince us.
Mr. Chris Patten : Just to be anecdotal for a moment, since the hon. Gentleman is being so courteous in referring to me at such length, I spent Saturday morning talking, among others, to employees of the National Freight Corporation. That experience confirmed to me the advantages of privatisation both for employees and for shareholders. Were I to take the hon. Gentleman through my constituency diary, I could give him many other examples.
Mr. Soley : I do not believe that Conservative Secretaries of State have ever been in love with co-operatives. Once or twice they have pretended to be in love with them. The National Freight Corporation is a good example of a co-operative, but there is no other privatisation that the Secretary of State might draw to my attention that can compare with the National Freight Corporation. The work force--I emphasise the work force, not just the management--wanted to benefit from a co-operative system. A co -operative system of that kind remains loyal to the root benefits of the Labour party.
Mr. Keith Mans (Wyre) : Does the hon. Gentleman agree that the Water Research Centre is another example of precisely the same kind of employee buy-out? Will he therefore correct his previous statement?
Mr. Soley : I have not considered the Water Research Centre in the same detail. However, it is not enough to assume that such a buy-out is the same as the National Freight Corporation co-operative. There is a very big difference between the two. Without examining it in detail, one cannot be sure that a management buy-out follows the co-operative principles that were adopted to a very large extent by the National Freight Corporation.
Mr. Gerald Bermingham (St. Helens, South) : Does my hon. Friend agree that if he talked to some of the former employees at the royal ordnance depot in Enfield who lost their jobs shortly after they were bought out of the public sector by the private sector he would find that they were not so happy?
Mr. Soley : My hon. Friend is absolutely right. There are many examples of privatisation, most notably in the National Health Service, where the treatment of the work force has been deplorable, by any standards. People are being asked to work longer hours for less money and the job is being less well done. The hon. Member for Southampton, Itchen (Mr. Chope) puts privatisation as one of his interests in "Dod's Parliamentary Companion". He ought to be ashamed of what has happened to many cleansing and catering facilities. People have been very badly done by, including the customer. The Secretary of State said that he believes in delegating as close as possible to the ultimate user. That will require some fairly large about-turns by a Secretary of State who is responsible for local government and housing. Contrary to their claims, the Government have centralised power. No other comparable country in the western world has centralised power to such an extent. The Government determine the extent to which local authorities can raise money. They also determine rent increases and how people's homes should be transferred from one owner to another without the people living in them having the right to independent advice.
So much for the belief in transferring the decision-making power to the user. The Government neither believe in it nor practise it. Tenants are not given the right to independent advice in many of the deals that are struck by Conservative-controlled councils. A council that decides to transfer tenants' homes puts its decision to the tenants. They are forced to choose without having access to independent advice. That is a classic example of abuse of power. Mr. Stern rose --
Mr. Soley : Before the hon. Gentleman is foolish enough to intervene --I shall allow him to do so, because I am all in favour of a few suicide cases on the other side--he ought to remember that the National Consumer Council has said that tenants' homes should not be transferred without the tenants having access to independent advice.
Mr. Stern : In the light of the hon. Gentleman's comments, will he put on record his congratulations to the Conservative-controlled Northavon district council, which is balloting its tenants on whether they want their
Column 349homes to remain in council ownership or to be transferred to a housing association or some other form of ownership? The council has even offered to pay for the independent advice that tenants may wish to take before they reach a decision.
Mr. Soley : You would rightly say, Madam Deputy Speaker, that I was out of order if I pursued that matter. [Interuption.] Just before the hon. Member for Bristol, North-West (Mr. Stern) loses control, I ought to point out to him that that would be perfectly acceptable if the council provided sufficient money for independent advice. Labour-controlled local authorities were transferring houses long before this Government even thought about it, but that was done only when tenants wanted their homes to be transferred. Rent levels were controlled, there was security and there were other safeguards, too. I very much doubt whether the Northavon district council is doing anything like that.
As for the ideological attempt by the Government to privatise for the sake of privatisation, there were a couple of inquiries whose aim was to decide whether privatisation of the Property Services Agency and the Crown Suppliers should go ahead. The Turton report and the Prime Minister's central unit on purchasing report said that it was not in the public interest to privatise. The hon. Member for, Itchen invented the idea of untying, although nobody has known him ever to untie anything. It suggests a degree of finesse and control that he does not exercise.
The Opposition regard him as the mad axeman of Itchen. Just like children who want to get at their Christmas presents and set about it with an axe in the hope of finding what is inside much more quickly, the hon. Gentleman slipped off bits of the PSA and the Crown Suppliers in order to prepare them for privatisation. However, he could not get the independent reports to confirm that they ought to be privatised, so he did what Conservative Ministers are very good at doing--he changed the question. He said to himself, "I've been asking the wrong question all the time. I've been saying, Should we privatise it?' Now the light has dawned. I ought to ask, How shall I privatise it?' ". Therefore he brought in outside consultants who said to him, "Yes, if you've made the decision to privatise, this is how you do it." That is how he got round the difficulty of two major reports which said that it was not in the public interest to privatise the Property Services Agency or the Crown Suppliers. If the Government could not get the answer that they wanted to the first question and had to change it, why has it suddenly become in the public interest to privatise? The Prime Minister's own unit said that it was not in the public interest to privatise. So did the Turton report, to which I shall return. The two important issues are the way in which privatisation is to be carried out and security, to which, worryingly, the Secretary of State hardly referred. However, both issues raise horrendous problems connected with terrorism and the defence of the country.
The Crown Suppliers has an impressive background. In August 1988, Samuel Montagu and Company, on behalf of the Property Services Agency, set out the main aims of the Crown Suppliers. It said :
"The main aim of The Crown Suppliers is to provide furniture, furnishings, equipment, materials, heating fuels, transport and selected services related to the domestic and operational needs of Government departments and other public sector bodies more efficiently,"--
these are the words that I wish to emphasise--
Column 350"economically and speedily than they can provide for themselves or enjoy from any other source. In achieving this aim"--
we should note these words from Samuel Montagu and Co.-- "the Crown Suppliers is required to act in a way which will help industry to improve its standards of design, to operate more efficiently and to exploit new materials and technologies." If that purpose is being achieved, why are the Government privatising the Crown Suppliers? It is not an old report. It was published in 1988, just over a year ago. The Government's case, therefore, looks exceedingly shaky.
The Government tried to undermine the Crown Suppliers and the PSA by going in for what the Secretary of State described as "untying". It is interesting that the Secretary of State has now said that they will be able to compete with the private sector in the run-up. What is deeply disturbing to Conservative Members, such as the hon. Member for Bristol, North-West, is that they have suddenly realised that some of their private company friends may be in trouble because they cannot compete equally with an organisation that has had a good record in terms of delivery to its customers. The Opposition have no objection to organisations being able to compete for various jobs, but it follows that organisations in the public sector should be able to compete with the private sector on a level playing field. The Government have consistently made it more difficult for companies in the public sector to compete effectively in the private sector, especially in the run-up to privatisation. That has turned them into a burden, rather than the advantage that they are at present. One of the most damning indictments of the Government's policy was the reference by Lord Macmillan to selling off the family silver. He was talking not only about selling off the silver, but about debasing it before it was sold. That is why the Government, in doing so much damage to the structure of public sector industries, have damaged the private sector as well. As the Montagu report pointed out, it is not in the interests of the private sector for privatisation to be carried out in the way that the Government are doing it.
The review by Lord Jenkin, a previous Secretary of State for the Environment in the early 1980s, said that the answer to privatisation should be no, because it was not in the public interest. The Crown Suppliers has been very successful. I quote the words of the hon. Member for Ealing, Acton (Sir G. Young), who was in the Chamber earlier, but has had to leave now, and who was Minister at the time. He said :
"The Crown Suppliers have had another successful year's trading. Despite the fact that over 65 per cent. of their business is now untied and optional, they have more than met their financial objective for 1985-86. They have achieved this by raising their level of service, speeding up deliveries, reducing resource costs and offering still better value for money for the products and services they provide to an increasing number of public sector customers. This process will continue. They operate of course under the constraint that, as Departments are increasingly free to purchase goods and services elsewhere, the Crown Suppliers are expected to compete for work within the public sector, yet they cannot, generally speaking, seek business outside it as they would if they were a private concern."-- [ Official Report, 25 July 1986 ; Vol. 102, c. 572.] Two Ministers have praised the work of the Crown Suppliers and the PSA. The question that arises again is why, if they are so good, the Government are flogging them off? If that is not in the interests of the country or of the taxpayer, whose interests are being met?
Column 351It is also worth bearing in mind the independent assessment of the work done, part of which my hon. Friend the Member for Workington (Mr. Campbell-Savours) quoted in an intervention. It said : "1. Design : In 1988 PSA's design costs were shown to be 25 per cent. to 30 per cent. cheaper than private designers.
2. Maintenance : In 1988 the Government abandoned its attempt to contract out District Works offices after receiving tenders for the pilot at Southwark which proved to be twice as high as PSA's own costs.
3. Estate Surveying"--
the section that my hon. Friend the Member for Workington quoted-- "private valuation of the new DHSS headquarters at Richmond Terrace, Whitehall, cost 266 per cent. more than a PSA valuation would have cost."
It is no good the Secretary of State trying to wriggle out of answering those comments by saying that he will deal with them later. These are not new facts ; they have been known for a long time. Many people have known those facts and the Secretary of State must know them. Why is he unable to tell us why those valuations have been carried out so much more effectively by the PSA than by the private sector? It is not good enough for the Secretary of State to say that he will come back to that at some stage.
In 1987, a report by David Hencke appeared in The Guardian which implied that the then Chief Secretary to the Treasury--the present Chancellor of the Exchequer--wanted to halt moves towards privatisation. [Hon. Members :-- "No."] Conservative Members may doubt David Hencke, but the story has never been denied and there are many reasons for believing that it is accurate. The then Chief Secretary was worried that Robert Maxwell or Hillsdown Holdings would bid for the agencies, or large parts of them, and because they themselves provided similar services, they would close down or run down the parts that were not necessary to them. That would have been a classic example of asset-stripping the public sector and that is why the Chief Secretary was worried.
Mr. Soley : Yes, but that says far more about the Chancellor of the Exchequer's uncertain position than about his judgment of the issue. I do not know whether this new and rather temporary Chancellor of the Exchequer will resign over the privatisation of the PSA and the Crown Suppliers, but I cannot see it happening. Let us be kind and say that he fought privatisation hard in Cabinet, but lost. He may find, like the previous Chancellor, that he loses more than just one battle and it will be interesting to see whether he loses the last battle. The Chief Secretary to the Treasury also seemed to be quite a patriot because he recognised that 90 per cent. of the products were made in Britain and he did not want to see overseas producers supplying British embassies and defence establishments.
It follows from all that I have said that the Opposition and, I suspect, many outside the House, will be deeply concerned about the way privatisation is carried out. I acknowledge fully that the Secretary of State has given a detailed exposition of the way in which he wants to carry it out. It follows from what he says that some of the
Column 352sweeteners that were offered in the case of Rover could not be used in this privatisation. However, there are questions about whether he will hold the shares, at what value they will be sold, at what point in the market they will be sold and whether any other advantages are built into the company to make it attractive. I warn the Government that we shall be watching all this carefully, as will the Public Accounts Committee and the European Commission. There are many reasons for believing that the way in which the Government go about the privatisation will raise considerable alarm and suspicion. If the Secretary of State does not want to get into the mess in which the Secretary of State for Trade and Industry finds himself after his predecessor set him up so well with the Rover deal, he should consider independent valuation. Some previous valuations are disturbing and I find it deeply unsatisfactory that public money should be used to prime the pump for the private sector. I know many people who would have liked to buy the Rover works if they had known that £38 million would be thrown in.
One might argue about the other reasons why that was done, as the Secretary of State has, but the crucial point with Rover, is that it did not need to be done in the first place, and that would be true of the PSA. Rover was set to make a profit and the PSA seems to be successful, so there is no need for softening up or for spending public money on that. When we see £21 million thrown away on advertising the water industry to soften it up, we have a duty to ask what the public is getting out of that. They see their money being used to soften up an organisation so that the private sector can take advantage of it. That must be wrong, and I can think of no other country that does such things.
We also want to know how the organisation will be split up. I shall have to read the remarks of the Secretary of State carefully, but I think that it follows that there will be a number of organisations that will be sold off and it sounded as if there would be quite a large number--not just two or three, but a half dozen or more. That will make a great deal of difference as to whether there is asset stripping and how viable the organisations will be on their own. It will also control the the question of whether it will be practical for the employees to produce a successful buy-out scheme. It may not be practical unless they are given a wider job, rather than the organisation being split into small bits and pieces. We shall examine that point carefully in Committee.
I am disturbed--all of us inside and outside the House should be disturbed- -that the Government have not touched on security. The Secretary of State hardly mentioned it in his speech, yet security is one of the most profoundly important aspects of the privatisation process. I strongly suspect--although for the moment we cannot know this for sure--that one of the reasons why it was argued in successive reports that it was not in the public interest to privatise was that it was felt that security would be affected. Our Government Departments and our armed forces are advised by the PSA on the physical security of their buildings, and that includes advice on counter-terrorist procedures. The Secretary of State will know that, although he did not refer to it.
The PSA vets employees and contractors on its sites, and the vetting is tough : one in 10 of the applicants do not get through. Suppose that the private building sector takes over and has access to the organisations' plans. We know
Column 353that the private building sector prefers to employ casual labour. Who will do the vetting? What will happen at Faslane and Aldermaston, let alone in Northern Ireland--a special example, to which I shall come in a moment. Will the work be done by people who have not been subjected to such vetting? Or will the Government exclude those establishments or arrange for the same people to operate an external vetting system, in which case, we ask again, "Why privatise?" What is the point if the same people are to be used to do the vetting?
Mr. Dalyell : The Secretary of State is muttering and shaking his head. If my hon. Friend is wrong, would it not be helpful to our debate if the Secretary of State would say so? It would certainly save time in later speeches.
I have an important point to make about the terrorist threat. We have seen examples of what has gone wrong with the privatisation of some of the security services that operate for the armed forces, and we know of the criticisms that followed the Deal bombing. Unless the Government get this privatisation right, they are in serious danger of creating a major threat to the security of our armed forces--to married quarters as well as to main bases.
The security implications are wider than that. Both the PSA and the Crown Suppliers operate in Northern Ireland. The hon. Member for Eastbourne (Mr. Gow), who is an expert on Northern Ireland matters, will appreciate the seriousness of my questions, and he will confirm that in Northern Ireland, the building industry is widely infiltrated by paramilitaries, both Unionist and Republican, who use it to obtain money for terrorist activity. We have known about that for some time, and it is one of the most difficult problems with which we have to deal.
The Secretary of State may or may not know that some of the civil servants who work for the PSA and Crown Suppliers are considered to be "legitimate targets" in the jargon of the paramilitaries. The Secretary of State and the Government have simply not considered how serious this matter is. Do they propose to transfer all those civil servants to the Northern Ireland Office, and if so, I repeat my question : "Why privatise?" Or will they make separate arrangements? Or will they do what I fear most and play into the hands of the paramilitaries, as they often have despite their rhetoric? The Government have a record of profoundly misjudging political and paramilitary activity in Northern Ireland. The Secretary of State is looking worried and shaking his head. Let him say something then ; let us hear something from him about security. Why did he not say in his speech that the security implications of privatisation were deadly serious? I choose my words carefully.
Mr. Chris Patten : There is a limit to what I shall say on this issue, not because of a lack of knowledge but because there are some things that it would be extremely irresponsible for me to say, just as there are some things that I think it is bordering on the irresponsible for the hon. Member for Hammersmith (Mr. Soley) to say.
Column 354well as a ministerial interest in the arrangements. I am sure that Ministers and others have experienced security arrangements being made perfectly satisfactorily by the private sector, just as the design and construction of many of our military establishments is looked after by the private sector.
The hon. Member for Hammersmith should be a little careful in his approach to these issues. I repeat that, for personal as well as ministerial reasons, I have even more cause to be concerned about these matters than he has.
Mr. Soley : That makes it all the more important that the Secretary of State should answer the question. He should not have introduced the Bill without mentioning security--and do not let the right hon. Gentleman stand there and preach to me about what is and is not a responsible thing to do. Does he really believe that the paramilitary organisations are not aware that privatisation is to take place? Does he really think that people concerned about the defence of this country are not aware of it? Does he think that he can pilot the Bill through Committee without ever talking about security? Is that the extent to which the Government would take their secrecy? He is right that he has been concerned with security issues, as all of us who have been involved in the affairs of the Northern Ireland Office have been concerned with them--in opposition or in government.
It is deeply disturbing that Ministers' cars are not to be privatised although the family homes of armed forces personnel are. I want to know why. It is legitimate to ask, on behalf of every armed forces family in this country and overseas, what sort of security they will have once the PSA and the Crown Suppliers are privatised.
Mr. Mans : The hon. Gentleman cannot pursue that argument much further, because large numbers of armed forces families live in private dwellings, miles away from the bases. I think that, on reflection, the hon. Gentleman will agree that his point has nothing whatever to do with the privatisation of the PSA.