House of Commons Hansard Debates for 18 Oct 1990

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We need to look at Europe. It may be just circumstantial good luck, but on the Order Paper today from the Leader of the House is the new structure for analysing the work of the EEC and the directives that come to us. In the new Session we shall have three Select Committees looking at draft directives split across three broad subject areas. It does not need me to re-emphasise to the House the importance of the EEC and its relationship with this Parliament. I plead considerable ignorance of our relationship with the European Court of Auditors and how the linkage will work in relation to the ever-increasing importance of Brussels. In our new Session we should have a deliberative discussion on the linkage with our work in Europe.

I want to deal with two of the reports, which both cover the same area : the first report on the financial problems at universities and the 16th report on financial management in the national health service. The report on the universities is principally about Cardiff but that has been covered adequately. I want to emphasise the recommendation that we made about universities generally. In paragraph (f) we make it clear that we remain concerned at the serious financial difficulties facing many universities. We emphasise the fact that the Universities Funding Council should monitor what is happening and we recognise the importance of the restructuring exercise that is in hand. The report says :

"On both these matters we expect the Council to keep Parliament fully informed on progress and results."

That is a crucial paragraph and should not be forgotten. The 16th report on the NHS is also about financial control. It picks up the aims of resource management initiatives. It explains the importance of case histories and regrets the slippage that occurred during 1988-89 and 1990-91. The response in the Treasury minute says that action is being taken.

If I have a worry that I wish to share with my colleagues, it is that in both higher education and the NHS--outside defence they are the two large areas of public expenditure--the aim seems to be to achieve a financial "level plain". In my judgment, that is the wrong way round. The philosophy of the Public Accounts Committee over the years has been to ask people what their objectives are. Their objectives are concerned not with finance but with policy. Currently, those policy objectives appear to be subsumed by the financial objectives. We run into great difficulties as a Government and a nation if we allow the accountancy element to dictate policy rather than the other way round.

The Chamber is fairly sparsely attended, but I should tell my right hon. Friend the Chairman of the Committee that it is time that we had a deliberative session on the scope of the Committee, its relationship with Europe and the financial dimensions involved. 7.14 pm

Mr. Terry Davis (Birmingham, Hodge Hill) : I should like to join other Committee members and say that I regret the tragic loss of Ian Gow from the Committee and the House. As several hon. Members have said, we shall all miss his incisive and perceptive style of questioning. The Committee benefited from his example, especially those of us who are younger and less experienced. I was a particular beneficiary because I sat next to Ian Gow and benefited

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from his whispered comments, many of which would not bear repetition in the House. He was always ready to say what he thought about a witness in terms that were as incisive and perceptive as his questioning.

I should like to join other Committee members in expressing my appreciation for the work of the National Audit Office. As years have gone by we have all learnt increasingly to appreciate its work. It is not patronising to say that the quality and standard of its reports and the work behind them has improved tremendously over the years. Every year we find that they are better and better and more informative. They go far beyond the old style of reports, which were concerned only with ensuring that civil servants did not abuse the taxpayer by taking his money. That is, of course, an important part of the work of the National Audit Office and it must ensure that there is no question of fraud. However, its work has gone beyond that now. We are concerned about value for money, as is the National Audit Office.

My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) said that many of our recommendations are put into effect before we make them. The same can be said to a greater extent of the work of the National Audit Office. Many of the faults, defects and errors of Government Departments are corrected before the NAO reports on them. That is to be welcomed because we do not want a lapse of time. We want them to be corrected as quickly as possible. However, the NAO does not always receive the credit that it deserves. Having talked to members of staff, I know that they recognise and accept that. They do not resent it because they are inspired by the spirit of dedication to public service. They are happy to see that things are put right. Nevertheless, this is an occasion on which to point out that the full benefit of their work cannot always be appreciated because we do not always know how many stable doors have been shut before they have been opened.

I should like to join other Committee members in expressing our appreciation for the work of my right hon. Friend the Chairman. We all recognise his skill and the leadership that he provides. I would not say that both sides of the Committee appreciate his work because, as he said, we do not work in that way. We all appreciate his skill in choosing who shall ask a question next. In an unguarded moment he once confessed to me that he sees himself much as an American football coach, playing Committee members as appropriate and bringing them in when he thinks that a witness deserves them. I am sure that he will particularly miss Ian Gow's contribution in that respect. As the hon. Member for Scarborough (Sir M. Shaw) said, we all appreciated his contribution. He was much too self- effacing in his remarks. Also, we shall miss the hon. Member for Scarborough if he is to leave the House at the next election.

The hon. Member for Northampton, South (Mr. Morris) made some interesting suggestions about the way in which we can improve our work and the presentation of our reports. It is a great misfortune that we confine ourselves to one debate a year. In that debate we are expected to consider many reports. This year we are expected to consider 40 reports, but it is sometimes more. That is too much to digest and too much to debate. I am not suggesting that we should have a debate for every report, but some reports would merit their own debate. For example, the report on the quality control of road and bridge construction would have merited a debate. A case

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can be made for having a series of debates in which we might take several reports together. This year, we have had several reports on the national health service, and it would have been useful to have a debate on those reports as a group, in which we could have drawn out common suggestions, themes and criticisms of NHS management. The hon. Member for Northampton, South drew a comparison between the problems of the national health service and those of universities. That has been one of the themes of this year. The health service and universities are suffering from a similar problem, and too often we assume that it is overspending. I wish that we could spend more time asking whether they are underfunded rather than overspending, because that can produce the same result of expenditure exceeding income. Perhaps we should consider whether they are receiving enough money, not simply whether it is being overspent. I link that with the objective of value for money. Too often, we fall into the trap of assuming, as sometimes do the National Audit Office reports, that value for money means spending less. Sometimes, we get better value for money by spending more. I give as an illustration a question that I put to the chief executive of the national health service management executive, and I was disappointed that he did not seem to understand the difference. If the national health service spends 2 per cent. more and treats 5 per cent. more patients, is not that better than spending 2 per cent. less and treating 5 per cent. fewer patients? It is a real cost improvement if more money is spent and more patients are treated because it comes from higher productivity and the unit cost is less. In our questioning and reports, we do not place the right emphasis on getting real value for money, which may result from increasing the amount spent by a Department or service.

I was delighted that my right hon. Friend the Member for Swansea, West (Mr. Williams) assured us that University college, Cardiff is doing much better and resolving its financial difficulties. However, that university is an example of it being better to take two reports together. Our first report, entitled "Financial Problems at Universities", was occasioned by the difficulties at University college, Cardiff, in which I took a personal interest. We have a Treasury minute, which is why it is included tonight, but we do not yet have the Treasury minute on the 36th report, entitled "Restructuring and Finances of Universities". Those reports would have made a good debate, because the report on University college, Cardiff and its problems leads naturally to the more general and wider problems of other universities.

Although many of the witnesses who appeared before us in the past year were rightly criticised, the Universities Funding Council was the least impressive of the bodies that we examined. I draw the attention of the House to some of the comments that we made in our first report, which arose from the difficulties at Cardiff. In the report, which was published on 15 January, we said :

"We believe strongly, however, that the UGC"--

as it was then called--

"should have taken earlier and more positive action to identify, appraise and tackle the financial difficulties at Cardiff. They were well aware of the difficulties facing universities as a result of grant levels ; and indeed they assured our predecessors that they would be discussing with universities exactly the sort of staffing problems that lay at the

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heart of Cardiff's troubles. We consider that they took too passive a role in concluding that they were unable to challenge the College's view that no staff reductions were necessary."

We expressed our respect of the independence of universities and said that

"this does not mean that the UGC should have abjured sufficient control to be able to assure themselves of competent financial performance by universities."

We added :

"We also consider that the UGC made an error of judgment in not reporting these problems to Parliament in their annual survey at the first available opportunity."

We then commented on universities generally and said :

"We remain very concerned over serious financial difficulties facing many universities. We expect the new Universities Funding Council to monitor developments closely and to intervene as necessary to ensure a high standard of financial management We expect the Council quickly to build up the planning arrangements, financial management and information systems, and the capacity for monitoring and analysis which are essential for the effective allocation and oversight of the grants to universities. We look to the Council to secure prompt and determined action where required by the public interest, whilst recognising also the responsibility and autonomy of the universities themselves in such matters."

We ordered that report to be published on 15 January 1990. The evidence on which it was based had been taken on 11 May 1988, and I revert to the point made by the hon. Member for Northampton, South that sometimes we should try to issue these reports more quickly. When we received the Treasury minutes in April 1990, the Treasury told us that

"The monitoring of all universities' financial position has been improved by : UFC requiring institutions to produce annual financial forecasts, which are then analysed ; institutions presenting their accounts in a uniform format according to newly-agreed conventions so that they can readily be analysed and compared with previous forecasts ; financial relations between UFC and the institutions being governed by financial memoranda which set out conditions under which Exchequer grant may be paid ; and the UFC establishing an internal audit unit and generally strengthening its financial expertise."

Unfortunately for the Treasury, we had taken evidence between our report on the problems at Cardiff and their general application and the publication of its minute. We had taken evidence in February, only six weeks after we had prepared our report on Cardiff's problem. The Treasury minute published in April bears little relation to the evidence that we were given in February, only two months before, by the chairman of the Universities Funding Council, as is shown in our report, which came out quite recently.

In the report, we say :

"The Funding Council needs to act vigorously in discharging its new responsibilities and ensuring a high level of accountability to Parliament for the financial control exercised over university expenditure and the economic, efficient and effective use of resources."

We make other comments, conclusions and recommendations, culminating in the statement :

"The Funding Council must take vigorous, prompt and effective measures to resolve these matters."

The echoes of the first report are in our 36th report. Between May 1988 and February very little had improved or changed ; indeed, I find it difficult to see any improvement or change. I do not believe that the Universities Funding Council has done anything like enough, and it did not have to wait for our report. If it had followed the suggestion and encouragement of my right hon. Friend the Member for Ashton-under-Lyne to put the greater part of recommendations into effect before they

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were made, we should have expected some progress to be made between May 1988 and February 1990, but I regret that we did not see such progress.

Therefore, it would be a good idea if, from time to time, we took reports together, as the hon. Member for Northampton, South suggested, to consider recommendations made a few years before and what happened when we took evidence at a later date. That would improve not only the work of the Committee but, much more important, the performance of Departments and accounting officers. Perhaps sometimes it is a good idea to go back to see what was recommended by our predecessors perhaps five or 10 years previously and how much has been done, rather than simply considering rather bland and flattering Treasury minutes that promise much but produce very little. 7.28 pm

Mr. Michael Latham (Rutland and Melton) : I am pleased to follow the hon. Member for Birmingham, Hodge Hill (Mr. Davis), who makes a signal contribution to our discussions in the Public Accounts Committee. As he said, he sat next to our friend, Ian Gow. The highest tribute that I can pay the hon. Gentleman is that he and Ian made a fine team in putting witnesses on the spot, in the interests of taxpayers. They worked well together in our Committee. Ian might well have been speaking at this moment almost where I am standing. Many hon. Members, particularly the Committee's Chairman, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), referred to Northern Ireland and the Northern Ireland report. One sentence in the 36th report sums up the way in which Ian Gow went straight to the kernel of the problem. On 14 June 1989, he asked the accounting officer, Mr. Blease :

"Does it come as a surprise to you if members of this Committee have read with disbelief the report of the Comptroller and Auditor General?"

Mr. Blease replied, "No." Ian put his finger on the deplorable failure of administration which had taken place in that case, and in many other cases- -a failure described by the accounting officer as "appalling". I echo the comment of the right hon. Member for Ashton-under-Lyne--who was properly given support by the Ulster Unionist party as he said it--that we do not expect third-world standards of administration from parts of the United Kingdom. I used that expression in questioning as well. As the right hon. Gentleman said, we expect and demand as a Committee exactly the same standards of administration in any part of the United Kingdom and we trust the Comptroller and Auditor-General for Northern Ireland to bring these cases before us, as Dr. Jack does now and as his distinguished predecessor, Mr. Calvert, did before him. All of us remember debating the disgraceful events involving the De Lorean report, to which the right hon. Member for Ashton-under-Lyne referred. It was one of the most serious failures of administration and of spending control ever to come before the Committee in the more than 100 years of its existence. The Committee rightly drew attention to that failure in its lengthy report, which the House felt necessary to discuss in a separate debate.

I have listened carefully to this debate, as I have listened to many over the seven years in which I have been a member of the Committee. There is always a danger,

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which we have not wholly avoided today, of being like soldiers pinning medals on to our own chests. There is always a danger that we shall say, "We are all doing very well. Everyone is very happy. If people were not happy, the House would be packed and Members would be moaning about the Committee's failure. The fact that people are not doing that suggests that the Committee is doing its job well." I am glad that my hon. Friend the Member for Northampton, South (Mr. Morris) and other hon. Members have made it clear that, while we have important work to do, we must never be complacent about it. We must always look for ways of improving and refining it in conjunction with the National Audit Office, which does such a signal service on behalf of taxpayers, and under the guidance of our Chairman.

Other than my direct constituency work of bringing the problems of my constituents before the House--which we all have to do, as it is an essential part of our duties--I believe that the work that I do on the Public Accounts Committee is far and away the most important thing I do in the House. It is the only thing that makes any difference. About 80 per cent. of what I do in the House is probably wasted, and perhaps 50 per cent. is harmful. The work that I do on the Committee is beneficial to taxpayers generally, for only one reason : because of the structure of public service, the method by which the National Audit Act 1983 was drawn up and the Committee's work, the Committee can bring the accounting officer, the permanent secretary, the Sir Humphrey Appleby, before it, and he has to come personally. One report which no one has discussed and which is probably not widely known is described as the second special report. It was published a few months ago and in it we set out the revised terms of appointment of accounting officers. Publishing the report provides a useful service to the public, who can see what accounting officers and permanent secretaries have to do. I should like to quote from paragraph 11, because it is an important point about which the public should know. The report states :

"If a course of action is in contemplation which raises an issue not of formal propriety or regularity but more widely of prudent and economical administration, it is the duty of the Accounting Officer to draw the relevant factors to the attention of his Minister and to advise him in whatever way he deems appropriate. He may think it right to refer to the possibility of criticism by the PAC. If his advice is overruled, he should ensure that both his advice and the overruling of it are apparent clearly from the papers."

I have talked to Ministers many times about that matter and several have said that that is no idle threat. On several occasions, they have made suggestions to the accounting officer, to the permanent secretary, who has said, "No, Minister. We cannot do that because I am the poor Charlie who has to go before the Public Accounts Committee and explain it away, not you. We must not do that." I asked Sir Peter Gregson when he appeared before us during the Rover inquiry whether the process of giving a written minute to the Minister had taken place. He said that it had not happened. I have asked that question on other occasions, for example, during the De Lorean affair. This is a strong power for members of the Committee. It enables an accounting officer to persuade politicians, of whatever Government, that they cannot take actions that would look bad in front of the Public Accounts Committee.

Perhaps the Committee's principal strength is not the unanimity to which the right hon. Member for

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Ashton-under-Lyne referred or the back-up of the Comptroller and Auditor General, which is essential ; it is the fact that the Committee is properly resourced. The House has devoted a lot of time--I remember the 1979 debates--to considering whether we should strengthen the Select Committee procedures. The debates took place when Lord St. John of Fawley was setting up these Committees as Leader of the House. Distinguished Members, such as Mr. Enoch Powell, took the view that such Committees were potentially detrimental to the House because they would take people away from the Chamber and allow for a consensus approach that would take away from the flow of party conflict. There are distinguished Members of the House now who still take that view and periodically express it.

There has been such a danger in the reports and the proceedings of some departmental Select Committees. To some extent, it depends on the subject that they have taken. If they take highly partisan subjects, they are likely to produce highly partisan reports or reports with a 7 : 6 majority. They often do so on the basis of the views of the expert witnesses and advisers who have been hired for the inquiry. By passing the National Audit Act and making the Comptroller and Auditor General's Department responsible to the House, the House has said, "Here is a properly resourced, fully staffed and efficient Department that does all the work in advance." On several occasions, led by the right hon. Member for Ashton-under-Lyne, the Committee has not been prepared to continue an inquiry because a Department has come to us disagreeing with the words in a green report. The Committee cannot operate on that basis. We have to have an agreed report in front of us. Then we can proceed.

As the right hon. Member for Ashton-under-Lyne and other members of the Committee remember, we have sent some of those great mandarins away with their tails between their legs because we have not been prepared to put up with them arguing about the text of the Comptroller and Auditor General's report when it should have been agreed in advance. On one occasion--no names, no pack drill--a permanent secretary took me out to lunch to get my advice on how to appear before a Public Accounts Committee. I gave him my advice, he thanked me very much for it, and shortly afterwards he retired from Government service.

Our work will become increasingly important. We often have to deal with the work of, for example, the Ministry of Defence, where billions of pounds have been wasted by inefficient procurement, poor management and so on. The Committee has greatly welcomed the appointment of Sir Peter Levene and much of his work as Chief of Defence Procurement.

As I sit in the Committee Room, under the chairmanship of the right hon. Member for Ashton-under-Lyne, two afternoons a week, most weeks of the year for the past seven years, it makes me mad to have to look again at examples of deplorably sloppy administration and of money being wasted, whether it is just a few hundred thousand pounds in Northern Ireland, such as happened in the nursery--which is none the less important--or billions of pounds in the Ministry of Defence. It is being wasted at a time when I, like all other hon. Members, have to go to surgeries in my constituency where I meet constituents who are not receiving pensions or social security and who are getting into difficulties over housing,

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over the community charge or in other areas. There is no money to deal with that because much of it is being wasted in faulty administration.

This may be my last speech in this debate. I believe that this is the role with which Members of Parliament especially have to deal. We have to go to the Committee and we have to read learned tomes from the National Audit Office. Finally, we have to say to ourselves that we are elected to represent ordinary people and it is their money that is being misspent. We must say, "I do not care, Sir Humphrey Appleby, whether you were there when it happened or not. You are the person who must explain to us why it went wrong and, above all, what you are going to do to get it right." That is why my hon. Friend the Paymaster General is sitting on the Treasury Bench now. That is why, when my hon. Friend the Financial Secretary winds up the debate, he and the Paymaster General will be taking governmental responsibility in their replies. I hope that when they go back to their Department they will say to their officials--who work very hard--and to all those in other Departments, "Look, at the end of the day, I have got to take the flak on the Government Front Bench. Please go away and smarten up your administration."

7.41 pm

Mr. David Trimble (Upper Bann) : I congratulate the members of the Public Accounts Committee on their work. I am a new Member of this House. On making my first acquaintance with PAC reports and on reading through them, I have been greatly impressed. I have also been impressed by the way in which the Committee members have carried out one of the primary functions of the House--scrutinising the work of the Executive. Having read the high quality of the reports that they produce, it is slightly disappointing to come to this debate and to see acres of green on the Benches.

I intend to concentrate on the matters relating to Northern Ireland that are highlighted in the reports. However, before I come to those, I have a passing comment relating to the first report in 1989-90 on "Financial Problems at Universities". That has already been touched on by several hon. Members and there has been particular reference to University college, Cardiff. It has been said that it was remarkable that the University Grants Committee, as it then was, seemed to be either ignorant or reluctant to act when matters at Cardiff were getting out of control.

Belfast is a lot further away from Cardiff than London is. However, as a former university teacher, I must tell the House that the fact that Cardiff was running out of control was common knowledge in the common rooms of Belfast long before the UGC or the Government acted. I find it rather sad that matters turned out as they did. The Government bailed out University college, Cardiff on condition that many of the senior staff who were responsible for administration had to have their careers prematurely ended. I notice that the same penalties were not publicly applied to those in the UGC who had been turning a blind eye to the situation for several years.

The hon. Member for Rutland and Melton (Mr. Latham) referred to the comment made by the permanent secretary of the Department of the Environment in Northern Ireland on the cases mentioned in the 36th

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report, which related to the nursery. The permanent secretary said, "They are appalling cases." The chief executive of the Northern Ireland Housing Executive said :

"there had been a degree of negligence at every level involved in the management and control of the nursery "

and that it

"did not receive adequate attention at the highest level." He was asked :

"what was the highest level at which you regard responsibility? Where did the buck stop?"

The chief executive replied :

"The buck stops with "

The text peters out in three dots. He continued :

"If something similar were to happen now, the buck would stop with me".

The comment about "appalling" cases was made in reply to a question from the Chairman of the Public Accounts Committee. He said : "These are two very bad cases. We hope we will not have to be dealing with this sort of thing again."

Eight months later, they were.

The 26th report of 1989-90 deals with the Northern Ireland Housing Executive's essential-car user scheme. Under the scheme, essential-car users were entitled to a high allowance per mile and to low-interest car loans. The executive was promiscuous in the number of people it designated as essential-car users. At first, there were 1,084, but after a while the executive realised that too many had been designated and the number was reduced to about 500. The 584 or so disappointed former essential-car users threatened legal action, which was settled by the executive at a cost of £1.2 million in compensation. The executive had handled the matter in such a sloppy way that it had to pay out that sum. That was far more than was lost through the nursery scheme, which was described in the 36th report. The case of the Housing Executive is especially galling to hon. Members who sometimes have to press the executive about the housing needs in their constituencies, only to be told that insufficient funds are available for this or that development. It is galling to see the millions of pounds that the executive has managed to lose. Money has been lost in other places as well. Other hon. Members have referred to the claims made by people who have allegedly tripped while walking along the footpath. It would be wrong to give the impression that the fault lies with the courts in Northern Ireland. It lies with the executive and with the Department of the Environment for failing to defend cases that were plainly spurious. Once word got round that all one had to do was to make a claim and that, like "Monopoly," one could pass "go" and collect more than £200, everybody was on to it in some areas.

We see such cases occurring again and again. As well as commenting on the individual cases, we should say that there is a need for a more radical approach to the way in which the administration of the executive is conducted. The Chairman of the Public Accounts Committee commented on the De Lorean case and referred to the rather curious position of the two directors appointed by the Government to serve on the board of De Lorean. As hon. Members are aware, the Northern Ireland Housing Executive is not a normal housing authority. Unlike all the other housing authorities in the United Kingdom, it is not under the control of a local authority or of elected representatives. There are three elected representatives on

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the board, but the majority of the members are not elected, but appointed. The main criteria for selecting the persons to be appointed are that they will ignore the views of the elected representatives and will acquiesce in the views of the management of the executive. If one appoints to a board people whose chief qualifications are that they will do nothing and that they will acquiesce in what the administration does, it is not surprising that such situations develop.

Those familiar with the Upper Bann constituency will understand why I could not help feeling that there is a remarkable contrast between local councillors and Ministers, civil servants and chief executives, such as those of the Housing Executive, when it comes to the sort of negligence that leads to the losses with which we are dealing. If a local councillor were to act in a negligent manner he would be surcharged, but if a Minister ignores a situation--the hon. Member for Newry and Armagh (Mr. Mallon) told us that the nursery was the subject of his first parliamentary question when he came to the House, so Ministers were not ignorant of the situation- -there is no surcharge, despite there being clear negligence. It is remarkable that people who serve without remuneration in local authorities can be exposed to considerable financial penalties, whereas persons who serve in the House and elsewhere, for a respectable financial reward and with considerable opportunities for earning on the side, should be responsible for the same or even worse losses without any penalty falling on them.

The hon. Member for Rutland and Melton referred to the penalty of having one's conduct adversely commented on by the Public Accounts Committee. That clearly is a penalty of sorts, but it is quite different from the penalty on councillors. Something should change in that respect.

I am sorry to refer to the hon. Gentleman again, but he said, and I entirely agree, that the Committee expects the same standards of administration in Northern Ireland as elsewhere. One way of achieving that is to ensure that Government Departments and other bodies in Northern Ireland are subject to the same disciplines as Departments elsewhere. The same standards will not be achieved without the same disciplines. Part of the problem in Northern Ireland is that bodies there are not subject to the same disciplines as bodies elsewhere. With the honourable exception of the Public Accounts Committee, the conduct of those Departments is largely ignored. Despite our continual efforts to persuade the Government to establish a Select Committee, as proposed by the Procedure Committee, nothing has been done. I hope that that road block will be removed so that we see the same disciplines applied in Northern Ireland as here.

The same report deals with cleaning and portering services in hospitals, which are the responsibility of the Department of Health and Social Services in Northern Ireland. My concern here is that the Department's response to the Public Accounts Committee's conclusions is weak in a couple of cases. The Committee refers to guidelines for the operation of the cleaning services and concludes that the DHSS should ensure that guidelines on good practice on any health-related subject are implemented. Unfortunately, the response is weak. The Department merely note the Committee's comments and says that where appropriate it will set up mechanisms to monitor the implementation of such guidelines. Such a weak response makes one unsure about whether such guidelines will be implemented.

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The Committee's third conclusion on cleaning services in hospitals was that low unit costs, which in some areas are remarkably low, should be examined to ensure that a proper quality of service is being maintained. The Department's response to that conclusion was to remain virtually silent. It just says that the variations in high and low unit costs had been investigated and then goes on to refer, as if as a solution to the problem, to the present competitive tendering initiative imposing a discipline. I wish that it were possible to be confident that competitive tendering would cure the danger of a low quality of service, but, if anything, I fear that competitive tendering is likely to result in lower services than we have at the moment.

Looking through the minutes of evidence, I was struck by a comment made by the hon. Member for Rutland and Melton. He said that in England opposition to competitive tendering had been minimised because most tenders in NHS hospitals in England had been won by in-house organisations employing the same people who had done the work before. If only the same were the case in Northern Ireland. Far too often in Northern Ireland, the in-house tenders have been overridden in favour of outside tenders which gives real reason to believe that a lower quality of service will be delivered. The Department's response to the Public Accounts Committee's conclusion on competitive tendering was that substantial savings were expected, but there is considerable doubt about whether there will be substantial savings and we fear that any savings that there may be will be swallowed up in other losses. For example, the Southern health and social services board in my constituency, which is responsible for cleaning and portering services in hospitals and which claims that it is achieving some savings through competitive tendering for cleaning and similar services, is moving to new headquarters. It decided not to move to new headquarters in Craigavon but instead to go to Armagh at a higher cost--some £2 million. I hope that the relevant Minister will take heed of that and act accordingly.

I conclude as I began, by congratulating the Committee on the thoroughness of its work, and I hope that more time will in future be devoted to its work.

7.56 pm

Mr. Michael Shersby (Uxbridge) : I add my tribute to the late Ian Gow, a dear colleague whom we shall all miss for many years to come. My abiding memory of him on the Public Accounts Committee was asking the question that he used to ask the accounting officer at the very beginning of his contribution, "On what day did you take up your appointment?" By getting the answer to that question, he was able to fix firmly in the minds of members of the Committee the date from which that accounting officer had responsibility for his Department. His questions were always penetrating, and his contribution to the Committee's work is a great tribute to his memory.

Listening to the debate, it is evident to me that my hon. Friend the Member for Northampton, South (Mr. Morris) was right when he said that the Committee's role is changing. This is one of the more interesting debates that we have had because we have talked about the way in which the Committee works and that is of interest not just to us as Members of Parliament but to the British public and the British taxpayer.

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It is all the more important that my hon. Friend should have made that point, because the British taxpayer can now watch the Committee at work and see what he or she is getting by way of value for money in return for the taxes that are paid. That must be one of the most important advances that has been made by Parliament since the Committee was set up in the last century.

One of the most interesting sessions that the public had the chance to watch on television was the Committee's examination of Sir Peter Gregson, the permanent secretary to the Department of Trade and Industry, when he was giving evidence on the sale of the Rover Group to British Aerospace. That episode rivalled anything in "Yes Minister". Sir Humphrey Appleby is in serious danger of being replaced or retired. Sir Peter gave a masterly performance in a remarkable session.

We have not yet published our final report on Rover Group, but we have published an interim report and a report on the leak of evidence which was published by The Guardian. This evening I am in the somewhat curious position of being able to comment on the sixth report of the Public Accounts Committee on the sale of Rover, but I do not have the advantage of having at my disposal the Treasury minute which sets out the Government's views. That will have to wait until the final report appears in due course.

Several of my colleagues have already referred to the effect of the Committee's work on the civil service. I am an occasional lecturer to the civil service college, and I have been impressed by the extent to which civil servants, as part of their training, are helped to understand the work of our Committee. That is valuable in maintaining the high standards in the British civil service.

I have just returned from Zimbabwe, where I had the privilege of being a member of the delegation to the 36th Commonwealth parliamentary conference. Together with several other members of the Public Accounts Committee who were also members of that delegation, I attended a fascinating session on the work of Public Accounts Committees in other Commonwealth Parliaments which proved to be one of our most interesting sessions. My hon. Friend the Member for Rutland and Melton (Mr. Latham) and I were fascinated to learn that, in Zimbabwe, the Committee has the power to have police present at hearings, to fine accounting officers who have not done their job properly and to have them arrested by the police afterwards. That has not proved necessary in Britain yet, and I hope that it will never be. However, it is interesting to note that some of our Commonwealth colleagues find it necessary to adopt more draconian measures than ours.

The most fascinating investigation which the Committee has carried out in recent times has been into the sale of Rover Group to British Aerospace. The motor industry and motor cars have provided us with some of our most interesting work over the past few years. I pay tribute to my hon. Friend the Member for Rutland and Melton for the quite extraordinarily effective work that he carried out when we investigated the affairs of the De Lorean motor company.

In our sixth report on the sale of Rover Group, we considered the fact that, in 1975, the British Leyland Motor Corporation was making heavy losses, was facing bankruptcy and was taken into public ownership. In August 1988, the Government sold their 99.8 per cent. shareholding in the company to British Aerospace for £150

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million, after providing a cash injection of £547 million in recognition of the company's debt and to support its investment programme.

From 1975 to the sale, the taxpayer had provided £2.9 billion in non- interest-bearing capital to support the company. My memory of my 18 years in this House is punctuated by periodic attendances in the Chamber to listen to debates in which Industry Ministers of both Labour and Conservative Governments sought to persuade hon. Members that they should vote yet another large tranche of our hard-pressed taxpayers' money to support British Leyland. A staggering sum of money was invested in that company--unfortunately to very little effect. We could all see the considerable difficulties which the company experienced until the time when the Government were obliged in August 1988 to take it into public ownership to prevent it from going bust.

When we came to the point of examining the sale of the company to British Aerospace for £150 million, it was perhaps not surprising that the Committee was anxious to be clear beyond all shadow of doubt that the Government's actions were justifiable and that the taxpayer was getting value for money for the sale of that very considerable asset. That was the basis of our investigation.

As I have said, the Committee has not yet published its final report, but the interim report is before us this evening and I can therefore pick out one or two of the salient points which will doubtless feature in the final report.

Last December, we examined the Department of Trade and Industry and its financial advisers on the sale and we had before us as witnesses the permanent secretary to the Department and his colleagues and a representative from Baring Brothers--otherwise known as Barings. We questioned them on the arrangements for the sale and the adequacy of the financial terms that were eventually agreed.

As the basis of our examination, we used a report and separate memorandum from the Comptroller and Auditor General which concluded that Rover Group was worth substantially more than the price that was agreed with British Aerospace. The purpose of the interim report is to deal only with the facts relating to the exclusivity and conduct of the Department's negotiations with British Aerospace and the handling of the relations with Parliament and the European Commission. As I have said, the conclusions will be set out in another report. The exclusive nature of the deal which the Department of Trade and Industry did with British Aerospace is the subject of this interim report.

British Aerospace first expressed interest to the Department in buying Rover Group in February 1988. We were told that its interest was conditional on the granting of exclusive negotiating rights, and the chairman of Rover Group told the Department that, in his view, such exclusivity would be in the company's interest. He was obviously very concerned that open competition would cause a repeat of the uncertainty that had damaged the business in 1986, during the negotiations with General Motors and Ford which, the House will recall, were abortive.

As a result of the chairman's view and the events that took place in 1986, the Department considered that

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competition would put the Government in a better negotiating position and might lead to better sales terms. However, it accepted that competitive bidding would lead to uncertainty and might so damage the company's prospects that the Government would have to consider extensive contingent liabilities under what are called the "Varley-Marshall -Joseph" assurances which are named after former Industry Ministers. The assurances would not allow Rover Group to be left in a position where it could not meet its obligations. They were worth £1.6 billion as the contingent liability. We must take that huge sum of money into account when trying to fathom out what determined the Secretary of State for Trade and Industry to agree to the exclusive deal and sell Rover Group to British Aerospace. The Department received legal advice that the exclusive negotiating rights granted to British Aerospace should amount to no more than a statement of intent to deal exclusively. The negotiating rights would leave the Department free to take account of any other offers that it might receive from potential bidders. In fact, we were told that approaches were made by four other interested parties--Ford of Europe, Volkswagen, Lonrho and Melton Medes, which is a Nottinghamshire company.

The Committee asked the Department why it believed that the threat that competition posed more than outweighed the benefits of a limited competitive tender of the kind of which it and Barings had originally been in favour. In evidence, the Department told us that the Government had carefully considered whether to proceed on that basis. They recognised the advantage of competition in giving a benchmark against which to measure prices, but they concluded that a public auction would be damaging to the company.

That belief, which was shared by the company, was based on the experience of 1986, when interest by Ford and the consequent loss of confidence by dealers and customers resulted in a decline in the Rover Group's market share from 18.4 per cent. in January to 15.8 per cent. in February 1986. That market share was never recovered. As I recall the evidence and the climate in the Public Accounts Committee, that information certainly had a substantial bearing on exclusivity--that the creation of uncertainty in relation to a motor company can result in a substantial and rapid loss of market share which it is extremely difficult ever to recover. The chairman of Barings made it clear to us that that decision was a matter of judgment by the Department. It is not a matter of certainty ; it is a matter of judgment.

We found ourselves considering a very interesting matter indeed. We noted carefully that an initial deal for the Rover group was concluded with British Aerospace in one month. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) talked about the time that it takes to build a hospital--15 years--but the speed with which the Rover Group was sold to British Aerospace was quite breathtaking--one month.

We therefore asked the Department why it was in such a hurry to sell the company, given that it was simply the Government's wish to dispose of it within the lifetime of this Parliament. We were told that the Government took the view that, if they could end the uncertainty about the future of the Rover Group which had persisted for a considerable time, it would clearly benefit the company. Of course, they were anxious to relieve themselves at the

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