House of Commons Hansard Debates for 17 Oct 1991

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In June 1983, there was a fire at the Army stores in Donnington. That one fire destroyed £169 million-worth of stores. It was a sad accident, but it happened. At least one can learn by mistakes, or one likes to think that one can. In November 1983 the services informed the Minister that the total destruction of any one of 28 buildings could result in a serious or very serious loss of operational capability, which could not be recovered in the short term--this is where the story becomes important in terms of national security. In questioning it emerged that in some cases it would take more than 12 months to make up for the damage. After the fire, there were still 28 stores described as serious or very serious risks, the loss of any one of which could have caused serious damage to the operational capability of our armed forces. That was corroborated in questioning. I shall not go into the details, but the facts were amply documented and corroborated by the questioning of the civil servants.

In December of the same year, 1983--this was in the cold war, we must remember, before there was any thaw in western Europe, when part of our strategy was intended to be the sustaining of a conventional war, if we had to, within the central plains of Europe and the year in which Ministers had been told that 28 stores were at risk, the loss of any one of which would have serious consequences, and had been warned about the critical strategic nature of each of those stores--the Ministry employed fire risk consultants.

The consultants advised that another building was hopelessly inadequate in terms of fire protection. They said that it was among the worst fire risks that they had ever seen, and that it was likely to burn out once every five years. That is a pretty clear and specific warning. The building was strategically important and expensive--the first fire had cost £169 million--and was described as one of the worst fire risks that the consultants had ever seen. Also in 1983 the Ministry carried out its own survey at the request of a Minister of State. That survey concluded that there was a real possibility of another equally serious fire. One would expect Ministers to have been somewhat alarmed when, after a fire costing £169 million, they were told by their own Ministry that another equally serious fire was possible and when outside consultants had told them that a fire was likely in one of the stores every five years.

In 1984, the Army drew up a comprehensive programme to protect the stores. That was abandoned because of lack of funds. Five years later, in 1988, a second fire occurred--on time, as prophesied by the consultants. It cost £180 million and took place in the partner store of the one burnt down in 1983. In the five years between the first and second fires the Army had implemented no structural fire protection changes to those stores.

Those who are Ministers or who have been Ministers know what it is like when a report lands on one's desk and one knows that one must take decisions on it. What is even more worrying about this case is the fact that page 1, paragraph 6C of the main report states : "Reports were made to Ministers up until February 1985." The first fire cost £169 million and the MOD consultants had already told it that another fire was likely, indeed certain, within five years. However, just about two years after the first fire, Ministers stopped receiving reports on the stores, although they knew that the Army's

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programme to deal with a potential fire had been abandoned because the MOD was unwilling to provide the money to carry out the necessary protection.

It is beyond credibility that Ministers could have been so lacking in sheer common sense and awareness of the hazard to their own shoulder blades that they did not continue to receive constant reports to ensure that adequate changes had been made to the 28 main stores. It is important to remember that we are talking not only about the £180 million of damage that was caused by the fires, but about the severe impact that they had on the operational capability of our armed services.

After the 1988 fire, we lost tank engine blocks, components relating to the Rapier and electronic equipment. When we went to fight in the middle east, we had to cannibalise tanks and get parts from west Germany. It was admitted the other night on television that a trawl was conducted in west Germany to find enough communications equipment to sustain our operations in the middle east.

It is remarkable to look back to February 1985 when reports to Ministers were abandoned. Who was the Minister who decided to abandon those reports to Ministers? Lo and behold, it was none other than the flak-jacketed right hon. Member for Henley (Mr. Heseltine)--he who preaches to everyone else about propriety and care in financial matters ; he who talks about the sanctity of the defence of Britain. This matter is the most unbelievable and stupid example of ministerial irresponsibility that I have ever come across. However, it has provided a fascinating insight into the way in which some Ministers choose to run their Departments.

6.12 pm

Mr. Tim Smith (Beaconsfield) : I begin by paying tribute to the Chairman of the Public Accounts Committee, the right hon. Member for Ashton -under-Lyne (Mr. Sheldon), who, as the House will appreciate, is the only member of the Committee who turns up to every session. He is also the only member who has to listen to every word uttered and reads every draft report. It is impossible to exaggerate the quantity and quality of the work that the right hon. Member undertakes on behalf of the Committee, and all members of the Committee are most grateful to him for it.

I should also make it clear that the Committee would be unable to operate in any effective manner without the National Audit Office, which carries out the financial and regulatory audits of Government Departments and undertakes the value-for-money reports. Its work, too, is of inestimable value to the PAC. Change can be precipitated in a Government Department purely by the arrival of the NAO. The right hon. Member for Swansea, West (Mr. Williams) referred to the fact that the Treasury decided to abolish beer duty. Sir Brian Unwin suggested that that decision was largely attributable to the European Community, but I believe that the fact that the NAO started to investigate beer duty and discovered that it was an absurd anachronistic tax with a huge allowance for wastage which simply could not be justified in practice was a major factor leading to the Treasury decision to abolish beer duty.

In February this year the PAC visited the United States. The Committee is quite properly extremely cautious before it spends any money on travelling anywhere, but that visit

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was justified because the United States has the General Accounting Office and expenditure there is probably between five and 10 times the size of pubic spending in this country. We felt that there might be some lessons to be learnt from visiting Washington, and there were. The main lesson to be learnt was that the way in which we do things in this country is extremely effective and that it would be wrong to make many changes to the system established by Gladstone some 100 years ago.

We discovered in the United States that many accounts of Government Departments in Washington are not audited at all. There is no provision in United States law for financial and regulatory audits. The GAO tends to concentrate on value-for-money issues, but much of its time has been diverted to straightforward policy issues. It is possible for a member of Congress to ask the GAO to investigate virtually any subject that he or she chooses. We discovered that the GAO has spent considerable time investigating the public sector deficit. That is an important matter, but it has nothing to do with value for money.

Mr. John Garrett (Norwich, South) : Surely the hon. Gentleman is aware that the legislation under which the PAC operates is the National Audit Act 1983, not the Act brought in by Gladstone. I helped to draft the 1983 Act and it is closely modelled on the Act which led to the establishment of the GAO in the United States. The powers and independence of the Comptroller result from copying the American legislation.

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

The Chairman of the PAC referred to the unfortunate fact that many of the appropriation accounts have been qualified recently for a variety of reasons. Much of today's debate has referred to appropriation accounts as much as to the green value-for-money reports. The two are complementary and perhaps debating which of the two is more important is not terribly fruitful. However, I believe that financial and regulatory audits are extremely important. I agree with my right hon. Friend the Member for Hertfordshire, North (Sir I. Stewart) about the report of the Select Committee on Procedure. It is important to retain the integrity of the system and I have been greatly reassured to learn that it was effectively conceded by the Chairman of that Select Committee that the PAC would have a veto over certain matters.

I also agree with the Chairman of the PAC that it is important that the Government should state the clear objectives of any new expenditure programme. The public expenditure White Papers have been improved in that sense and contain clearer statements of the objectives

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behind Government spending programmes. It is also important that, at the start of the exercise, the Department concerned should consider how it will assess at the end of the programme, or at some suitable point, just how economic, efficient and effective that programme has been. However urgent the project or political problem, consideration must be given at the beginning. We all know that Ministers are often tempted to throw money at a problem if it is urgent, but it is important that consideration be given to how, at a later stage, it can be determined whether that money was spent effectively.

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

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

Two aspects concerned me. The first related to the costs of owner- occupation. When house prices were rising quickly from about 1985 to 1988- 89, but interest rates were low, the fact that the cost of housing was rising rapidly was not properly reflected in the index. Since then, there has been a fall in house prices but a rapid increase in interest rates until recently, which has resulted in a substantial addition to the index. It is accepted that that needs to be examined. The Treasury minutes reported that

"the CSO would consider whether there was a possibility of improving the treatment of owner-occupiers' housing costs in the RPI."

Will my hon. Friend the Minister say what progress the Central Statistical Office has made and whether it has any proposals to improve the housing element of the retail prices index?

The second point that concerned me was how the community charge, and particularly transitional relief, was treated in the retail prices index. The principle that is used in determining what should be included in the RPI and what should be left out is whether an item is means tested and whether it is income related. I fully accept that community charge benefits, for example, should not be taken into account in the retail prices index. I am concerned about so-called transitional relief, which was available to certain owner-occupiers, regardless of their income. It was determined by the rateable value of the property and the relationship between the previous rates bill and the new community charge bill. That was not taken into account in the RPI, even though it was not an income-related benefit. I was glad to learn that that matter had been referred to the Retail Prices Index Advisory

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Committee, which had never previously considered it, but I was less happy to learn that that committee had accepted the way in which the community charge was treated in the index. I still think that it managed to get that wrong.

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

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

extra-statutory concession had been included in the Finance Bill in 1990.

Although I appreciate that the Treasury minutes were probably drafted by the Inland Revenue, they said :

"The Committee's concern at the growth in the number of extra-statutory concessions has been noted. The content of Finance Bills is of course a matter for Ministers".

We are all well aware of that fact and we know that there are different pressures on Ministers. Some hon. Members, including me, have complained about the length and complexity of tax legislation. It is not satisfactory that so many extra-statutory concessions are left out of taxation legislation and I hope that we shall make more progress on that in future.

My right hon. Friend the Member for Hertfordshire, North and the Chairman of the PAC have already referred to the most extreme example of how the Government manage their property--the appalling story of the British Library. Two other examples have been presented to the Committee in the course of the year. The first was the new headquarters building for the Department of Energy. The second was accommodation for Customs and Excise London investigation division. Those examples have a number of common features. In the period that we were studying--1987-88--there was an appalling staffing problem in the Property Services Agency. As a result, one member of staff was responsible both for the Department of Energy head office and for the Customs and Excise building. Once we had taken evidence, PSA Services sent us a note about the poor man who was in charge. It was no reflection on the individual concerned, who could not possibly do the work allocated to him. The project manager on that scheme was Mr. Tony Stark. The note said :

"At the time of the Worship Street project, Mr. Stark was a Grade 7 officer. The pay scale for Grade 7 in October 1988 was £18,442 to £23,487 per annum".

Mr. Stark was responsible for literally hundreds of millions of pounds' worth of taxpayers' money, and it is no criticism of him if he could not keep all the balls in the air at once. The PSA was seriously understaffed.

Following the changes made to the structure of the PSA since then, that problem should be resolved. However, my hon. Friend the Minister should give a clear undertaking

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that there is now adequate staffing to cope with those property matters. If it is appropriate for the Ministry of Defence to hire experts in defence procurement, it is equally appropriate for Government Departments, which are now responsible for their property, to hire experts in property. It is clear from the reports that some civil servants had rings run round them by private sector developers, so perhaps more expertise would be a good idea.

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

6.29 pm

Mr. John Battle (Leeds, West) : I do not have the privilege of serving on the Public Accounts Committee. However, I wish to comment on three of the reports before us which relate to the work of the Department of the Environment. They are the 33rd report on regenerating the inner cities, the 22nd report on homelessness and the 19th report on privatisation in the new towns.

The Department of the Environment is primarily responsible for policy action in our large cities. Today, the Archbishop of Canterbury pointed to the worsening conditions in our inner-city areas and to the gulf between inner-city and suburban areas. Over the years we have seen under this Government a series of initiatives, some of which have sparked, quickly flared and then died away, whereas others are still with us. The initiatives have included the urban programme, the partnership programme with local authorities, urban development grants, urban regeneration grants, city grants, derelict land grants, the urban development corporations, enterprise zones, estate action, housing action trusts, inner city task forces and city action teams. More recently there has been the city challenge and most recently, and as yet untitled, the competition for housing resources initiated by the Secretary of State for the Environment whereby local authorities are invited to take part in a competition for housing investment funds. Sadly, the list is restricted to certain cities and others are not invited to apply. Not all the projects have been subjected to detailed critical scrutiny. I welcome the report by the Public Accounts Committee into regenerating the inner cities. I will focus on one tiny part of the initiatives. One section of the report deals with city action teams and task forces. Paragraph 8 says :

"The 16 task forces have been enthusiastically developed and are well managed, but their project management responsibilities have increasingly diverted them from their

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primary role of stimulating the regeneration efforts of other organisations. However, the Department of Trade and Industry told us that they had recently re-emphasised to the task forces that building up the capacity of local organisations was a vital part of their role."

The conclusion in the report on the co-ordination of programmes refers to a "shift of resources away" from local projects which has "resulted in some important projects being closed."

That section of the report refers to the community programme. The same is happening with some of the other task force projects in which there is a shift away from the local community.

I will give one example from my city. A sight and sound project is run in conjunction with the Yorkshire Post newspaper group. It was the task force project and was based in Jamaica house in Chapeltown, Leeds. It did very good work in helping black ethnic minority groups to set up businesses and was involved in getting community economic projects off the ground.

About a year ago, everything associated with that task force project was shifted away from the local area back to the Yorkshire Post headquarters building outside the local community. In effect, the project was closed down and resources were shifted out of the inner-city area for which they were intended to elsewhere in the city. The Parliamentary Under-Secretary of State for Industry and Consumer Affairs was approached about the matter, but he refused to meet and discuss the matter with the local authority chair of the race equality committee, Councillor Fabian Hamilton, on behalf of the local Chapeltown community, and he said that nothing could be done. I urge the Treasury to investigate ways of examining how funds are used by the organisations to which they are given.

The question arising in the projects is whether the funds are used for the purpose for which they were originally intended. There are questions about public accountability. As the report makes plain, the primary purpose of projects for the inner cities should be that they are based in the inner cities so that people there can benefit from them. There is unfinished business and work that still needs to be done in the Chapeltown area. I hope that Ministers will examine the matter.

The second conclusion of the Public Accounts Committee was this : "We note the efforts made to co-ordinate inner city programmes at local level ; but the multiplicity of bodies and initiatives involved is potentially a recipe for confusion and overlap. We expect the departments to watch the position closely."

I hope that we, as Members of Parliament, will watch the position closely and that we shall urge departments not to be complacent in the matter.

The 22nd report concerns homelessness and was published in July this year. The first conclusion states :

"We are gravely concerned that homelessness has more than doubled over the last decade official statistics may well significantly understate the true scale".

The report then spells out the position. It says that the number of households accepted as homeless rose from 56,000 in 1979 to 145,800 in 1990. Since that report was published in July, the numbers of homeless people have continued to escalate. The number of people in temporary accommodation has risen to 55,300 according to figures released by the Department of the Environment this September. Similarly, the numbers in bed -and-breakfast

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accommodation have risen from 12,240 at the end of April to 13,330 at the end of August. The crisis of homelessness is worsening around us.

The report on page 17 on the action taken by the Department of the Environment concluded :

"We note the improvements being made in the Department's arrangements for allocating resources to local authorities for general housing purposes, and we support the aim of targeting resources increasingly on authorities with the worst housing problems, including homelessness We note the measures the Department are now taking to tackle homelessness and we expect them to keep the position under close review and to take further action as necessary". In the Treasury minute relating to the report by the Public Accounts Committee, the Department responded by referring to the improved arrangements for the allocation of resources. It referred especially to the £300 million special allocation for the years 1990-92 which is available for local authorities and housing associations provided that they are in London and the south-east of England. Northern cities could not apply for that special allocation.

Homelessness is not limited to the south and to London. When coupled with the skewing of the Housing Corporation's allocations to housing associations--again heavily in favour of the south-east region and not even in favour of the inner London boroughs--it is not surprising that there is some bewilderment in the north about the Government's claim to be targeting resources to the authorities with the worst problems. We do not resent resources going to tackle homelessness in London and in the south-east, but it seems to us that tackling homelessness in northern cities as well may mean that homeless people do not set out on the trek south to London to add to the numbers of the homeless here.

Following the publication of the report of the Public Accounts Committee, the Department of the Environment produced a revised code of guidance on homelessness. It also revised what are now called the quarterly statistical returns which local authorities make about their action under the legislation for tackling homelessness. Since June 1991, revised reports have to be presented every quarter. That means that the latest quarterly returns are now available. In Leeds, the quarterly returns that are just out show that there was a 60 per cent. increase in the number of homeless households who approached Leeds city council over the past year. There is an especially large increase in the scale of single homeless people. In 1991 the number of households accepted as homeless was 1,290. The figure has gone up this year to 2,066. The number of households accepted as homeless and in priority need in 1990 was 1,262 ; it is now 2,050.

The number of households resident in temporary accommodation has risen from 118 in 1990 to 307 in 1991. The needs of the homeless are increasing still. On top of that, the general waiting list has risen to 23,000 this year from 19,000 last year and the waiting list of people with special housing needs, as specified under the new guidelines, has also increased.

I would classify what are known as concealed households as the hidden homeless. In 1990, 650 single households were classified as concealed, a number which rose to 878. The number of married households in that category rose from 1,990 to 2,687. So the numbers of households on the waiting list have risen, as have the numbers of households with special needs, and overall

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there has been an absolute increase in the number of registered homeless households--even under the revised guidelines.

Paragraph 15 of the report concludes :

"We note the Treasury's assurances that within total resources local authorities are free to tackle homelessness by capital expenditure rather than bed and breakfast. We recommend that the Department should issue revised guidance on what is allowable." Although the report challenges the huge waste of resources involved in bed and breakfast, there is a practical alternative that could be implemented quickly : the Government could allow local authorities to use their capital receipts from council house sales to build new dwellings for rent. I cannot agree with paragraph 7, which states that, in the Department of the Environment's view,

"the decline in the local authority housing sector of about 1 million units over the last decade through the right to buy' policy had not yet led to a significant loss"

in the number of rented houses available. I cannot believe that that is true. The reduction in the amount of public rented housing is a major factor in cities such as Leeds, where the declining amount of such housing- -8,500 units lost--means that constituents in difficulties with their mortgages, who assume that they can be slotted into local authority housing, cannot be because of the shortage.

Leeds has one of the lowest rates of void properties, at 0.89 per cent. That compares favourably with the national average of 2 per cent. and extremely favourably with the figure for Government-owned properties-- primarily owned by the Home Office--which is running at 18 per cent.

There is no room for the homeless in local authority housing, which is shrinking away. The absolute shortage of housing must be dealt with. While it remains, it is a major factor in rising homelessness in our towns and cities.

I was also surprised at the PAC report's failure to mention the denial of access to income support and hence to housing benefit or help with rent for the under-18s. That policy change was effected a few years ago by the Government and the action taken by the Department of Social Security is generating homelessness among single young people. I hope that the PAC will examine the interaction between the policies of the Department of the Environment on housing and the policies of the Department of Social Security. Between them, those Departments are adding to the problem of homelessness. Treasury assurances on capital expenditure cannot be squared with the latest idea on which the Department of the Environment is insisting--that local authorities should compete for funds to repair council housing. The idea of competition for a restricted list of local authorities is not the way to allocate resources and it is far removed from the idea of allocation according to the needs index from which the policy originated.

The housing charity Shelter, in its recent report entitled "Urgent Need for Homes", pointed out that 500,000 new homes will be needed in the next five years to solve the housing crisis. That could be achieved with the use of funds amassed from council house sales and by reducing the exorbitant cost of bed-and-breakfast accommodation. The Government claim that they are tackling the problem of homelessness ; I hope that they will concede that they are nowhere near solving it yet.

Tackling homelessness, actual and hidden, should be a top Government priority in any civilised society and the response to such homelessness should be organised on the

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scale and with the vigour and determination of the sort of resources and task forces that were used in the Falklands and the Gulf. The homeless are being denied their basic right to a home. They are due more than Government complacency and tinkering with the problem.

The 19th report deals with the privatisation of the new towns and recommends in paragraph 3 :

"We do not accept that the novelty of the business venture arrangements was sufficient reason for the Department not issuing early guidance on the principles and procedures to be followed." Between April 1987 and September 1989 work for the development corporations of Milton Keynes, Telford and Warrington and Runcorn was privatised, but no cost objectives were set and at Milton Keynes important costing records were not retained--that is not to be regarded as a precedent. Some of the professional and support staff were encouraged into private business ventures to undertake work for the corporations under contract. Those bodies were allowed to break the same sort of rules that the Department of the Environment now suggests should be applied to local authorities. The Treasury note states :

"The Department also accepts that competition should be pursued wherever practicable and that, where there is a proposal by employees to establish a business venture, they should not normally be given a privileged opportunity to secure the work. The Department considers that exceptions might be justified where, as in the case of new town development corporations approaching wind-up, a particular premium is placed on retention of access to staff experience and expertise."

These are the sort of arguments that might be deployed when the Government look at the future of local government. The very Department that broke its own rules on open tendering and competition in the case of the new towns now persistently hammers local government about competitive tendering for local government services. If the principles and practices applied to the new towns are allowed to remain, why are not they to be applied to local government? Local government would not be allowed to get away with what happened in the new towns, which resulted in a shoddy deal for public money. The dogmatic "novelty" of privatising and selling off ventures should not override considerations of real value- for-money options and genuine accountability. I hope that we shall return to that point after the Queen's Speech, when the Government produce more proposals for privatising local government services.

6.48 pm

Mr. John Wilkinson (Ruislip-Northwood) : During the debate on the defence estimates on Tuesday, I argued briefly--there was a 10-minute limit --that it was imperative that we institute new parliamentary procedures to control defence expenditure more effectively. The 11th report of the PAC for the Session 1990-91. The 1989 statement on major defence projects-- projects in full development or production with 20 per cent. of total costs remaining to be spent--exemplifies the need for such procedures.

In political terms, I am an amateur on the work of the Public Accounts Committee. I have not had the honour to serve on it, but I greatly admire the work of its Chairman, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), and those who do serve on it. They fulfil an invaluable function on behalf of the House. However,

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professionally speaking, I am certainly not an amateur on the subject matter of the report, although I do not have a commercial interest to declare.

To many hon. Members who spoke in Tuesday's debate, it was an affront that major formations, proud regiments and units which they treasured, were to be disbanded or merged while the Government continued to spend so much money on defence weapons procurement. In that sense, my Damascus road came during a visit by the Select Committee on Defence to Nepal to study the Gurkhas. In the hills of eastern Nepal, I found that the outstanding British military hospital at the cantonment at Dharan, which was the only modern hospital in the whole of eastern Nepal and served a huge population, was to be closed to save £1.5 million a year.

My work in the 1970 Parliament on the Select Committee on Science and Technology and, more particularly, my Select Committee on Defence work in this Parliament have shown me how the Government were capable of wasting not tens or hundreds but in some instances thousands of millions of pounds. That money had gone for ever, and we had been unable to control it.

When I started my work on the Select Committee on Defence, it had just concluded a report on the Nimrod airborne early warning aircraft. On this project, which never saw service, about £1 billion of public money was lost. During my three year service, reports were completed on the type 23 command and control system, the EH101 helicopter and the F3 Tornado interceptor, which in its early days gained a certain notoriety for having what was called blue circle radar--solid ballast in the nose--instead of an effective airborne interception radar.

The trouble with the work of the Public Accounts Committee is evident, in that it is the study of the flow of water under the bridge. The Committee can be wise after the event and propose all kinds of remedies, but it is difficult to institute fully effective sanctions, even if it were possible to identify those who were responsible for the waste of public money that had occurred. In defence, we need a system of monitoring expenditure of public moneys as the expenditure is incurred. There should be way points at which Parliament approves the expenditure on projects. That is to say, we need an appropriations function. We have made considerable progress in the control of the procurement process, and the competitive process has enabled significant savings to be made. As the right hon. Member for Ashton-under- Lyne has said, we owe Sir Peter Levene, who was chief of defence procurement, a great debt of gratitude.

However, the competitive process has some fundamental flaws, the first of which is that it is fully effective only for the production stage. It is much harder to have fixed-price contracting for the development stage. It is right to have a competitive process, but it is difficult to have watertight bids that will not be subject to cost overruns during the development phase. The report shows the truth of that.

Another difficult aspect is that, as defence expenditure declines in real terms, as it will if the world environment remains tolerably peaceful, it is likely that more and more contractors will either leave the defence business altogether or, because the defence business as a proportion of their total activity is reduced, will merge or form bigger

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conglomerates. That means that there will probably be an ever smaller number of big contractors bidding and, increasingly, they will become monopolies or quasi-monopolies in their field. Smaller contractors already find it difficult to bid for contracts, because the costs of doing so are high and sometimes the chances of success are very remote. Therefore, it will become increasingly difficult to persuade small companies to bid for defence contracts, and that will hasten the monopolistic tendency to which I have referred. The Ministry of Defence is doing something about it through the Independent European Programme Group, a body set up within the European part of NATO. It is having the contract bulletins of the respective Ministries of Defence published in other countries, so that defence industries outside this country can bid. This is all to the good, and a step forward.

However, even in Europe we see more and more transnational alignments and collaboration, leading even to international companies. Within Europe, in the long term competition may be reduced. I fear that in future we shall not see as many savings from competition as we have seen in the recent past.

The report is instructive in another matter, because it demonstrates cost overruns, especially in the development phase, and also illustrates the serious time delays that have occurred in the procurement of equipment. At a time when budgets are under strain and the Treasury is trying to reduce defence expenditure, it is tempting to allow slippage to occur and, as the jargon says, to move programmes to the right. The difficulty is that, over the life of the development and production process, total cost is increased and the operational cost to our armed forces is heightened. There is the cost of keeping in service outdated equipment that is difficult to repair and maintain, and there is also the potential risk of the armed forces having to fight with such equipment.

The report contains an excellent analysis of the statement on major defence projects on pages 15 to 18. Table A shows projects in which there is a 20 per cent. or more projected cost variation at 31 March 1989 over the original Treasury approval. We see that, at that date, there was a 75 per cent. increase, of £86 million, in the cost of the type 23 frigate. There was a 99 per cent. increase--that is, of £12.5 million--on the Tristar second batch. There was a 33 per cent. increase in the EH101 helicopter project, and a 59 per cent. increase in the Foxhunter radar project.

Table D shows that the cost of the Trident 2400 submarine, the Upholder class, increased by 10.7 per cent. and that of the Ptarmigan communications system by 10.6 per cent. At the foot of table A is the comment :

"seven of the ten projects show an increase of 20 per cent. or more".

That is a substantial amount.

Table B shows the net increase in cost for development, which is no less than £1,854.9 million. For that money, many hospitals in Nepal or extra regiments of the line could be maintained.

Table C gives an analysis of the slippage. For example, the Upholder class submarine slipped by two years, the Spearfish torpedo by two years, the Warrior armoured fighting vehicle by two years, the LAW 80 infantry anti- tank by five years, the Tornado GR1 by three years, the Tornado ADV by two years, the Tristar by two years and the Foxhunter radar by three years. The figures are not given for the ALARM system--there are only stars

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--but we know that it had to be rushed into service in the Gulf to enable Tornado crews to suppress enemy defences, even though the system had not been fully proved and developed.

This catalogue of overspending and slippage should cause the House the greatest concern and induce it collectively to take action to put the matter right. I shall repeat the way that I suggested on Tuesday. It is to give the Select Committee on Defence an appropriation function, so that, step by step, through the development, and perhaps even in some instances the production phase, of major pieces of equipment tranches of expenditure that are required by the Ministry of Defence, projects are approved by the Select Committee on behalf of the House, and that approval by the House should be given in the defence debate. The trouble as we work the system today is we just write a blank cheque to Her Majesty's Government. The report shows that this is not good enough, and that we are not adequately fulfilling our responsibility in Parliament to the British public. 7.2 pm

Mr. John Garrett (Norwich, South) : I shall concentrate on the 36th report on university finance, but I shall first use the opportunity of the debate to elicit the Treasury view on some aspects of the status of the Comptroller and Auditor General and the National Audit Office. I hope that I have not disturbed the Minister's rest, because the questions will be simple, but I shall find the answers useful and I hope that others will, too. In my youth, with my right hon. Friend the Member for Ashton-under- Lyne (Mr. Sheldon) I spent 15 years campaigning to alter the status of the Comptroller and Auditor General, with some success. The effect was to bring the comptroller back under the control of the House. I should say in passing that I am glad to see that my right hon. Friend has won his boundary war with the Select Committee on Defence, which had tried to acquire analytical and research staff on the cheap by borrowing the staff of the comptroller. The Committee does not need such staff.

The National Audit Act 1983 established the Comptroller and Auditor General as an Officer of the House. To be accurate, it re-established him in that role. The Treasury was bitterly opposed to that change and fought it with all the means at its disposal. I have the impression that this status is being subtly changed back in favour of the Treasury. First, I have always assumed that not only the comptroller but his staff were Officers of the House, but I have the impression that the Treasury disputes this. It thinks that the staff are civil servants. We all know that the Government believe that the loyalty of civil servants must be to the Government of the day. Therefore, it is important that we establish to whom the staff belong.

If the Comptroller and Auditor General is an Officer of the House, why is he not a member of its Board of Management ? The Ibbs report, which I found fairly insubstantial, made great play of the fact that the House of Commons services had no management information or budgetary control system, but our expert on these matters is not involved in the financial management of the House and does not serve on the management board. Strictly speaking, the Treasury should not have a view on the way

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