House of Commons Hansard Debates for 25 Oct 1993

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In America, for example, there is no doubt that the approach to which the hon. Member for Walsall, North (Mr. Winnick) referred has secured a substantial reduction in the moneys coming from people who previously, perfectly genuinely, believed that they were supporting a patriotic organisation. My hon. Friend is absolutely right in the thrust of his question.

Mr. Peter Hain (Neath) : In welcoming the statement by the Secretary of State, and his strong but sensitive responses to the questions, I especially applaud his statement that reason and not rage should inform our response to this evil atrocity. In that spirit, I salute the courage of the hon. Member for Foyle (Mr. Hume) and I urge the Government to give the Hume -Adams talks a fair wind because, ultimately, if we are not continually to be involved in what are almost tragically ritual condemnations of terrorist outbreaks, we must pursue a political settlement and reach the constitutional settlement to which the Secretary of State has aspired. That requires courage on all sides and a determination to back those who are willing to put their lives on the line to achieve that settlement.

Sir Patrick Mayhew : The hon. Gentleman will have heard what I said about my approach to the initiative by the hon. Member for Foyle. I do not think that it was at all uncongenial and I do not wish to add to it, save simply to say that the hon. Member for Foyle has said that he has been acting on his own initiative and not as the emissary of anyone. I have told the House of my reaction if that process produced the only message in which I have an interest--that the violence and the justification for violence were finished and finished for good.

Mr. Nigel Evans (Ribble Valley) : I have been into Irish pubs in New York and into Irish clubs in California, so I am delighted to hear that the money has dried up to some extent, although it is still coming in. If there is one clear message from the atrocities over the weekend in Northern Ireland, is it not a message to Irish-Americans that, if they wish to see an end to the violence and to the atrocities, they can play their part by stopping giving money to IRA groups and sympathisers in America?

Sir Patrick Mayhew : Of course that is right. I endorse what the hon. Member for Foyle said some time ago, which was referred to in our debate last Friday--that the IRA has killed more Catholics than anyone else has. Since that has come as news to many people who sympathise with the objectives of militant nationalism in Northern Ireland, it needs to be publicised even more widely. My hon. Friend is right : we shall do what we can to act on that.

Mr. Tony Benn (Chesterfield) : As I was a member of the Cabinet that sent in the troops in 1969, and as I note that more than 33,000 people have been killed and injured since, may I thank the Secretary of State for his tribute to my hon. Friend the Member for Foyle (Mr. Hume) for the courage and integrity of his initiative? Will the Secretary of

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State remember that the Dublin Government also said that they believed that the initiative was constructive and creative? Will he take account of the fact that there are many people, probably the majority, in this country who believe that at some stage everybody must get round the table to find a peaceful way to avoid a repetition of the terrible deaths that occur daily, as has happened in so many other parts of the world?

Sir Patrick Mayhew : I warmly agree with what the right hon. Gentleman has said. All constitutional politicians must get round the table, recognising that it is only those who disavow unequivocally the use of violence for political purposes in a democracy and the justifying of it who will be able to find a political solution to political problems. A propos his reference to 25 years ago, I think it will be congenial to the right hon. Gentleman, with his and his family's record, if I say that the price of defending democracy is always high, but it is always worth paying and we will continue to pay it for as long as may be necessary.

Mr. John Wilkinson (Ruislip-Northwood) : I thank my right hon. and learned Friend for his firm but unequivocally just statement, which has helped us to channel our sense of collective grief and righteous indignation into appropriate and, I would hope, constructive responses. Can he tell us that he will not eschew new security measures, including perhaps the introduction of identity cards for all British nationals throughout the United Kingdom and the imposition of a requirement upon Irish nationals in this country to carry a passport?

Sir Patrick Mayhew : I am grateful to my hon. Friend for his kind opening remarks. The bulk of what he suggested is at least as much-- probably rather more--a matter for my right hon. Friend the Home Secretary than for me. I take careful heed of what is suggested by my security adviser in Northern Ireland, who is the Chief Constable. I assure my hon. Friend that I shall continue to do so.

BILL PRESENTED

Closed Churchyards (Wales)

Mr. Paul Flynn presented a Bill to amend the law relating to the maintenance of closed churchyards in the area subject to the Welsh Church Act 1914 : And the same was read the First time ; and ordered to be read a Second time on Thursday 4 November, and to be printed. [Bill 256.]

STATUTORY INSTRUMENTS, &c.

Motion made, and Question put forthwith pursuant to Standing Order No. 101(3) (Standing Committees on Statutory Instruments, &c.). That the Income Support (General) Amendment No. 3 Regulations 1993 (S.I., 1993, No. 1679) be referred to a Standing Committee on Statutory Instruments, &c.-- [Mr. Conway.]

Question agreed to.

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Public Accounts

4.27 pm

Mr. Robert Sheldon (Ashton-under-Lyne) : I beg to move, That this House takes note of the 12th to 54th Reports of the Committee of Public Accounts of Session 1992-93, and of the Treasury Minutes and Northern Ireland Department of Finance and Personnel Memoranda on these Reports (Cm. 2145, 2175, 2186, 2199, 2226, 2257, 2279, 2310, 2341 and 2354) with particular reference to the following Reports :

Sixteenth, The sale of the twelve regional electricity companies ; Twenty- sixth, The Chelsea and Westminster Hospital ; Twenty-seventh, Quality of service : war pensions ; mobility allowance ; attendance allowance ; invalid care allowance ; Thirty-fourth, Ministry of Defence : prices paid for spare parts ; Thirty-fifth, PSA Services account 1991-92 ; Forty- seventh, Welsh Development Agency accounts 1991-92 ; Fifty-second, Fire prevention in England and Wales. Today we are discussing 43 reports--the same number as last year. I am sure that we shall mention many more in debate than the seven that are set down in front of us, but almost all of them would warrant a full-scale debate on their own.

I am grateful to all my right hon. and hon. Friends who are members of the Committee for their dedication. The Committee meets more often than any other Select Committee and a commensurate amount of effort is required. Each week the Committee's members have to digest the information that is given to them in a voluminous amount of paper, to maintain the accountability for which we stand.

As an example of just one of those matters which are not so likely to be dealt with in debate, I shall mention report No. 31, Her Majesty's Customs and Excise Account Matters--an uninteresting title. The report deals with control over common agricultural policy exports ; it deals with refunds of £455 million ; it deals with the single European market that came into being on 1 January 1993, which presents great problems to the Customs and Excise and to all who deal with them, and its many risks. It deals with the way in which Customs and Excise handle the VAT debts of small traders and it gives instances of irregularities ; it deals with the issues of time to pay and with the problems of small traders in meeting some of the Customs and Excise requirements. The costs of the Department are rising. I deliberately singled out what may appear to be one of the less interesting reports in order to show the importance of the matters that we have to consider. I intend to deal mainly with seven reports, but I shall refer to several others, describing some of the lessons that we have to learn and giving details of how we handle our responsibilities. It is a burdensome task for all the Committee members, but it is essential.

The important thing to remember is that we have the enormous advantage of tradition on our side. Here I pay tribute to one who has long since gone : Gladstone got it astonishingly right 130 years ago. He put the responsibility on the Chairman of the Public Accounts Committee, who he said should be a Member of the Opposition. One would never get away with that today, but he had the standing to enable him to impose it on Parliament at the time, with the result that Government expenditure is monitored properly, adequately and--using the traditions that we have inherited--responsibly as well.

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With the advent of the National Audit Act 1983, we have had to consider questions of economy, efficiency and effectiveness. On economy, we must ensure that whatever the Government buy is bought with due attention to getting the best possible price and deal for the taxpayer. The Committee also considers efficiency--to ensure that the best methods are used--and effectiveness, which covers wider activities.

Normally, the Committee takes evidence from the accounting officers, who are usually permanent secretaries. The Committee's contact with them is a big advantage because it enables us to understand some of the problems that face their Departments and to know some of the personalities involved, so that we can assess how well they are carrying out their functions. We can make comparisons and judge how they are doing. We see the strengths and weaknesses of Departments and of the people who run them.

We discover a number of very able civil servants, and their standards are a matter of great importance to us. A constant stream of overseas visitors come before me, and the Committee, to discover why we have a relatively incorrupt civil service. I always tell them that our main advantage is that we do not have, and are determined not to have, corruption in our civil service.

Fortunately, we do not have to spend much time dealing with fraud and corruption, because we do not have much of it, but when we do find it, everything has to stop--it comes before everything else. We must retain those standards. Of course we want to improve on them, but we must not allow them to weaken in any way.

In attempting to improve the standards of the civil service, we have the defence of the taxpayer in mind. That is what unites the Committee and it is one of our greatest advantages. Of course Committee members have enormous differences of opinion on policy--we are still politicians, and party politicians at that--but we are even able to deal with issues such as privatisation, on which our views differ greatly, because we do not consider policy. If something is the policy of the Government, we consider how they can achieve their objectives and how we can defend the taxpayers and the money that they have to raise. That is what gives us the power for such unanimous reforms.

During the past 10 years every one of more than 400 reports has been unanimous--not because they have been fudged in any way, but because the taxpayer is king as far as we are concerned and so we are able to produce the unanimous reports that are the foundation of the Committee's strength. When Departments study our reports they know that, however widely members may differ, we are united in defence of public money and the public interest.

The Committee is extremely fortunate in having a close and happy relationship with the Comptroller and Auditor General. The National Audit Act 1983 gave us the legislative right to propose matters to the National Audit Office for investigation. That is a very great help. Every year we go through the Comptroller and Auditor General's suggested programme, discuss it, consider matters that we may raise and come to an understanding on the areas of greatest interest. Important though our discoveries are, our success does not merely lie with them but in what we can prevent from happening. The very fact that our presence is known and that the accounting officer is aware that matters will come

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before us has the consequence that the officer is very careful in dealing with certain matters that might not otherwise be given the attention that they deserve.

I pay tribute to Sir John Bourn and his staff, who never fail to excite the interest, enthusiasm and acceptance of the Committee. The staff have changed enormously. When I first became a member of the PAC in 1965, most of the staff came in from the executive class and were not much more than book-keepers. Today they are auditors. That makes an enormous difference because when they visit Departments they can ask the kind of questions that any top auditor in the City, or in a big public company or institution, can raise. They are accorded the respect and understanding that is important for proper auditing of our accounts, which is of enormous benefit to us.

The Comptroller and Auditor-General for Northern Ireland, Dr. Bill Jack, also does his work very well. Last year, I mentioned the new offices that were being planned. The Committee recommended that the independence of the Northern Ireland Audit Office would be more clearly demonstrated if its staff were housed in a headquarters building separate from the Government Departments that they audit. It is clearly wrong for them to occupy a building occupied by the Northern Ireland Office Department whose accounts they were auditing. The building that the auditors shared with the Northern Ireland Department of Finance and Personnel was also inadequate for their needs. The Comptroller and Auditor-General for Northern Ireland and his staff moved to new headquarters close to central Belfast at the end of July. We look forward to seeing the results in due course. The number of cases that we have and the standards that we maintain have been extended because of the increase in the number of executive agencies and of non- departmental public bodies, of which there are about 1,000. It is an enormous growth industry, and it is difficult to maintain control and oversight.

I referred in my speech last year to those matters, and the Financial Secretary to the Treasury--whom I am pleased to see in his place--also expressed concern about them. Standards of public service become harder to maintain, let alone improve, when there must be oversight of so many such bodies. The number of cases perhaps means that we are not able to deal with them as thoroughly as we would wish. I shall say more about that later.

Dr. Kim Howells (Pontypridd) : Does my right hon. Friend agree that there is a worrying trend of cases of irregularity and hints even of corruption in a couple of nominated quangos? Does not the duty fall heavily on Government Departments to monitor quangos, for which they have some responsibility? The people of Wales in particular look to the Government to clean up their act in respect of the Development Board for Rural Wales and the Welsh Development Agency. I hope that the Financial Secretary to the Treasury can assure the House that there will be no more such nonsense at the Welsh Office in Cathays park.

Mr. Sheldon : I shall deal with that matter and others raised by my hon. Friend at some length later.

Our great advantage is that we have a civil service that is one of the finest in the world. We should take pride in that. A number of years ago an attempt was made to belittle

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the role of the civil service. I am glad that that has now ceased and that people understand and respect those who enter the civil service because they believe in high standards of public service. So long as we need public servants, we must reassure them that we have their future and the standards that need to be maintained very much in mind. I will look very closely at those non-departmental public bodies, and so will the Committee. I will refer to them later. The House should know how we go about our work. Basically, it is not a difficult task. A number of years ago we laid down that whenever a programme that will cost money is put before us, we ask the Department concerned what its objectives are-- what it is trying to achieve with that expenditure--and we want it quantified. We also want the outcome quantified ; we want the achievement recorded and compared with the objective. At the same time, we want the programme monitored, so that if something goes wrong the Department is able to bring it to a halt, or change it or modify it in some way. Only by comparing objectives with achievements are we able to bring Departments to account for any particular programme. That quantification has been improving in a number of cases.

The Committee has heard many horror stories. Although, luckily, some of the worst examples are in the past, unfortunately we have a few to deal with today. I need not go into those matters at the moment, but will deal with a number of other points.

First, and most important, is the proper conduct of public business--a matter raised by my hon. Friend the Member for Pontypridd (Mr. Howells)-- and I will have more to say on that later. Secondly, there is value for money and how we achieve it. Thirdly, there is performance, and how we judge whether a Department is meeting its obligations in the way that we expect.

The first of the Committee reports of the 1992-93 session that I wish to deal with is the 16th report, entitled "The Sale of the Twelve Regional Electricity Companies". In December 1990, the Government sold all their shares in the 12 regional electricity companies in England and Wales--which had a total asset value of £16.1 billion--for net proceeds of £7.7 billion, of which £4.9 billion was from the sale of equity and £2.8 billion from specially created debt.

Although there are differences between members of the Committee as to how far we want the privatisation to proceed, we are unanimous in our desire to ensure that we get the best value for the taxpayer. A question that we have put time and again is this : why do privatisations have to be carried out in one fell swoop? Why can they not be phased in? The Government do not sell a year's worth of gilts--£50 billion--in one go on 1 January ; they have a very sophisticated broker who knows the market, studies it and releases amounts of gilts into it at relevant periods. Privatisation cannot proceed in quite the same way, but the priniciple is similar. We have argued time and again that there should be a similar kind of phasing with privatisation--in two or three tranches, perhaps more, depending what it is --because if it goes wrong on the first tranche we can hope to get it right on the second or subsequent tranches.

Mr. Rhodri Morgan (Cardiff, West) : To quote the immortal words of the late Andrew Holmes o

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it go with a bang, there is an enormous advantage in retaining 40 per cent. or 25 per cent. or whatever of the shares, so that, if they zoom away afterwards to double their value at privatisation--a fairly common occurence with the main utilities--the Government and the taxpayer will get the benefit of that higher price at the sale of subsequent tranches. That was done with the generating companies but not with the electricity distribution companies, and the taxpayer has lost many hundreds of millions of pounds as a result.

Mr. Sheldon : My hon. Friend is right. I will deal with that point later.

In paragraph 12 of our 34th report of 1987-88 we dealt with the question of phased sales. That approach has been used on occasion, but in the event the Department decided that if it went for a partial sale it might be seen as a failure of the Government's nerve, which might have affected the climate of the sale and the proceeds. The Department judged that to be the most weighty argument against a partial sale.

That argument does not weigh heavily with me. The Government's argument is that over a period everyone would know that all the assets of these privatisation companies were to be sold off, and that therefore we would get a better sale. I suspect that a stronger argument--which was never put by the Treasury--is that at the beginning of a year the Treasury wants to know how much it will get from privatisation, and it gets a commitment from the Department as to what it will receive. Once the steam engine starts, it is hard to get it to stop. We cannot say, "Look here, things have not gone very well so we should delay the privatisation," because that would delay the receipts and therefore the objective of Government finance. On the first day of trading, the Government decided that the privatisation was worth £5.2 billion. In the end, the market decided that it was worth £6.3 billion, and the difference was lost to the taxpayer. Such uncertainty should lead to tranches being examined more carefully and fully in the future. We have constantly asserted that to the Government, and we hope that they will accept it.

Mr. Robert Maclennan (Caithness and Sutherland) : In an earlier report of the Public Accounts Committee, on the sale of Forestry Commission assets, the Committee strongly took the view that a wholesale sell-off of the nation's assets would not only fail to achieve value for money for the public, but would have disruptive effects on land values. Those matters are now current once again and comparable threats are being uttered by Ministers in respect of Forestry Commission assets. The Government should take to heart the prudent words of the right hon. Member for Ashton-under- Lyne (Mr. Sheldon) when they consider the future of forestry.

Mr. Sheldon : I do not feel that the Government have taken fully into account the need for phased sales in the Treasury minutes provided. They have done so in a number of cases ; they have paid it lip service-- which is of limited value--and in some cases they have accepted it, but I do not think that it has really struck them as being as important as the need for speed in the selling off of these publicly owned assets.

We see in the 16th report that the Government appointed 53 advisers to deal with the sale of the electricity companies, and 16 of them were appointed without competition. We feel very uneasy about some of those

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appointments. We feel that there should have been competition--we do not know why there was not--and we look forward to hearing what the Financial Secretary to the Treasury has to say about that. There were 9 million shareholders on flotation ; the number has now fallen to 3 million, so the objective of widening share ownership has not been very successful in that respect.

I now wish to comment on the 26th report of the Committee of Public Accounts, on the Chelsea and Westminster hospital. The Committee was dealing with a 665-bed hospital which was under construction on the site of the former St. Stephen's hospital at a total estimated cost of over £230 million. The regional health authority intended that the cost would ultimately be funded by receipts from the sale of four surplus sites. However, as things have turned out, there is now a gap of around £100 million between the total costs and the expected sales proceeds. As a result, 24 other major schemes in the region have been cancelled or delayed.

The report states the Committee's concern that the health authority assumed that planning agreement would be forthcoming and was therefore unprepared for the difficulty and delay that occurred, at a cost of £16 million. In paragraph 25, the report states that the Committee was surprised that the region should consider that the complex and important project would need only a part-time project development manager. The Committee shared the Treasury's doubts as to whether that role could be adequately discharged on the basis of one day a week. It is quite astonishing that the project was handled in that way. The manager was dealing with a £230 million hospital, and 24 other projects had to be dropped or postponed because so much more money was spent than was estimated.

The chief executive of the NHS management executive at that time, Mr. Duncan Nichol, gave evidence and was asked about the fact that the project development manager had been moved to another post within the national health service while continuing work on the project on a part-time basis. I asked him the following question :

"One of the biggest hospitals of its kind in the history of the National Health Service and the project development manager was moved somewhere else and managed this project on a part-time basis. Was this a sensible way to proceed?"

Was it sensible, in other words, that the project development manager had worked on something else while continuing to work for one day a week on the biggest development project of its kind in the NHS? The National Audit Office report stated that the work of the manager was increased to two days a week in February, but

"still failed to provide adequate control."

I said to Mr. Nichol :

"You presumably agreed that there was not adequate control." Mr. Nichol replied "I agree with that". That really is a terrible story.

The report also points out that the Committee shared the Treasury's doubts as to whether the role of project development manager could be adequately discharged on that basis. We endorsed the management executive's final conclusion that in future project development managers should give full and undivided attention to the management of major schemes.

Mr. Andrew Rowe (Mid-Kent) : The right hon. Gentleman is pointing out a worrying weakness in the way in which public services often operate. There seems to be an unwarranted belief that the number of people capable of

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doing important jobs is limited. In fact, when a worker is needed to work elsewhere, there is a tendency to try to stretch thinly the resources of those capable people. I believe that the public services are full of able people, many of whom have to wait far too long for recognition. Would it not be better if people were given the opportunity to do a full-time job when such a position arises?

Mr. Sheldon : I could not agree more with the hon. Gentleman. Too often we underestimate the potential of the people of this country. People who are provided with a certain amount of training, background and assistance can do all sorts of jobs in the community. They fail to do those jobs because of a lack of trust, not only in the people themselves, but in the methods that can be devised for dealing with and training them.

The memorandum from the Comptroller and Auditor General stated that there were 24 delayed schemes costing more than £1 million which had received approval in principle. Those included projects within the regional health authorities of Bedford, Luton, Watford, Barnet, Napsbury and other places. Those were viable schemes which had been recommended, and were then delayed and delayed because money had been spent unwisely on other projects. The Committee thought that that was wrong and stated its views clearly and firmly.

I will now deal with the 27th report of the Committee, "Quality of Service : War Pensions ; Mobility Allowance ; Attendance Allowance ; Invalid Care Allowance." The report deals with the Department of Social Security and with the Benefits Agency, which was established as an executive agency in April 1991. Mr. Michael Bichard, chief executive of the agency, came before the Committee to explain his responsibility and how he had undertaken it. Sir Michael Partridge, who was and is the permanent secretary at the Department of Social Security, also gave evidence.

The Benefits Agency administers a number of schemes that provide help to people with disabilities and to those who care for them. In 1991-92, there were on average around 2 million people receiving a war pension, mobility allowance, attendance allowance or invalid care allowance. Expenditure on those four schemes in that year amounted to some £3.8 billion. From April 1992, disability living allowance replaced mobility allowance and attendance allowance for people becoming disabled before reaching the age of 65, and who claim before their 66th birthday.

The Committee saw clearly that the service had been deteriorating. War pensions--if I may deal with that matter first--are different from other schemes administered by the Department. They are not social security benefits, but state compensation, which is very different, paid in recognition of the fact that disability or death was suffered during service to the country.

The report states that the average time taken to clear war pensions disablement claims increased from less than six months in 1985 to between eight and nine months in 1990-91. Despite a 30 per cent. increase in productivity in 1991-92, and a further doubling of productivity in the first six months of the following year, the surge of claims resulted in the accumulation of even larger backlogs of work. The Department has estimated that the total number of war pensions claims in 1992-93 will reach 180,000. The report states that the Committee is concerned that the

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service to war pension claimants has been deteriorating, and also that it took the Department five years to recognise that and to take remedial action.

The report notes the progress now being made in securing improvements in the productivity of staff and the measures taken to deal with the large and unexpected growth in the number of claims in 1992-93. The Committee expects those claims to be pursued with vigour. That is important, because those people have earned their right to their pension in the strongest way possible and it is correct that we should deal with them in a proper, reasonable and efficient manner.

I turn now to disability living allowance and attendance allowance. One of the advantages that Committee members have is that they know the problems faced by those in such circumstances--not just from the voluminous and well -explained papers which they receive, but because of their constituency cases. Committee Members go to hearings with a fair understanding of the problems and are able on occasion to dispute some of the assertions made by those who are called before the Committee. We knew about the matters of which our constituents complained. For example, we all knew of the poor telephone service provided by the agency and about the frequency with which claims for disability living allowance or attendance allowance had been lost. The agency acknowledged that there had been problems in locating the case papers. That was clearly wrong and showed that the kind of efficient operation that we might have expected was lacking. The agency could not provide even an indication of the number of lost disability living allowance or attendance allowance claim forms, as no statistics had been kept in connection with the problem. We point out that we were concerned that an enormous backlog of 400,000 uncleared claims for disability living allowance and attendance allowance had built up by June 1992, as compared with the 130,000 that the agency had expected. The agency said that the situation had been caused by the surge of claims in the early months following the scheme's introduction. We were concerned to note that the Department believed that the implementation of disability living allowance had been rushed.

Mr. Alan Williams (Swansea, West) : The members of our Committee and especially its Chairman understandably try to avoid any political comment, but is it not right that people should be aware that what in fact emerged was that the surge in claims at that date had resulted from the high profile advertising campaign launched in the run-up to the election to draw claimants' attention to what was supposed to be a very generous new system? Lo and behold, that advertising was suspended at the time of the election and never recommenced once the election was over.

Mr. Sheldon : I am sure that my right hon. Friend would want to make that point. We noted that there had been a change in the advertising, and that had certainly resulted in more claims being made rather more quickly than had perhaps been expected.

In our conclusions, we say that we welcome the improvement in performance on invalid care allowance. I suppose that it may be some consolation to the agency--considering how critical we were of most of the rest of it--that we welcomed that improvement in performance and were pleased to note that the staff of the invalid care

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allowance unit had received an award for one of the most improved performances in the civil service. We pay tribute to any success of that kind.

The 34th report of the Committee is entitled "Ministry of Defence : Prices Paid for Spare Parts", and concerns the £2 billion a year that the Ministry of Defence spends on spare parts--which are, of course, vital for the maintenance of defence equipment. The spares inventory comprises more than 2.7 million items. During the 1980s, the Department began to adopt a more commercial approach to defence procurement, and that included a number of initiatives relevant or specific to spares procurement. I should point out that the former chief of defence procurement, Sir Peter Levene, has now been replaced by Dr. Malcolm McIntosh.

We were pleased with one aspect of the work done in relation to spare parts --namely, spare parts labelling. We had been concerned that spare parts and control of the cost of spare parts had not been handled as well as they should have been. We were very much aware of what we had been told by a Congressman on our visit to the United States--that the one way to ensure that charges for spare parts were not excessive was to label them with their cost. That congressman would regularly hold up an ashtray and say, "This cost $1,000" or whatever. The cost was so absurd that everyone knew that the taxpayer had been ripped off. As a result of that discussion and our discussions with Sir Peter Levene, we decided to recommend price labelling so that someone going into the store could see the price marked on components.

Labelling is a highly effective way of ensuring that the customer--the taxpayer--is not overcharged. Many contractors to the Ministry of Defence did not like the idea because they felt that they were giving a much better service to the British Government than to Governments overseas and did not want those Governments to realise that they were having to pay rather more. We were somewhat sceptical of that point of view and persisted with our argument, which eventually carried the day. In due course, labelling was introduced. The Committee is rightly very chary about giving praise. Our task is not to praise, but to ensure that the taxpayer gets value for money. In 1966, when Lord James said that he wanted to have the University Grants Committee examined by the PAC because he had a good story to tell, Sir John Boyd-Carpenter, the then Chairman of the Committee, told him, "If you've got a good story to tell, you won't tell it here."

Nowadays, things are a bit different. We are prepared to go a little further in our praise--although not much--and on one occasion I went so far as to say that I was "satisfied" with the work that Sir Peter Levene had done. When he left, however, I went even further, in a statement that I never expected to make again--although I should be delighted to do so--and said that I was "very satisfied", which is about as far as I ought to go in these matters.

The question of the cost of spare parts is an important one because is it something that everyone can understand. Even in very esoteric and technical matters, the public have a right to expect that their money will be handled properly. On matters that they can understand, however, it is even more necessary that they are given such assurances. It is the task of the PAC to provide assurances, and that is what we sought to do.

We identified a need to increase competition in spares procurement. The Department acknowledged that there

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was scope for a further increase in competition. Given the substantial savings that can be secured, we encouraged the Department to continue its drive to increase the level of competition. The question of competition is important. Competition is not always possible : for example, one cannot have large numbers of manufacturers or concerns providing nuclear submarines. What one can do, however--and what Sir Peter Levene showed could be done--was to have a number of sub-contractors bid for competitively. One can also encourage people to compete in areas in which competition is possible, by giving certain incentives and certain help. That is a positive gesture, which we welcome.

We say in our report :

"We commend the work carried out by the Purchase Research Units which has resulted in the generation of significant savings. However, whilst recognising the Department's plans for disseminating the techniques used by these Units, we note that at present the techniques are by no means widely applied throughout the Department."

In paragraph 16, we say :

"In the past, this Committee has commended the initiative to label spare parts showing the unit price charged thus making users more aware of the cost of the items concerned. We are therefore concerned that some contractors are still not complying with the requirements to place labels on spare parts. Moreover, in some cases where labels are provided these are attached to outer packaging and are therefore not always seen by the end user. Thus, the user is not aware of the price paid and is unable to challenge what might be an unduly high price."

That is the whole purpose of labelling, so we urged the Department to undertake to ensure that the requirement was fully met and our recommendations accepted.

Most of the recommendations of the Committee are accepted in the Treasury minute, and we welcome that. We have our differences from time to time, but we know that the Financial Secretary and the Treasury must also be concerned with securing value for money, which gives us a common theme and a common cause.

In one other aspect in relation to competitive contracts we note the Department's acknowledgement that one way of improving value for money lies in letting fewer and longer comptitive contracts with built-in incentives to ensure downward pressure on costs. Under a long-term contract, one can get a larger quantity at a cheaper price, which is clearly desirable. We are concerned that the Department does not have a system that flags up cases where there have been large increases between orders for the same item. There should be something that calls out for a fresh examination whenever a large increase in price is proposed for any article that it may want to purchase. I shall now turn to the 35th report of the PSA Services Account 1991-92. I have had trouble over the years with the Property Services Agency and it has been a constant theme of the Committee. The report reads :

"In their Twenty-second Report of Session 1991-92 our predecessors concluded that it was a most serious matter that PSA services' financial systems should have broken down to such an extent that in 1990-91 they had been unable to recover £65.6 million owed by customer departments,"

Our predecessor

"expected PSA services to keep their invoicing up to date," It is not a difficult matter to keep one's invoicing up to date. Any business starting from scratch does that automatically. For our predecessor to have to make a recommendation of that kind is almost an insult. We pointed out :

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"Further increasing difficulties in 1991-92 resulted in clients owing PSA Services £190 million when they closed their books in June 1992. Of this, £116.8 million related to works expenditure on behalf of Government departments."

One might have thought that Government Departments would be paying up if those invoices had been substantiated. We further pointed out :

"We regard it as unsatisfactory that PSA Services could not substantiate invoices"--

it was unable to prove that it had provided the goods or services totalling £12.8 million--

"and we find it most disturbing that some of these have been disputed for up to 10 years We consider it unsatisfactory that PSA Services were unable to invoice the Ministry of Defence in time for them to pay £80.4 million in the 1991-92 year of account." That is a sad record, and we felt unhappy about that.

We discussed the problem of the payment of contractors. In question 31, which was put to Sir Geoffrey Chipperfield, on behalf of PSA Services, he said that the department--the PSA--

"are moving over to a system which the Ministry of Defence have authorised for all their contractors, which is the so-called pay-when-paid system"--

one does not pay until one has been paid--

"whereby in the contract that we have with the contractor we shall be saying that we shall pay them when we get paid by our client. This will mean that as soon as the work has been validated there will be a change : we will not be paying the contractor until we are paid by the Ministry of Defence."

That struck us as strange. We knew that the Treasury had recommended that 30 days be the period.

The Treasury minute, which deals with the matter, says that the "MOD have an existing obligation to pay promptly and this, taken together with the new arrangements adopted by the PSAS Building Management Businesses, should ensure that contractors will be paid within 30 days from validation."

I would like to hear from the Financial Secretary that this is now the rule. It was quite disgraceful. A number of small firms accepted work from the Property Services Agency and found that they were not in a position to know when they would get their money, as it was dependent on when the PSA got its money. As the Treasury advised that it should be 30 days, the Government Departments seem to be at odds with each other. I hope that that has now been resolved and I look forward to hearing from the Financial Secretary in due course. A particularly serious matter is the Welsh Development Agency accounts for 1991-92. At the close of the investigation, I informed the witnesses that we would produce a strong report. That is what we produced. We discovered a number of serious failings during our investigation. Under the Welsh Development Agency Act 1991, the pensions were determined by the Secretary of State for Wales. Redundancy terms were settled by the agency. The total amount paid--about which the Welsh Office knew nothing--was £2.3 million with a £1.4 million loss.

Again it was not reported to the Welsh Office, as it should have been. The report says that senior officials had the free use of their cars for their own private use.

On the retirement settlement to the agency's international director, the report says :

"We note that tensions which had developed between Mr. Price and his superiors".

Mr. Price was given a retirement package of more than £228,000, with a confidentiality agreement. We are talking

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