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Column 924The Public Accounts Committee is one of the oldest--indeed, I believe that it is the oldest--and most senior Committees of the House. Since its foundation by Gladstone, it has enjoyed a uniquely privileged position in the mechanisms of oversight. Committee members have been able to draw on the National Audit Office's considerable resources and our abilities have been greatly strengthened by the National Audit Act 1983, for which the Government can take some credit. It enables us to consider issues in detail and with an authority with which few other Committees are able to compete. Committee Members take their role seriously and we expect the Government to consider our reports with equal seriousness. I fear that it is possible that the Minister may attack my speech later, but he should at least be able to say that the Government take the PAC report seriously, that our recommendations have elicited action and that serious failings are being dealt with according to our prescription.
I acknowledge all of that, but in the eighth report we also requested that the Comptroller and Auditor General be given the power to investigate all non-departmental bodies and other organisations which derive the greater part of their income from central Government funds. If the Minister does not accept that recommendation or confirm that it is being given serious consideration, any statement that he may make about the attention that the Government pay to the Committee's recommendations will be seriously diminished. The recommendation is a necessary extension of the remit of the Comptroller and Auditor General. The trend established by the Government is firmly in the direction of enlarging the number and authority of non- departmental public bodies. If the Government refuse to give the Comptroller and Auditor General the authority freely to investigate activities that were previously carried out by Departments under their scrutiny, they will seriously limit the effectiveness of the National Audit Office and the Public Accounts Committee. Permission will have to be sought on a case-by-case basis from the Department concerned, and such a process limits the effectiveness of the inquiry.
In many cases, it cannot be known in advance where it would be appropriate to look for information. The ability of the National Audit Office to decide for itself has turned up some of the more striking cases of maladministration that we have had to consider. The Minister should allude to that issue, which is one of the most important in our reports. In the world in which we live and in the week in which Lord Nolan, a Law Lord, has been appointed to consider standards of public conduct, it is not appropriate that Ministers should be in a position to say which matters should be open to scrutiny and which should not. The whole point of the National Audit Office's independent oversight is to enable it to go where it wants, to go where the Administration would prefer it not to go, and to examine what the Administration might prefer to remain hidden. The Prime Minister said in the House only yesterday that if any Minister has been guilty of wrong doing--
Mr. Richard Page (Hertfordshire, South-West): I have served on the Public Accounts Committee for a few years. The hon. Gentleman says that certain matters cannot be
Column 925investigated by the Public Accounts Committee because they are not within its remit. Has he any evidence for that allegation, or is he just trailing a kite?
Mr. Maclennan: I am referring to the recommendation of the eighth report. Paragraph 7 on page vi states:
"We shall . . . be paying particular attention in our future examination of accounts and the implementation of programmes to the successful combination of the proper conduct of public business with the energetic pursuit of value for money."
The following sentence contains the most important point. It states:
"To assist us in this task, it would be helpful if the National Audit Office were enabled to examine and inspect all non-departmental public bodies and other organisations which receive the greater part of their income from central government funds, and to report the results to us."
Mr. Stern: Will the hon. Gentleman give way?
Mr. Maclennan: Before I give way again, perhaps it would be sensible to refer directly to the Government's reply to that point. They state:
"The Government has considered the Committee's view that it would be helpful if the Comptroller and Auditor General . . . was able to examine and inspect all non-departmental public bodies . . . and other organisations which receive the greater part of their income from central Government funds. The National Audit Act 1983 already provides the C&AG with the access to bodies whose members are appointed by or on behalf of the Crown and which receive more than half their income in any year from public funds. The C&AG also has access to a wide range of public bodies by agreement of the sponsor department. The Government will consider on a case by case basis the need for the C&AG to examine any other body. The C&AG, as departments' auditor, is of course able to examine the way in which departments exercise their control over all NDPBs."
Because of the apparent doubt about what I have been saying, I felt it necessary to spell out those points in some detail. However, the hon. Member for Bristol, North-West (Mr. Stern), who is also a member of the PAC and, if I may use the Chairman's word, an assiduous one, will know that many non-departmental public bodies do not fall into the category that I have described.
Mr. Stern: I do not wish to quarrel with the hon. Gentleman but I remind him of an earlier remark which, I hope, on reflection he will accept was somewhat misleading. He said that certain bodies were not open to scrutiny. The purpose of the recommendation in the eighth report is that such bodies should be open to scrutiny by the National Audit Office. I entirely agree with that. However, he left the House with the impression that those bodies not subject to scrutiny by the National Audit Office were not subject to any scrutiny. That is untrue. Those not subject to scrutiny by the National Audit Office frequently come under the purview of the Audit Commission or private auditors. It is wholly incorrect to suggest that they are secretive bodies that the Government are trying to hide.
Mr. Maclennan: I should regret it if any words of mine unravelled what was a unanimous report and recommendation. We have made a powerful argument; it is one which the Government accepted and one to which I, at least, adhere. The House and our constitution proceed with incremental changes, and I can understand that we might have to fight for the right to follow public money wherever it goes. The Chairman raised that point in his important speech. I agree with him about the objective
Column 926and the means. We may have to be satisfied with less than full-hearted acceptance of the American principle, but that the principle is one that we should embrace I have no doubt. It falls to the Government, not to the Committee or to the House, to defend the exclusion of the National Audit Office.
Mr. Sheldon: I think that I can clarify the matter. During the very useful visit to the Chancellor of the Exchequer, we pointed out that it was attempted in the National Audit Act 1983 but that 11 years had passed since then. Perhaps some of the anxieties that might have been present then had been put to rest by the way in which the National Audit Office has developed, and the Public Accounts Committee has gone along with it. He accepted that the changes had gone smoothly and expressed some sympathy with our aspirations. It was too early for him to reach a conclusion in time for today's debate, but we hope some progress will be made.
Mr. Maclennan: They are very encouraging words from the Chairman and we look forward to glimmers of hope from the Minister, reflecting the views of the Treasury. I have detained the House long enough on this point but it is important. I hope that the Government will show their attachment to the principle that we have outlined.
Mr. John Horam (Orpington): For many years we have recognised the fact that at the heart of Parliament's concerns is the control of Government spending. That was never more so than now when, for 1994-95, the Government are spending about £291 billion, which is rather more than 43 per cent. of the country's gross domestic product.
Equally, the role of the Public Accounts Committee, the National Audit Office and the Comptroller and Auditor General is central to Parliament's historic concern. I like the phrase that the NAO used in its annual report. It said:
"The NAO's goal is helping the nation spend wisely".
That was rather felicitously put. In fact, the NAO can boast a remarkable record over the past two or three years. It claims in its annual report to have saved no less than £266 million of public money in the past year, which adds up to more than £700 million-worth of savings over the past three years.
As has already been pointed out, three or four successive Conservative Governments have made major improvements in the way in which public spending is controlled and managed. I am thinking of market testing, competitive tendering, the next steps agencies and the successive changes in the way in which the Government have examined the public expenditure round. The latest development is the introduction this year of accrual accounting, which will mean a big change in the way in which the Government examine their internal accounts. In addition, there have been changes in the way that the Treasury conducts its internal audits. I understand that the Department of Health has undertaken a similar examination of how effective and efficient its own procedures are.
Indeed, the next steps agencies, or non-departmental public bodies-- whatever jargon one wishes to use--have been a remarkable success story. My right hon. Friend the Financial Secretary will be aware of a recent independent
Column 927report by Price Waterhouse which examined how effective the agencies had been, most recently in 1994. It concluded:
"Their drive to achieve better public services has been genuinely successful."
It pointed out that agencies are good value for money for the taxpayer in that they have reduced costs and improved management but that they have also led to improvements for the consumer and ordinary citizen in the form of better public service. They have undoubtedly led to improvements in staff morale by giving civil servants and others working in the agencies more control over their own environments, and the ability to run the show as they prefer. In all those respects the agencies have an excellent track record, which is proved by the independent analysis that I mentioned. The Government can say that, in their management of public spending, there is a genuine success story to relate.
Of course, that does not attract the same kind of publicity as other policies of the past 15 years, such as privatisation and the reform of the trade unions. None the less, it is on a par with those, at the centre of the way in which a Government should effectively conduct their affairs. The Government can take legitimate pride in what has been done.
However, I am sorry to say that although the Government's record in controlling public spending has been good, as I have outlined, Parliament's record in scrutinising Government has not been so good. The major change, which has already been mentioned, was brought about by the National Audit Act 1983, which altered the basis for the activities of the National Audit Office and the Comptroller and Auditor General and, significantly, led to the new "value for money" exercises.
The Act led to a major improvement in the role and workings of the Public Accounts Committee. The right hon. Member for
Ashton-under-Lyne (Mr. Sheldon), its Chairman, can take considerable credit for his assiduous approach, which has meant a better attendance record, and more reports scrutinised each year. All that has genuinely led to a greater interest in such matters, and to much greater activity by the Committee, partly as a result of the right hon. Gentleman's efforts but also, as he would agree, because of the 1983 reforms.
However, other parts of Parliament's scrutiny of public spending have not worked out so well. For example, over the past 15 years the departmental Select Committees have been created, and part of their remit is to examine expenditure within their Departments and the way in which the business of their Departments is conducted. With few exceptions--the Defence Select Committee has examined such matters carefully from time to time--they have failed to do that. They continually scrutinise aspects of policy, but expenditure does not seem to come within their remit--possibly because they feel that that is the responsibility of the PAC alone. However, that has never been so. The Committees have always been able to examine expenditure, just as the PAC has.
Parliament itself has not improved its methods of examining public expenditure. Before the unified Budget, as hon. Members will recall, we used to have separate debates on public expenditure at this time of year, in October or November, followed by the Budget debates in March or April. Now that has all been rolled into one,
Column 928and we do not have the single-minded analysis of public expenditure that we had in the past. The Budget debate is almost the only time during the parliamentary year when Parliament addresses itself to the central issues of how the Government are spending money--this year's figure is no less than £291 billion--and how they are raising the taxes to pay for it. To use jargon that may be more familiar in Europe, there is a "democratic deficit" in the way in which Parliament scrutinises the business of Government expenditure. The Public Accounts Committee itself can sometimes be rather counter-productive in that respect. As we know, it homes in on errors and irregularities--and rightly so. It does so in a way that is often highly exposed. The television cameras are brought in and the matter becomes news. Other hon. Members and journalists comment on it, sometimes distorting the information or getting it completely wrong. The most famous example was when ITN's "News at 10" implied that the Queen had somehow pocketed some of the money from the sale of tickets to look round Buckingham palace, because the broadcasters had mixed up revenue and profit, in a rather elementary way. The impression created was wholly out of kilter with what we had said in the report.
I imagine that a permanent secretary or chief executive appearing in front of the Committee must find it all rather daunting. If he is a cautious man, as many civil servants are, he will ask himself, "Why should I take risks with this dreadful Committee, and all that may flow from that? Isn't it better to play safe, and not change anything?" That could make the civil service, which is already rather risk-averse, even more so.
Danger arises if we do not balance our criticisms--I am sure that they are wholly justified, and I have never known a member of the Committee hold back on a criticism--with praise where praise is due. We must recognise that civil servants are trying to push through a wider view of controlling expenditure, and that that will sometimes lead to mistakes. If one does not make mistakes, one will never make anything, and sometimes risks are necessary and justified when trying to control the leviathan of public expenditure. We should bear that in mind as we read reports.
Another worrying element in the way in which the Public Accounts Committee conducts its affairs is the fact that sometimes its reports become unduly politicised. Clearly, all of us in the Chamber are politicians, and we must accept that occasionally such things happen, but sometimes they go too far.
For example, I was disappointed that when we produced the famous eighth report--which has been discussed at such length--on "The Proper Conduct of Public Business", at the next Prime Minister's Question Time the then Leader of the Opposition brought it out in that heavily adversarial point- scoring atmosphere as an example of what was going wrong with the Government. He gave the impression that there had been a dramatic decline in standards, all because of the new methods that the Government were introducing. He implied, in particular, that the non-departmental public bodies were somehow the cause of that decline in public standards.
Yet that was not what the Committee said; it said nothing of the kind. As my hon. Friend the Member for Bristol, North-West (Mr. Stern) said earlier, the Committee was just as critical of errors and irregularities in traditional civil service Departments as in the
Column 929non-departmental public bodies. In the evidence on which the report was based there were as many criticisms of traditional Departments as of the new bodies. There was no evidence that the new bodies were any worse than traditional Departments.
We did not make comparisons with the past. We did not say that things were worse than they were five or 10 years ago. There was no evidence whatever that the number of irregularities, or examples of overspending or misspending, that we found had escalated during the period under consideration. We simply said that clearly there had been some errors, difficulties and problems in both types of body--in fact, in all types of Government activity. We did not say that things were worse than they had been; we made the point almost as a warning that in the drive towards efficiency and greater economy in public spending, we should not allow our standards to drop. It was a shot across the bows, meaning, "Don't throw out the baby with the bath water. Keep standards as high as we recognise that they have been." I am glad that the hon. Member for Caithness and Sutherland (Mr. Maclennan) recognised that fact, although in other respects he implied the reverse. He seemed to be doing what the former Leader of the Opposition did, and dramatising the idea that Committee had said that there had been a fall in standards. The Committee did not say that; it issued a warning that, as the drive for economy and efficiency, rightly, went ahead, there should not be a fall in standards. That would be the consensus among members of the Committee.
Mr. Mike Hall (Warrington, South): Does the hon. Gentleman agree that the report refers to a decline in standards over the past 140 years? That was in the opening paragraph.
Mr. Horam: With respect, the report does not say that there has been a decline in standards over the past 140 years.
Mr. Hall: That is what is in the report.
Mr. Horam: No, the report clearly says that some of the incidents that have taken place represent a decline, but equally that similar incidents took place over the previous four or five years, before the report was produced. Those examples are evidence that standards are not being maintained in those instances. The report does not say, as the hon. Member for Warrington, South (Mr. Hall) will see if he reads it carefully, that there has been an overall decline. We have no evidence about the number of such incidents. I disagree with the hon. Gentleman in that respect. The report simply says that certain things have happened wrongly in particular Departments and that they represent the sort of things that should not happen again. We are in some danger, especially in the present atmosphere, of acting in a way that is genuinely counter-productive in terms of trying to get economy, efficiency and greater control of public expenditure--aims that the Government are trying to achieve through the measures that I have outlined.
There are two or three points of our procedures at which the Committee and the National Audit Office might look to see whether we can improve them. For example, it could consider whether to interpret its remit rather more widely. Many audit companies in the private sector, such as Coopers and Lybrand Deloitte and Arthur Andersen, have looked as management consultants at strategic issues
Column 930of financial control because they have seen from their audit work the problems that may arise in a private sector organisation and they have seen ways in which matters could be improved. Obviously, value-for-money exercises are an example of that to some extent because the idea of one may be thrown up by an audit on a Department. I should like to take that further and to see whether such organisations could suggest ways, based on their audit experience and findings, in which Departments could improve their methods to achieve greater efficiency.
Coopers and Lybrand Deloitte, for example, recently went over the Department of Health, as hon. Members may have seen in the press, and came to the conclusion that no less than one fifth of the £282 million a year that the Department spent on pay and salaries was wasted money, and that there was a waste of public money in terms of duplication, unnecessary checking and committees meeting without any real purpose. That is the sort of exercise that the NAO could suggest to Departments. The NAO would not necessarily carry out the exercise itself; the work could be done by a private audit company. Substantial sums of public money are simply disappearing through waste and the NAO should be encouraged to go into those matters more fundamentally. That would be a valuable thing to do.
The Committee Chairman, the right hon. Member for Ashton-under-Lyne, will be aware of my next point from his long experience of such matters. He will have looked at what happens in Public Accounts Committees in other countries. In New Zealand and Australia, for example, they have tended to break away from our rather formulaic approach of having in front of us the permanent secretary and chief accounting officer, whom we then cross- examine on the basis of an NAO report. Often, for example, the New Zealand and Australian Committees have had a second or third bite at the cherry. They have called in another officer, who may be relevant to the particular inquiry, and have investigated him as well. They have often taken a month or more over one report. It is worth investigating whether we should do that.
Similarly, the New Zealand and Australian Committees have sometimes spent a lot less time on other reports. They have sometimes, for example, decided to eschew investigating witnesses. They have simply had discussions among the members of the Committee on three or four reports that they deem to be less important or controversial than others. They have looked at them quietly, decided what they want to say about them and then issued their response. Is there a case for varying our procedures in view of what happens in other countries? We might then be able to concentrate more on what matters rather than adopting the rather straightforward approach of simply having a report and then an examination of witnesses, who are only the permanent secretary or the chief accounting officer.
The relationship between the Public Accounts Committee and the departmental Select Committees is also worthy of further thought. As the right hon. Member for Ashton-under Lyne will be aware, the Select Committee on Procedure considered that point in the 1989-90 Session and pointed out that there was an overlap which the House could consider. It may be sensible for some of the Select Committees to take greater account of public expenditure questions in their deliberations.
Column 931As the right hon. Member for Ashton-under- Lyne pointed out, we have produced no fewer than 49 reports, which we are considering in this debate. That is a huge number--the average Select Committee produces three or four reports a year. There is a huge discrepancy in the number of reports from the various Committees. I am sure that some of the departmental Select Committees, such as the Select Committee on Defence, could take on board some of the points at which we have looked and could examine, for example, the permanent secretary, rather than us having to do all that work. That would enable us to concentrate on especially important issues, particularly if we have to do more work on non -departmental public bodies.
Mr. Maclennan: I suggest to the hon. Gentleman that, on the whole, the existing arrangements work rather well. I draw his attention to the example of the work done by the PAC some years ago on the Stingray defence procurement issue. The PAC looked closely at the matter and expressed great scepticism about the expenditure incurred. We criticised the delays, but we recognised that we could not analyse the strategic arguments for purchasing Stingray. We felt that we had to pass that task to the defence experts--our colleagues on the Select Committee on Defence. That division of labour works pretty well.
Mr. Horam: The hon. Member for Caithness and Sutherland is suggesting working together. He has an advantage over me because I was not in the House when that report was considered. We considered specific expenditure aspects and left it to the Defence Select Committee to look at the strategic aspects. Something similar happened with the Pergau dam issue. Both the Select Committee on Foreign Affairs and the PAC had a bite at the cherry. I am arguing that perhaps we should do that more often and that we should not fiercely grasp all expenditure issues to our own bosom. We should let other Committees look at expenditure issues from time to time, which might lead to more fruitful consequences. Those are merely suggestions to carry the work of the Committee forward.
In my experience, the past 10 years or so in the history of the PAC have been valuable. The Committee has revived. Previously, it was hard to get a quorum and the Committee's work was not as well regarded as it is today. Our work, especially as a major Committee in the House, will be even more important in the future for the reasons that hon. Members of all parties have addressed in this debate. Therefore, I wish more power to the PAC.
Mr. Alan Williams (Swansea, West): I very much enjoyed the speech by the hon. Member for Orpington (Mr. Horam) and I thought that his constructive observations were typical of the attitude that prevails within the Public Accounts Committee, where there is a general wish to see the Committee working as effectively as it can. However, I am sure he appreciates that his good idea about more in-depth analysis and about calling further witnesses runs contrary to the problem that we are rather inundated with reports. I enjoyed what he said and the Committee may well want to look at his ideas--I am
Column 932sure that the Chairman, my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) will--and to consider some of the points at our meetings.
It is important that we keep reiterating what the Committee's role is. There has recently been an unfortunate misunderstanding. It is felt that in some way the Committee is a general parliamentary troubleshooter, so if anything crops up, people ask whether they can refer it to the PAC or ask why it has not been looked at by the PAC. One example is the Al Yamamah deal. We have all been inundated with telephone calls about that. My right hon. Friend the Chairman will, I suspect, confirm that among the £20 billion involved in the contract, a minimal amount was within our remit. As he and Sir Michael Shaw pointed out, the Committee considered the public money. Other expenditure is not within our remit; we do not have that power. It is just as well for everyone to understand that. We do not have the power to look into private money. It may save us all some time answering our telephones if we can get that message across. Indeed, that message may also be passed on by the Treasury Minister to one or two of his colleagues who made comments about a rather wider interpretation of the report produced by the Chairman and Sir Michael Shaw in the context of Al Yamamah.
It is typical of the problems of the House of Commons that here we are with one day's debate on 49 reports, many of which, as I am sure all of us would agree, deserve considerable attention in their own right. It is impossible to do full justice to so many reports in such a debate. The report on the conduct of public business--I do not intend to dwell on it--has been a catalyst for the way in which Government and people outside Parliament have looked at the role of accountability. It is the first time that the Committee moved from specific into general analysis, drawing on its wider experience. I congratulate the Chairman on initiating that move and I congratulate all members of the Committee, especially--this is not meant to be patronising--those Conservative members of the Committee because, after 14 or 15 or years in Government, inevitably, everything we look at involves their Administration. Therefore, one recognises that for them it is a more sensitive issue than it is for us. However, the easy unanimity with which we endorsed that report was encouraging. I was delighted at the positive action taken by the Government. The Chairman mentioned the check list and I think that that check list is good. Indeed, yesterday's announcement by the Prime Minister was helpful because the quangos and the civil service are to be within the remit of the standing body to be created. I am sure that our report will be part of the essential background reading for the members of that body when it starts its studies. I welcome the creation of that body and its forthcoming report. It is important that, every now and then, we stop, and that observations and assessments of how effective we are and how well we are or are not doing our jobs are made by people who are perhaps at arm's length from Parliament.
I do not want to talk about the issues surrounding the Pergau dam because they have been trampled over substantially and in so far as they needed mentioning, the Chairman dealt effectively with some of the key points. However, what came as a surprise to me--it may not have surprised my colleagues--having been in the House a little while, was that I did not realise the limitations in
Column 933the effectiveness of an accounting officer's letter. I had presumed, like various Opposition and Conservative Members who have been in government in different offices, that the accounting officer's letter was automatically looked at and referred to by the Comptroller and Auditor General. Many of us and certainly many people outside the House were surprised to find that, in fact, it is only in the context of fraud and impropriety that there is any automatic reference to the CAG.
I am sure that we all welcome the Government's positive response to our feeling that the letter should be an early warning which is drawn as rapidly as possible to the attention of the CAG so that the Public Accounts Committee can consider issues of wastefulness and uneconomic use of resources when an accounting officer's letter has been considered relevant. Indeed, it is conceivable that had the new system, which I hope will apply, operated at the time of the Pergau decision-making, the existence of the accounting officer's letter may have brought matters to the attention of the House and focused the attention of Ministers earlier on the confusion that arose and that was revealed in the Foreign Affairs Select Committee about the relationship between arms and aid in the deal.
I observed last year--hon. Members have at various times made the point-- that the job and role of Parliament has been altered by the structural changes that have taken place in the machinery of Government. It is not our job as Committee members to discuss whether the policy was right or wrong. All that we can consider is whether it has made our job easier or more difficult and whether it has made the role of the National Audit Office more or less effective. There is little doubt that the proliferation of accounting units, even right down now to hospital trusts, has made it more burdensome for the National Audit Office at step one to carry out its job. At one time, there was a single department in which a relatively simple audit could take place. Now, to follow through the implications of certain decisions, one may have to go to a dozen agencies or health authorities.
There is little doubt that the structural changes have created some difficulties. The hon. Member for Orpington said that he felt that the agencies were a good influence. I am sure that there are good and bad points to them. I have one of the biggest agencies in the city which I have the honour to represent--the Driver and Vehicle Licensing Agency. The information and technology division of the DVOIT has just been hived off. I am afraid that my experience has been somewhat different from the hon. Gentleman's because I have witnessed a fall in morale there. That is due to uncertainty, because, all too often, such hiving off is seen as the first step towards complete privatisation. In fact, that has already happened to DVOIT. I hope that now its future has been settled, morale will improve. The other factor that has made a difference was also dealt with by my right hon. Friend the Member for Ashton-under-Lyne. Contracting out and privatisation mean that public money, which a year before could have been followed right through by the National Audit Office, can no longer be followed, although it is still being spent in the same amounts, possibly by the same people and, possibly, for the same purposes. We have lost our right as Parliament to monitor the way in which that money is
Column 934used. It must be recognised that we have fewer rights even than the Audit Commission, which monitors activities in relation to local authority spending.
I intend to be brief in dealing with my other points, but before hon. Members become optimistic, I would add that that is a statement in relativity. As a Celt, my brevity may be different from the wishful brevity of some of my colleagues. My right hon. Friend referred to some of the problems that we encountered. We discovered a Welsh WIZARD in the Welsh Development Agency, and we had problems in the west midlands, where management were manoeuvring circumstances for privatisations. We have to bear in mind the fact that, if we are going down the privatisation route, desirable as in many cases management buy-outs may be, they also present dangers and temptations. Therefore, they must be monitored closely to ensure that there is no conflict of interest or that no circumstances arise in which the price is unduly favourable to those wishing to buy. The Scottish Bus Group, about which the hon. Member for Caithness and Sutherland (Mr. Maclennan) will be more aware than I because of his Scottish links, was sold for £90 million. However, just a couple of years before privatisation, the group had a profit of £9 million. By the time of privatisation, its profit was £500,000. There may be very good reasons for that, but it is disturbing that the Scottish local authority bus services operating alongside the group experienced exactly the opposite: the local authority bus services were becoming increasingly viable in what seemed to be the same market context.
Although I cannot speak for everyone, many of us were concerned about the group's privatisation and particularly about Citylink. Two years before privatisation, Citylink made a profit of £900,000. By the time of privatisation in 1990, that profit had turned into an £800,000 loss. On privatisation, there was in effect a £1.5 million cash injection in that the Government wrote off that much debt. The company was sold for £265,000 and three years later it was sold for £5.1 million.
We must ask whether it is just conceivable that the Government were had in respect of that operation. I suppose the Government would console themselves with the thought that while they made only £90 million when they sold the group, in respect of a company which was sold for 1p, that 1p proved to be one of their best pieces of expenditure because, in finally releasing all the companies within the group into the private sector, the Government opened access to the surpluses in the pension fund. The Government may feel that what they lost on the privatisation swings, they gained on the pension roundabout, because although they made only £90 million selling the whole group, they had the £150 million from the pension fund which was in surplus.
Committee members will remember that we had to work to obtain that figure. We were told in the report that the pension fund was £75 million. However, when one of my colleagues asked whether that figure had been revised, he was told that it was something above £100 million. When I asked precisely how far it was above £100 million, we discovered that the £75 million had become £150 million. From the Government's point of view, that was 1p well spent.
I am referring to some of the minor reports which are important to the people involved. With regard to the sale of the trust ports, I am sorry that the hon. Member for Gillingham (Mr. Couchman) is not present because he
Column 935raised questions on behalf of his constituents during the hearing. There was also a management buy-out in respect of the trust ports. Once again, there was a strange situation.
Medway was privatised for £13.2 million. That was the yield to the Government. However, within a short while, the managing director had made £12 million selling his shares to the Mersey Docks and Harbour Company, which, incidentally, is partly owned by the Government. The Government bought back some of the shares they had sold at a knock-down price.
Charterhouse Development made three times as much as the Government by selling its shares for more than £35 million. Something was drastically wrong somewhere in the way in which the company was evaluated. Although I am not sure where matters stand in terms of the legal representations being made by the work force, we can observe what happened. A short time after the company was privatised, half the work force no longer worked for Medway. Under the deal, they were required to sell back their shares at an enforced price. They had to sell their shares back for £2.40 only to see them sell a short time later for £37. One can understand that there is bitterness among those ex-employees. Perhaps we can understand why they sought legal retribution.
When we asked how the share price could rise from £2.40 to £37 if the Government had got the privatisation right, the permanent secretary told us that that reflected the increased profitability. I examined the increased profitability. Profitability had risen 50 per cent., but a 50 per cent. increase in profitability does not explain a 15-fold increase in the market value of the shares.
I want briefly to refer to two important points relating to law and order and to reports which did not receive much consideration. The first refers to the Insolvency Service executive agency. Hon. Members, in particular the hon. Member for Bristol, North-West (Mr. Stern), whose background in accounting has been a great asset to the Committee, will appreciate the significance of the role of the agency and the Insolvency Service in identifying people who should be dismissed as directors and barred from being directors.
When we examined the service, we discovered that at a time when insolvencies had trebled, the number of staff had increased by only 25 per cent. As a result, there was a backlog. It was impossible for the disqualification unit to handle the sheer volume of work it faced. That was reflected in cases in respect of which receivers had identified unfit conduct. Over a period of six years, we found that while the receivers had referred to the disqualification unit in 1987 one in three of the cases in respect of which there was unfit conduct, in 1988 that became one in five; in 1989 it became one in seven; in 1990 it became one in nine; in 1991 it became one in 10 and in 1992 it became one in 22. As I said at the time, Britain had become seven times safer for the corrupt director.
However, the problem is more important than that. The hon. Member for Gillingham raised the very important point that there is no method of ensuring, even when directors are disqualified, that they relinquish their other directorships. In addition to finding that corrupt directors have a much greater chance of getting away with it, it is
Column 936clear that even if they do not get away with it, no one has been following up to ensure that they get rid of the directorships that they are supposed to get rid of.
Committee members and I put it to the chief executive that if unfit directors continue to operate, they are a danger to other businesses, suppliers and customers, and that that is an undue risk for the public. The chief executive recognised that point. However, despite that clear collapse of the agency's ability to monitor those unfit to be directors, the department was being denied the extra manpower it needed in the context, to make a minor political point, of a Government who continue to talk about law and order.
Mr. Stern: I am listening with great interest, and I agree with the right hon. Gentleman. My recollection of our discussion of that point in Committee is that the Committee could not conclude whether the obvious failing was the fault of inadequate staffing or of inadequate legislation in the first place.
Mr. Williams: Inadequate legislation might have been an element, but, as it emerged in questioning, the problem was a lack of resources. The hon. Gentleman might recall exchanges in which, in essence, officials were challenged with, "Are you asking the Department for the extra manpower that you need? How much extra manpower do you need?" They admitted that they had not made even as assessment. They made the point that if extra manpower is needed, that is a job for Ministers, not them.
The next matter is literally a one-point dip into the report on organised Department of Social Security fraud. We are not talking about the person who fiddles the odd voucher. We are talking about crooks, big money, counterfeiting, and the theft of mailbags--that is, big organised crime. There is an organised fraud branch. In discussions, it emerged that three quarters of such fraud takes place in London and that, for every member of the fraud branch in London, there was a saving of £350,000 which would otherwise have been defrauded. When asked how much it cost to employ someone to save that £350,000, we were told, on average, £20,000. Many of us might naively think that there is an obvious logical next step from that. I shall read a couple of the permanent secretary's answers. I said:
"That means in London . . . he is saving £1/3 million, £350,000."
The permanent secretary said, "That is right." He was then asked about taking on extra manpower, and he said:
"However there is a limit to which you can put more and more staff into that and you cannot just do it just on cost effectiveness criteria otherwise the size of the Civil Service would be twice what it is now."
I must admit that if it is cost-effective, it does not cause me great worry. I went on to ask:
"As long as it was cost effective that would not matter, would it?"
The permanent secretary said, "Yes, it would." I said:
"Why? Why would it? As long as it was giving the taxpayer back more than it was costing, why would it matter?"
His answer was:
"no Government has ever proceeded on the basis that you simply staff the Civil Service on the grounds of how much money you can recover."
It was one of the saddest interviews we had.
Mr. John Austin-Walker (Woolwich): On a point of order, Madam Deputy Speaker. I wish to raise an urgent
Column 937issue which relates to courtesy to hon. Members and which might impinge upon hon. Members' rights. Several hon. Members and noble members of the other place were assembled in the Parliament street building at a meeting which I called to hear the European representative of the Kurdistan workers party.
On his way to that meeting, between Westminster station and Parliament street, the speaker was arrested by about a dozen police officers. He is currently at Charing Cross police station. My noble Friends Baroness Gould and Lord Avebury are currently at Charing Cross police station to ascertain on what grounds he was arrested. Could you use your offices, Madam Deputy Speaker, to ensure that no action is taken to deport that gentleman until we have an opportunity of questioning responsible Ministers in the Foreign and Commonwealth Office and the Home Office? Will you urgently investigate the matter?
Madam Deputy Speaker (Dame Janet Fookes): If the hon. Member for Woolwich (Mr. Austin-Walker) is alleging, as I rather think that he is, a breach of privilege, his course of action is clear: he must write to Madam Speaker privately without delay and inquire whether investigations can be made. Apart from that, I am unable to act. 6.44 pm
Mr. Richard Page (Hertfordshire, South-West): They say that it is a sign of either old age or enjoyment if time flies by rather quickly. It seems only a few months since our previous annual Public Accounts Committee debate. It therefore comes as a shock and surprise to find that it is exactly a year and a day since we considered the excitements of the previous year.
Once more, several excitements are worthy of note, comment and, indeed, censure. At this time of feeding frenzy, which seems to have gripped Westminster for the past week or so, it is important to keep a balance and a perspective. Although a book of horrors has been opened by the National Audit Office during the year, I put it to the House and to the country that a veritable library has been assembled during the year through the good practices and good offices of the civil service. That service has been satisfactorily delivered and standards have been achieved that are envied throughout the civilised world.
I pay tribute to the National Audit Office not only for its work in supporting members of the Committee but for its day courses for members of the Committee, which allow them to find out how a report is worked through the system and how it carries out its investigations. That understanding helps us when we have to examine an accounting officer.
I express my appreciation of the delicate way in which the Chairman of the Committee guided us through the year and helped us to produce unanimous reports. He ensured that we did not stray into commenting on policy, with all the chaos and confusion that would have followed. He kept us focused on examination of the effectiveness of policy implementation and value for money.
Much of the debate has focused on the past year. The recently created executive agencies are becoming more of a regular feature of our debates. As reforms advance, the boundary between public and private "becomes open